Rural Marketing

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A

DISSERTATION

ON

Rural marketing in India

Executive Summary

Seventy percent of India’s population, or approximately 700 million people, live in rural areas . As of the 2000 census, this equates to just under 2.5 times the population of the U.S. A location is defined as rural if at least 75 percent of the

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population is agrarian. With such a large number of potential consumers, it is clear why multinational corporations would like to successfully penetrate the rural Indian market.

With an average income equivalent to $42 per month ($504 dollars per year), rural Indians have a very low disposable income . Most rural homes have minimal storage space and no refrigeration. Very few people own or have access to cars. As a result, rural Indian purchasing habits tend to be of an “earn today, spend today” mentality. Rather than buying in bulk, which would mean paying more for a large quantity upfront, rural Indians tend to buy what they need for short segments of time . These factors result in consumers buying products locally, as well as on a daily basis. In addition to the fact that income levels are low, rural incomes also vary greatly depending on the monsoons. When a monsoon hits, this devastates the livelihood of most rural consumers because they are dependent on agricultural work for income. Corporations are also directly affected because this makes it difficult to predict demand (Kanaan, 2001).

CONTENTS

1. Introduction .........................................................................6

2. Literature review .................................................................... 8

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3. objective …………………………………………………………………………….. 9

4. scope ……………………………………………………………………………………10

5. Research Methodology …………………………………………………………………….11

6.Rural market in India........................................................12 6.2 . Types of Rural market..........................................................16

6.2 Problems in rural market ......................................................16

6.3 Emerging trends in market...................................................18

7. Consumer Behaviour in rural market .......................................22

7.1 . Factor influencing consumers behaviour ..............................24

8 . Marketing of consumer durable product in rural market..........29

8.2 4 As approach............................................................ ..........30

9 . Data Analysis and findings .....................................................34

10.Strategies for rural marketing..................................................42

10.1case study : Akashganga........................................................46

10.2Case study : ITC..................................................................... 47

11 . Conclusion ............................................................................51

12. Reference ..............................................................................52

Introduction

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Rural marketing is an attractive term today as compared to what it was in mid and late 80s Rural market have widened and deepened , thanks to government who helps farmer in the form of support pricing resulting in increased incomes . Rural markets are turning out to be attractive to companies consumer product .

National Council for applied economic research survey showed that rural purchases are significant for varieties of product , according to the survey , rural market accounted for the purpose of

Over 70 % of portable radio , bicycles , mechanical wrist watches and cigarettes .

60 to 70 % of pvc footwear , tooth powder and cooking oil. 50 to 60% of table fans , sewing machines , motorcycle , kerosene stove ,

ghee, tea and toilet soaps. 40 to 50% of quart wrist watches , ceiling fans , black and white TVs ,

mopeds , cassette recorder , washing powder , talcum powder . Another survey conducted by NCAER known as marketing

information survey of house hold shows that More than 7 out of 10 rural house hold owned watches.

It can thus be observed from decade old NCAER survey that rural market have gained in depth for many consumer durable product which hitherto were

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believed to be mostly confirmed to urban market. A lot has been done by informational boom to transform to change the rural market.

The awareness level of rural consumer are on the higher plane owing to the fully expanded TV network in to every nook and cranny of rural india.

For quite some time now, the lure of rural India has been the subject of animated discussion in corporate suites. And there is a good reason too. With urban markets getting saturated for several categories of consumer goods and with rising rural incomes, marketing executives are fanning out and discovering the strengths of the large rural markets as they try to enlarge their markets.

Literature review

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Rural market is one of the best opportunity for the FMCG sector. In some sense we can say that rural market is future of FMCG. As per research of Purba Basu, (faculty of ICFAI business school),the lifestyle of rural consumers is changing. Rural Indian market and the marketing strategy have become the latest marketing buzzword for most of the FMCG majors. She added the strategies of different FMCG companies for capturing rural market like Titan’s Sonata watches, Coco Cola’s 200ml bottle, different strategies of HUL and Marico etc. She takes into consideration the study of National Council for Applied Economic Research (NCAER). According to the NCAER projections, the number of middle and high-income households in rural area. India is expected to grow from 80 million to 111 million by 2007. In urban India, the same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be double that of urban India.

According to Pradeep Tognatta, (former vice president of LG) The economic growth in India's agricultural sector in last year was over 7%, compared with 3% in the industrial sector. This implies a huge market potentiality for the marketer to meet up increasing demand. Factors such as village psyche, strong distribution network and market awareness are few prerequisites for making a dent in the rural markets. The model is of the stolid Anglo-Dutch conglomerate Unilever Group, which has enjoyed a century-long presence in India through its subsidiary Hindustan Lever Ltd. It was Hindustan Lever that several years ago popularized the idea of selling its products in tiny packages. Its sachets of detergent and shampoo are in great demand in Indian villages.

OBJECTIVE

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The main objective of study is to analyse and present marketing of consumer product in rural India . To set the direction for study following objectives have been set . They are

1: Present Rural marketing perspective.

2: Present Profile of Indian rural market.

3: study and analyse consumer behaviour in rural area.

4: Brand penetration in rural area.

5: Present marketing strategy fame for marketing consumer product in rural area.

Scope of study:-

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With a population of 1 bn people, India is a big market for FMCG companies. Around 70% of the total households in India reside in the rural areas. The total number of rural households is expected to rise from 135 m in 2002 to 153 m in 2010, which represents the largest potential market in the world.

Rural and urban potential

  Urban Rural

Population 2001-02 (m household) 53 135

Population 2009-10 (m household) 69 153

% Distribution (2001-02) 28 72

Market (Towns/Villages) 3,768 627,000

Source: Statistical Outline of India (2001-02), NCAER

An average Indian spends around 40% of his income on groceries and 8% on personal care products. A larger part of the total spending pie along with a large base (in terms of population) makes India one of the largest FMCG markets.

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RESEARCH METHODOLOGY

SAMPLE DESIGN

SAMPLE UNIT: - All working people are included both the genders i.e. males and females irrespective of their education level.

SAMPLING PROCEDURE: - Random Sampling

DATA COLLECTION METHOD

PRIMARY DATA:

Primary data was collected through a self administrated questionnaire. This questionnaire aims to gather information related to various FMCG product.

SECONDARY DATA:

Secondary data was collected through magazines, research papers, internet etc.

RESEARCH INTRUMENTS

QUESTIONNAIRE DESIGN:

As the questionnaire is self administrated one, the survey is kept simple and user friendly. Words used in questionnaire are readily understandable to all respondent. Also technical jargons are avoided to ensure that there is no confusion for respondents.

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Rural Marketing in India -With Special Reference to Agricultural

Produce in IndiaABSTRACT

Around 700 million people, or 70% of India's population, live in 6,27,000 villages in rural areas. 90% of the rural population is concentrated in villages with a population of less than 2000. Rural marketing is as old as the civilization. Surplus of agro - products are exchanged in earlier days in the barter system. The introduction of currency, transport, and communication has increased the scope of rural market. This paper discusses the present scenario of rural marketing especially rural produce, and its importance, current trends, and highlights certain problems related to rural marketing. Further it highlights the improvements that make the rural marketing system most effective.------------------------------------------------------------------------------------------------------

RURAL MARKETING

Rural marketing facilitate flow of goods and service from rural producers to urban consumers at possible time with reasonable prices, and agriculture inputs/ consumer goods from urban to rural. Marketing as a function has started much earlier when civilization started but not recognized as marketing. All economy goods are marketed in terms of goods and services (Barter system). Now money is being practiced as a good exchanging medium. The market may be a street, or a small town/ metropolitan city, Developments in infrastructure, transport, and communication facilities has increased the scope of the rural market.

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Environment

The difference between rural and urban markets on the basis of various socio – economic factors, most dominant among them being the source of income, the frequency of receipt of income, the seasonal nature of income and consumption. Rural markets are small, non- contiguous settlement units of village relatively low infrastructure facilitates, low density of population, their life styles also being different. Rural consumers are mostly farmers whose income receipts are dependent on the vagaries of nature.

Agri-Marketing

Rural population has been increased about 74% of the total population; the demand for products and services has increased a lot in rural areas. Green revolution in the North and white revolution in the West has brought about a new prosperity in the lives of rural people. Government emphasis on rural development has caused significant changes in the rural scenario. Moreover, the special attention given for infrastructure development through the successive Five-year plans has improved the buying and consumption pattern of rural people.

The Rural Agro – Products:

The rural agro-products are

* Fruits & Vegetables * Grains * Flowers

Rural sale products

* Milk & poultry products * Handicrafts and Hand loom products * Tribal village products like tamarind, Lac, soapnut etc

The peculiar characteristics of agricultural produce are:

* Bulkiness * Perisability * Wide varietal differences * Dispersed production

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* Processing needs for consumption * Seasonality

GROSS CROPPED AREA BY 1997 CROP WISE PERCENTAGE GIVEN BELOW

CROP PERCENTAGE AREA

SUGGER CANE 2COTTON 4RICE 22WHEAT 13OTHER CEREALS 19PULCESS 13OIL SEEDS 15OTHERS 12TOTAL 100

More than 40 % of the gross cropped area under non- food grains is under oilseeds. Principally groundnut and rapseed and mustered, cotton and sugar cane area the other major non- food grain crops.

VEGETABLES (share in production)

CROP % 0F TOTAL PRODUCTION

TOMATO 8ONION 8BRINJAL 9CAULIFLOWER 6OKAR 6PEAS 3POTATO 25CABBAGE 6OTHER 29TOTAL 100

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FRUITS

The major fruits share in total fruit production

Fruit name Percentage of fruit Production

BANANA 27APPLE 2CITRUA 8MANGO 23GUVA 3OOTHERS 37

India is the largest producers of mangos and banana in the world, and top ten producers of apples and pineapples. Other fruits, guava, sapota, papaya etc. Area under fruits which was estimated to 1.45 millions hectares in 1970-71 grow slowly and gear up after 1991-92 to 2.8 million hectares.

DAIRY

India is the largest milk producer and processing of milk was largely in the cooperatives sector.

NATIONAL DAIRY DEVELOPMENT BOARD PLAN ESTIMATION FOR YEAR 2010

Year 1999 Year 20106 lack litters per day sale 34 lack litters per day9.11 lack litters per day procurement 71 Lack lit per day174 ml per consumption per day 230 ml per consumption

per day

Rural marketing depends on agricultural produce, the production is seasonal and the consumption is spread out equalization of demand and supply has to be done. In addition, the raw agricultural produce as marketed by farmers has to be processed by many middlemen This include collection and assembling, financing, grading and standardization, storage, transportation, wholesaling and retailing these functions performed by village merchants, commission agents, wholesalers, processors etc. These people seek returns commensurating with

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their investments of capital, time and labour. As a result, the middlemen get more share of the price than the producers.

TYPES OF RURAL MARKETS

HAATS /SANDIES (mostly for weekly market for all commodities)

MANDIS (mostly for all types of grains)

COMMODITY SPECILISED MARKETS

Nasik for onions and Grapes market, Nagpur for Orange market, Delhi for Apples market, Salem{TN} for Mangoes, Farkka market for potato market and Calcutta / Assam for tea market.

REGULATED MARKETS

There are more than 5000 primary and Secondary Agricultural produce wholesale assembling markets functioning in the country. These markets are meant for the farmers to take their produce for sale. These markets facilitate formers, immediate cash payments. The directorate of state Agricultural Marketing Board or Registrar of cooperative marketing societies is controlling these markets. The market is run by an elected committee comprising of members from the farmers community, commission agents/wholesalers and some government nominees from Directorate of state agriculture / cooperative societies.

COOPERATIVE MARKETING

Another major improvement for rural producers is the formation of cooperative societies. Farmer's common interest helped to increase the incomes of the farmers and avoid exploitation of the middlemen. There are about five lack cooperatives working but very few cooperative societies in selected areas like Dairy, sugar, oilseeds, Mahagrape in Maharastra, tomato growers in Punjab etc. succeeded in cooperative processing industry.

Problems in Rural Marketing

The rural market offers a vast untapped potential. It is not that easy to operate in rural market because of several problems and also it is a time consuming affair and it requires considerable investments in terms of evolving appropriate strategies with a view to tackle the problems.

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The problems are.

* Underdeveloped people and underdeveloped markets * Lack of proper physical communication facilities* Inadequate Media coverage for rural communication* Multi language and Dialects* Market organization & staff

Underdeveloped people and underdeveloped markets

The agricultural technology has tried to develop the people and market in rural areas. Unfortunately, the impact of the technology is not felt uniformly through out the country. Some districts in Punjab, Haryana or Western Uttar Pradesh where rural consumer is somewhat comparable to his urban counterpart, there are large areas and groups of people who have remained beyond the technological breakthrough. In addition, the farmers with small agricultural land holdings have also been unable to take advantage of the new technology.

Lack of proper physical communication facilities

Nearly 50 percent of the villages in the country do not have all weather roads. Physical communication to these villages is highly expensive. Even today, most villages in eastern part of the country are inaccessible during monsoon season.

Inadequate Media coverage for rural communication

A large number of rural families own radios and television sets there are also community radio and T.V sets. These have been used to diffuse agricultural technology to rural areas. However the coverage relating to marketing is inadequate using this aid of Marketing.

Multi language and Dialects

The number of languages and dialects vary from state to state region to region This type of distribution of population warrants appropriate strategies to decide the extent of coverage of rural market.

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OTHER FACTORS INFLUENCING MARKETING

Natural calamities and Market conditions (demand, supply and price). Pests and diseases, Drought or too much rains, Primitive methods of cultivation, lack of proper storage facilities which exposes grain to rain and rats, Grading, Transport, Market Intelligence (up to date market prices to villagers), Long chain of middlemen (Large no. of intermediaries between cultivator and consumer, wholesalers and retailers, Fundamental practices (Market Dealers and Commission Agents get good part of sale of receipts).

EMERGING TRENDS IN MARKETS

ON LINE RURAL MARKET (INTERNET, NICNET):

Rural people can use the two-way communication through on – line service for crop information, purchases of Agro-inputs, consumer durable and sale of rural produce online at reasonable price. Farm information online marketing easily accessible in rural areas because of spread of telecommunication facilities all over India. Agricultural information can get through the Internet if each village have small information office .

COST BENEFIT ANALYSIS IN THIS SECTOR

Cost benefit can be achieved through development of information technology at the doorsteps of villagers. Most of the rural farmers need price information of agri-produce and inputs. If the information is available farmers can take quick decision where to sell their produce, if the price matches with local market farmers no need to go near by the city and waste of money & time it means farmers can enrich their financial strength.

NEED BASED PRODUCTION

Supply plays major role in price of the rural produce, most of the farmers grow crops in particular seasons not throughout the year, it causes oversupply in the market and drastic price cut in the agricultural produce. Now the information technology has been improving if the rural people enable to access the rural communication, farmers' awareness can be created about crops and forecasting of future demand, market taste. Farmers can equates their produce to demand and supply, they can create farmers driven market rather than supply driven market. If the need based production system developed not only prices but also

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storage cost can be saved. It is possible now a days the concept of global village.

MARKET DRIVEN EXTENSION

Agricultural extension is continuously going through renewal process where the focus includes a whole range of dimensions varying from institutional arrangements, privatization, decentralization, partnership, efficiency and participation. The most important change that influences the extension system is market forces. There is a need for the present extension system to think of the market driven approach, which would cater the demands of farmers.

AGRO- PROCESSING INDUSTRY

India is the second largest producer of fruits and vegetables in the world with an annual production of more than 110 million tonnes of fruit and vegetable only 1.3 percent of the output is processed by the organised sector commercially, the reason higher consumption in fresh form. However, as the packaging, transportation and processing capacities increase, the market for processed fruits and vegetables is projected to grow at the rate of about 20 % per annum. 100 % export oriented units (EOU) and Joint venture units required improving the processing industry.

KISAN MANDI

There is a need to promote direct agricultural marketing model through retail outlets of farmer's co-operatives in urban areas. The direct link between producers and consumers would work in two ways: one, by enabling farmers to take advantage of the high price and secondly, by putting downward pressure on the retail prices.

RECENT DEVELOPMENTS IN TAMILNADU

Many remote villages now connected to main roads and link roads with the help of innovative technique of grass root development by the people for the people of the people. "Uzhavar sandhai" the another development of rural farmers reducing middle men and also cost to the benefit of urban society.

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The Innovative –" Uzhavar sandhai"

The recent changes in agricultural produce sale by farmers in Uzhavar sandhai leads to direct selling vegetables and other commodities to urban needs. Government of Tamilnadu started Uzhavar sandhai all over the state for the purpose of direct selling their produce to urban needs, not only selling of rural produce but also exchange of their ideas each others.

Procurement Prices / Support Prices

These prices are more than minimum prices, which facilitates government bulky procurement for Public Distribution System and maintains buffer stock levels.

Farmer has little control over prices, which are determined by the broad factors of, supply and demand market at large.

SUGGESTIONS FOR SOUND AGRICULTURAL MARKETING IN INDIA

* Suitable structure of support prices for various farm commodities adjusted from time to time.

* Adequate arrangement of agricultural produce on support price if the price falls below the level.

* Regulated infrastructure of markets and warehouses, which ensure fair prices.

.* Rural roads must be compliment and coordinate with railways, nearest waterways (port), airports if possible.

* The efficient marketing is predominantly influenced by efficient distribution system it means products such ultimate consumer in the quickest time possible at minimum cost.

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* The development of communication systems appropriate to rural market may cost up to six times as much as reaching an urban market through established media, need rural communication facilities.

* The state marketing board or federation or market committees also the producers, traders and sellers have necessarily to be consulted as they have the principle interest towards it s use. . * Public weighing machines one in each rural market to ensure correct weightment both for farm and non-farm arrivals. Storage godowns and an office also required.

* For storage facilities the government should not depend on private agencies to store food grains (National commission on Agriculture recommended).

* Rural markets need more number of go downs and ancillary platforms for packaging places, market office cum information cell, bank and post office.

* Rural marketing is the nerve centre of a rural economy, rural markets are the channels for the movements of goods and services as well as to promote cultural integration.

* Agricultural technology must reach all over the country, irrespective of size of land holding.

* Improve physical communication facility to nook and corner of the country.

* Land reforms need effectively implemented, because the land is basic asset of rural people.

* Rural communication must be in regional language and dialects. * The existing marketing staff must be increased and adequate training must be given.

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* Extending of financial support for modernization of the agro-processing units is also needed.

* Processing units should utilise fully capacity.

Consumer Behaviour in Rural MarketConsumer Buyer Behaviour refers to the buying behaviour of final consumers - individuals and households who buy goods and services for personal consumption. All of these final consumers combined make up the consumer market.

The consumer market in this case is Rural India. About 70% of India’s population lives in rural areas. There are more than 600,000 villages in the country as against about 300 cities and 4600 towns. Consumers in this huge segment have displayed vast differences in their purchase decisions and the product use. Villagers react differently to different products, colours, sizes, etc. in different parts of India. Thus utmost care in terms of understanding consumer psyche needs to be taken while marketing products to rural India.

Thus, it is important to study the thought process that goes into making a purchase decision, so that marketers can reach this huge untapped segment.

Factors influencing buying behaviour

The various factors that affect buying behaviour of in rural India are:

Environmental of the consumer - The environment or the surroundings, within which the consumer lives, has a very strong influence on the buyer behaviour, egs. Electrification, water supply affects demand for durables.

Geographic influences - The geographic location in which the rural consumer is located also speaks about the thought process of the consumer. For instance, villages in South India accept technology quicker than in other

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parts of India. Thus, HMT sells more winding watches in the north while they sell more quartz watches down south.

Influence of occupation – The land owners and service clan buy more of Category II and Category III durables than agricultural laborers/farmers.

Place of purchase (60% prefer HAATS due to better quality, variety & price) Companies need to assess the influence of retailers on both consumers at village shops and at haats.

Creative use of product ex Godrej hair dye being used as a paint to colour horns of oxen, Washing machine being used for churning lassi. The study of product end provides indicators to the company on the need for education and also for new product ideas.

Brand preference and loyalty (80% of sale is branded items in 16 product categories)

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Cultural factors influencing consumer behavior

Cultural factors exert the broadest and deepest influence on consumer behaviour. The marketer needs to understand the role played by the buyer’s culture. Culture is the most basic element that shapes a person’s wants and behaviour.

In India, there are so many different cultures, which only goes on to make the marketer’s job tougher. Some of the few cultural factors that influence buyer behaviour are:

1. Product (colour, size, design, shape): There are many examples that support this point.

For example, the Tata Sumo, which was launched in rural India in a white colour, was not well accepted. But however, when the same Sumo was re-launched as Spacio (a different name) and in a bright yellow colour, with a larger seating capacity and ability to transport good, the acceptance was higher.

Another good example would be Philips audio systems. Urban India, the viewpoint is totally opposite. That is the main reason for the large acceptance of big audio systems. Thus Philips makes audio systems, which are big in size and get accepted in rural India by their sheer size.

Social practices: There are so many different cultures, and each culture exhibits different social practices.

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For example, in a few villages they have common bath areas. Villagers used to buy one Lifebuoy cake and cut it into smaller bars. This helped lifebuoy to introduce smaller 75-gram soap bars, which could be used individually.

1. Decision-making by male head: The male in Indian culture has always been given the designation of key decision maker.

For example, the Mukhiya’s opinion (Head of the village), in most cases, is shared with the rest of the village. Even in a house the male head is the final decision maker. In rural areas, this trend is very prominent.

1. Changes in saving and investment patterns From gold, land, to tractors, VCR’s, LCV’s

The Differences in Buyer behaviour

Rural Urban· Conservative InnovativeValues, aspirations, needs -

traditional and based on culture, social customs, beliefs

Follow trends

(including International)

Eldest Male Member KDM · VariesCollective Sanction Unheard of

Brand Protection in India

This is the latest initiative by the consumer goods industry in India in association with Federation of Indian Chambers of Commerce and Industry to fight a long standing menace - that of counterfeits and pass-off products.

Be it Soap, shampoo, toothpaste or hair oil, biscuit, soft-drink or confectionery, batteries or balm - go to any market in India and you will find a plethora of products that are available in lookalike packages under slightly twisted names – Fair & Lovely could be Pure & Lovely or a Parachute could be Parashudh. The packaging, color and design of the pass-off product is so similar to the original, that it is impossible to distinguish between the two if you are not the sort who reads product names before picking them up. Leave alone the vast uneducated masses that live in this country, hardly any of the educated informed consumer

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would also be in a habit of verifying the accuracy of the product name or manufacturer before buying goods at the local kirana shop. A recent study conducted by AC Neilson reveals that 80% of consumers realize they have brought a counterfeit or fake product only after they have consumed it. And there may be a large number of those who never realize the same even after consumption!

While the problem of fakes is witnessed all across the country, it is more severe in the North. Counterfeiting is rampant in the states of Delhi, Punjab, Haryana and UP. Procter & Gamble, which has embarked on a major drive against counterfeits of its popular Vicks Action 500 brand, found through a study that 54 strips in every 100 strips of Action 500 being sold in the market were counterfeits. The company’s sales growth in this sector has been stated to have been affected by 10% due to this menace of counterfeits. Counterfeits and pass-off products are reportedly affecting sales of several brands to the extent of 20-30%. It is estimated that the counterfeit products contribute to about Rs17bn worth of sales of the Rs60bn FMCG market. Government would be losing almost Rs6bn in revenues that would have been generated on excise, octroi, sales and income taxes that would have been paid on these sales. For companies, besides loss of revenues, an even greater loss would be through damage to brand reputation or loss of customer loyalty caused by the poor quality of these look alike brands. And the customer unwittingly is using products that may sometimes cause bodily harm or even danger to life.

The problem of counterfeits is not confined to India alone. It is estimated that counterfeits account for Rs200bn i.e. about 5-7% of total world trade.

The consumer goods industry in India has therefore come together to launch on offensive against these unscrupulous players. A Brand Protection Committee has been formed under the aegis of the Federation of Indian Chambers of Commerce and Industry (FICCI). The Mission of the Committee is to stem the sale of counterfeits and fakes in India. Directors of leading consumer non-durable companies such as P&G, HLL, Marico, Smith line Consumer, Britannia, Indian Shaving and research agencies such as A C Neilson and CERC are members of the Brand Protection Committee. The committee aims to work in close conjunction with industry, consumer associations, trade associations and regulatory authorities to eliminate counterfeit and pass-off sales in the country. The Committee proposes to focus on enforcement of

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applicable laws, measure and publicize negative economic impact of counterfeits and create consumer awareness, and take action against errant manufacturers, wholesalers, distributors and retailers with the help of regulatory authorities. This is a concerted effort on part of the FMCG industry to stem the loss that accrues to the companies, the Government and the consumers.

The problem of fakes is more rampant in rural areas due to low literacy levels and consumers reliance on product identification through pneumonic. Companies are trying to educate customers to look for certain packaging identification marks before purchase.

A brief summary of a study conducted by ORG-MARG is given below.

Aug 2000 – Jul 2001

BRANDS

No. of look

alike

Brands

Volume

No. of

Dealers

(Lacs)

Major States

Dabur Vatika 2 148 K.L 1 Pun/Har, Assam

Clinic All Clear 38 1099 K.L 1Del, Assam, Bihar,

M.P.

Surf Nw Exl Act

Oxg5 1837 11

Bihar, W.B., Guj,

M.P., Maha

Horlicks 2 1276 - Assam, Karnataka

Colgate Dental

Cream9 2190 T 20 W.B., Bihar, M.P.

Colgate Tooth

Powder6 1009 28 Assam, Bihar, Maha

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Dabur Amla 34 9893 K.L 14 Raj, U.P. Pun / Har

Panteen Pro-V

New7 733 K.L 4 U.P., Bihar, Guj, M.P.

Ariel Power

Compact4 200 9 Assam

Iodex 26 755 9 U.P., Guj, M.P.

Product Strategy: This is a strategy which companies apply to their product according to the market needs and the target group. It is a

strategy which best suits the company and also targets the consumer of that particular region. Some product strategies are such that they encapsulate the whole of rural India.

e.g.: Coca-Cola targeted the whole Indian rural market with the positioning of “Thanda Matlab Coca-Cola” advertisements because most of the villagers say when wanting a drink refer to it as Thanda…… so Coca-cola used that word.

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Marketing of consumer durable product

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,

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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

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

Affordability

The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh — the so-called `Bimaru' States.

Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is

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available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15.

Acceptability

The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. One company which has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customised TV for the rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice boxes — a tin box for new outlets and thermocol box for seasonal outlets.

The insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total premia. The company tied up with 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

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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."

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DATA ANALYSIS

After a good deal of consumer survey and marketing research, I have a good collection of data. The analyses of those data’s are given as follows:-

DATA ANALYSES FOR PREFERENCE FOR TOOTHPASTE IN RURAL MARKET:-

In the initial years, the rural consumers preferred tooth powers, datoons etc. but from the last decade, the preference of rural consumers towards toothpaste has been changed. A huge number of toothpastes of different companies are sell in rural market. Colgate, Pepsodent are the most popular toothpaste brands in rural market. The rural consumers preference towards the different toothpaste brands are given in following pie chart.

TABLE-1:- consumers preference towards different toothpastes

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DEMANDS OF DIFFERENT TOOTHPASTE BRANDS

35%

30%

15%

10%

10%

PEPSODENT

COLGATECLOSE UP

BABOOLOTHERS

As per analyses of above pie chart, we has found that Hindustan Uniliver’s Pepsodent leads the market with 35% rural market share. 30% of rural consumers prefers colgate as their favorite toothpaste brand, once again Hindustan Uniliver’s close up occupies third position with 15% market share.10% of the rural consumers prefers Dabur’s babool toothpaste and 10% consumers uses other toothpaste brands.

DATA ANALYSIS FOR THE PREFERENCE FOR SOAP IN RURAL MARKET:-

In the survey of preference of my target consumers towards soap, I had found the different preference and different choice of the consumers.

On the basis of their choice, I have got the following data given in following table:-

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DEMAND OF SOAP BRANDS

812

30

50

0

10

20

30

40

50

60

LUX LIFEBOY REXONA OTHERS

BRANDS

PECE

NTAG

E LUX

LIFEBOYREXONA

OTHERS

As per given in the above table, the 90% of the soap market is coverd by the products of Hindustan Uniliver.50% of rural consumers prefers HUL’s Lux, where as 30% goes towards HUL’s Lifeboy third position is also acquired by a HUL product where 15% of the market captured by Rexona. 8% of rural consumers prefers some other soap brands.

CONCLUSION:-

In this analysis , I found that a vast majority of rural consumers prefers Lux as their more faithful brand.

DATA ANALYSIS FOR PREFERENCE FOR SHAMPOO IN RURAL MARKET:-

As per concern of shampoo , total 31.9% shampoo uses in rural market. It shoes a good number of consumers preference towards shampoo in rural area. From the last few years , the demand of shampoo sashes as well as

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medium size bottles has increased in rural area. Peoples of every age are interested to use shampoo at regular interval.

The preference of consumers towards shampoo is given in following table.

DEMAND OF SHAMPOO BRANDS

42

36

16

6

05

1015202530354045

CLINIC PLUS SUNSILK CHICK OTHERS

PRODUCTS

PERC

ENTA

GE

CLINIC PLUS

SUNSILK

CHICK

OTHERS

.

DEMAND OF SHAMPOO IN SACHE CATAGORY

3228

1812 10

05

101520253035

BRANDS

PER

CEN

TAG

E

HEADS &SHOULDERSPANTENESUNSILKCLINIC PLUSOTHERS

The consumer’s preference towards shampoo are as follows:-

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42% prefers clinic plus. 30% consumers prefers sunsilk. 10% consumers go through Calvin Care’s Chick. 8% consumers prefers other shampoos or non shampoo users.

Preference of shampoo in saches:-

32% of consumers uses Heads & Shoulders. 28% goes through Pantene. 18% prefers sunsilk. 12 % prefers clinic plus. 10% includes non shampoo users or users of some other

brands,

CONCLUSION:-

This analysis shows that a vast majority of rural consumers prefers HUL’s clinic plus and Sunsilk in high and medium size sample. But on the other hand, in sachet sample there is different story. More than 50% of the rural consumers prefers the brands of P&G (Heads & Shoulders and Pantene)

CONSUMERS PREFERENCE TOWARDS DIFFERENT TEA BRANDS:-

In the segment market, generally consumers had prefer local tea , but from the few years they starts to use some brands of the different tea companies because of the avaibility of tea in small sachets. The following table provides a brief details about the different tea brands popular in the rural market.

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DEMANDOF TEA DIFFERENT BRANDS

32%

26%

21%

11%

10%

TAZATATA TEA

DOUBLE DIMONDTAJ MAHAL

OTHERS

the data analysis of consumers preference towards tea is discussed as follows:-

32% consumers prefers taza as their best choice. 26% of the rural consumers prefers tata tea. 21% of the rural consumers prefers double diamond. 11% consumers prefers taj mahal tea. 10% consumers are among those who prefers some other

tea brands.CONCLUSION:-

As per given in the above table taza and tata tea are the leading tea brands in the rural market.

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Promotion of Brand in Rural Market of India

Indian Marketers on rural marketing have two understanding (I) The urban metro products and marketing products can be implemented in rural markets with some or no change. (ii) The rural marketing required the separate skills and techniques from its urban counterpart. The Marketers have following facilities to make them believe in accepting the truth that rural markets are different in so many terms.

(i) The rural market has the opportunity for.

(ii)  Low priced products can be more successful in rural markets because the low purchasing, purchasing powers in rural markets.

(iii)  Rural consumers have mostly homogeneous group with similar needs, economic conditions and problems.

(iv) The rural markets can be worked with the different media environment as opposed to press, film, radio and other urban centric media exposure.

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How does reality affects the planning of marketers? Do villagers have same attitude like urban consumers? The question arises for the management of rural marketing effects in a significant manner so than companies can enter in the rural market with the definite goals and targets but not for a short term period but for longer duration. The Research paper will discuss the role of regard. The strategy, which will be presented in the paper, can be either specific or universally applicable.

Realities before the Marketers

70% of India's population lives in 627000 villages in rural areas. 90% of the rural population us concentrated in villages with a population of less than 2000, with agriculture being the main business. This simply shows the great potentiality rural India has to bring the much - needed volume- driven growth. This brings a boon in disguise for the FMCG Company who has already reached the plateau of their business urban India.

As per the National Council for Applied Economic Research (NCAER) study, there are as many 'middle income and above' households in the rural areas as there are in the urban areas. There are almost twice as many' lower middle income' households in rural areas as in the urban areas. At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas.  According to the NCAER projections, the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In urban India, the same is expected to grow from 46 million to 59 million. Thus, the absolute size India is expected to be doubles that of urban India.

HLL chairman MS Banga Says, "This exercise may not pay in the immediate future, but will definitely give long-term dividends. Incidentally, over 50 percent of the sales of HLL's fabric wash, personal wash and beverages are in rural areas. And we see a future in going rural in a major way".

The improved agricultural growth is expected to boost rural demand, through not at too sizzling a rate. Moreover, the price drop in personal products, after the recent excise duty reductions, in also expected to drive consumption. "Better agricultural yields will give farmers more spending power, making the rural markets bullish," says an analyst.

As a result, HLL has planned a rural marketing program that is expected to result in a marked growth in the consumption of the company's products in the

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rural market. HLL will adopt three-pronged marketing strategy- new price points, sizes and awareness campaigns for its detergents and soaps segment to augment rural growth.

The Indian established Industries have the advantages, which MNC don't enjoy in this regard. The strong Indian brands have strong brand equity, consumer demand-pull and efficient and dedicated dealer network which have been created over a period of time. The rural market has a grip of strong country shops, which affect the sale of various products in rural market.

The companies are trying to trigger growth in rural areas. They are identifying the fact that rural people are now in the better position with disposable income. The low rate finance availability has also increased the affordability of purchasing the costly products by the rural people.

Strategies For Rural Marketing

1: BY COMMUNICATING AND CHANGING QUALITY PERCEPTION

Companies are coming up with new technology and they are properly communicating it to the customer. There is a trade-o_ between Quality a customer perceives and a company wants to communicate. Thus, this positioning of technology is very crucial. The perception of the Indian about the desired product is changing. Now they know the difference between the products Wanted and the utilities derived out of it. As a rural Indian customer always wanted value for money with the changed perception, one can notice difference in current market scenario.

2: BY PROPER COMMUNICATION IN INDIAN LANGUAGE

The companies have realized the importance of proper communication in local language for promoting their products. They have started selling the concept of quality with proper communication. Their main focus is to change the Indian customer outlook about quality. With their promotion, rural customer started asking for value for money.

3: BY PROVIDING WHAT CUSTOMER WANTS

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The customers want value for money. They do not see any value in frills associated with the products. They aim for the basic functionality. However, if the seller provide frills free of cost they are happy with that. They are happy with such a high technology that can fulfil their need. As "Motorola" has launched, seven models of Cellular Phones of high technology but none took off. On the other hand, "Nokia" has launched a simple product, which has captured the market.

4: BY PROMOTING INDIAN SPORTS TEAM Companies are promoting Indian sports teams so that they can associate themselves with India. With this, they inuence Indian mindset. LG has launched a campaign "LG ki Dua, all the best". ITC is promoting Indian cricket team for years, during world cup they have launched a campaign "Jeeta hai jitega apna Hindustan India India India". Similarly, Whirlpool has also launched a campaign during world cup.

5: BY TALKING ABOUT A NORMAL INDIAN

Companies are now talking about normal India. It is a normal tendency of an Indian to try to associate himself/herself with the product. If he/she can visualize himself/herself with the product, he /she becomes loyal to it. That is why companies like Daewoo based their advertisements on a normal Indian family.

6 : BY DEVELOPING RURAL-SPECIFIC PRODUCTS

Many companies are developing rural-speci_c products. Keeping into consideration the requirements, a _rm develops these products. Electrolux is working on a made-for India fridge designed to serve basic purposes: chill drinking water, keep cooked food fresh, and to withstand long power cuts.

7:BY GIVING INDIAN WORDS FOR BRANDS

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Companies use Indian words for brands. Like LG has used India brand name "Sampoorna" for its newly launched TV. The word is a part of the Bengali, Hindi, Marathi and Tamil tongue. In the past one year, LG has sold one lakh 20-inch Sampoorna TVs, all in towns with a population of around 10,000. By the end of 1999, roughly 12Thats Rs 114 crore worth of TV sets sold in the villages in a year.

8:BY ACQUIRING INDIAN BRANDS

As Indian brands are operating in India for a long time and they enjoy a good reputation in India. MNCs have found that it is much easier for them to operate in India if they acquire an Established Indian Brand. Electrolux has acquired two Indian brands Kelvinator and Allwyn this has gave them the well-established distribution channel. As well as trust of people, as people believe these brands. Similarly Coke has acquired Thumps up, Gold Spot, Citra and Limca so that they can kill these brands, but later on they realized that to survive in the market and to compete with their competitor they have to rejuvenate these brands.

9:BY EFFECTIVE MEDIA COMMUNICATION

Media Rural marketing is being used by companies. They can either go for the traditional media or the modern media. The traditional media include melas, puppetry, folk theatre etc. while the modern media includes TV, radio, e-chaupal. LIC uses puppets to educate rural masses about its insurance policies. Govt of India uses puppetry in its campaigns to press ahead social issues. Brook Bond Lipton India ltd used magicians e_ectively forlaunch of Kadak Chap Tea in Etawah district. In between such a show, the lights are switched o_ and a torch is ashed in the dark(EVEREADYs tact). ITC's e-chaupal (chaupal is the common place where villagers gather) has been the most elaborate and extensive venture in this _eld so far. Conceived by ITC's international business division and launched in 2000, the e-chaupal project has since grown to around 2,700 chaupals covering a population of around 1.2 million in _ve states { Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh and Maharashtra.

Rural marketing requires the understanding of the complexities and this article reviews some of the key issues. Indian agricultural industry has been growing at a tremendous pace in the last few decades. The rural areas are consuming a large number of industrial and urban manufactured products. The rural agricultural production and consumption process plays a predominant role in developing the Indian economy. This has designed a new way for understanding

43

a new process called Rural Marketing. The concept of rural marketing has to be distinguished from Agricultural marketing. Marketing is the process of identifying and satisfying customers needs and providing them with adequate after sales service. Rural marketing is different from agricultural marketing, which signifies marketing of rural products to the urban consumer or institutional markets. Rural marketing basically deals with delivering manufactured or processed inputs or services to rural producers, the demand for which is basically a derived outcome. Rural marketing scientists also term it as developmental marketing, as the process of rural marketing involves an urban to rural activity, which in turn is characterised by various peculiarities in terms of nature of market, products and processes. Rural marketing differs from agricultural or consumer products marketing in terms of the nature of transactions, which includes participants, products, modalities, norms and outcomes. The participants in case of Rural Marketing would also be different they include input manufacturers, dealers, farmers, opinion makers, government agencies and traders. The existing approach to the rural markets has viewed the markets as a homogeneous one but in practice, there are significant buyer and user differences across regions as well as within that requires a differential treatment of the marketing problems. These differences could be in terms of the type of farmers, type of crops and other agro-climatic conditions. One has o understand the market norms in agricultural input so as to devise good marketing strategies and to avoid unethical practices, which distort the marketing environment. Many of the inputs used for production process have implications for food, health and environmental sectors. Rural marketing needs to combine concerns for profit with a concern for the society, besides being titled towards profit. Rural market for agricultural inputs is a case of market pull and not market push. Most of the jobs of marketing and selling is left to the local dealers\ and retailers. The market for input gets interlocked with other markets like output, consumer goods, money and labour. The importance of rural marketing can be understood from the fact that today modern inputs i.e. diesel, electricity, fertilisers, pesticides, seeds account for as much as 70Green Revolution areas. Further the percentages were higher at 81of land. Strategic aspects Rural marketing in India is not much developed there are many hindrances in the area of market, product design and positioning, pricing, distribution and promotion. Companies need to understand rural marketing in a broader manner not only to survive and grow in their business, but also a means to the development of the rural economy. One has to have a strategic view of the rural markets so as to know and understand the markets well. In the context of rural marketing one has to understand the manipulation of marketing mix has to be properly understood in terms of product usage. Product usage is central to price, distribution, promotion, branding, company image and more important farmer economics, thus any strategy in rural marketing should be given due

44

attention and importance by understanding the product usage, all elements of marketing mix can be better organised and managed.

10 :MELAS

Melas are places where villagers gather once in a while for shopping. Companies take advantage of such events to market their products. Dabur uses these events to sell products like JANAM GHUTI(Gripe water). NCAER estimates that around half of items sold in these melas are FMCG products and consumer durables. Escorts also displays its products like tractors and motorcycles in such mela.

Case Studies-1: AKASHGANGA

This case study is about a product and service named Akashganga sold by a small, entrepreneurial business named Shree Kamadhenu Electronics Private Ltd. (SKEPL). Akashganga is for diary farmers and it is intended to enable to them to increase their efficiency and productivity. The Indian diary industry is plagued by several problems, the major ones being low productivity of Indian cows, the delays in processing milk, low quality caused by manual handling, corruption and mismanagement, and, of course, endemic dilution of milk with water. Akashganga attempts to alleviate some of these issues. Akashganga is a computerized system. When a farmer gets milk into the collection point, it's weighed and the amount of fat measured and immediately an entry is made on the farmer's swipe card. The money can be collected immediately. This is marked contrast to the previous system where the financial calculation was done later to avoid holding up the queue of farmers ready for milking; the calculation was done by hand and was somewhat complicated. With the new system, calculation is done automatically which makes it possible to pay the farmer on the spot rather than having him wait for a couple of days. Also the potential for cheating is reduced. An entry is made electronically on the farmer's swipe card. When SKEPL wanted to market this service, it ran up against the scepticism of the Indian rural people against unproven technology. This is the classic catch-22 situation as the farmer does not trust the tool till he tries it, and is reluctant to try it till he trusts it. SKEPL got around this problem by offering free trials and delayed payment schemes stretching up to several months. The company also provided responsive and efficient after-sales service. It established a service network covering the rural areas, and typically would attend to a compliant

45

within a few hours of receiving it. It's important to note that the company's local presence whether for marketing, sales or service helped tremendously, since the villagers would not be disposed to make a journey to a town or city to learn about their products. The company also used a name Akashganga that Indian villagers can relate to. This helped earn the trust of the villagers. Also, Shree Kamadhenu Electronics used local people for marketing, sales, service, etc. This was a very important factor that helped the farmers relate to and trust the company.Of course, the company had a solution that was superior in terms of time, transparency, fairness, etc, and that played a big role in their success. As a result of these factors, SKEPL gained a threshold in this large market and earned respect among farmers.

Case-Study 2: ITC E-Choupal

ITC followed a different media/communication strategy which is more elaborate and extensive in rural marketing so far, which benefits both the farmers and the organization. The strategy is use the Information Technology and bridge the information and service gap in rural INDIA which gives an edge to market its products like seeds, fertilizers and pesticides and other products like consumer goods. With this strategy it can also enhance its competetiveness in global market for agri exports. A pure trading model does not require much capital investment. The e- Choupal model, in contrast, has required that ITC make significant investments to create and maintain its own IT network in rural India and to identify and train a local farmer to manage each e-Choupal.

The company has initiated an e-Choupal effort that places computers with Internet access in rural farming villages; the e-Choupals serve as both a social gathering place for exchange of information (choupal means gathering place in Hindi) and an e-commerce hub. The computer, typically housed in the farmers house, is linked to the Internet via phone lines or, increasingly, by a VSAT connection, and serves an average of 600 farmers in 10 surrounding villages within about a five kilometre radius. Each e-Choupal costs between US $3,000 and US $6,000 to set up and about US $100 per year to main-

tain. Using the system costs farmers nothing, but the host farmer, called a sanchalak, incurs some operating costs and is obligated by a public oath to serve the entire community; the sanchalak benefits from increased prestige and a

46

commission paid him for all e-Choupal transactions. The farmers can use the computer to access daily closing prices on local mandis (government mandated markets), as well as to track global price trends or find information about new farming techniques either directly or, because many farmers are illiterate, via the sanchalak (the village farmer who runs the e-Choupal and acts as ITCs representative in the village). In addition they can also know about weather forecast(local) and best practices in the world from e-Choupal website. They also use the e-Choupal to order seed, fertilizer, and other products such as consumer good from ITC or its partners, at prices lower than those available from village traders; the sanchalak typically aggregates the village demand for these products and transmits the order to an ITC representative. At harvest time, ITC offers to buy the crop directly from any farmer at the previous days closing price; the farmer then transports his crop to an ITC processing center, where the crop is weighed electronically and assessed for quality. The farmer is then paid for the crop and a transport fee. Launched in June 2000, 'e-Choupal', has already become the largest initiative among all Internet-based interventions in rural India. 'e-Choupal' services today reach out to more than 3.5 million farmers growing a range of crops - soyabean, co_ee, wheat, rice, pulses, shrimp - in over 31,000 villages through 5200 kiosks across six states (Madhya Pradesh, Karnataka, Andhra Pradesh,Uttar Pradesh, Maharashtra and Rajasthan).

Vision and Planning Behind the e-Choupals

Implementing and managing e-Choupals is a significant departure from commodities trading. Through its tobacco business, ITC has worked in Indian agriculture for decades, from research to procurement to distribution. ITCs translation of the tactical and strategic challenges it faced and its social commitment into a business model demonstrates a deep understanding of both agrarian systems and modern management. The principles followed in implementing the e-Choupals are

Re-engineer, Not ReconstructPresent Mandi system have some success factors in it. ITC decided tobuild e-Choupal on existing system. Already ITC has trading agents in

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local mandis for its tobacco business. It retained the efficient providers and created roles for inefficient people. It recruits and engages members of landscape thereby making their expertise available to ITC. With this principle ITC can avoid the reinventing the system in areas where it can add no value with its presence i.e., in areas where efficient agents are there.

Address the Whole, Not Just One PartThe farmers various activities range from procuring inputs to sellingproduce. Currently, the village trader services the spectrum of farmers needs. He is a centralized provider of cash, seed, fertilizer, pesticides, and also the only marketing channel. As a result, the trader enjoys two competitive benefits. First, his intimate knowledge of the farmer and village dynamics allow him to accurately assess and manage risk. Second, he reduces overall transaction costs by aggregating services. The linked transactions reduce the farmers overall cost in the short term, but create a cycle of exploitative dependency in the long-term. Rural development efforts thus far have focused only on individual pieces rather than what the entire community needs. Cooperatives have tried to provide agricultural inputs, rural banks have tried to provide credit, and mandis have tried to create a better marketing channel. These efforts cannot compete against the traders bundled offer. Functioning as a viable procurement alternative, therefore, must eventually address a range of needs, not just the marketing channel.

ITC e-Chopal provide services as a bundle what the entire agriculturalcommunity needs.

An IT-Driven SolutionDelivery of real-time information independent of the transaction. In the mandi system, delivery, pricing, and sales happen simultaneously, thus binding the farmer to an agent. E-Choupal was seen as a medium of delivering critical market information independent of the mandi, thus allowing the farmer an empowered choice of where and when to sell his crop.

Risk analysis & challenges Radical shifts in computing access will break community-based

business models.

The sanchalaks are ITCs partners in the community, and as their power and numbers increase, there is a threat of unionization and rent extraction.

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The scope of the operation: the diversity of activities required of every operative and the speed of expansion create real threats to efficient management.

If ITC fails to fulfil the aspirations of farmers, they will look elsewhere for satisfaction.

Strategies to be followed

(1). Adopt the ability to determine the grades of the crop(grains) in the field which commands the price premium for the crop.e.g: Wheat

(2). Build the concept of traceability into the supply chain which will allow to address the food safety concerns.e.g: For perishables such as shrimps, which decays quickly with in short period of time, it need to define standards of production and product quality.

(3). Provide the service as market-place for commodities where ITC is not a sole buyer. It will reduce the operational cost of e-Choupal such as IT infrastructure and transaction costs.e.g: coffee grains.

(4). Marketing value added products and services to rural INDIA , in addition to marketing agri inputs, through e-Choupal system.

(5). Sourcing IT-enabled services from rural INDIA. Telemedicine, ecotourism , traditional medicine and traditional crafts are some of the services that can be sourced from rural INDIA.

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Conclusion

With an approximate population of 700 million people, the rural Indian market is important for multinational corporations to tap. Although rural Indians need to purchase consumer goods just as their Western counterparts do, rural Indian consumers have a different set of needs that must be met by both package and product. Spending time researching the rural Indian consumer as well as the market before diving in can help to prevent unnecessary struggles and failures. If the opportunity exists, partnering with an existing Indian company upon market entry can provide several key advantages to a company. Understanding the available distribution networks in rural India is crucial to making a successful entry into the rural Indian market. Packages need to be designed to withstand more distribution abuse due to poor roads and more primitive modes of transportation.

Finally, when creating a package for rural India, small sizes allow consumers to try new products. It also caters to the fact that most rural Indians have low disposable incomes and little storage space at home. By applying these lessons that have been learned from multinational corporations in the past, the task of entering the rural Indian market should be promising.

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ReferencesBailay, R. (2003). Small packets, big business.

Bullis, D. (1997). Selling to India’s consumer market.

Westport, CT: Quorum Books.

Kannan, S. (2001). Rural market – a world of opportunity.

Kripalani, M. (2002). Rural India, have a Coke. Business Week

Rural market in india - Srinivas rao

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