Rural marketing...

Selling in Rural India

The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore
TO expand the market by tapping the countryside, more and more MNCs are foraying into India's rural markets. Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate Palmolive and the foreign-invested telecom companies.

Opportunity The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban. As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased. The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart.

The 4A approach

The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special

occasions; poor roads; power problems; and inaccessibility to conventional advertising media. However, the rural consumer is not unlike his urban counterpart in many ways. The more daring MNCs are meeting the consequent challenges of availability, affordability, acceptability and awareness (the so-called 4 As)

Availability

The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system which helps its brands reach the interiors of the rural market. To service remote village, stockists use autorickshaws, bullock-carts and even boats in the backwaters of Kerala. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices.

Affordability

The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm

packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh the so-called `Bimaru' States. Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. CocaCola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15.

Acceptability

The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. One company which has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customised TV for the rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because of the lack of electricity and refrigerators in the rural areas, CocaCola provides low-cost ice boxes a tin box for new outlets and thermocol box for seasonal outlets. The insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total premia. The company tied up with non-governmental organisations and offered reasonably-priced policies in the nature of group insurance covers. With large parts of rural India inaccessible to conventional advertising media only 41 per cent rural households have access to TV building awareness is another challenge. Fortunately, however, the rural consumer has the same likes as the urban consumer movies and music and for both the urban and rural consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or indulgence. Hindustan Lever relies heavily on its own company-organised media. These

are promotional events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language. Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. It doubled its spend on advertising on Doordarshan, which alone reached 41 per cent of rural households. It has also used banners, posters and tapped all the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising. Philips India uses wall writing and radio advertising to drive its growth in rural areas. The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. Mr Carlo Donati, Chairman and Managing-Director, Nestle, while admitting that his company's product portfolio is essentially designed for urban consumers, cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive. "Any generalisation" says Mr Donati, "about rural India could be wrong and one should focus on high GDP growth areas, be it urban, semi-urban or rural."

I hope this will be usefull Take care Warm Regards

Priyanka

Warm Regards, Priyanka (FOUNDER OF BBI FORUM) Life is not the amount of breaths u take but the moments

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O&M launches rural link drive in UP

ADVERTISING major Ogilvy & Mather (O&M) has launched a new rural initiative called Param which will take connectivity and thereby e-governance to interior India where a large portion of the population lives. According to Mr Pankaj Baveja, who is heading this initiative, "We are calling our project connecting the last mile first." It is focused on communications and providing connections among people by using multiple technologies, some developed in-house and others off the shelf, to reach remote rural areas, where no landline phones or media-based communication is available.

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A pilot project called Beta-I has been undertaken in two remote villages of Basti district in east Uttar Pradesh. Mr Baveja, who was speaking at the International Conference

on e.governance 2003, said the project could prove critical for e-governance related communications including education, healthcare and business.

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The Rural Network to bring market issues centrestage

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THE Rural Network, an alliance of leading rural marketing organisations in the country, is spearheading a series of initiatives designed to put rural marketing issues squarely in the reckoning of corporates looking for new markets. The Network partners, Mr R.V. Rajan of Anugrah Madison, Chennai, Mr Pradeep Kashyap of MART, New Delhi, Mr Pradeep Lokhande of Rural Relations, Pune and Mr R.A. Patankar of Sampark, Mumbai, met in the city last week to finalise the initiatives. Mr Kashyap, speaking to Business Line, said one of the key initiatives was a seminar that the Rural Network is organising in association with FICCI in New Delhi on April 24 for senior management. The seminar will have participation from both the government as well as the private sector and will focus on what organisations need to do in their structures to service the rural market. "One of the reasons for this lack of focus on rural markets is the lack of commitment from the top. We need to get a buy-in from top management," said Mr Kashyap. The Network expects 300 delegates from some of the top FMCG and consumer durables companies to attend the seminar to debate some key issues confronting rural marketers. Another area that the Rural Network will collaborate on is research and data on the rural markets, "Currently, it's a black hole, there's not enough data; we will try to create a knowledge base," said Mr Kashyap. This year, two studies are planned - financing of durables in small towns. The other, related study will look at how to promote and distribute products of companies. It will study platforms like melas and mandis and buying patterns of rural folk and how corporates can use this network to good effect. "It will show the way for corporates on how to reach out," he added. For now the Network will fund these qualitative studies, and will use students from management institutes to undertake them. Another area that the Network will look at is getting management schools interested in starting rural marketing courses. As Mr R.V. Rajan of Anugrah pointed out, "More than 50 per cent of durables and FMCG sales come from rural areas, but except for a few, not many institutions offer a course in rural marketing." The Network will also look at publishing some case studies on rural markets based on its collective experience.

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Marketing the Kumbh Mela

This year, The Rural Network is looking to leverage the Kumbh Mela

to make it a marketer's delight. This year's Mela is at Nasik in Maharashtra and it starts on June 27. Over 45 lakh pilgrims are expected. The Network has identified around 10 important bathing ghats where pilgrims will congregate in great numbers. "We've identified 40 important days to carry out branding activities for corporates," said Mr R.A. Patankar of Sampark, who, along with Mr Lokhande, is coordinating the activities there. The Network is organising both the manpower and field vans which will be used to distribute leaflets as well as carry out product samplings and trials. It will also put up stalls and will also look at using the postal infrastructure like vans and post boxes for advertising. It is also looking at companies wanting to launch products. It is already in dialogue with interested corporates across several industries, including the mobile companies. "We've done an assessment study of the Mela; we've experience of fairs and the Kumbh is one on a much larger scale. We will plan a post-impact study for brands as well," said Mr Patankar. The Mela will be promoted as a must-be-there opportunity for corporates.

Mega conference planned

NEXT year, The Rural Network plans a mega conference, perhaps in New Delhi, which will bring together under one roof all types of players dealing with rural marketing and will provide a platform for sharing experiences. It will also explore the possibility of starting a Rural Marketing Association on the lines of AAAI and other similar professional bodies. Publishing a directory of all people in the industry is also on the agenda. The directory will be a database of people ranging from rural wall painters to folk artistes who can be used to promote products in rural areas. The planned two-day mega show will consist of talks, panel discussions, case study presentations as well as an expo. The conference will target all clients and ad agencies dealing with agriinputs, consumer durables, FMCGs and other services, rural event managers, video-on-wheel operators and other vendors who are involved in rural marketing in some form or the other.

Warm Regards,

Priyanka

Warm Regards, Priyanka (FOUNDER OF BBI FORUM) Life is not the amount of breaths u take but the moments that take ur breath away..
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ITC to expand rural marketing network

The e-choupals, primarily set as a part of the company's agribusiness initiative, are going to be an important vehicle of ITC's business. The company will be launching financial and FMCG products through the choupals on revenue sharing basis. A plan has also been drawn up to expand the choupal network in four more States apart from the existing four. Overall the agri business volume is expected to increase from Rs. 1,000 crores last year to Rs. 1,600 crores. Talking to media persons on the sidelines of the AIMA National Management Convention, here on Friday, S

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Shivakumar, chief executive, agri-business, said the company would launch life insurance products through the e-choupals in 50 villages, before the forthcoming kharif season. The products will be launched on a revenue sharing basis with the local `sanchalaks' of choupals each of which will have four of them. "The products will later be launched in other underprivileged villages," he said and added that the company had plans to launch other financial products including general insurance products soon. While FMCG products are generally available, the company is now conducting market research on launching these products through the choupals. "To begin with we will launch vegetable oils followed by salt and sugar". Keeping in tune with its ambitious rural marketing plans, the company has decided to increase the spread of choupals in Uttar Pradesh, Andhra Pradesh, Madhya Pradesh and Karnataka in the first phase. The choupal network will be extended to Kerala, Maharashtra, Tamil Nadu and West Bengal in the second phase.

Warm Regards,

Priyanka Warm Regards, Priyanka (FOUNDER OF BBI FORUM) Life is not the amount of breaths u take but the moments that take ur breath away.