A

Research Project Report

ON

ROLE OF PERFORMANCE MANAGEMENT

IN CURRENT BUSINESS SCENARIO

TO BE SUBMITTED TO DR. APJ ABDUL KALAM

TECHNICAL UNIVERSITY, LUCKNOW
IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE DEGREE
OF

MASTER OF BUSINESS ADMINISTRATION

Batch 2014-16
Submitted to :
Mr. Mohit Saharan
Faculty of Management

Submitted By :
Nikita Chaudhary
MBA-IV SEM
ROLL NO.1407470058

DEWAN INSTITUTE OF MANAGEMENT STUDIES

Meerut By-Pass Road, Partapur, Meerut.(U.P.) INDIA Pin-250 103
Ph.:91-121-2440315, 2440375, Fax: 91-121-2440337
Email:info@dewninstitutes.org,Web Site: www.dewaninstitutes.org

STUDENT DECLARATION
1

I am NIKITA CHAUDHARY student of M.B.A. here by declares that the project report
titled Role of Performance Management in Current Business scenario is completed
and submitted under the guidance of Mr. Mohit Saharan Faculty of Management is
my original work.
The imperial finding in this report are based on the data collected by me. This project has
been submitted to Dr. APJ Abdul Kalam Technical University. Lucknow for the
purpose of compliance of MBA and requirement of this examination or degree.

Nikita Chaudhary
MBA-IV SEM
ROLL NO.1407470058

ACKNOWLEDGEMENT

I, NIKITA CHAUDHARY the student of DIMS, Meerut, feel honored in doing

my summer training on Role of Performance Management in Current Business
scenario .I also acknowledge and express my deepest gratitude to Mr. L.K SINGH
(Assistant Marketing manager), of

HCL INDIA LTD. for

providing

me

opportunity of industrial training in the most adaptable environment.

this
I am

indebted to them and for extending their valuable guidance, comments, suggestions
and inspiration for this project.

I would also like to thank HOD Sir and my training mentor Mr. Mr. Mohit Saharan
Faculty of Management

for their support.My humble thanks are due to all our

professors for guiding me during the two months training as my training mentor.
Lastly I would like to pay our special regards to my parents and friends for their
encouragement and full support for completion of this project work.

NIKITA CHAUDHARY

TABLE OF CONTENTS
Synopsis
Employee performance
Overall Goal and Basic Steps
Performance Management Process Checklist
Performance Plan
3

 Performance Appraisal
Basics of Conducting Performance Appraisals
Evelopment Plan
Performance Development Planning
Establishing performance goals
Strategic Planning
Specifying Job and Role Competencies
Identifying Performance Problems Activity
Performance Improvement
Implementing Performance Management
Basics of Firing an Employee
Guiding Principles for Performance Management
Performance Management during Rapid Change
Performance Evaluation Tips For Supervisors
Implementing Performance Management
Seven Things employees do to let down Performance Management and
Appraisal
Ten Things Managers Do to let down Performance Management and
Appraisal
Seven Things Human Resource Departments do to let down Performance
Management and Appraisal
Bibliography

SYNOPIS

SYNOPIS
Title- STUDY OF RURAL MARKETING IN PRESENT SENERIO OF INDIAN
CONTEXT.
5

Objective- For rural market the over all objective of the Dissertation is light on scope
of Rural Marketing in India
To know the scope of rural marketing in India

Future growth potential in Indian. Rural marketing

Different strategies for competing in rural India

opportunities & threads in Indian Rural marketing

Scope:

It will help in understanding the whole marketing strategy about Indian rural
market.

It will also help in understanding, why Indian rural market is booming.

Methodology Used:
Data collection:
6

Secondary data:
Internet, magazines, books, journals, newspapers.

Dissertation Guide :Mr. Amit Aggarwal

Submitted by: NIKITA CHAUDHARY

OBJECTIVE
OF
RESEARCH

OBJECTIVE
The over all objective of the Dissertation is to know the whole scenario of rural
marketing in India.
To know the scope of rural marketing in India

Future growth potential in Indian Rural marketing

Different strategies for competing in rural India

opportunities in Indian Rural marketing

Scope:

It will help in understanding the whole marketing strategy about Indian rural
market.

It will also help in understanding, why Indian rural market is booming.

INTRODUCTION

10

INTRODUCTION

"The rural market is a significant part of our marketing strategy which enables us to
help the consumer link with our product."

While we all accept that the heart of India lives in its villages and the Indian rural market
with its vast size and demand base offers great opportunities to marketers, we tend to
conclude that the purse does not stay with them. Nothing can be far from truth. Rural
marketing involves addressing around 700 million potential consumers, over 40 per cent
of the Indian middle-class, and about half the country's disposable income. According to
a NCAER study the consuming class households in rural equals the number in urban. and
awareness The recent NCAER publication "The Great Indian Middle Class" further
reveals that the Indian middle class consisted on 10.7 million households or 57 million
individuals of which 36 per cent lived in rural areas. No wonder, the Rural markets have
been a vital source of growth for most companies. For a number of FMCG companies in
the country, more than half their annual sales come from the rural market.
Although with the substantial improvement in purchasing power, increasing brand
consciousness, changing consumption pattern and rapid spread of communication
network rural India offers a plethora of opportunities all waiting to be harnessed, the
marketers lack the in-depth knowledge of the village psyche, strong distribution channels
and awareness that are indeed the prerequisites for making a dent into the rural market.
Moreover, vast cultural diversity and vastly varying rural demographics, poor
infrastructure - be it inadequate roads and highways or the availability of telephones and
11

electricity, low income levels, low levels of literacy often tend to lower the presence of
the corporates in the rural markets.
Thus, although the rural markets must be alluring, tapping the vast potential calls for a
systematic psychographic analyses and an appropriate marketing mix to meet the
consequent challenges of availability, affordability, acceptability.
To achieve success, in rural India, companies will need to establish rural market
development programme. There is a need to innovate and adapt products that suit rural
operating conditions. The rural consumers need to be educated of new concepts, relevant
to the environment and usage habits that will improve their quality of life.
In addition to focusing on targeted promotions and advertising there is an urgent need to
work on economical packaging, dual pricing and special sizes of FMCG and household
products. IT can be considered as an important marketing tool.
Moreover, the corporates need to place emphasis on retailers directly rather than
depending on the wholesalers for distribution in the rural market as this has not proved to
be very effective and a proactive marketing medium.
There is a need to generate superior data on rural marketing system, the haats, melas,
mandis and on village and small town income levels and consumption patterns. They
need to learn how to use existing market places - haats, melas, and mandis - to arrange
live demonstrations of products. The ingredients for successful penetration into the hearts
and wallets of village consumers include long-term commitment, cost re-engineering and
sustained innovation and specialized strategies.

12

I would like to mention that despite the hurdles that Rural economy presents, corporaterural partnership can overcome these and bring about positive results for both the entities.
Partnership needs to extend beyond agribusiness. It is not only the FMCGs but also the
financial and insurance sector that needs to come forward. We are glad that today we
have senior representatives from the Banking and Insurance sector to discuss their
success stories and tailor-made financial products that have been introduced by them to
address the specific needs of the rural markets.

Characteristics of Rural markets

There are certain characteristics of rural India, which every prospective
marketer needs to be aware of before unleashing his product:
Low income influenced by seasonal fluctuations
Low literacy
Diverse customs, languages and social structures
Resistant to change
Price sensitive
High brand loyalty
Influenced by traditions
Moderate aspirational levels
Quality Conscious
Low to moderate risk taking ability
These typical characteristics of the rural market make it evident that
there are huge challenges, which a marketer will face. These
challenges need to be tackled using appropriate strategies and proper
planning. The major obstacles can be classified as follows:

13

The major obstacles can be classified as follows:

Poor infrastructure facilities, which hamper the effective distribution
of products and make the task of reaching the target consumer
difficult.
Traditional media is ineffective due to illiteracy and non availability.
There is insufficient past research to provide some insight about
consumer behaviour.
Disposable income is highly dependent on good monsoons and a rich
harvest.
Varying linguistic and socio-cultural norms compel the marketer to
vary his marketing message for different parts of the same country.
Role of women in buying process is still not independent of family
constraints.
Inadequate credit availability hampers the ability of rural retailers to
carry stocks.
Understanding the psyche of the rural consumer and gauging the
complexity of the rural market has to be given utmost priority by
marketer. Creative marketing solutions need to be devised to combat
these barriers.
Methods followed traditionally
Traditional methods of rural marketing make an interesting study and
they ought to
be analyzed carefully to draw relevant conclusions. Conventionally
marketers have
used the following tools to make rural inroads:
Use of few select rural distributors and retailers to stock their goods
but no direct interaction with prospective consumer.

14

Use of print media or radio but no alternate form of advertising for

promoting their brands
More focus on price of product but less attention devoted to quality or
durability
Same

product

features

for

urban

and

rural

setting

with

no

customization for rural areas despite differences in the market

environment.
Low frequency of marketing campaigns.
Little uses of village congregations like haats and melas to sell the
products.
More focus on men as decision makers and buyers.

Marketing in focus groups

To explain how the dynamics of branding works in different settings, let
us take example of four villages from various parts of the country. For
our purpose we will refer to these villages as our focus groups. We
have taken a village each from Punjab, Bihar, Kerala and West Bengal.
As we have stressed earlier, for any product to be successful in the
rural parts of the country, a customized approach is necessary. So we
will start our analysis by describing the features of each village, define
a product that we wish to market in that village and then describe the
marketing strategy for that product.

15

Difference between rural customer & urban customer:

Not only today - but there has been 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 a 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 its urban
counterpart. 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 we need to understand the buyer.
Also, whatever little understanding we have is not for the entire industry. There is no
collective effort. Some people have spent time in the rural markets, carried out studies
and have understood the rural behaviour, but their works have not been passed or known
to the rest of the industry.
16

So, an in depth understanding of the consumer is one key area that the industry needs to
work on. Second is -- what appeals to him, what are the right kind of products for him.
For example - can I sell the same Lux or the same Tata Tea that I sell to the urban
customer to the rural as well? What needs to be the difference in the marketing mix when
we try to sell the same commodity to the 2 different sections.
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.

Why go Rural?
There are various reasons why every industry is taking a very serious
look at rural markets
About 285 million live in urban India whereas 742 million reside in
rural areas, constituting 72% of Indias population resides in its 6,
00,000 villages.
The number of middle income and high income households in rural
India is expected to grow from 80 million to 111 million by 2007 while
urban India is expected to grow from 46 million to 59 million.
Size of rural market is estimated to be 42 million households and
rural market has been growing at five times the pace of the urban
market
More government rural development initiatives.
Increasing agricultural productivity leading to growth of rural
disposable income.
Lowering of difference between taste of urban and rural customers.
Many companies like Colgate-Palmolive, HLL, Godrej etc have already
17

made forays into rural households but still capturing the markets is a
distant dream. Most marketers still lack in depth knowledge to analyze
the complex rural market.

METHODOLOGY USED

18

METHODOLOGY USED

In order to carry out any research investigation there is a need of a Systematic method
and to adopt a well defined procedure for each and every research there is also a need of
methodology . Methodology of any research constitutes ,application of the appropriate
research tools and the techniques.

The research involves the following steps:1 - DEFINE THE PROBLEM AND RESEARCH OBJECTIVE:If the problem is clearly defined ,it is half solved .The problem Objective here to
assess the scope of rural marketing

2 - COLLECT THE INFORMATION :The information is collected from secondary sources- Internet, books, magazines ,
newspapers , and journals

3- ANLAYZE THE INFORMATION :The next step in the marketing research process is to exact findings from the
collected data .

19

4-PRESENT THE FINDINGS AND CONCLUSIONS :As the last step ,the findings and conclusion of whole research are presented .
.

RURAL MARKET ENVIRONMENT

The rural market environment need a separate examination as it varies significantly from
that of the urban market. We shall deal with the subject under the three headings :1

The rural consumer.

The rural demand.

Other aspects of the rural market environment.

(A)-THE RURAL CONSUMER : A Detailed Profile :Size of Rural Consumer Group

In numerical terms, Indias rural market is indeed a large one ; it consists of more
than 740 million consumers. 73% of Indias total population is rural. The rural
market consists of more than 12 crorer households, forming over 70%of the total
households in the country.
Characteristics of Rural Consumer Group
LOCATION PATTERN :-

20

Rural Market of India is a geographically scattered market. The rural

population is scattered across 5,70,000 villages . And, of them , only 6300
villages , have a population of more than 5,000 each . More than 3 lakh
villages, are in the category of 500 people or less.

SOCIO-ECONOMIC POSITION :Rural Consumers continue to be marked by low per capita income/ low
purchasing power. Similarly, they continue to be a traditional -bound
community, with religion, culture and tradition strongly influencing their
consumption habits. Nearly 60% of rural income comes from agriculture.
Rural Prosperity and discretionary income with rural consumers are thus linked
to a sizeable extent with agricultural prosperity.

LITERACY LEVEL :Rural India has a literacy rate of 28% compared with 55% for the whole country.
The adult literacy programmes launched in the rural areas are bound to enhance
the rural literacy rates in the years to come . The rate is certainly on the low side.

LIFESTYLE :The rural consumers are marked by a conservative and tradition-bound lifestyles.
But this lifestyle of a sizeable segment of rural consumers has already changed

21

significantly in recent years .The changes can be attributed to several factors

such as:
Growth in income and change in income distribution .
Growth in education.
Enlarged media reach ( particularly television).
Growing interaction with urban communities.
Marketers effort to reach out the rural market.

BUYING BEHAVIOUR :Buying behaviour of rural consumers have been effected by the following
factors:-

INFLUENCE OF CULTURE:Rural consumers perception of products are strongly influenced by cultural

Factors .For example-the preference in respect of colour, size and shape is
the result of cultural factors.

GEOGRAPHIC LOCATION:Rural consumer behaviour is also influenced by the geographical location of the
consumers. For example , nearness to feeder towns and industrial projects influenced
the buying behaviour of the consumers in respective cluster of villages.

22

DIFFERENT WAY OF USING THE PRODUCT

The situation in which the consumers utilize their the product also their buying
behaviour. For example Lack of electricity automatically increase the purchase of
batteries by rural consumers: since the rural consumers cannot use washing powders
/detergents powders that much, as they wash their clothes in streams .

Amazing innovator
With a queer psychology of purchase and usage, Indian rural market is still a puzzle to
marketers. In many a case, it stretches its imagination to find surprisingly different uses
of some of the products. And the red-faced marketers admit that they actually sell their
products in areas they would otherwise find difficult, simply because there are other uses
for them. For instance, in parts of Northern India, condoms are used by weavers as gloves
on their fingers to weave fine threads. Lubrication on condoms allows them fine control
on threads and protects their sensitive fingers. Buffaloes displayed at the haats for sale are
dyed an immaculate black with Godrej hair dye. Horlicks is used as a health beverage to
fatten up cattle in Bihar. In villages of Punjab, washing machines are being used to make
frothy lassi in bulk. Paints meant for colouring up the rich-smooth walls are used to paint
the horns of cattle to make identification easier and to achieve a long-term protection
from theft. Iodex is rubbed into the skins of animals after a hard days work to relieve
muscular pain. The organizations in question might not be pleased with such usage.
However, their moneybags keep on jingling.
23

Quality consciousness
It will be unjustified to think that rural consumers are less bothered about product quality.
Even the village buyers desire to buy a quality product and upgrade their quality of life.
Marico, an Indian edible oil company, has found the rural consumers in the interior of
India willingly pay a reasonable price premium for branded cooking oil, over community
oil, because they are certain of its consistent quality. Unbranded products are often
considered by some of them to be adulterated.

FUTURE OF RURAL MARKETING

Between nineteen sixties and eighties the divide between rural and urban india
was white and black. With the turn of the century the difference has become
black and grey and offwhite depending on which territory you operate.
Expanding infrastructure, widespread education, easy communication, mass
media penetration, it revolution, second generation distribution diversification, the
desire to improve quality of life, family pressures to acquire new products and
services have unlocked a market potential of very large proportions to be
exploited by the learned few.
Many companies have entered rural markets with good products, but failed to use
the opportunity or sustain their effort and growth.
We examine the reasons why? And some lessons that can be learnt keeping the
old kotler marketing principles in mind.
Moving beyond 4 ps.
The rural households in village clusters are the focal point: the user, person
buying, the person spending, and the member deciding may not be the same
individual. We need very focussed customer profile for different product/service

24

categories. And treat each family member differentially. Rural youth are the
emerging force.
Market surveys, research forums, and audits provide the answer.
Organisations enter rural markets to diversify, sometimes on a national basis,
allocating

scarce resources for distribution development, communication,

corporate image building and marketing. They invariably fail! - corporate

commitment to rural must be from the stakeholders and the board who must
expressly spell out their commitment and long term rural mktg.
Strategy/objectives.
Companies must establish specific rural marketing divisions manned by rural
competent managers who are assured resources and an understanding of the
corporate and marketing objectives.
Products must be specifically designed/modified for rural costomers through
industrial engineering excercises for transportation, storage, performance,
operation, packaging and servicing requirements. Thrusting urban technology
down rural markets is not desirable. Relate technology to market development
indexes.
Check primary, secondary, and transport packaging for rural oreintation.
Audit manufacturing competence
Products must be specifically designed/modified for rural costomers through
industrial engineering excercises for transportation, storage, performance,
operation, packaging and servicing requirements. Thrusting urban technology
down rural markets is not desirable. Relate technology to market development
indexes.
Check primary, secondary, and transport packaging for rural oreintation.
Audit manufacturing competence
Sales forecasting, positioning, inventory management, inter territory transfers,
pricing and credit management are functions of how the agriculture in the area is
faring. Managers must learn to corelate and respond

25

to drought, floods,

irrigation,good and bad monsoons, harvesting and sowing seasons and impact of
these on disposable incomes of rural households.
For agri inputs, position inventory that can be liquidated,monitor product
movement. Handle complaints. Develop knowledge.
Location, shop profile, dealer network, financial position, cash to credit outlook,
reputation, track record, allied lines, accounting, ability to implement company
policy, competitive products position, attitude and partnership status are some
useful criteria.
Do not change network often. Appoint carefully and develop. Change with
caution and transparency. Settle disputes.

Understand rural buying is not a function of prices or discounts only but of building
relationships and value chains.
Do not overstate roles of c&f agents, stockists,wholesellers, dealers and retailers.
Use govt channels, ngos, sfgs, selectively.
Employ manualised trade management practices with cod and sales staff. Do not
deviate. Do not give verbal commitments. Put every deal in writing, advise all
concerned, act on the commitment. He who sells collects.
Do not allow juniors to tackle a problem. Catch the bull by the horn, resolve
yourself. Make it a win -win position.
Know who to deal with managing partner.
Legalise appointments with agreements and validate them each year. Check
collateral support.
Meet and travel with your cod. Do not eat or drink with them. Why compromise.
Do not accept gifts.
Involve cod in promotions, events, roadshows, complaint handling, field days,
demos, customer meets at haats and melas. Innovate and talk to consumers.

26

 Do not expand distribution without consolidation. Get more out of your network,
putting processes in place to track outlet coverage, margin control and rate
stability.
Sales should be on the basis of what is liquidated from the dealers shelf especially
for agri inputs. Sales people must be rewarded for liquidation not for raising
invoices. - expired stocks, old inventory, market returns are a function of this.
Demand generation programs should be carried out through teams with daily
review by team leaders. Dgp must result in brand awareness and movement from
dealer shelves.
Inter dealer transfer of stocks should not be permitted as a rule without accounting
processes.
Brands must have visual identity, be regularly available, and promoted with few
price changes.

Collect money when available seasonally through schemes.

Work out c:c ratios with cod by evaluating creditworthiness and defining
peak/normal limits.
Recognise tell tale signs of sickness of your distributor well in time.
Believe in action not in promises.
Go into details and anticipate events.
Take back stock, cash, use influence, sell collateral, position manpower, check
accounts, go to linked dealers.
Take legal action on check bouncing, charge penalties, do not negotiate on bad
performance.
Settle disputes and keep ego aside.
Reward timely payments, punish erring staff
Cod wiil be as loose or firm as per their perception of company iamge.
Loose a little for long term gains.

27

 Select rural advertising, sales promotion and publicity media with care and cost
effectiveness
Have a central message without conflicts
Use loud visuals, straight forward message giving product values, no subtle
slogans, or religion, or unrelated celebrities do not over claim.
Budget asp spend. Control thru mid term audit.
Structure asp campaign differently keeping asp objectives in mind by advising ad
agencies
Sales promotion measures must follow asp blitz.
Make territorial distinctions in promotion campaigns
Test market. Use haats and melas. Word of mouth.
Examine the tangible impact of communication strategy by mid term audits and
take corrective steps.
Can you sustain your promos? In off season?
Build reminder campaigns on a smaller scale. Talk to your consumer and build
confidence.
Make an

it enabled system for reporting, informatiom, data collection, and

periodicity area wise, mandiwise.

Staff must report, officer must respond using fax or email or phone or sap.
Design formats
Frequent training is necessary
Act on reports through decision taking.
Review mis effectiveness yearly.
Marketing audit for corrective action.
Make market research an ongoing activity
Hire and train staff with aptitude for rural marketing
Transfer managers from one territory to another
Carry out cross territory audits
28

 Make indpendendent market assessment

Senior managers must tour during marketing campaigns and monitor activity in
the field and not in the hotel
Learn from competition, your staff, your mistakes.
Minimize expenses and settle cod claims
Managers must be capable of getting along with cod, staff, display leadership
roles, and above all be honest.
Companies must build corporate image through a planned approach
Introduce good supply chain practices - deliver 24 hrs.
Settle accounts twice a year once in october(kharif) and then in march, (rabi) in
writing.
Territory wise rural development plus rural marketing.
Sustainable development through plans .
Take appropriate technology/product/service to rural markets and keep updating.
Build credibility, confidence and corporate image.
Viable distribution mechanisim .
Excel in customer services and product quality.
Establish responsive marketing organisation.
Add 2 p`s to 4 p`s - people and profitability.
Remember rural customer needs are changing fast , faster than we think.
Consider business process transformation for rural markets.
Continue to build relationships and deliver value.
Anticiapte future key drivers and outputs.

29

SOME PLAYERS ARE IN RURAL MARKET

Here the rain gods still play havoc with ones dreams. The dusty village path winds past a
cluster of slumbering cottages and leads one to a weekly rural bazaar or haat, brimming
over with din, bustle and transaction. This is where the real India resides. Telephone is a
luxury here. Electricity, if at all, comes here only in fits and starts. And a delivery by road
may

take

any

stretch

of

time.

However, things are changing fast now. Thanks to the increasing literacy level and media
explosion, people are becoming conscious about their lifestyles and about their rights to
live a better life. Brand consciousness is on the rise. This, clubbed with increasing
disposable income of rural households, has made the rural consumer more demanding
and choosier in his purchase behaviour than ever before. And the dusky village damsel
has now learned to pine for a satin rose .

The rural India offers a tremendous market potential. A mere one percent increase in
Indias rural income translates to a mind-boggling Rs 10,000 crore of buying power.
Nearly two-thirds of all middle-income households in the country are in rural India. And
close to half of Indias buying potential lies in its villages. Thus for the countrys
marketers, small and big, rural reach is on the rise and is fast becoming their most
important route to growth. Realizing this Corporate India is now investing a sizeable
chunk of its marketing budget to target the rural consumers.

Increasing brand awareness

In the rural families, studies indicate a slow but determined shift in the use of categories.
There is a r Increasing brand awareness In the rural families, studies indicate a slow but
determined shift in the use of categories. There is a remarkable improvement in the form
of products used. For instance, households are upgrading from indigenous teeth-cleaning
ingredients to tooth powder and tooth-pastes, from traditional mosquito repellant to coils

30

and mats. There is also a visible shift from local and unbranded products to national
brands. From low-priced brands to premium brands.

FMCG CONSUMPTION
Organizations like Hindustan Lever Ltd., Nirma Chemical Works, Colgate Palmolive,
Parle foods and Malhotra Marketing have carved inroads into the heart of rural markets.
Various categories of products have been able to spread their tentacles deep into the rural
market and achieved significant recognition in the country households. And, in the
process, the regional brands, local brands and the other unbranded offerings got displaced
by the leading brands.

Company
HLL

Household penetration

Nirma Chemical
Company
HLL
Nirma
Colgate

Household penetration
88%

Chemical

Works 56%
Palmolive 33%

Parle

Foods 31%

Malhotra marketing

27%
%
volume

Category
Washing

of

local

brands/unbranded
88

cakes/bars

Tea

56

Salt

33

Of the expenditure on consumer goods in rural household, approximately, 44% is on food

articles such as biscuits, tea, coffee and salt, 20% on toiletries, 13% on washing material,
10% on cosmetics, 4% on OTC products and 9% on other consumables. A number of
category products have established themselves firmly in the rural households.
31

It is evident that in the villages low-priced brands are well accepted and one might feel
that a larger proportion of the purchases made in rural market can be attributed to local/
unbranded players. Surprisingly, however, the unbranded/local component contributes to
a substantial portion of the volume of only a few of the highly penetrated categories.
Focus on urban categories

Category
Toilet
Washing
Edible
Tea

Category

Brand with highest

Penetration

penetration

Soap 91%

Lifebuoy

cakes/Bars 88%

Wheel

oil 84%

Double iran mustard

77%

Lipton

Washin powder / liquid 70%

Salt
64%

Nirma

Biscuits

Parle G

Tata

61%

Taaza
Salt

Though the commodity products have greater penetration, traditionally urban categories
such as skin creams and talcum powder have also made a mark. While the urban talcum
powder market suffered a de-growth, the rural talcum powder market darted ahead.
Similarly, growth of rural skin cream market was at par with that of urban skin cream
market. This clearly indicated that after being considered urban for a long time, some
categories are now wearing a rural face. And, in many a case, it is the rural market that is
actually driving the growth of category.

Premium brands
Ponds is the leader in the talcum powder category with a penetration of 65% and volume
contribution of 56%. Its rivals viz. Nycil and Liril are trailing far behind. Moreover, 60%
of the Ponds users have purchased no other brand i.e. they are 100% brand loyal. This
reflects the strength of the brand in rural bazaar.
32

Category
Skin

Household Penetration
18%

creams

Talcum Powders

15%

In the skin care category, Fair & Lovely fairness cream, with a penetration of 75%,
accounts for 60% of the skin care market in rural India. It also enjoys the undistinguished
patronage of 58% of its user households. Both Ponds and Fair & Lovely are enjoying a
monopoly

in

the

rural

markets

in

their

respective

categories.

Rural India is not averse to trying out the premium brands at high prices. A study
indicated that a majority of the premium brand users are using the brand for the first time.
Similarly 0.9% of the talcum powder-using families have started using Denim talc and
0.7% of the shampoo using households started using Pantene. Surveys also reveal that
trials are not restricted to the more affluent echelon of the villages. The experimenting
households are more-or-less evenly spread across the various socio-economic clusters of
the rural market. This should further encourage the marketers to focus their attention on
rural buyers.
Brand

Penetration of category

Surf

users
6.2%

Ariel

4.5%

Pantene

1.8%

Denim
1.8%
The rural youths are more open to fresh concepts as against their elderly family members.
Their difference in choice of products/brands with the seniors of the households often
leads to a dual-usage of product categories. As an instance, 20% of the households
using tooth powder also use tooth paste. Similarly, many of the households using
premium brands also use mass market brands. For example, while 15% of Surf and 12%
of Ariel using families also use Nirma detergent, 3% of Denim users use Ponds
Dreamflower talc and 18% of Pantene using households use Clinic shampoo as well.

33

MARKETING MIX FOR RURAL MARKETING

Product
The strategy revolves around what attracts the rural customer to a product. For example Packaging. Now the rural customers are usually daily wage earners and they dont have
monthly incomes like the ones in the urban areas have. So the packaging is in smaller
units and lesser-priced packs that they can afford given their kind of income streams.
Then a thing like the colour that attracts him is also important.
Another important factor is Convenience. An example is what Colgate did to its tooth
powder packaging. Firstly - it made sachets as was required by their income streams.
Secondly - since many households dont have proper bathrooms and only have a window
or things like that to keep such things -- it was wise to cap this sachet for convenience of
storage while use. So this is what they did.
There is also a difference in the kind of media mix that is used to convey the messages to
the rural customers. We need to use different models and means to reach them as what
appeals to the urban customer may not appeal to him due to varying lifestyles. The
communication and the design of it are also different as what attracts one need not attract
the other as well. So again, even if the media reaches him, there might not be an impact
as it may fail to attract him as fails to connect to it due to the lifestyles being different.
Then there is the case of product availability that again has different strategies. The
concept of supermarkets coming up in urban areas is not the same as in rural areas. There
the concept of Haats is more prevalent.

34

FOR all the management jargon associated with it, CRM has had grassroots beginnings.
Here's a classic example which illustrates this perfectly: CavinKare's Chik shampoo in
50-paise sachets - a huge success which redefined shampoo usage and forced giants such
as HLL and P&G to follow suit - saw the idea germinate from the grassroots. Literally.
Several years ago, CavinKare found that many rural consumers were using bathing soap
for washing their hair. The company field force found the reasons - the rural consumer
had not heard of soaps damaging hair, and in any case, hair was being washed by soaps
for generations by their predecessors. Interestingly, the rural consumers were aware that a
shampoo cleansed hair better, but was expensive at Rs 2 per sachet. That's when
CavinKare began working on a shampoo for the rural consumer. The 50-paise Chik
shampoo was conceptualized then, and has since been a runaway success in rural markets

Keep Products Simple and Functional

Driving consumption of goods in rural areas is not just about lowering prices and
increasing volume sales. It is also about product innovation: developing indigenous
products that cater to the needs of rural consumers who demand quality products at an
affordable cost. This requires substantial R&D to better understand consumer behavior
and preferences.
A case in point is the rural market for shampoo. Hair products were introduced to rural
India in an attempt to capitalize on a culture where hair grooming is taken extremely
seriously by women. While rural women may wear faded saris and little jewelry, few step
out without ensuring that their hair is in place. Consumer goods companies introduced a
transplanted product from developed markets, the 2-in-1 shampoo/conditioner.
Companies thought that women would be attracted to this product because it was cost35

effective; however, initial sales were dismal. What companies failed to recognize is that
most rural consumers had previously never used shampoo and did not value or
understand the full benefits of conditioner. Several years back, Hindustan Lever focused
on product development strategies for rural consumers who still did not use shampoo in
India. Their research indicated that a prevailing consumer habit in rural India was to use
soap for hair and body care. Rather than try to change instilled consumer behavior,
product developers focused on creating an opportunity. Consumers wanted a product that
was convenient and low-cost. The result was a new 2-in-1 soap, a product that cleans the
hair and body, and is targeted towards consumers in rural areas.

MODEL VARIANT:Models developed specifically for the rural market have found more takers in the market.
For instance, Motorcycles that are designed to take on the rig ours of rural roads have
succeeded more in the rural market.

COLOUR VARIANT:The rural consumer differ from their urban cousins in colour preference . in case of some
products , colour may matter vary much . firms can exploit this fact to their advantage.
For example , ASIAN PAINTS understood the substantial difference between the rural
buyer in the colour preference .

36

Different products/ models, Different brands, packing, pricing and

different positioning
By and large, the rural market can be tapped better through different products / models ,
different brands, different packaging and different positioning.

PACKAGE DESIGN AND PACK SIZE

In some case, the product can be the same, but the package and pack size may have to be
different for the rural target group. Package design and colour help identification of
brands by rural buyers. Many rural consumers are not quite conversant with various
brands .All the same, they manage to pick the brand that they want . They recognize the
brands by its packaging. This reason why a number of local brands in rural areas imitate
the packaging of big national brands.
As regard pack size, as a general, it can be stated that smaller packs are more suited to the
rural areas. Low purchasing power and limited availability of cash for shopping force the
rural consumer to go in for smaller packs with low unit price. In some cases, they also
prefer small packs so that they can make a beginning on small scale and after trial and
satisfaction go in for regular purchases.
In recent years , sale of shampoo brands were priced at Re 1 or below per sachet helped
the trail and adoption. The 5-gram Vicks Vapourb tin and the small size Lifebuoy soap
are other such examples.

37

HLL, has deepened coverage of many of its products in the rural market through such
combination. It has come up with a series of small pack sizes/saches that specially cater
to low end consumers.

Logo , Symbols and Mnemonics :Image is far more potent the rural market , which in many cases is an uninitiated market.
Symbols, therefore , add value to brand recall and brand personality in the rural market.

Asian Paints Gattu:

Asian Paints Gattu though equally well known in urban and rural market , has greater
effectiveness as an identity tool in the rural market .Actually in many rural parts of India ,
Asian Paints is referred to as the bahahawala or chokrawala company.

The Nirma Girl:

The Nirma Girl in Frock on the packs of Nirma washing powder has become the
mnemonic for effective and good value in washing powders.

The Dettol Sword and the Mortein Genie:

For the same reason , Reckitt& Colman has been focusing on the Dettol Sword and the
Mortein genie in its rural communication.

Brand Decisions :Branding too needs skillful handling in the rural market. The rural consumers have
already graduated from generic products to branded products. Today, the brand name is
38

the surest means of conveying quality to rural consumers. In other words, brand is the
key to confidence building among the rural consumers. Besides quality, it conveys that
the manufacturer is going to show sustained interest in those products ands markets.
Whether the same brand is used in either urban and rural market, or appropriate variants
of the brand must be adopted for the rural market, is a matter for conscious decisions by
the individual firms depending on the context. In quite a few cases, the same brand is
providing right and cost effective. In some cases, however, the brand name that is suited
to the urban market may not be quite suitable to the rural market. Low priced variants
seem to work better in majority of cases in the rural market. It will, however, be incorrect
to assume that rural consumers prefer local brands to national brands.

Sell Value Brands, Not Cheap Brands;While brands specifically developed for the rural market and low priced variants may
work better in many cases , the strategy should be one of selling value brands . HLLs
Lifebuoy, for example, is a low priced carbolic soap that is often the first choice of bath
soap by a rural consumer .HLL, however , does not sell it as a cheap soap. Instead, sell it
as a hygiene brand. It communicates the value of the brand to the target market. It also
tries to enhances the value of the offer by giving suitable add-ons .for example, while
targeting rural students for the soap , it distributed height charts along with the soap and
conveyed its concern for their health and well being . Rural marketers would do well to
add some value to their products in this fashion if they are keen to secure the loyalty of
the consumers.

39

Wider competition for a product

Many of the rural buyers tend to have little stock of money, only a flow. Consequently,
they tend to make purchases only to meet their daily needs and have little capacity to
build inventory. The marketing implications of this are far-reaching. Not only are pack
sizes and price points affected, but in turns out that consumers have to make a selection
from a much wider array of product categories. Thus the nature of competition for any
given
product is much broader. For instance, in a village haat, Coca Cola competes not just with
Pepsi, but with a broad set of purchases that the rural consumers consider as treats.

Preference for Low Unit Packs (LUP)

Trial is often encouraged by Low Unit Packs (LUP) or sachets. The sachet packaging
strategy caught the popular FMCG imagination in the early 1990s and it was considered
as a breakthrough in the psyche of the rural consumers. Today, the sachets are
increasingly dominant on shelves. Shampoo, for instance, has invaded the rural
households with sachets at low affordable prices. Sachets of tea, blues and washing
powder are being launched in a big way in the village haats by leading manufacturers.
Companies like HLL and Marico are making concrete efforts to create and then meet the
demand of rural consumers by launching products in small affordable packs.

40

Price:
According to Euromonitor data, the 2002 per capita income of India was a mere $360.
Marketing strategies in rural India must rely on large volumes over fat margins to drive
profitability in such a price sensitive market. However, how can consumer goods
companies drive volume growth when a regular bottle of shampoo costs more than the
average daily
rural wage? Hindustan Lever, a subsidiary of Unilever coined the term nano-marketing in
the early 90s when it introduced its products in small satchets. In tiny pillow-like plastic
packets that contain about 20 millilitres of product, Unilever sells shaving gel,
dishwashing liquid and toothpaste, to name just a few items. The satchets answer the
needs of rural consumers who cannot, or are not used to, buying larger sizes and enables
them to buy on a more frequent basis.This strategy provides a viable entry-level price for
many rural consumers who want to try new products, and allows companies to drive
volume sales. Today, Hindustan Lever estimates its shampoo sachets are sold in around
400,000 of India's 600,000 villages.Other multinational companies, such as Coca-Cola,
have learned the hard way. After being thrown out by Indias earlier socialist government,
Coca-Cola re-entered the Indian market in 1993 and struggled to grow its business. CocaCola overestimated the size of the market, misread consumer preferences and
underestimated Pepsis market penetration in India which had beene stablished through
its long-standing presence in the country. In 2000, the company wrote down its Indian
bottling assets by $405 million after incurring years of financial losses.Since Coca-Cola
recruited a local Hindustan Lever veteran, Sanjeev Gupta, its Indian operations have
started to turn around. With a pulse on rural consumer needs and preferences, companies
41

introduced a new, smaller sized bottle in 2001. The 200ml Coca-Cola bottle sells at 10c
and is aimed at rural areas and lower-income urban markets (the Climbers and the
Consumers).Furthermore, this year Gupta dropped the price of a 300ml bottle of CocaCola to 17c from 24c.These price cuts have boosted volume sales and the smaller sized
bottle has been extremely successful and is expected to represent about half of CocaColas sales by volume in 2003,turning Coca-Colas operations to profitability.

Distribution:
Retailer Power
While independent retailers are a fragmented group, they have a substantial amount of
power in driving consumer purchases, particularly in rural areas. Most rural stores are
cramped providing little opportunity for consumers to browse. The consumer interacts
directly with the retail salesperson (usually the owner) and services often include
informal lines of credit and home delivery in addition to personal opinions on goods. In
rural areas, retailers tend to carry only a single brand in a product category. In such a
retailing environment, being first on the shelf and developing a privileged relationship
with the retailer is extremely important and a competitive advantage to consumer goods
companies.One of the grey areas that needs to be probed more into is the Trade -- that is
the retailer. When an urban consumer goes to shop -- he has many options in front of
him(around 10 to 15 in some cases) as are displayed in the store. But for the rural
customer these choices are limited.

42

So the retailer plays a very big role here. The rural customer goes to the same shop
always to buy his things. And there is a very strong bonding in terms of trust between the
two. The buying behaviour is also such that the customer doesn't ask for the things by
brand but like -- "paanch rupey waali chaye dena". Now it is on the retailer to push
whatever brand he wants to push as they can influence the buyer very easily and very
strongly on the preferences.
Unfortunately, we have not spent enough money and time on understanding the rural
markets in a collective way. As we need to understand the consumer, we need to do the
same thing for the retailer as he is a chief influencer in the buying decision.

Promotion
There is an example in innovative media. It was used to push products in personal wash
like Lux and Lifebuoy and fabric wash items like Rin and Wheel. For both, washing and
for taking bath - one requires water. Now for rural markets there are three sources of
water - wells, handpumps and ponds. For the first in the history of advertising - these
were branded. Special stickers were put on the handpumps, the walls of the wells were
lined with advertising tiles and tinplates were put on all the trees surrounding the ponds.
The idea was to advertise not only at the point of purchase but also at the time of
consumption.
So the customer could also see the advertising when he was bathing or washing. Now, the
customers who bought these brands got a sense of satisfaction by seeing their choice

43

being advertised in these places while a question was put in the minds of the customers
who had bought other brands. So this was an innovative strategy that worked quite well.
Therefore to understand the way the rural markets work -- we need to go to these markets
and spend time there in understanding them. We live in surroundings where the things are
completely different from what the rural customer experiences. And we can't understand
him unless we go and spend time there. Things like what time does he get up, etc need to
be studied and customer needs to be understood. Also these studies need to be passed on
so others can also benefit from the ground works done and enhance them further.
We need in depth studies of the market, the medium, the message and the rural customer
in center of all these to understand the rural markets completely.

44

RURAL MEDIA

Urban consumers shop daily and have 365 opportunities a year to switch brands while the
rural purchasers who buy their goods in weekly haats have only 54. Attempts to reach
rural consumers, even once during the purchase cycle to ensure repeat purchase, make
point of purchase advertising and trade push indispensable. This requires a significant
reorientation in the allocation of funds across media. For example, outdoor advertising
accounts for over 7% of all media expenditures in India, while it only accounts for 0.8%
in USA.

Rural buyers living in small isolated groups distributed across vast distances have limited
access to the broadcast media. The existence of a multiplicity of languages and varying
level of illiteracy complicates the task of communication further. To overcome some of
these challenges, Unilever pioneered the concept of video vans that travel from village to
village screening films in the local language, interspersed with advertisements for
Unilevers products. The company also provides product usage demonstrations to the
captive audience because written instructions on the

pack may be illegible to the

consumers who are either illiterate or do not understand the dialect. Where mass media is
used, variability can, at times, back fire. On re-entering India in the 1990s, Coca Cola
decided to reinvest massively on a TV advertising campaign. It opted for slick
commercials, rich in colour, with high production values, but the effect was somewhere
lost

on

market

where

60%

of

all

TVs

are

still

black

and

white.

However, in the recent past, the improved technology has allowed the cable and satellite

45

networks to increase their reach across the countryside thus exposing a rural consumer to
a lifestyle that was beyond his dreams. And this increasing awareness has led to a
significant change in his buying behaviour and consumption patterns. While the urban
market is getting increasingly competitive and saturated, the rural market is blooming
with increase in the disposable incomes of the households, thus promising a far better
scope for growth for marketers. Hence, with the shifting dynamics of the present-day
market situation, now it is the turn of the rural consumers to dictate the terms. And this
reinforces the need for marketers to formulate a well-designed strategy to feel the pulse
and to tackle the mystic rural marketing.

Selecting The Media Mix :TV :With he increase in coverage and increase in TV ownership in rural areas , TV is
gradually becoming the prime media for rural communication .

Cinema :The cinema is a useful medium in rural context . most large and medium villages have
one or more cinema house. Also, more than one-third of all rural people do see cinema as
a matter of regular lifestyle. Advertisement films , short feature films, with disguised
advertisement message, and documentaries that combine knowledge and advertisements,
can be employed for rural communication.
It has been estimated that 33 per cent of the total cinema earnings in the country come
from rural India.

46

Radio:The radio is well -established medium in rural areas. A big expansion in broadcasting
facilities has taken place in the country over the years. The availability of radio sets has
also expanded. While radio as a medium cannot match TV in potency and effectiveness,
in the existing context ,it can certainly play a significant role in rural communication.

Print media too has some scope :The role of print media is certainly limited in the rural context. Even the remotest rural
parts have a small group, which is literate. Moreover, while the group may be
numerically small , its member usually happen to be the opinion leaders , influencing the
purchasing behaviour of the large segment of the rural consumers. so, it would be unwise
to assume that the print media has no scope at all in the rural areas . Moreover, the
younger generation in the rural areas is comparatively more literate. With the new trend
of increasing rural literacy , the scope for using print media in rural communication will
increase further.

Outdoor:The outdoors , which include hoardings, wall paintings, illumination and other displays,
also lend well for rural communication . In fact , many companies are using the outdoors
in the rural communication mix.

POPs ( point of purchase) :The POPs Point of purchase promotional tools- are also quite useful in the rural
markets. The POPs meant for the rural market should be specially designed to suit the
rural requirements. Symbols, Pictures, and colours must be liberally in POPs meant for
47

the rural market. Colour is of particular significance . As a general rule ,the rural people
love bright colours. The effective Communicator utilize such cues.

48

RURAL SMALL SCALE INDUSTRIES

In India, the Small Scale Industries Sector has been growing faster than the whole of the
manufacturing sector, at rates of 7% to 10% during the past decade. Hence, the targeted
growth rate of 12% envisaged in the 10th Five-year Plan appears imminently attainable.
SME sectors contribution to GDP has been increasing and is about 40% now. Today,
11.4 million SSI units provide employment to over 27.1 million people contribute 40% of
the countrys industrial production and 34% of the exports from the country and also
produce more than 8000 products. Setting up of National Commission on enterprises,
Revamping of Khadi and Village Industries, Small Industries Development Bill, Golden
Jubilee of SIDO and Third All India Census of Industries are some of the highlights
during the year.
To address the concerns of the unorganised / informal sector enterprises, a four member
National Commission on enterprises in the unorganised /informal sector under the
Chairmanship of Dr. Arjun Sengupta in the rank of Cabinet Minister has been set up on
21.9. 2004. The mandate of the Commission is to examine the problems being faced by
the enterprises in the unorganised / informal sector and to provide appropriate
recommendations for technical, marketing and credit support to these enterprises. The
Commission will function both as an advisory body and a watchdog for the informal
sector.

Revamping of Khadi and Village Industries

For revamping the Khadi and Village Industries (KVI), the Government dissolved KVIC
on 14.10.2004. The Chairman and all members of the Commission ceased to hold their
offices since that day. The Ministry set up a ten member Expert Committee (a) to review
the existing structure, functioning and performance of the KVI since its inception (b) to
review the KVIC Act, 1956, KVIC Rules, 1957 and the Regulation made thereunder and
(c) to recommend other measure(s) considered necessary by the Committee to revamp the
KVI and to launch new appropriate programmes/schemes.

49

Small Enterprises Development Bill

The Small Enterprises Development (SED) Bill has been drafted. Enactment of this Bill
will remove the barriers to SSI growth by inculcating a hassle-free, user friendly
environment enabling SMEs to diversify from the conventional product range. It will,
thus, encourage exports and global integration and propel SSI towards the projected 12%
growth target. This can help India achieve its ambition of transforming into a global
manufacturing hub, a centre of excellence for small enterprise activities.
In addition to SED Bill, a major promotion package for development and promotion of
SSI sector is under formulation.

Credit Rating Scheme

A Credit Rating Scheme has been introduced to encourage the SSI Units to get their
credit rating done by the reputed credit rating agencies, with a view to facilitating credit
flow to them and enhancing the comfort-level of the lending banks. 75% of the cost of
the credit rating exercise, with a maximum limit of Rs.40, 000 per SSI unit, is now
reimbursed to the SSI units availing of this one-time facility. The scheme is being
implemented by the NSIC.
SME Fund
Looking to the credit needs of the SMEs in 1990, the Small Industries Development Bank
of India, (SIDBI) was launched to aid and finance for small enterprises with a corpus of
Rs. 2500 crores. To further improve credit availability, a SME Fund of Rs. 10,000 crores
has been operationalised under SIDBI from April 2004. Credit to SSI
In order to facilitate smooth flow of credit to SSIs, the composite loan limit for SSI
entrepreneurs has been increased from Rs. 50 lakh to Rs. 1 crore. Credit Cards
Laghu Udyami Credit Card (LUCC) Scheme has been liberalized by enhancing the credit
limit from Rs. 2 lakh to Rs. 10 lakh, for borrowers who have a satisfactory track record.
SSI Clusters 16 new industrial clusters were identified and taken up under Small

50

Industries Development Programme during this year. These are:

1.

Food Processing, Muzaffarpur, Bihar

2.

Steel Re-rolling Mills, Raipur, Chhatisgarh

3.

Agricultural Implements, Karnal, Haryana

4.

General & Light Engineering, Parwanoo, Himachal Pradesh

5.

Readymade Garments, Bangalore, Karnataka

6.

Gold Ornaments, Thrissur, Kerala

7.

Readymade garments, Indore, Madhya Pradesh

8.

Brass & Bell metal, Khurda, Orissa

9.

Agricultural Implements, Moga, Punjab

10.

Ball Bearings, Jaipur, Rajasthan

11.

Leather Footwear, Agra, Uttar Rpadesh

12.

Leather goods, Shaniniketan, Uttar Pradesh

13.

Installation of Common Facility Centre in Brass/Bronze, Utensils, Manufacturing

Cluster at Pareb, Bihar

14.

Development of Whiteware Cluster at Khurja, U.P.

15.

Development of Auto Parts Clusters at Phagwara, Jallandhar and Ludhiana

16.

Development of Cane & Bamboo Cluster at Dimapur, Nagaland.

The development of these clusters is at various stages of implementation.

A National presentation on Rural Business Hubs was organised by the Ministry in

collaboration with the Confederation of Indian Industries at Vigyan Bhavan on 5
November, 2004. The Prime Minister Dr. Manmohan Singh delivered the valedictory
address. The presentation focussed on the number of issues including the participation of
the private sector in such programmes. Conference of States/Uts Ministers A conference
of Ministers (SSI, KVIC & COIR) was organised on 25 June 2004 at Vigyan Bhavan,
New Delhi under the chairmanship of Shri Mahabir Prasad , Minister of SSI & ARI.
Progress of implementation of various programmes of SSI/KVIC and coir industry was
reviewed in the context of implementation of NCMP. The Minister stressed upon the need
for a comprehensive promotional package for the SSI sector. Golden Jubilee Year of
SIDO This year was celebrated as Golden Jubilee year of the Small Industrial
51

Development Organisation (SIDO) along with the SSI convention on 30 August at

Vigyan Bhavan , New Delhi . SIDO was set up in 1954 as an apex body for formulating
and overseeing the implementation of policies for the promotion and development of
small-scale industries in the country On this occasion, the Prime Minister gave away
National awards for outstanding achievements in the fields of enterpreneurship, research
and development, and quality product in the SSI sector. The inaugural session of function
was followed by an open-house by way of an interactive session on SSI lending in which
the representatives of major banks participated along with the representatives of industry
and other officials. Global Summit on SMEs The Ministry in association with the
Confederation of Indian Industry ( CII) organised `India Global Summit on SMEs
Emerging Challenges and Opportunities on 23-24 November, 2004 in New Delhi. Dr R.
Chidambaram, Principal Scientific Advisor to the Government of India made a special
presentation. The global summit facilitated networking and sharing of best international
practices, in the SMEs sector, to provide a sustainable focus on the future development
and the growth of the SMEs. During the summit discussions, deliberations took place on
the themes of enabling policies, role of finance/ innovative finance and measures for risk
sharing. Value addition through information and communication technology, global
outsourcing opportunities and global small enterprises. 137 foreign delegates from 27
countries across the globe attended the summit. Conference on `Small Business
Competitiveness Development National Small Industries Corporation (NSIC) in
collaboration with the Commonwealth Secretariat London organised a pancommonwealth programme on `Small Business Competitiveness Development in New
Delhi. On 15-19 November, 2004. Dr. V.Krishnamurthy, chairman, National
Manufactruing Competitiveness Council delivered the key note address Techmart India
2004 National Small Industries Corporation (NSIC) organised `Techmart India 2004 , the
12th Internatioinal Technology Fair, during the Indian International Trade Fair 2004 at
Pragati Maidan, New Delhi. More than 236 SSI units participated in it. NSIC was
awarded a silver medal for `Excellence in special Display by the India Trade Promotion
Organisation.

52

WTO and SMEs

Under the World Trade Organisatioin (WTO ) regime, new opportunities are being
created for linkages between SMEs across the globe. The dismantling of the textile
quotas is being anticipated in India with great enthusiasm. Garment export is a dominant
characteristic of Indian SMEs. Other sectors, such as Biotech, IT and IT enabled services,
footwear to name a few, have shown promising potential. Closer connectivity of Indias
large agricultural resources affords growing opportunities for new ventures. Indias vast
pool of talented and educated persons, and low-cost labour can translate into possibilities
for foreign collaborations. SMEs grew by 19% last year, faster than the overall growth of
the IT sector, and has expected SMEs to deliver better results in the coming years. SMEs
are also engaged in cutting edge research and development activities, logistics services,
back-office operations and other services.

Reservation Policy
On the recommendations of the Advisory Committee, the Government has deserved on
20.10.04, 85 items from the list of items reserved for manufacture by the small scale
industries. This was done to enable the SSI sector to grow and adapt to the fast changing
economic scenario.
The Ministry brought out the final results of the third All India Census of small scale
industries 2001-2002. The census was launched in November 2002 . The main objectives
of the census were: (I) to update the frame (list) of registered SSI units.(ii) to identify sick
and incipiently sick units with the reasons thereof, and (iii) to collect other useful
information for policy formulation.
The State Directorate of Industries have been requested to de-register 8,87,427 SSI units
found closed during the survey of the Third All India Census.
Tool Room & Training Centre at Guwahati was inaugurated by Minister of SSI & ARI on
June 26, 2004.

Action Plan for Employment in Agro & Rural Industries

To generate more employment in the agro and rural industries sector, the Government has
fixed a target of creation of 25 lakh additional job opportunities in rural areas during the
53

10th Plan under the Rural Employment Generation Programme (REGP) being
implemented through the Khadi and Village Industries Commission (KVIC). In the first
two years of the 10th Plan 8.32 lakh job opportunities have already been created under
the REGP and a target of creation of 5.25 lakh jobs have been fixed for the current
financial year 2004-05.
Further, a target of creation of 16.5 lakh employment has been fixed under the Pradhan
Mantri Rozgar Yojana (PMRY) for the 10th Plan period. In the first two years of the 10th
Plan 5.44 lakh job opportunities have already been created. A target of creation of 3.75
lakh employment opportunities has been fixed for 2004-05
Coir Industry
The 10th Plan outlay is Rs. 11500 lakhs envisaging 12% growth in production and
export. The 10th programme of coir industry is aimed at overall sustainable development
of coir industry trough research and development, modernisation, quality improvement,
human resource development, better marketing of products and welfare of all those who
are engaged in this industry.

54

STARTING THE E - MARKETING IN RURAL INDIA

Modern information and communications technologies (ICTs) and web based marketing
of agricultural produce hold great promise for the socio-economic development of rural
hinterlands in India. However, if they are to serve the `unserved and spawn innovation
at grass root level their implementation must be carefully localised. This paper explores
several models of ICT deployment and information design issues which have been tried
in various parts of the developing world in the context of agricultural marketing over the
web and uses that learning with field experience from a live project. The flexible systems
framework is found appropriate and useful to design the next action agenda.
The anytime-anywhere advantage of e marketing leads to efficient price discovery and
offers economy of transaction for agricultural trading. This attracts many rural
developmental agencies to deploy websites for marketing agricultural produce. But in
spite of a core value proposition and significant investment by the Indian
government/NGOs and commercial agencies in developing such portals, many have
failed. Internet traffic on these websites is either very limited or none at all. Yet there is a
lack of empirical studies on the modes of their failures.
This study using the sap-lap methodology examines the experiences of a number of
internet portals from India and other countries engaged in rural marketing or
disseminating rural development information, with usability measures derived from
farmers and traders and those suggested by researchers. The findings are used in
developing a conceptual framework for e-marketing info design for agricultural market in
rural northern India for the portal (DM).

Situation
Common wisdom has it that the advent of modern information and communication
technologies (ICTs) such as telephony or the internet hold unprecedented opportunities

55

for rural development. Researchers, policymakers and entrepreneurs alike frequently

claim that ICTs represent one of the most powerful tools in the struggle against poverty.
The significance of the Web in disseminating information and communicating this
effectively to the targeted user has been sufficiently debated. Most experts agree to it that
the Web will have a great impact on the way rural marketing would be conducted in the
future, yet there has been little research towards exploring the effectiveness of the
provision of agriculture-related and rural marketing information in the electronic form.
This study set out to assess the current performance of agricultural websites in some key
areas of information provision through such websites maintained by government
departments and agencies, private profit-motivated as well as non-governmental
organizations (NGOs), and to identify the barriers to communication. The results offer
significant implications for researchers and practitioners interested in development of
portal information structure for Web development, multi-dimensional communication,
electronic commerce networks and e-commerce trading platforms for rural marketing.
There are a number of ways some obvious and some not-so-obvious ones in which
ICTs may serve the development process. For instance rural entrepreneurs can benefit
because ICTs help to improve access to markets or supply chains and provide a broader
base for decision-making, thus making risk more calculable. Moreover, many local
communities have experienced that ICTs have increased bottom-up participation in the
governance processes and may expand the reach and accessibility of government services
and public infrastructure. In Andhra Pradesh, Internet-based Integrated Citizen Service
Centres allow for electronic bill payment, issuing of certificates, permits and licenses; or
access to public information.

The electronic village project of M.S.Swaminathan

Research Foundation (MSSRF) in Pondicherry received the Stockholm award for its
promise.
However, there is as yet little systematic empirical evidence of the supposed enormous
developmental impacts of ICTs. Moreover, in many especially rural areas, the
private sector is yet to invest significantly in ICT experiments (except for a few like ITC
or Tata Chemicals) because of lack of experience with rural markets or low purchasing
power of the local population. This means that, if ICT access is to be expanded, public
56

money will have to be spent which in turn means that there are important trade-offs to
be considered. In many areas, there are serious questions about how much money
policymakers should spare for the build-up of ICTs instead of investing further in potable
water supply, roads, electricity or other physical infrastructure projects.
Given such trade-offs, there is a need to identify which kinds of ICT access deliver the
best value for money, and how the limited resources that can be spent on it can be made
to best suit the particular needs of rural India. A number of `models have so far been
tried.
One of the most famous projects of successful ICT application for development is the
Grameen Village Phone system, undertaken by Grameen Telecom (a member of the
Grameen Group). The project aims at ultimately spreading phone access to the over 100
million inhabitants of Bangladesh who are so far unwired, made possible by combining
the Grameen Banks expertise in village-based micro-enterprise and micro-credit with the
latest digital wireless technology. The aim is to have selected member borrowers of
Grameen Bank purchase the phones under a lease programme and make the phones
available

to

all

users

in

the

village

on

fee-paying

basis.

Another model of ICT provision in rural areas of developing countries, and one which
attempts to combine phone access with access to the Internet is that of the so-called
Telecentres or Information Kiosks or the recently introduced Infothela of MLAKLH. An
Infothela is a common point of access for multiple users (often an entire community),
providing a range of ICT services including Internet, fax, phone, e-mail, word processing,
and even specialised information retrieval or applications (e.g. distance education or
matrimonial matchmaking).
Telecentres have been established widely in the developing world, and vary in their
service provision and means of funding. In Peru, the establishment of numerous `Cabaas
Pblicas created one of the highest concentrations of public internet access and a
significant reduction in prices. Nevertheless, the experience with telecentres has so far
been a mixed one. In numerous cases, usage, particularly of PCs, has been lower than
expected or commercial viability was not attained. Of the over 70 Community
57

Telecentres established since 1997 by the South African Universal Services Agency, only
40 per cent remain open today, with only 3 per cent making enough money to cover costs.
Buried at the end of the World Bank policy paper on the Networking revolution:
opportunities and challenges for developing countries ( June, 2000)

is an account of

multipurpose community telecentres (MCTs) in rural Mexico. It turns out that of twentythree MCTs built in rural Mexico, only five were working two years later. This is a failure
rate of 80 percent.
The policy paper comments, Problems encountered included insufficient maintenance
funding, inadequate political interest and will, and cultural constraints which hamper
community interest in the projects. The paper gives no hint why political interest and
will might have been inadequate and why community interest might have been
constrained by that holdall excuse for failure, culture.
The paper concludes that the Mexican case underscores the importance of participatory
design and attention to sustainability issues in the development of such programs.

Actor
Internet and Information Kiosks exist in various kinds, each with their respective merits.
First, one might distinguish between the small private sector cyber cafes on the one hand
and bigger, donor-funded telecentres like e-Seva in Andhra Pradesh or e-Village in
Pondicherry on the other hand. Smaller, privately run cyber cafes are often financially
self-sustaining but are thus usually restricted to areas where they expect to be viable
(usually urban centers) and are usually neither within physical nor financial reach of the
poor. They are also unlikely to be able to provide local content. By contrast, larger,
often externally funded telecentres are rarely financially sustainable but can focus more
on specific development aspects, including access specifically targeted at rural
communities and the poorest in general, as well as a focus on training.
A second distinction is according to the institutional context they are embedded in. This
often has a significant influence on the developmental impact of telecentres.
commercial telecentres and commercial franchises (like e-choupals of ITC) are usually
58

closest to commercial viability but, as mentioned, are unlikely to have an impact on the
poor outside the economic circle of the e-Choupals.

Telecentres run by or with the

involvement of developmental NGOs are more likely to target poor and marginalized
communities and focus on much-needed additional services like training, content
creation, provision of public goods without which ICT access would be of limited
developmental use. Telecentres in village schools for example as another alternative have
the significant advantage that for their establishment an existing physical infrastructure
only has to be extended and some of the ICT-relevant training can be cost-effectively
integrated into the mainstream curriculum of the educational institution. This partnership
has successfully worked in the DM project.
One further idea for the Digital Mandi that evolved was Virtual Telephones or village
voice mail systems, as have been set up in Brazil. These can provide individuals with
their own telephone number and access to a voice mailbox. In other words, the individual
need not possess a telephone but can receive calls to a voice mailbox using his/her
personal PIN. Extending this idea to text e-mail access, a South African company assigns
e-mail addresses to every Post Office box address in the country, thereby providing
electronic mail indirectly to around eight million South African households through
public internet terminals located in post offices which users can access with a personal
identification number. The Postal Department in India has now taken up a similar
programme. .
Thus there are a number of alternatives and apparently mutually exclusive business
models for ICT implementation in Rural India.
On one hand it appears that kiosks run by local entrepreneurs with localized and targeted
applications (like e choupals in Northern India or voicemail service in Brazil or
matrimonial matchmaking service in Tamil Nadu) will succeed on the other hand
following the success model of the world wide web itself one may suggest that if an
infrastructure is created and user friendly appropriate interfaces are continuously
accessible then local rural folks will develop their own applications and Information
Kiosks or Infothela will survive.

59

The Digital Mandi Project conceived as an electronic trading platform for agrocommodities of Northern India and meant to run as a core application on the mobile
Infothela faced additional problems.
Barriers to information access may be physical, economic, intellectual or technological,
that impede a users participation in the activities on a website. The barriers may be
actively imposed by the architects and website designers or they may be allowed to
continue simply through their lack of action or lack of understanding of the critical user
conditions. Such critical user conditions may arise due to particular demographic,
geographic, cultural, social, psychological, economic or other factors. Issues related to
usability such as ease of use, usefulness (Davis, 1989), decision effectiveness (Mason et
al, 1973), user response, user satisfaction (Doll et al, 1988) and many other aspect of
usability have been studied in great detail by researchers. But interactions with focus
groups at various agricultural market places around Lucknow-Kanpur showed the need of
a more detailed study on Information communication barriers on a more localised set of
priorities.

Learning
It is therefore, assumed that a website with relatively high-level of accurate, up-to-date
and pertinent content, deployed in a user-friendly way, customized to particular user
groups, and tailored to specific geographical needs should be universally successful and
hence, accepted in India too. However many such efforts have apparently failed to
achieve their targets.
The challenges to agricultural website usability for rural marketing in India arise mainly
because of the highly specific local needs and the great diversity in local conditions. The
major challenges are

Poor literacy rate low use of textual information

Remote village locations - physical distances compounding problems of

lack of proper price information and habitual dependence on middlemen.
60

Absence of alternate media for dissemination of info.

Absence of info in vernacular languages and multiplicity of languages.

Cash crunch of farmers, immediate cash transaction system and reluctance

of banks to provide soft loans to farmers.

Economic, low-cost solutions - any technology solution aimed at

benefiting the masses in rural India must be affordable and low-cost so
that the perceived economic benefits of such an endeavor are much more
than the cost of switching over to a different technological solution.

In the absence of timely and correct information about prices, arrivals and market trends,
compounded with the problems of low cash-at-hand and proper advice, farmers are
forced to sell their produce at lower-than-expected rates. The result is that the benefits of
the green revolution have not really percolated down to the farmers.

Action
The Digital Mandi project demonstrates that there are a number of features pertaining to
the ICT access projects that are particularly successful from a developmental viewpoint
This means, for instance, to somehow convey the relevant (local) content provided
through internet access to the largely illiterate rural populations of developing countries
in local language may have far- reaching spin-offs.
It has a leased line connection to the Internet, and in the so-called process of radio
browsing programme presenters browse the Web in the studio on behalf of listeners (who
provide requests/input through phone or post). Relevant experts from the community
then interpret the information for listeners. Another good example of the creation of
relevant local content are the Infoshops in Pondicherry, India. After information
requirements are identified during a trial period, volunteers from the village create a local
database comprising government programs for low income rural families; cost and
availability of farming inputs such as seeds and fertilisers, grain prices in different local
61

markets; a directory of insurance plans for crops and families; pest managements plans
for rice and sugar cane; a directory of local hospitals, medical practitioners and their
specialties; a regional timetable for buses and trains; a directory of local veterinarians,
cattle and animal husbandry programs. All these preceding experiments contributed to the
Digital Mandi design.
Web site success depends on a number of factors the most important of which is the
website design, which encompasses both the content creation and information design.
All website design issues aim at providing certain requisite features in the website.
Jonathan Palmer (see references) has contented that website success depends on such
factors as website download delays, navigation, content, interactivity and responsiveness.
The inclusion of these features into a good website can be addressed as
(a) content-related issues
(b) information design issues and
(c) communication design issues.
Traditionally, the basic work of a good website design has been considered as addressing
the content-creation and context-appropriateness issues only. While website designing
objectives for other purposes may be fulfilled by creating a good fusion of relatively
high-level content with fine design features taking care of the issues mentioned above,
they would certainly fall behind their objectives when considering agricultural websites
for rural marketing. The reasons as has been listed earlier, can be found in the inherent
characteristics of rural markets in India. These websites are therefore bound to fail unless
delivery services for agricultural information can be effectively integrated with good
information design models and grass root innovators/ social activists agenda.

Performance
The basic findings from our initial research at Digital Mandi has shown that the presence
of a number of desired features in a website leads to higher user satisfaction. Such
62

features are broadly aimed at satisfying one or the other of the following immediate user
objectives:
a

Ease of access.

Up-to-date content.

Layout, design, consistent themes.

Easy navigation.

Higher interactivity.

Access through multiple media.

Higher use of non-textual information.

Multiple languages.

Lower cost of transaction.

It was assumed that each of these factors contributed to higher user satisfaction. The
Digital Mandi project now wants to integrate an ethnographic approach with flexible
systems methodology to focus on the communication design issues for web-portals
specifically devoted to rural marketing in India. The specific research questions are:
1

What are the major information design features for rural marketing in India?
Hypotheses (a), (b), (c), (d) and (e) are tested to find answer to this question.

What are the major communication media tools to be used for agricultural
websites in India? Hypothesis (f) is tested against this question.

What are the modes employed to transcend communication and cost barriers for
specific user groups?

What local language solutions are to be provided through which media?

What non-textual solutions can be provided for the under-educated,

untrained user?

What makes ICT relevant for the unserved rural communities?

63

IMPACT OF POWER BRANDS

"With the implementation of the power brands strategy almost complete, we have shown
both topline and bottomline growth in this quarter." D Sundaram, finance director,
Hindustan Lever Limited, after announcing Q3 2005 results.
"We benefited by dropping brands with low profit margins or moving out of categories
that were not growing." Harsh Mariwala, chairman and managing director, Marico
Industries. Three men, one voice. Indian fast moving consumer goods companies like
HLL, Godrej Consumer Products Limited and Marico Industries are completely sold on
the concept of "power brands". But in their rush to put their best brands forward, are
these big companies in danger of overlooking the potential offered by some of the alsoran brands?
It's been almost five years since these three FMCG giants opted to manage their brand
portfolios on the basis of the power brand strategy. How have they fared? And what does
the future hold?

Why power brands?

In 2001, HLL decided to put its marketing resources behind 30 power brands out of a
bouquet of 110. Of these select brands, the top five brands of the company contributed
more than Rs 3,000 crore (Rs 30 billion) to the company's turnover (close to 30 per cent
of sales). So what did it take to be a power brand? In a nutshell - size, brand strength,
uniqueness and growth potential. The thinking in HLL? Helping brands grow under the
prevailing market conditions required scale.
Even in 2001, the Indian FMCG market was crowded. More than 3,000 advertisements
were beamed on television every month, while stock-keeping units at retail outlets had
increased by over 40 per cent, in just three years. Unfortunately, for the most part, shop
sizes remained the same. Which meant in-store displays - critical for impulse purchases suffered. Even the plethora of television commercials wasn't helping the FMCG cause: it
was difficult for brands to stand out amidst the clutter. For others like Marico, GCPL or
64

Dabur, too, "getting more from fewer brands" became the magic mantra. In 2002, GCPL
decided to focus on five brands in a bid to sustain growth; since these five contributed
more than 90 per cent of the company's total sales, that strategy made eminent sense.
Around the same time, Marico decided to exit from slow-growth, low margin sectors
such as Sweekar edible oil and Sil jams. Instead, it chose to stick with brands like
Parachute, Saffola and Hair & Care. Was the approach correct? Arindam Banerjee,
professor and chairman, marketing area, Indian Institute of Management, Ahmedabad,
agrees cautiously. "Power branding counters brand dilution by allocating organisation
resources on lesser but more secured marketing investments," he explains. Adi Godrej is
more emphatic. "[Power branding] is not to prevent dilution of brand, but to prevent
dilution of the company's focus. If a company has 10 brands and tries to support all of
them, focus on the important brands would be diluted."
Top to bottom
Has it worked out quite the way these companies anticipated? Global marketing experts
aren't too bullish about a power brands strategy's impact on the balance sheet. "Power
brands will have an impact on the bottomline of companies, but not necessarily on the
topline growth," says Nirmalya Kumar, director, centre for marketing, and co-director,
Aditya V Birla India Centre, at London Business School. Jagdish Sheth, Charles H
Kellstadt Professor of Marketing, Goizueta Business School, has a slightly different
viewpoint. "You may have problems in the short run, but these can be ironed out in the
long run. Introducing brand variants will help." Consider some numbers. Between 200102 and 2004-05, profits at GCPL increased 19.66 per cent, from Rs 41.98 crore (Rs 419.8
million) to Rs 86.07 crore (Rs 860.7 million). Over the same period, turnover went up
less than 4 per cent, from Rs 520.47 crore (Rs 5.2 billion) to Rs 603.46 crore (Rs 6.03
billion). "This is clearly unsustainable," says an analyst. In sharp contrast, Marico has
shown significant hikes in both turnover and profit from 2002 to 2005. While sales
climbed from Rs 671.08 crore (Rs 6.71 billion) to Rs 953 crore (Rs 9.53 billion), profits
increased from Rs 49.32 crore (Rs 493.2 million) to Rs 73.79 crore (Rs 737.9 million).
For its part, HLL has been plagued by flat or declining growth for some time now.
Between 2001 and 2004, profits plunged more than 22 per cent {Rs 341 crore (Rs 3.41
billion)}, while turnover dropped by Rs 892 crore (Rs 8.92 billion).
65

The troubles magnify when specific categories are considered. Toilet soaps, for instance,
contributed 24 per cent of HLL's sales in 2004, with sales value increasing marginally
from Rs 2,089 crore (Rs 20.89 billion) to Rs 2,380 crore (Rs 23.8 billion). But sales
volumes had actually declined, from 384,000 tonnes in 2001 to 368,000 tonnes,
indicating that the growth was mainly on the back of price hikes.
The story was repeated in reverse in the detergents sector, where HLL had three power
brands (Surf, Rin and Wheel). Sales volumes increased from 892,000 tonnes to 930,000
tonnes, but sales value crashed from Rs 1,975 crore (Rs 19.75 billion) to Rs 1,872 crore
(Rs 18.72 billion), thanks to the price wars with Procter & Gamble.
The lesson? Power brands may be "powerful" to the company or the retailer, not
necessarily to the consumer. Not everyone agrees. Counters a senior HLL executive, "The
impact was because of the migration phase to power brands - sales of non-power brands
declined." He adds that the company's power brands strategy will boost both topline and
bottomline growth in the future.
It doesn't help that India isn't just one, big market: it's several hundred. Brooke Bond tea
may be a power brand for HLL, but it doesn't face the same enemy in every market in the
country: if Wagh Bakri rules in Gujarat, Girnar and Sapat vie for the top honours in
Maharashtra.
Making matters worse is the fact that rural India is an entirely different nation when it
comes to preferences. That's a problem GCPL, too, faces; at present, rural sales account
for just 30 per cent of the Rs 603.46 crore (Rs 6.03 billion) company's sales, but the
company expects that figure to go up substantially in the coming years.

Marico's

Mariwala agrees that penetration is difficult to achieve with a power brands strategy.
Consequently, segmentation takes a hit, because you don't have 20 brands for 20 different
people. "As a brand grows larger, it simply cannot mean everything to everybody," agrees
London Business School's Kumar. There is a way out, though. Kumar points out that a
power brand strategy allows a company the luxury of targeting fewer segments, but the
more profitable segments.

66

HLL found another way. In addition to its 30 national superpowers, it also has 10 regional
jewels. HLL executives point out that with fewer brands on which to focus, the company
will be able to manage its marketing spends better.
Godrej is attempting to beat regional diversity at its own game. For instance, when toilet
soap Godrej No.1 entered the sub-popular category in 1998-99, it had only one offering:
rose.
It soon also introduced its first variant, sandal, which has proved popular in the southern
markets. The rose variant finds takers in northern states such as Uttar Pradesh, Bihar,
Punjab, Madhya Pradesh and Rajasthan.
One, two, three, you go free
If the rural-urban divide cuts into the aspirations of power brands, the changes in the
urban shopping landscape renew hopes. Most analysts expect shoppers to throng to malls
and hypermarkets, for everything from electronics and clothing to groceries.
As the shopping landscape changes in India and malls look down upon hole-in-the-wall
outlets, power brands could be an answer. According to HLL, at present just 3 per cent of
Indian customers shop through organised retail outlets. The average in Asia -- 30 to 35
per cent. How will organised retail help power brands? In developed markets, all brands,
leaving aside the top three sellers, have to buy space on retailer shelves. Since private
labels get a free ticket to the shelves as the third brand, it is important to be a No. 1 or No.
2 in a category.
Marketing experts claim that large-format retailers have changed the destiny of
companies in foreign countries. Sheth refers to P&G's experience in Canada. In that
market, rival Unilever was a market leader with loyal customers, while P&G wasn't doing
all that well. When Wal-Mart entered Canada, it changed the complexion of the market.
Wal-Mart provided P&G a much-needed distribution channel. In five years, P&G gained
significant market shares in Canada. "When a Wal-Mart happens to India, the power
branding companies will reap better benefits," says Sheth. That's because organised retail
formats will provide more display space to power brands, their extensions and variants:
and marketers believe that whatever gets seen, gets sold. That's not happening at present.
Remember, more than 90 per cent of grocer shops in India are cubby-hole outlets.

67

So, what's the final take-away? Will a power brands strategy work in the future in India?
The answer: it depends on the category, the market and the consumer. Now, where have
we heard that before?

Power brands in perspective

Power brands as a concept came into existence by seeing the retailer as an economic
partner. When a P&G executive paid a visit to Japan, he saw the respect and importance
given to retailers -- something that was not happening in the US where there were several
layers in the distribution channel.
Later, when Wal-Mart emphasised that it was the largest customer for P&G and the
company could work closely with the retail chain and reduce costs in its supply chain,
P&G started power brand projects with Wal-Mart, K Mart and others.
The principle was simple. Brands were rationalised to support the super retailer. In 1999,
P&G's arch-rival Unilever decided to focus on 400 out of its 1,600 strong brand portfolio.
Two years later, Unilever's Indian arm, too, adopted the same strategy. Hindustan Lever
decided to spend on only 30 brands and 10 regional brands from its original basket of 110
brands.
Other Indian companies, too, decided to follow the power brands strategy, including
Godrej, Britannia, Dabur and Marico.
Recently, Vijay Mallya's United Spirits also joined this group by naming Director's
Special, Antiquity, Bagpiper, McDowell No 1, Signature and 10 other brands as power
brands.

68

Cracking the Rural Market in India

To a marketer, India's rural market presents a challenge like no other. While marketers
salivate at the prospect of making their marketing millions in rural India, none has yet
been able to understand what makes rural India tick. Harish Bijoor says that so far
marketers have sought to thrust cornflakes and dog biscuits alike at rural Indians. He
makes a plea to preserve the sanctity of Rural India and discover commerce and sense in
it all - by creating brands that keep in mind rural imperatives. The rural market for brands
is a powder keg of an opportunity waiting to be explored - not exploited!
I used every mode of travel to enter into the gut and gore of the slice of market I had the
privilege to look after. The bullock-cart, the camel-driven cart and the boat were all
means to penetrate a terrain no MBA in his right mind wanted to. Dirty rat-infested
lodges, police-raids that had me ashamed of my neighbors in the rooms around and food
that had me running to the nearby field even in broad daylight are tales my early life in
the rough and tumble of Indian marketing is made of. These four years taught me one
thing clearly! There are two India, Real India and Virtual India! Real India was this piece
of terrain I sold tea, coffee, spices and condoms to. It was a big chunk of the land mass. It
occupies bulk of the landmass and houses 742 million people as of now! It is populous,
multi-cultural and multi-faceted. India started here. This is the residence of the arts, the
culture, the food, the ethnic fashion, the agricultural practice, the nuance of language and
diction and everything else that we in Urban India have morphed to our needs as of today.
Remember, in the very beginning there was no urban at all! It was all rural! All real!
Virtual India was where I came from. Virtual India was where I was shaped into a being
capable of commercial, social and cultural existence. The size of pie of land I came from
was an urban island of sorts. An aberration even! The populace that lives here comprised
69

fourth

of

the

size

of

the

population

of

India

on

the

whole.

There sure was a Matrix at play! While politics of the nation was governed largely by
what Real India had to say, government policy did not necessarily tread the very same
path. There was this huge gap in understanding what was right for the masses and what
was politically expedient. In the bargain, policy was hijacked by the politician. While
politics was the domain of the politician and the bureaucrat that ran the nation in many
ways, commerce was largely played in the very same way. Till the wave of liberalization
set in. And when this happened, Indian businesses actually steered Virtual India. Whats
more, Virtual India took charge of the way Real India was to be run as well.

And in Virtual India, the businesses that dictate the soap that needs to be placed in your
toilet and the detergent in your bathroom and the cooking gas in your kitchen, actually
ran Real India. Real India is today run by Virtual India. The largest part of land-mass and
the larger part of the population base is controlled in many-many ways by the way the
urban man in urban India wants it run. A true blue hegemony of the Urban Indian!

Remember again that all marketing men and their kin in advertising, market research and
branding are mostly urban souls. Many in disguise as well! Real India (read as: rural
India henceforth) is fast morphing to the needs, wants, desires and aspirations discovered
by the urban man. Television as a medium has created awareness, a raging interest in
brands, a latent desire to consume and possess what is shown on the not-such-an-idiotafter all-box! Television has spurred on consumptive action and has acted as a brand
consumption catalyst in many ways. And television has continually shown us images that

70

make everything Urban desirable and everything Rural as something that is basic.too
basic!

Look keenly at the statistics that tell us the growth of urbanisation. In 1951 we had 2,843
Urban Agglomerations(UA) and towns. Today, the number is close to 4000! The Urban
population in 1951 stood at 17.3 per cent of total. Today, the number is a proud and
unidimensional 27.8 per cent! In the last fifty years, we have had what I would call
creeping urbanisation. In the next fifty, it is time to expect a galloping rate! Thanks to
televisionand thanks fundamentally to the Brand movement, which is poised to make a
big movement in the heart and hearth of the rural dweller! The two Indias mean two sets
of peoples. The rural man, woman, child, dog and cat for a start! Remember, dog-food
and cat-food companies will definitely want to invade the vast rural hinterland sometime
in

the

future

for

sure!

How then does one go about creating brands for the rural person in the rural dwelling?
There are two ways really. The first is the insensitive way most marketers
have adopted to date. The second is a more sensitive rendering of what marketers and
brand-evangelists in the future could adopt. The first is really the easy way. Pioneer
marketers in rural areas used it to good advantage. Take the urban brand,
1)

Tweak the product a wee bit (read: make it rustic, rugged and even lower-quality if

necessary),
2)

Lower the price (read: offer inferior grade teas to the rural market and superior

grades

to

the

urban

one

71

in

the

same

brand),

3)

Extend the brand to Low Unit Packs (read: lower unit packs will be cheaper in price

and inferior in quality as well. Higher unit packs will take in superior quality. Urban
markets
4)

use

High

unit

packs

and

rural

markets

LUPs)

Modify the packaging marginally (read: add the brand name in Hindi and four other

prominent
5)

use

vernaculars)

Advertise (read: Take the English rendering of the standard urban storyboard and

make a film in Hindi. Take this film and dub it in the vernacular. Never mind the lip sync
even.in
6)

the

early

days!)

Promote (Read: Use Cinema widely. Use wall-site paintings. Sponsor the local boat

race and the temple festival alike! Use rural publicity vans to percolate the brand message
through television sets that would carry a VCR and a large-format screen as well)
7)

Market Research (Read as: find out more about the rural dweller. Use the intrusive

and alien questionnaire format to find out more. Use probes of every kind. Use the focus
group at times if you are feeling particularly qualitative in your yearnings for data.)

The easy way is the insensitive way to create and build brands in the rural markets that
still remain on the landscape. My clarion call: Forget the easy way you have used all hese
years. Take the tough route of branding in the rural market. Preserve rural India and what
it represents. Bring back pride to rural India in terms of what it has to offer in its
multivariable format. But why? Is this a return to socialism? A form of retro-appeal? Of
retro-fashion? No, the logic is strong enough for us to pursue the new rules of branding
for

rural

India..

72

For one, take the case of the fertilizer and pesticide situation. In the very beginning, all of
India was organic. We grew everything we did to cater to a population size that was
manageable without the use of pesticides and fertilizers. Natural organic manure and very
innovative natural practices that used plant and animal waste distinguished the
agricultural practices of India. And then came the revolution everyone wanted. The men
in the Gandhi caps (except Gandhiji of course) wanted a bigger yield from the land and
the cow and the factory alike. Practices morphed and India became yet another dumping
ground for the pesticide and fertiliser that came from far and near. The countryside
morphed.

Yields

doubled.

The year is 2003! The world is discovering health and the joy of consuming the organic
produce. Its back to naturethe pure way! And India has lost it! Imagine a situation
where India could emerge as a 100 per cent producer of the organic product! And
remember still that the organic produce today commands a premium in the key
consumption markets of the world! We lost it! The rural terrain we still boast of can be
preserved. I seek a sensitivity among the marketing man. A sensitivity that promises not
to harm commercial intent, which is the salient driving force of all business intent.
Sensitivity that could well carve out for the marketing man a commercial space one can
be

truly

proud

of.

I present in this piece therefore, is a case that seeks to preserve the sanctity of Rural
India and discover commerce and sense in it all! A plea to really stop this one-sided
movement that seeks to make the rural man a consumptive animal of cornflake and dog

73

biscuit alike! Create brands keeping in

mind rural imperatives then. Here goes
the ideal

74

CHANGES IN RURAL MARKETING

Anugraha Madison has widely been credited with introducing the concept of rural
marketing in India. The company was one of the first marketing firms to realise the
potential of rural India and decided to focus on rural marketing.
R V Rajan, chief managing director, Anugraha Madison, shares his views with Shobha
Warrier on how rural India has changed over the last two decades.
When marketing agencies concentrated only on urban India, why did you decide to focus
on the rural market?
My foray into the rural market was not deliberate. It so happened that when I came to
Chennai from Mumbai in 1974, I found that most of the clients belonged to the
agriculture and fertiliser sectors. So I had to deal with farmers.
When Sam Balsara of Madison came down to Chennai looking for an associate, we
decided to have a joint venture and position ourselves as rural specialists mainly because
of my experience in the field.
Although I have been involved with rural communication and marketing for the last two
and a half decades, the positioning of Anugraha took off only after the joint venture.
In the last two and a half decades, how much has rural India changed in its aspirations,
attitude and consumption?
Rural India has changed tremendously. The data published by the National Council of
Applied Economic Research shows that in the last ten years, the income of rural India has
grown several-fold. There is a definite shift from middle to upper middle class and from
lower to middle class segments.
Is the shift due to the growth in Indian agriculture?
For the last 10 consecutive years, we have had good monsoons. So, agriculture is
prospering. Of course, there have been setbacks in the last couple of years.
Another interesting aspect is, today rural India is not 100 per cent dependent on an
agrarian economy. Unlike in the past where the ratio between those who involved in
agriculture and in other business was 75-25, today the estimated ratio is 50:50, if not
60:40. So today, 50-60 per cent of the rural population is involved in other businesses. A
75

lot of people belonging to the second generation are getting white-collar jobs in nearby
towns. So, there is a growing middle class with a monthly income in rural India and it is a
drastic change from the past where their income was totally dependent on the monsoon,
cropping season, etc. This has resulted in a definite growth in the prosperity level in rural
India. Of course, there are still a lot of poor people, especially the agricultural labourers.
But there is a growing middle class with regular income and the rural rich are becoming
richer.

Is the urban-rural divide in India thinning now?

The urban-rural divide is still there, but the divide between urban and rural India is
thinning among the top segment of rural India. The rural rich are almost like urban India.
Rural India is like a pyramid. The top of the pyramid is occupied by the rich farmers and
businessmen. They may constitute around 5 per cent of the population. The next level
belongs to those with a regular income and the base of the pyramid is occupied by the
vast majority of the people who are daily wage labourers.
So we cannot say that the urban-rural divide has melted. It is still there. But there is hope
with the growing emphasis on education.
How would you categorise different parts of rural India?
In India, we have the developed rural India and undeveloped rural India. Punjab,
Haryana, Tamil Nadu, Andhra Pradesh, Kerala and parts of Maharashtra come under the
developed rural India but the rest of the states are undeveloped where power,
infrastructure, etc are big problems. The prosperity of Kerala has come from the NRI
income and not from agriculture. Today, there is hardly any village in Kerala.
Tamil Nadu is prosperous as power and good roads are available. All the villages with
proper infrastructure have developed. In such villages, people also have better access to
towns and cities. What are the major reasons for the change in the lifestyle of the
developed rural India?
Television has done wonders to rural India. Today, especially in the south, the penetration
of satellite television is very high, which is around 50 per cent unlike 25-30 per cent in
the rest of the country.
76

These people may not be literate in the true sense but they know what is happening
around the world because of television. They know how the rest of the country live.
Do you television is driving the aspirations of rural India?
Definitely, the rural youth today is an important trigger in changing the profile of rural
India. About 40 per cent of the graduates coming out of Indian universities today are from
mofussil areas. And, they are all doing very well.
Their aspirations are similar to the urban youth, and it gets reflected in their eagerness to
earn more and live better. So, if there is a problem in agriculture, they do something else.
They ensure that they have steady flow of income.
It has been reported that by 2009-10, the number of urban households is projected to
grow by 4 per cent, while rural households are expected to grow by 11 per cent. Does this
mean developmental initiatives are reaching rural India?
The total expenditure of urban India is almost equal to what has been spent by rural India.
But what is being spent by urban India is being done by only a small percentage of the
population.
About 25 per cent of the urban India is spending as much as 75 per cent of what rural
India is spending. This shows the potential exists in rural India. There is a huge market
waiting to be tapped in rural India.
So the corporate world cannot ignore rural India?
Yes, they cannot afford to ignore rural India. Unfortunately, they are only talking about it,
they are not investing enough to get the maximum mileage out of it. For them, rural India
is an unknown entity even today, and it calls for a lot of investment. Initially, the ratio
between investment and returns will not be the same as you see in urban India. For urban
India, one television spot is enough but it's not so in rural India. You have to slog it out
there. But eventually, you will get the returns. In today's corporate world, all the
managers, especially those working in the MNCs depend on their quarterly results. They
only look at what gives them immediate success. Freebies have no meaning in rural India.
You have to give value for money for the brand you are selling.

77

How long can the corporate world ignore rural India?

You will not be able to survive without rural India in future. One company that conquered
the rural market 50 years ago and has consistently ruled is Hindustan Lever.
About 50-55 per cent of their sales come from the rural market. Even today, they are
constantly innovating and improvising. And Hindustan Lever is marketing directly in the
rural markets.
The success of Cavin Kare has become a very notable case study. It is a company that
began in a small way. It started the Chic shampoo sachet for 50 paise when shampoo was
available at Re 1, and it revolutionised the market.
The sachet pack itself was a novel way of attracting the rural market. Now, it has
conquered the rural market all over India. They are giving a run for Hindustan Lever's
investments, as they have understood the local market very well and communicate in
their language. Now, Maruti is also seriously looking at rural India.
According to a report, between June 2002 and December 2003, rural per capita
consumption expenditure grew by 11.5 per cent while the urban expenditure grew by 9.6
per cent.
There is a tremendous potential for consumer durables like television sets, refrigerators,
air-conditioners and household appliances in rural India. After the basic needs of food,
cloth and shelter, they are looking at how to live better.
Television is the most sought after consumer item in rural India followed by two
wheelers. Gradually, they are moving to small cars like Maruti and that's what Maruti is
trying to exploit.

Creating Rural Business Hubs To strengthen, stched are often well below the fair
market price
78

The creation of a global trading network proposed by representatives of

grassroots producer groups, governments and development agencies

Accenture Development Partnerships (ADP), UK commissioned to conduct

feasibility tudy. Recommendation: The business case is strong and establishment
of the company should commence as soon as possible

Grassroots Trading Network (GTN) will be piloted in India in 2004-05. GTN will
then be expanded across Asia, moving into Latin America in year 3 and Africa in
year 6

Connect poor producers globally to wider markets

Provide support for the development, marketing and distribution of products by

mentoring + capacity building

Facilitate collaborations between producer groups, businesses, research and policy

think tanks, advocacy groups, international organizations, and governments

Campaign to improve international trade policies and tariffs that hinder the poor

Aggregate best practice from the commercial sector and apply it to grassroots
producer organizations

Vibrant Centres of Commerce in rural areas with the right conditions to accelerate
grassroots entrepreneurship as well as to encourage the expansion of businesses that have
traditionally operated in urban markets into rural markets
Small rural entrepreneurs exist need to expand for economies of scale

Their strength lies in production, not in marketing and distribution

With access to marketing and distribution, their volumes will grow

Distribution Houses is one solution

Distribution Networks should allow flow of products and services

out Small rural entrepreneurs exist need to expand for economies of scale

Their strength lies in production, not in marketing an

79

DISRIBUTION
With access to marketing and distribution, their volumes will grow
Distribution Houses is one solution
Distribution Networks should allow flow of products and services of rural markets as
well as into rural markets
Out Small rural entrepreneurs exist need to expand for economies of scale
Their strength lies in production, not in marketing and

distribution

With access to marketing and distribution, their volumes will grow

Distribution Houses is one solution
Distribution Networks should allow flow of products and

services of rural markets as

well as into rural markets

Over 95% of urban India does not know rural India
Corporate India realises the need for expansion into rural markets given saturation of
urban mkts + eroding margins. Over 70% of countrys populationuntapped
consumer market + human capital
How? Presently, lack of knowledge, data and experience inhibit success
Result: Products and Marketing Strategies are not being adapted or created with rural
consumers in mind
Learn from 1. FMCG industries 2. NGOs 3. Others (e.g. IRMA) with knowledge and
experience of how things work at the grassroots
GTNs Role: Demonstrate the poor are viable consumers+producers
The GTN Consolidator Model
Identify needs / benefits for involved partners to ensure a win-win situation for all
With Globalisation, economies of scale is critical
If we can tap the production strength of this large rural population with its small scale
enterprises, consolidate it

and provide larger players with their requirements -

we have an answer

GTN projects in agriculture demonstrate the model. Also being extended to

handicrafts/handlooms/textiles
80

Sewa Graam Mahila Haat (SGMH), agricultural marketing arm of SEWA,

provides small and marginal farmers with technical, financial and marketing
assistance

Pilot between ITC & SGMH for procuring sesame seeds, where SGMH was
positioned as the Consolidator

In 2003, ITC purchased 250 tonnes of sesame seed from SGMH who procured
this from 1450 poor farmers

Price realisation went up from Rs 18/kg in 02 to an avg of Rs 29/kg in 03. Avg

realisation/farmer: up by Rs 2,000

ITC now plans to procure amla, cumin, groundnut in 04 + equip SGMH to

produce organic sesame

A.

Creating a Rural Distribution Network -The Objectives SGMH & HLL

Procure agricultural and cottage industry goods from SEWA rural producer
members

B.

Employ SEWA women members to:

Process and pack the goods

Sell finished goods in a direct-to-home model, most effective communication

channel, given low literacy

Implement promotional campaign e.g., skits

SGMH, GTN & HLL established the business and implementation plan:

Piloting in 84 Gujarat villages between Oct 04 - Feb 05

Brand name RUDI (Rural and Urban Development Initiative). Also, means
beautiful, pure + SEWAs first woman member

81

Creating a Rural Distribution Network

Creating employment + entrepreneurship at grassroots
Tremendous scope to upscale operations:

SGMHs base = 530,000 women in 14 districts in Gujarat

@ avg sale of Rs 120/member/pm = 76 crores pa (from

o existing members alone)

Employment to over 10,000 poor women in 14 districts

Tremendous scope to extend reach to non-members

Widening product basket will add to turnover

Capacity-building + mentoring to SGMHs RUDI team in

o business and production processes

Individual RUDI team members given functional responsibilities to ensure

accountability vs. everyone responsible approach

Unique project, enhances credibility. Attracts new poor producers keen on taking
advantage of the benefits to existing members

Unique initiative boosts morale internally

Initial focus rural Gujarat; plans to upscale across Gujarat and nationally.
Vision to expand reach

Some Recommendations

Bridging the Knowledge Gap

Partner with NGOs and others to leverage their grassroots experience +

knowledge

Executive Training Programs to understand rural India

Expose small enterprises + NGOs to business practices

82

Financial Capital

Expand Micro Finance Schemes nationally

Micro Finance Schemes largely debt-based. Also need Equity Finance

Industry Chambers + Banks work with Government to devise new ways to lend to
the rural sector, safeguarding banks interests

Marketing and Distribution

Government Policy, incentivizing Distribution Houses

Reduce Entry Barriers

The Government and Industry Chambers need to work out the modalities to make
the process less cumbersome and more transparent. This will also reduce rent
seeking behavior

COMMUNICATION

Dealing with two very different worlds

Initiatives breakdown because of lack of understanding of the other world

Organizations arent on the same page

Market Linkages Sales & Distribution of GPOs Branded Goods:

Promote ears-to-ground approach

Analyze sales data for understanding and directing production to the market

Identify domestic and international markets for expansion

Identify products for markets based on GPOs capability

Create responsibility/accountability for sales targets

83

Large Retailers:

Identify buyers based on GPOs capability

Facilitate understanding of buyers requirements

Enhance GPOs skills to supply to large buyers through domain experts

Vendor Development:

Identify buyer interested in vendor development exercise

Map GPO products to buyer needs

Define gaps where buyer and domain experts will work with GPO to upgrade
skills

Capacity-Building Support

Conduct As Is Analysis to determine gap between GPOs status and vision

Map business processes to identify bottlenecks in supply chain

Engage domain experts to work with GPOs to address critical problem areas,
develop or refine systems, and upgrade skills

Knowledge and Information Management

Host workshops bringing together experts from GPOs, businesses, government,

development and multilateral agencies for sharing knowledge and best practices

Document and disseminate case studies based on hands on experience with GPOs

Policy Analysis and Advocacy

Partner with international bodies/lobbies to promote interests of GPOs

Host multi-stakeholder consultations for GPOs to voice thei

84

OPPORTUNITY OF RURAL MARKETING

Urban consumers shop daily and have 365 opportunities a year to switch brands while the
rural purchasers who buy their goods in weekly haats have only 54. Attempts to reach
rural consumers, even once during the purchase cycle to ensure repeat purchase, make
point of purchase advertising and trade push indispensable. This requires a significant
reorientation in the allocation of funds across media. For example, outdoor advertising
accounts for over 7% of all media expenditures in India, while it only accounts for 0.8%
in USA.
Rural buyers living in small isolated groups distributed across vast distances have limited
access to the broadcast media. The existence of a multiplicity of languages and varying
level of illiteracy complicates the task of communication further. To overcome some of
these challenges, Unilever pioneered the concept of video vans that travel from village to
village screening films in the local language, interspersed with advertisements for
Unilevers products. The company also provides product usage demonstrations to the
captive audience because written instructions on the pack may be illegible to the
consumers who are either illiterate or do not understand the dialect.
Where mass media is used, variability can, at times, back fire. On re-entering India in the
1990s, Coca Cola decided to reinvest massively on a TV advertising campaign. It opted
for slick commercials, rich in colour, with high production values, but the effect was
somewhere lost on a market where 60% of all TVs are still black and white.
However, in the recent past, the improved technology has allowed the cable and satellite
networks to increase their reach across the countryside thus exposing a rural consumer to
85

a lifestyle that was beyond his dreams. And this increasing awareness has led to a
significant change in his buying behaviour and consumption patterns.
While the urban market is getting increasingly competitive and saturated, the rural market
is blooming with increase in the disposable incomes of the households, thus promising a
far better scope for growth for marketers. Hence, with the shifting dynamics of the
present-day market situation, now it is the turn of the rural consumers to dictate the
terms. And this reinforces the need for marketers to formulate a well-designed strategy to
feel the pulse and to tackle the mystic rural market.
The above article has been condensed/abstracted from the following articles with all their
rights are reserved.
1. Rethinking marketing programs for emerging markets,
2. Growing brand awareness,

Concept:
In recent years, rural markets have acquired significance, as the overall growth of the
economy has resulted i.e. companies who see the poor as their customers. substantial
increase in the purchasing power of the rural communities. On account of green
revolution, the rural areas are consuming a large quantity of industrial and urban
manufactured products. In this context, a special marketing strategy, namely, rural
marketing has emerged. But often, rural marketing is confused with agricultural
marketing the latter denotes marketing of produce of the rural areas to the urban
consumers or industrial consumers, whereas rural marketing involves delivering
manufactured or processed inputs or services to rural producers or consumers.
What makes Rural Markets Attractive?
Rural market has following arrived and the following facts substantiate this.742 million
people

Estimated annual size of the

rural market
86

FMCG Rs 65,000 Crore

Durables Rs 5,000 Crore
Agri-inputs (incl. tractors) Rs 45,000 Crore
2 / 4 wheelers Rs 8,000 Crore
In 2001-02, LIC sold 55 % of its policies in rural India.
Of two million BSNL mobile connections, 50% in small towns/villages. Of the six lakh
villages, 5.22 lakh have a Village Public Telephone (VPT) 41 million Kisan Credit Cards
issued (against 22 million credit-plus-debit cards in urban) with
cumulative credit of Rs 977 billion resulting in tremendous liquidity.
Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from
these towns on
Rediff online shopping site
42 million rural HHs availing banking services in comparison to 27 million urban HHs.
Investment in formal savings instruments: 6.6 million HHs in rural and 6.7 million in
urban
Opportunities:
Infrastructure is improving rapidly.
In 50 years only 40% villages connected by road, in next 10 years another 30%. More
than 90 % villages electrified, though only 44% rural homes have electric
connections.
Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is
connected by STD.
Social Indicators have improved a lot between 1981 and 2001
Number of pucca houses doubled from 22% to 41% and kuccha houses halved (41%
to 23%)
Percentage of BPL families declined from 46% to 27%
Rural Literacy level improved from 36% to 59%
Low penetration rates in rural so there are many marketing opportunities.
Durables Urban Rural Total (% of rural HH)
CTV 30.4 4.8 12.1
Refrigerator 33.5 3.5 12.0
87

FMCGs Urban Rural Total (% of rural HH)

Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6
Marketers can make effective use of the large available infrastructure
Post offices 1,38,000
Haats (periodic markets) 42,000
Melas (exhibitions) 25,000
Mandis (agri markets) 7,000
Public distribution shops 3,80,000
Bank branches 32,000
Proliferation of large format rural retail stores which have been successful also.
DSCL Haryali stores
M & M Shubh Labh stores
TATA/Rallis Kisan Kendras
Escorts rural stores
Warnabazaar, Maharashtra (annual sale Rs 40 crore)
Rural Consumer Insights:
Rural India buys.
Products more often (mostly weekly).
Buys small packs, low unit price more important than economy.
In rural India, brands rarely fight with each other; they just have to be present at the right
place.
Many brands are building strong rural base without much advertising support.
Chik shampoo, second largest shampoo brand.
Ghadi detergent, third largest brand.
Fewer brand choices in rural: number of FMCG brand in rural is half that of urban.
Buy value for money, not cheap products
Some Myths:
1. Myth-1: Rural Market Is a Homogeneous Mass

88

Reality: Its a heterogeneous population. Various Tiers are present depending on the
incomes like Big Landlords; Traders, small farmers; Marginal farmers: Labors, artisans.
State wise variations in rural demographics are present viz. Literacy (Kerala 90%, Bihar
44%) and Population below poverty line (Orissa 48%, Punjab 6%)

2. Myth-2: Disposable Income Is Low

Reality: Number of middle class HHs (annual income Rs 45,000- 2, 15,000) for rural
sector is 27.4 million as compared to the figure of 29.5 million for urban sector. Rural
incomes CAGR was 10.95% compared to 10.74% in urban between 1970-71 and 199394.
3. Myth-3: Individuals Decide About Purchases
Reality: Decision making process is collective. Purchase process- influencer, decider,
buyer, one who pays can all be different. So marketers must address brand message at
several levels.Rural youth brings brand knowledge to Households (HH).
Why Different Strategies?
Rural markets, as part of any economy, have untapped potential. There are several
difficulties confronting the effort to fully explore rural markets. The concept of rural
markets in India is still in evolving shape, and the sector poses a variety of challenges.
Distribution costs and non availability of retail outlets are major problems faced by the
marketers. The success of a brand in the Indian rural market is as unpredictable as rain.
Many brands, which should have been successful, have failed miserably. This is because,
most firms try to extend marketing plans that they use in urban areas to the rural markets.
The unique consumption patterns, tastes, and needs of the rural consumers should be
analyzed at the product planning stage so that they match the needs of the rural people.
Therefore, marketers need to understand the social dynamics and attitude variations
within each village though nationally it follows a consistent pattern. The main problems
in rural marketing are:
Understanding the rural consumer
89

 Poor infrastructure
Physical Distribution
Channel Management
Promotion and Marketing Communication
Dynamics of rural markets differ from other market types, and similarly rural marketing
strategies are also significantly different from the marketing strategies aimed at an urban
or industrial consumer.
Strategies to be followed:
Marketing Strategy: Marketers need to understand the psyche of the rural consumers
and then act accordingly. Rural marketing involves more intensive personal selling efforts
compared to urban marketing. Firms should refrain from designing goods for the urban
markets and subsequently pushing them in the rural areas. To effectively tap the rural
market a brand must associate it with the same things the rural folks do. This can be done
by utilizing the various rural folk media to reach them in their own language and in large
numbers so that the brand can be associated with the myriad rituals, celebrations,
festivals, melas and other activities where they assemble.
Distribution Strategy:
One of the ways could be using company delivery vans which can serve two purposes- it
can take the products to the customers in every nook and corner of the market and it also
enables the firm to establish direct contact with them and thereby facilitate sales
promotion. However, only the bigwigs can adopt this channel. The companies with
relatively fewer resources can go in for syndicated distribution where a tie-up between
non-competitive marketers can be established to facilitate distribution. Annual melas
organized are quite popular and provide a very good platform for distribution because
people visit them to make several purchases. According to the India n Market Research
Bureau, around 8000 such melas are held in rural India every year. Rural markets have
the practice of fixing specific days in a week as Market Days (often called Haats) when
exchange of goods and services are carried out. This is another potential low cost
distribution channel available to the marketers. Also, every region consisting of several
90

villages is generally served by one satellite town (termed as Mandis or Agri-markets)

where people prefer to go to buy their durable commodities. If marketing managers use
these feeder towns they will easily be able to cover a large section of the rural population.
Promotional Strategy:
Firms must be very careful in choosing the vehicle to be used for communication. Only
16% of the rural population has access to a vernacular newspaper. So, the audio visuals
must be planned to convey a right message to the rural folk. The rich, traditional media
forms like folk dances, puppet shows, etc with which the rural consumers are familiar and
comfortable, can be used for high impact product campaigns.
Some Live Examples:
One very fine example can be quoted of Escorts where they focused on deeper
penetration. They did not rely on T.V or press advertisements rather concentrated on
focused approach depending on geographical and market parameters like fares, melas etc.
Looking at the kuchha roads of village they positioned their bike as tough vehicle. Their
advertisements showed Dharmendra riding Escort with the punch line Jandar Sawari,
Shandar Sawari. Thus, they achieved whopping sales of 95000 vehicles annually.
HLL started Operation Bharat to tap the rural markets. Under this operation it passed
out lowpriced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and
Ponds cream to twenty million households.
ITC is setting up e-Choupals which offers the farmers all the information, products and
services they need to enhance farm productivity, improve farm-gate price realization and
cut transaction costs. Farmers can access latest local and global information on weather,
scientific farming practices as well as market prices at the village itself through this web
portal - all in Hindi. It also facilitates supply of high quality farm inputs as well as
purchase of commodities at their doorstep.
BPCL Introduced Rural Marketing Vehicle (RMV) as their strategy for rural marketing. It
moves from village to village and fills cylinders on the spot for the rural customers.
BPCL considered low-income of rural population and therefore introduced a smaller size
cylinder to reduce both the initial deposit cost as well as the recurring refill cost.
91

Conclusion:
Thus looking at the challenges and the opportunities which rural markets offer to the
marketers it can be said that the future is very promising for those who can understand
the dynamics of rural markets and exploit them to their best advantage. A radical change
in attitudes of marketers towards the vibrant and burgeoning rural markets is called for,
so they can successfully impress on the 230 million rural consumers spread over
approximately six hundred thousand villages in rural India.

92

PROBLEMS IN RURAL MARKETING

Where the rural market does offer a vast untapped potential, it should also be recognized
that it is not that easy to operate in the rural market because of several attendant
problems. rural marketing is thus time consuming affair and requires considerable
investment in terms of evolving appropriate strategies with a view to tackle the problems
The major problems faced by manufacturing and marketing men in rural areas are
described below

Underdeveloped people and underdeveloped market;

The agriculture technology has tried to develop the people and market in rural areas .
unfortunately ,the impact of the tectology is not felt uniformly through out the country
.while there are pockets- some districts in punjab .haryana or western utter Pradesh
where a rural consumer is some what comparable to his urban counterpart , there are lage
areas and groups of people who have remained beyond the technogial break throgh .
Even today about 75 districts in country are drought prone and no new technology worth
the name has percolated to in crease in the standard of living of these people in addition,
the small agricultural land holdings have enable to take advantage of new technological
breakthrough . the number of people below poverty line has not decreased in any
appreciable manner. Thus the rural markets, by large number, by and large are

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characterized by underdeveloped market.. a vast of the rural people image old customs
tradition habits , taboos and practices

Lack of proper physical communication facilities;

Nearly 50% of the villages is the country does not have villages in the country do not
have all weather roads. Physical communication to these villages is highly expensive.
even today ,most villages is in eastern part today inaccessible during monsoon
season. hence, distribution put in by manufacturer prove expensive and some times of no
consequences .to be effective the products have to be physically moved to places of
consumption or places to purchase.

Media for rural communication;

Among the mass media, at some point of time, say in late 50s or early 60s ,radio was
considered to be a potential ,medium for communication to the rural families . Now the
advent and expansion of telecast network appears for easy communication with rural
masses. The question is how many peole access viewing television? There is a need to
examine the ownership pattern of television sets in rural areas to judge the potential reach
of this medium. Another mass medias cinema. it has been observed that cinema viewing
is fairly satisfactory ,where available . Mobile theaters are also good medium but very
expansive companies like HLL using these vans found 10 to12 times higher in rural areas
than urban areas due to bad roads in areas
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4 Hierarchy of markets.
Rural consumer has identified market places for different items of their requirements. So
there can not be uniform distribution pattern for all products. It has been seen that 90% of
farmers visited the nearest town , where an agricultural produces assembling market is
situated at least once a quatter for either selling the produce or for purchase of there
requirements . so town/ mandi centers with large hinterland villages become the focal
point thus depending upon the purchase habit of rural people. The distribution netwpork
for different commodities has to be different.
5

Low level of literacy:

the literacy rate is low in rural areas as compare to urban areas. This again leads to the
problem of communication for promotion purposes. Print medium becomes in effective
and to an extent irrelevant in rural areas since ita reach is poor and so is the level of
literacy. The dependent should be more on electronic media cinema, radio and television.
While the excess to cinema and radio appears to be fairly easy and common. in not so in
case of television. Television advertising is very expensive. Probably it will be prudent to
take advantage of such professional rural advertising agencies. The promotion of product
along with distribution is also being resorted to by many.
6,

Seasonal demand:
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the distribution of any product in rural areas either agricultural inputs , consumables or
durable should necessarily follow a seasonal pattern. Since 75% of the rural income is
generated through agricultural operation which is seasonal so the demand pattern is also
seasonal. A typical example is that of fertilisers.the demand of fertilizers is always high
during the start of kharif and rabi system the fertilizers manufacturers have evolved a
distribution pattern so that the seasonal demand can be met. Like wise the demand for
consumables and durable will be high during the pek crop harvesting and marketing
season. . this is the time at which the rural people have substantial cash inflows. Hence
the distribution should be fairly intensive. During harvesting season this arrangement
would result in adequate sales realisation vise versa in summer months the demand will
be very low festivals seasons like sankranti, poangal, vaisakhi or depawali are also
demand seasons. So the distribution of rural areas should be more and frequent during the
harvest and festival seasons as opposed to a fairly uniform demand pattern in urban areas.
7.Many languages and dialects:
even assuming that media are available for communication or the company commotions
its own media vans the large number of languages and dialects very wildly from state to
state and reason to reason. The messages have to be delivered in local; languages and
dialects. Even though the number of recognized languages are only 16, the number of
dialects are estimated to be around 850.

8 Low per capita income:

Even though about 33 to 35 percent of gross domestic product is generated by rural areas.
It is shared 75% of population hence the per capita income is low compared to urban
areas. This apart the distribution of income is highly is qued. Since the land holding
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patterned itself is esqued thus the rural population present a highly heterogeneous seen.
given the low percapita incomes and population spared in the villages, what wiill be the
off take of any product by rural consumer, say from avillage shop? What should be the
inventory levels to be maintained by the rural shopkeeper and how long will it take for
the rural areas shopkeeper to liquidate his stock? if the n company

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CONCLUSION

Conclusion
Thus looking at the challenges and the opportunities which rural markets offer to the
marketers it can be said that the future is very promising for those who can understand
the dynamics of rural markets and exploit them to their best advantage. A radical change
in attitudes of marketers towards the vibrant and burgeoning rural markets is called for,
so they can successfully impress on the 230 million rural consumers spread over
approximately six hundred thousand villages in rural India.
My research has attempted to explore the key opportunities and challenges of marketing
in rural India. To be successful, multinational consumer goods companies need to be

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innovative, dogged and culturally sensitive in developing rural marketing strategies. A

direct transportation of traditional marketing strategies that have worked in core first
world markets will likely need to be localized to cater to the substantially lower per
capita incomes, a lack of formal retail and distribution networks and the relatively low
cost of labor. It is a testament to both multinational and local consumer goods companies
that they have been able to innovate and address the challenges offered by Indias rural
market to bring goods, to and improve the lives so many people. These successful
marketing techniques may even be introduced to other large emerging markets.

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SUGGESTION

SUGGESTION
Products must be specifically designed/modified for rural costomers through
industrial engineering excercises for transportation, storage, performance, operation,
packaging and servicing requirements.

thrusting urban technology down rural

markets is not desirable. relate technology to market development indexes.

Check primary, secondary, and transport packaging for rural oreintation.

Sales forecasting, positioning, inventory management, inter territory transfers, pricing

and credit management are functions of how the agriculture in the area is faring.
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managers must learn to corelate and respond to drought, floods, irrigation,good and
bad monsoons, harvesting and sowing seasons and impact of these on disposable
incomes of rural households.

Location, shop profile, dealer network, financial position, cash to credit outlook,
reputation, track record, allied lines, accounting, ability to implement company
policy, competitive products position, attitude and partnership status are some
useful criteria.

Demand generation programs should be carried out through teams with daily review
by team leaders. dgp must result in brand awareness and movement from dealer
shelves.

Brands must have visual identity, be regularly available, and promoted with few price
changes.

Make an

it enabled system for reporting, informatiom, data collection, and

periodicity area wise, mandiwise.

Make market research an ongoing activity

territory wise rural development plus rural marketing should be done

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 companies should introduce good supply chain practices - deliver 24 hrs

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BIBLIOGRAPHY

BIBLIOGRAPHY

Rural Marketing -S.L.Gupta

www.google.com
www.ciionline.org
www.msnsearch.com

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