This document is a dissertation submitted by Anurag Singh Rathour to their dissertation guide Mr. Anurag Duggar at Jagran Institute of Communications & Management. The dissertation topic is "A Comparative Study of Brands in Rural India & The Brand Loyalty & Awareness of Rural Customers". The dissertation includes sections on the introduction, literature review, research methodology, data analysis and interpretation, findings, conclusion and recommendations. It also includes declarations by the author and acknowledgements. The executive summary provides an overview of the types of brands available in rural areas, factors influencing customer loyalty, and the importance of retaining loyal customers. Original brands, duplicate brands, local brands and unbranded products are

1.
DISSERTATION TOPIC:
‘COMPARATIVE STUDY ON BRANDS IN RURAL INDIA’
DISSERTATION GUIDE:
Mr. Anurag Duggar
SUBMITTED BY:
Anurag Singh Rathour
Roll No‐ MCM2009023
PGDM‐C, (MCM)
JICM

2. DECLARATION
I Anurag Singh, studying in Jagran Institute of Communications &
Management, do hereby declare that this Dissertation titled “A
Comparative study of Brands in Rural India & The Brand Loyalty &
Awareness of Rural Customers”, has been prepared by me, under the
guidance of Mr. Anurag Duggar. This Dissertation embodies the result of
my original work and studies carried out by me and the contents of the
Dissertation do not form the basis for the award of any other degree to me
or to anybody else.
I further declare that this Dissertation report has not been submitted
earlier to any other University or Institute for the award of any degree or
diploma.
Anurag Singh Rathour
MCM‐2009’023’
PGDM‐MCM

3. ACKNOWLEDGEMENT
The satisfaction and euphoria that accompany the successful completion of
any task would be incomplete without mentioning the people who made it
possible, whose consistent guidance and encouragement crowned the
efforts with success.
I would consider it my privilege to express my gratitude and respect to;
Mr. Mani Shreshtha for having accorded me the opportunity to learn in
field of the Rural Markets and buying behavior.
I cannot forget the contribution of the staff of Jagran Institute of
Communications & Management,as I troubled them through my queries at
every stage of their work and I really appreciate the patience with which
they resolved my doubts amidst their busy schedule, I express my sincere
thanks to all of them.
I would express my thanks and gratitude to my Dissertation guides Mr.
Anurag Duggar, of JICM for their able guidance and support throughout the
tenure of the Dissertation. I am extremely thankful to them for making this
Dissertation worth.
Anurag Singh Rathour
MCM2009’023’
PGDM‐MCM

4.
TABLE OF CONTENTS:
SR. NO. DESCRIPTION PAGE NO.
Declaration 1
Acknowledgement 2
Executive Summary
Chapter‐1 Introduction of Dissertation 4‐18
1.1 Report Literature Review 11‐34
Chapter‐2 Research Methodology 46‐47
2.1 Methods of Data Collection 48
Chapter‐3 Data Analysis & Interpretation 49‐69
Chapter‐4 Findings 70
Chapter‐5 Conclusion & Recommendation
5.1 Suggestion & Recommendations 85
5.2 Limitation 86
Bibliography 87

5. EXECUTIVE SUMMARY
This report on Types of Brands Available in Rural Areas are basically of 4 Types;
1.Original Brands for e.g. LUX, COCA COLA,
2.Duplicate Brands for e.g. LUKZ, COCO COLA
3. Local Brands for e.g. Tan man soap, Dilbag sharbat
4. Unbranded for e.g. unpacked soap bars, Oil etc.
Customer Loyalty comprises of a first part devoted to a theoretical
approach of customer loyalty and a second part focusing on “Customer satisfaction is not
customer loyalty” warns this report so as to highlight the
rather complex. If a loyal customer is no doubt a satisfied customer, this does not entail that a
satisfied customer is loyal. In fact, a satisfied customer remains very likely to switch to other
competitor’s products. Brand Awareness in Rural Sectors.
profitable loyal customers are, and how important it is to retain them, namely through
zero defection schemes or by carrying out studies on defections and complaints.
In other words, customer loyalty creates value and anything that might undermine it
should be identified and eliminated.
INTRODUCTION:
Original vs. Duplicate Brands in rural Markets:
Lack of awareness, low literacy level & low purchasing power are three major challenges in rural
market. Local manufacturer earning good profit because of these challenges in rural India. One
of my friend is working with a leading NGO in Uttarakhand. He was sharing his experience with
me. He went to a shop and found lot of copy products of big brands. He was surprised! He
enquired about these copy brands and found that people buy these copy brands because, they
are‐
Cheaper & affordable
Available in small sizes & packs
Unable to differentiate
My friend was amazed to know that maximum people knows that they are buying a duplicate
product. But still they prefer because duplicate products has wider reach and available in small
quantity packs.
It reminds me lines from 'Bottom of Pyramid'. Mr Prahlad Kakkar said, “In rural India if you want

6. to succeed than you must have very good supply chain and small quantity packs.”
Big companies are spending lot of money, time & energy on marketing. And ultimately small
local players reaping the enormous benefit of the spent. If big companies want to penetrate in
rural India and want to succeed, they will have to have strong supply chain and small quantity
packs for need based products.
If we take an example of Pepsi & Coke, we will find that in rural area, consumer has never
accepted any duplicate brand of soft drinks. Even RC Cola & Nimbooz could not succeed as soft
drink is not as they are not a need based product. Soft drink multinational companies are
investing huge amount of money on marketing & advertisement. Rural consumer likes to flaunt
with these brands. When it comes to need based product consumer has ‘Chalta hai’ attitude.
Small purchasing power forces them to buy small quantity at a time. And lack of awareness
leads them buying duplicate product.
Big corporate can learn from small local manufacturers how they are eating up a big pie without
spending money on marketing & communication. Also government & NGO needs to play an
important role in educating Indian rural consumer & eradicating such mal‐ practices. Duplicate
products can be harmful.
Duplicate products threaten reputed Trade Marks
Tribune News Service
Ludhiana, January 13
There is a saying about Ludhiana that no matter how strong and powerful a brand may be, be it
local, national or international, its duplicates will be readily available here. Name any brand and
the duplicate costing one‐fourth, and in certain cases even less than that, of the original prices
will be found quite conveniently. In fact some traders sell both the original as well as the
duplicate brands offering both the options to the customers.
Industry and trade sources disclosed that the problem of duplicate products and the violations
of the copyright and branding rights was so rampant in Ludhiana that the original brands suffer
phenomenal losses. Recently, a leading hosiery brand which manufactures and exports
sweaters, jackets, sweat shirts and thermals throughout the world issued a public notice
announcing that there was no discount sale of its product.
Using the name of the owners of the brand, a trading house announced “heavy discount sale”.
Although one could make out the difference between the original and the brand sold at the
sale, but that could only be possible when the customer sees it for himself. Otherwise they are
misled by the advertisements, disclosed the owner of the brand on the condition of anonymity.
In most of the cases it is difficult to point out the difference between the duplicate and the
original brands. The problem is not limited to the hosiery products. Even the machine, auto and

7. cycle parts face the similar problem and to a large extent. In fact for the cycle and auto part
manufacturers the problem is more serious as their customers are mostly illiterate who cannot
easily make out the difference.
Recently the police registered a case against a manufacturer of cycle parts. It was based on a
specific complaint. In this case the person making duplicate products was not mentioning
anything on the product, but had used the packaging pattern of a reputed brand. In fact it was
stupendous task for the original brand owner to convince the courts that he had a genuine case.
Because intelligently enough, the duplicate manufacturer was using his own brand name and
trade mark on the products and was only copying the packaging pattern and colour scheme.
It is learnt that more than half of the goods sold in Ludhiana, be those of hosiery or machinery
parts, are duplicate. Like in the recent instance, where the police registered and FIR and
arrested one person, while three others are on the run, the violator had used the pattern in
such a manner that even the original owner of the brand could not make out the difference
from a close distance.
Although the problem is so serious, the victims are feeling helpless as it is “very difficult” to
locate the duplicate products and initiate action against the violators. Even the police cannot act
unless there is a specific complaint. In order to check this menace leading brands are mooting
the idea of setting up their own task force to ensure that no duplicate products are sold. In the
recent case, it was by a sting operation that the violator was nabbed.
Rural Marketing in India Economy
The concept of Rural Marketing in India Economy has always played an influential role in the
lives of people. In India, leaving out a few metropolitan cities, all the districts and industrial
townships are connected with rural markets.
The rural market in India is not a separate entity in itself and it is highly influenced by the
sociological and behavioral factors operating in the country. The rural population in India
accounts for around 627 million, which is exactly 74.3 percent of the total population.
The Registrars of Companies in different states chiefly manage: The rural market in India brings
in bigger revenues in the country, as the rural regions comprise of the maximum consumers in
this country. The rural market in Indian economy generates almost more than half of the
country's income. Rural marketing in Indian economy can be classified under two broad
categories. These are:
• The market for consumer goods that comprise of both durable and non‐durable goods
• The market for agricultural inputs that include fertilizers, pesticides, seeds, and so on
The concept of rural marketing in India is often been found to form ambiguity in the minds of
people who think rural marketing is all about agricultural marketing. However, rural marketing

8. determines the carrying out of business activities bringing in the flow of goods from urban
sectors to the rural regions of the country as well as the marketing of various products
manufactured by the non‐agricultural workers from rural to urban areas. To be precise, Rural
Marketing in India Economy covers two broad sections, namely:
• Selling of agricultural items in the urban areas
• Selling of manufactured products in the rural regions
Some of the important features or characteristics of Rural Marketing in India Economy are being
listed below:
• With the initiation of various rural development programmes there have been an
upsurge of employment opportunities for the rural poor. One of the biggest cause
behind the steady growth of rural market is that it is not exploited and also yet to be
explored.
• The rural market in India is vast and scattered and offers a plethora of opportunities in
comparison to the urban sector. It covers the maximum population and regions and
thereby, the maximum number of consumers.
• The social status of the rural regions is precarious as the income level and literacy is
extremely low along with the range of traditional values and superstitious beliefs that
have always been a major impediment in the progression of this sector.
• The steps taken by the Government of India to initiate proper irrigation, infrastructural
developments, prevention of flood, grants for fertilizers, and various schemes to cut
down the poverty line have improved the condition of the rural masses.
Building brands in rural india:
In a market where life has revolved around deep rooted community values, joint families,
and social customs and taboos (women, for example, are not allowed to wear trousers),
marketers realize that the traditional routes of market entry and brand building employed
in urban India are often not feasible. As Adi Godrej, Chairman of the Godrej Group, says,
“The challenge [for brands] is to understand the [psyche] of the rural consumer, create
better distribution, and [appreciate] the heterogeneity.”
In recent times, rural India has witnessed a wave of change. Dinesh Malhotra, general
manager of Linterland (rural arm of Lintas), points out, “With media exposure and
increasing literacy levels, people in rural India are now demanding a better lifestyle.” The
educated “rural yuppie” (males in the 15‐34 age group) is moving out to work in nearby
towns and cities, and sending money home to his family. This has created an indirect
increase in disposable incomes and a surge in demand for consumer goods. The rural youth
are slowly evolving as “opinion leaders” in influencing brand and product decisions in a

9. market that was swayed by village elders for centuries.
When building a brand in rural India, word‐of‐mouth is a huge motivator. Focused brand‐
building initiatives—like participation at community events such as “melas” (village fairs),
“haats” (markets), street theater, van campaigns, and puppet shows—generate positive
word‐of‐mouth and influence buying decisions.
Cholayil Ltd., a purveyor of the herbal soap “Medimix,” campaigned in mobile vans to
promote its brand. “We run a van campaign which visits the interior villages where there
are no distributors. We halt the van at specific points [where village folks congregate and
watch videos shown on these vans] and give out product samples.” However, contrary to
claims of Medimix’s success, Malhotra believes that “van campaigns can be very expensive.
[Alternatively, promoting one’s brand] in large congregation points like village markets and
fairs has a far wider reach, and is more cost effective.”
Direct media promotions have helped build knowledge of product categories and change long‐
entrenched living habits. Colgate‐Palmolive, a leading oral hygiene product manufacturer,
entered the rural market at a time when “Neem” twigs (the Neem tree has herbal properties)
and non‐dentifrice products like ash, charcoal, or salt were the norm for brushing teeth (in fact
in some rural pockets, this tradition still continues). In 2001, Colgate‐Palmolive launched
“Operation Jagruti” to educate villagers about oral hygiene and its benefits vis‐à‐vis traditional
products like “Neem.” Through product trials and free samples, the company was able to
generate awareness in this new market. On a similar note, CK Ranganathan, managing director
of Cavin Kare, notes, “When we entered the rural areas in South India, people used to wash
their hair with soap. When we launched the ‘Chik’ brand of shampoo we educated the people
on how to use it through live ‘touch and feel’ demonstrations and also distributed free sachets
at fairs. This strategy worked wonders in the rural areas of Tamil Nadu and Andhra Pradesh—
two important states in India.”
Colgate and Cavin Kare have shown that communication is key when it comes to building brands
in rural markets. As R. V. Rajan, managing director of the Anugrah Advertising Agency, adds, “To
communicate effectively, it is important to understand the fears, aspirations, and hopes of the
rural consumer.” Not to mention the traditions and stereotypes that have governed their lives
for centuries.
While communicating the brand message, marketers must realize that language plays a
prime role. Though a large part of urban India is well versed in English (thanks to the British
and modern television), in rural India, heritage plays a powerful role and regional
languages are predominant. There are 15 regional languages, and 1600 dialects in India,
and as one moves into the countryside, English is replaced with regional tongues. V. S.
Sitaram, Dabur India executive director, explains, “Often people treat India as one big
market, but the reality is that India is more like the European Union—a mix of different
cultures, habits and languages.” Dabur is also considering the use of South Indian

10. celebrities to propagate the brand message in South India. Marketing companies not only
need to customize their communication, but in some cases they must also change their
product names to match regional differences. Take toothpaste, for example: “Dabur’s Lal
Dant Manjan” (red toothpowder in Hindi) was rechristened as “Dabur Sivappu Pal Podi”
(red toothpowder in Tamil, the local language) for the South Indian market.
Affordability of the product is also a critical success factor when building brands. A
spokesperson from Tata Group, which retails the Sonata brand of watches to rural India,
says, “[rural folks] think of a purchase in terms of how it serves their needs and how well
its suits the family, rather than the individual.” Products must be affordable and immensely
practical. Furthermore, since the rural consumer often survives on daily wages, he engages
in daily purchases. Several companies like Cavin Kare, Godrej, and Dabur adopted the
“single use” sachet strategy, which has worked in their favor. As Byas Anand, Senior
Manager, Corporate Communications, Dabur India, claims, “We introduced one‐rupee
sachets (2.5 cents) for Dabur Vatika shampoo which resulted in doubling of volumes in the
rural market.”
Though pricing is important, rural consumers favor quality as well. For rural consumers, a
purchase is a bigger investment than it is for the urban, veteran consumer. Hence, a
particular brand will be rewarded only if it earns the rural consumer’s trust through
consistent product quality. As R.V. Rajan says, “the rural consumer is conscious of value for
money, and it might be difficult to convert him to a new brand. However, once converted
he is fiercely loyal to the brand.” This issue will be a challenging one for corporations when
they strategize their brand entry and decide how to balance pricing with brand quality.
The challenge doesn’t end with just building brand awareness. While television and direct
marketing activities help rural consumers learn about different brands, ensuring product
availability is even more critical. Marketers in rural India claim that setting up a supply
chain that reaches the remotest rural areas is extremely arduous given the infrastructure in
the country. According to Harish Manwani, chairman of Hindustan Unilever Limited (HUL),
“The rural market [centers] are scattered over large areas and [their] connectivity to the
urban centers is poor.” To overcome the distribution challenge and increase penetration in
rural hinterlands, HUL launched a unique operation called Project Shakti in 2001 (“Shakti”
is a Hindi word which means “strength”). The project targeted rural women from existing
self‐help groups to work as “direct‐to‐home” distributors for HUL products, and helped the
company break into a market they were unfamiliar with.
Malhotra (Linterland) believes that, “While Project Shakti might have worked for HUL, it is
not an established channel.” Reasons like relatively high capital investment, gender roles,
and taboos could present an upper limit to those sales numbers. According to Malhotra, a
“hub and spoke” model of distribution is the “future.” As he explains, “We successfully
adopted the hub and spoke model for Dabur India and it has worked very well. Here,
feeder towns, primarily on the highways serve as hubs, where companies can rent a
warehouse and stock their products. [Spokes are comprised of] ‘cyclist salesmen’ [who]

11. then distribute products to small retail outlets in nearby rural pockets.”
In short, customized and affordable products, effective distribution, and focused marketing
initiatives are essential factors in building credibility for a brand in rural India. Brand
awareness and trust will play a key role in combating the blitz of local copycat brands that
are formidable competition. If marketers tailor make their brand building initiatives
according to the dynamics of the rural market, it may no longer come as a surprise to see
the rural Indian consumer sitting before a Samsung television, enjoying a bag of Frito‐Lay
potato chips, and drinking a bottle of Coke.
Why Companies See Bright Prospects in Rural India:
In late May, when India's GDP numbers were released, many were happily surprised. In the
fourth quarter of the fiscal year (January‐March 2009), the economy grew 5.8% against
expectations of less than 5%. For the year, growth was 6.7%, less than the 9% recorded in 2007‐
2008, but still very respectable during a global downturn. Multinational banks and brokerage
houses rushed back to their spreadsheets to raise their growth forecasts for 2009‐2010.
But why were the estimates so pessimistic in the first place? A possible explanation is that most
analysts work in cities, and their views are colored by what is happening around them and in
the corporate world. That picture has been bleak: During the last quarter of 2008‐2009,
manufacturing shrank 1.4%. In contrast, agriculture grew 2.7%. The feel‐good factor in urban
India is returning only now with a new, stable government and a sharp jump in the Bombay
Stock Exchange Sensitive Index (Sensex).
In the villages and small towns, it has been a very different picture. "The rural market is
insulated from the global meltdown," says Harish Bijoor, CEO of brand and business strategy
consultants Harish Bijoor Consults. "The rural part of our economy has been untouched by
credit cards and mortgages as known in the West."
"The slowdown experienced by India on account of the IT (information technology), real estate,
financial services and automobile sectors was an urban phenomenon," says Ajay Gupta,
founder and CEO of ruralnaukri.com, which focuses on jobs in the rural sector. (See
"ruralnaukri.com's Ajay Gupta: 'Rural Jobs Can Provide Momentum to the Wheel of the
Economy')."However, the negative impact of all this on urban India has been more than offset
by encouraging performance in rural areas. The rural economy has provided a cushion. Overall
sentiment in the country was different from other parts of the world where each household
had at least one person with a pink slip."

12. "Several factors have led to an increase in rural purchasing power," says Pankaj Gupta, practice
head, consumer & retail, Tata Strategic Management Group. "The increase in procurement
prices [the government sets the minimum support price ‐‐ MSP ‐‐ for many farm products] has
contributed to a rise in rural demand. A series of good harvests on the back of several good
monsoons boosted rural employment in agricultural and allied activities. Government schemes
like NREGS [National Rural Employment Guarantee Scheme, which guarantees 100 days of
employment to one member of every rural household] reduced rural underemployment and
raised wages. Also, farmers benefited from loan waivers [introduced in the last Union Budget].
The increase in rural purchasing power is reflected in rural growth across a number of
categories. For example, in the financial year 2009 [April‐March], FMCG [fast moving consumer
goods] rural volume growth is estimated to be 5% to 12% higher than urban growth across a
number of categories."
A Short‐lived Renaissance:
Some academics agree with these upbeat views of a rural resurgence. "Policy measures like the
waiver of agricultural loans to the tune of US$13.9 billion and the NREGS have really put cheer
into the rural economy," says Devi Singh, director of the Indian institute of Management
Lucknow (IIML). "The Bharat Nirman program with an outlay of US$34.84 billion for improving
rural infrastructure is another step that has helped the rural economy. To some extent, the
growth of organized retail can also be held responsible for the rural economy's growth, as this
has ensured that farmers get a better price for agricultural produce. The MSP set by the
government has been rising further, fuelling rural growth by putting more money into the
hands of the rural population."
Singh adds a caveat, however. "While the statement that the Indian economy has been saved
from the slowdown due to rural growth is true to a certain extent, this is not the only factor,"
he says. "India's growth has been fuelled more by domestic demand than exports. Also Indian
spending and saving habits differ from other parts of the world. Indians by their very nature
always save for their future and this holds them in good stead during times of crisis. The Indian
buyer is more finance conscious than his global peer. The Indian banking system, due to the so‐
called non‐reforms, is actually more resilient and the level of delinquencies is far lower than in
other parts of the world."
Some observers are skeptical about the durability of rural demand. "There is a worrying
groundswell of optimism that rural consumers will come to the rescue of an Indian economy
which is in the midst of a sharp slowdown. This optimism may be misplaced," suggest consumer
behavior expert Rama Bijapurkar and Rajesh Shukla, a senior fellow at the National Council for
Applied Economic Research. Writing in business daily Mint, they continue: "Hearing phrases
such as 'rural renaissance' or 'rural India to the rescue' makes us nervous. Such talk bears
overtones of the 'Great Indian Middle Class' story of the 1990s, where we declared victory at

13. least a decade before we should have." Their question: How sustainable, stable and volatility‐
free is the growth in income and consumption?
Bijapurkar and Shukla note that "periodically, India has seen a consumption spurt because of a
one‐time burst of a combination of events. This recent spurt seems no different. Over the past
four years, the monsoon has been good; the support prices for crops have grown at 10% to 15%
CAGR [compounded annual growth rate] in 2005‐2008 compared with 2.5% to 4% in 2002‐
2005. In addition to a healthy flow of farm credit, there has been a one‐time loan write‐off of
US$13.9 billion as well as a sizeable cash outlay from the NREGS. This doesn't show intrinsic
growth in rural India: This growth is, instead, owing to a combination of acts of God and acts of
government. What we must never do is make the same mistake with rural India that Western
multinationals make with India as a whole ‐‐ assume that it will evolve the same way with a 10‐
year lag. The rural Indian market and consumer call for sophisticated new marketing strategies
and paradigms, not a transplant of old ideas."
What Rural Means:
Even as this debate continues, the term "rural" is being re‐defined. "'Rural' is difficult to define
any more," says Bijoor of Bijoor Consults. "Typically, from an Indian census point of view, rural
has been defined with a 'deprivation' orientation, rural being a landmass without access to
continuous electricity, water, the stock market. There has been a correction in this view,
however. Marketers today define rural as people living a different lifestyle as opposed to that
of those who have settled in the bigger cities and towns. Rural is defined as pastoral in nature
and as a mass of people who relate their income closely to the lands they till or use to raise
their cattle and livestock. I, personally, define rural differently. I believe rural is a mindset.
Those who possess it are rural and those who do not are urban. To that extent, in Bangalore
city, just off the old airport road, are a whole set of people who live by farming on their lands. If
you visit their homes, their lifestyles are totally rural. Similarly, there are people who live in
villages, who have access to the best of it all. These are urban folk. Rural is not a geography; it is
a mindset."
"Definitions for rural India abound while the most convenient remains, 'anything that is not
urban'," says Gupta of ruralnaukri.com. Singh of IIML adds: "Rural India comprises all places
that are not urban." This definition by exclusion for what is the much larger part of the country
has its roots in the government's own approach. "The Census of India defines urban India," says
Gupta of TSMG. "Urban India constitutes places with a population of more than 5,000, a
population density above 400 per square kilometer, all statutory towns, that is, all places with a
municipal corporation, municipal board, cantonment board, notified area council, etc. and with
75% of the male working population engaged in non‐agricultural employment. All non‐urban is
rural."

14. Such definitions leave marketers cold. "The traditional definition of rural may be of little use to
marketers in terms of providing consumer insights," says S. Ramesh Kumar, professor of
marketing at the Indian Institute of Management, Bangalore (IIMB). "Given the diversity of
culture and lifestyle/aspirational changes that are taking place across non‐metro consumers,
the non‐metro areas need to be segmented into tiers of varying urban orientation using
psychographic and lifestyle analysis along with demographics. The digital 1 or 0 type of urban
and rural definitions is unlikely to yield consumer behavior nuances. For example, district
headquarters [towns] in Tamil Nadu are likely to be significantly different from those in
Karnataka or Maharashtra."
Many others agree that census‐style definitions are no longer enough. "My understanding of
rural India is a less developed countryside where the infrastructure is primitive, houses are of
mud or brick but rarely painted well, the primary source of livelihood is agriculture,
employment opportunities in the organized sector are negligible, eating choices are restricted
to home‐cooked, simple food, schools are far away, health facilities are rudimentary and ‐‐
importantly ‐‐ the youth, while energetic and ambitious, are to be seen playing cards the whole
day," says Gupta of ruralnaukri.com.
"We recognize rural India by certain characteristics," says B.N. Garudachar, general manager,
corporate communication and investor relations at Voltas, a Tata group company in air‐
conditioning and engineering services. "These are: low population numbers, low median
income, poor infrastructure [roads, electricity, communications], and agrarian rather than
industrial activity. Such rural areas are within the sphere of influence of neighboring cities and
metros. This influence determines their aspiration levels and their viability as markets."
Massive Market
View it as you may, few people dispute that the rural market is massive. According to Singh,
12.2% of the world's consumers live in India. "Rural households form 72% of the total
households. This puts the rural market at roughly 720 million customers." Gupta of TSMG
extrapolates the Census 2001 numbers and comes up with an estimate of 790 million. "Total
income in rural India (about 43% of total national income) is expected to increase from around
US$220 billion in 2004‐2005 to US$425 billion by 2010‐2011, a CAGR of 12%," he says.
Bijoor explains that this is entirely disposable income unlike what it would be in urban India. "If
a farmer in rural Holenarsipura earns US$1, all of it is his to dispose off as he pleases. The same
income in the hands of an urban person, who is possibly a tech worker, is actually not US$1 of
disposable income. It is most likely 67 cents; the rest goes as tax. The farm economy, with zero‐
tax on farm income, creates far more disposable income. Buying power in the hands of the rural
rich is higher than the buying power of the urban rich."
Gupta of ruralnaukri.com provides some telling statistics. "The purchasing power of rural India
is more than half for fast moving consumer goods [US$17 billion]," he says. "The durables and
automobile sectors contribute US$2.5 billion each, and agri‐inputs (including tractors) about

15. US$1 billion. Some 42 million rural households [use] banking services against 27 million urban
households. There are 41 million Kisan credit cardholders [credit cards issued to farmers for
purchase of agricultural goods] against some 22 million card users in urban markets. Be it
automobile, telecom, insurance, retail, real estate or banking, the future drivers of growth are
rural. No marketer can afford to ignore the possibilities of rural India."
Bijoor adds some growth numbers. "Our rural folk have bought a lot more of FMCG; this part of
the market has grown at a robust rate of 23% [last year]," he says. "As durables shrink in urban
India, the rural market is witnessing a 15% growth rate. Some 60% of the durables market lies
in rural India. Telecom in rural India is growing at 31%." It depends on the product, of course.
"Just the sheer population numbers don't mean very much from a marketing point of view,"
says Garudachar of Voltas.
Across product categories, however, there seems to be a lot of action. Media ‐‐ particularly TV ‐
‐ has been a great leveler. Even in small villages, people who have seen the urban lifestyle on
television seem to want similar goods and services. Companies have realized this and are going
all out to tap this latent demand.
Consider some examples:
The State Bank of India (SBI) has started a zero‐balance bank account program for villagers.
Called the SBI Tiny account, there are no physical branches or officials, just a paid volunteer
who is equipped with a small box and a cellphone. The box enables biometric measurements
(fingerprints), at the time of opening the account to confirm the account holder's identity. The
cellphone enables communication with the zonal office to check on available balance.
Payments under programs such as the NREGS and pensions are made directly to these
accounts. The advantage for the villagers is that they can withdraw money from their accounts
at any time of the day or night. (Withdrawals are never more than a few dollars.) SBI hopes to
cover 100,000 villages by 2012. The bank has tied up with India Post for some services.
India Post, the public sector postal network, has its own plans. It has been hard hit in urban
areas because of the more efficient (though more expensive) private sector courier services.
Now it is looking at consolidating its hold on the rural areas. Project Arrow has been launched
to IT‐enable post offices in the hinterland. A pilot project involving 500 post offices ‐‐ the
country has more than 150,000 ‐‐ has been kicked off. It will focus on banking, money
remittance, and transmission and delivery of information.
Products for Rural Markets
Maruti Suzuki, India's leading automobile manufacturer, today sells 5% of its vehicles in the
rural markets. The company expects this number to rise to 15% in the next two years. "This is
not just our wish, but reflects market demand," says director (marketing & sales) Shuji Oishi.

16. In telecom, service providers are making a beeline for the villages. That's where the growth in
what is now the world's fastest growing mobile market lies. According to industry estimates,
70% of all new subscribers will come from rural areas. (See NTT DoCoMo's Tata Deal: Why
Global Telecom Firms Want to Dial India.)
Mobile device manufacturers are also tailoring their products to this market. Nokia had earlier
launched a basic handset with a torch (large parts of rural India don't have electricity) and an
alarm clock. (see How Did Nokia Succeed in the Indian Mobile Market, While Its Rivals Got Hung
Up?) In December 2008, it went one step further with the launch of Nokia Life Tools. "Nokia Life
Tools is a range of agriculture, education and entertainment services designed especially for the
consumers in small towns and rural areas of emerging markets," says the company. "Aimed at
providing timely and relevant information customized to the user's location and personal
preferences directly on their mobile devices, Nokia Life Tools is the first step towards bridging
the digital divide."
The mobile phone is a new‐age product; gold jewelry is as old as the hills. Here, too, there has
been a rural move. According to World Gold Council figures, 60% of India's US$15 billion annual
consumption of gold and gold jewelry is from rural and semi‐urban areas. The Tatas have
launched a mass‐market jewelry brand ‐‐ GoldPlus. The Tatas train unemployed youth and send
them to the villages as brand ambassadors. The problem with gold in India is that it is often
adulterated. In rural areas, gold jewelry is not for ornamentation; it is a safety net for
emergency situations. Thus, the Tata seal of good housekeeping is taking the brand places.
"GoldPlus is an interesting example of the brand addressing the non‐metro jewelry culture with
its ethnic touch with regard to its designs and retailing," says Ramesh Kumar of IIMB.
"There is substantial scope to create products that are oriented towards non‐urban sectors,"
notes Kumar. "These can be in terms of functional appeal or cultural aspects or both. Chik
shampoo created the jasmine variant [in tune with the culture of women using jasmine flowers
to style their hair in a few parts of the country]. TVS mopeds created functional value in tune
with the 'all purpose' vehicle culture existing in several parts of the non‐metro areas. Philips is
moving forward with the creation of gas stoves and lanterns that will be useful to such
markets."
Singh of IIML talks about pricing successes: The Chik shampoo sachets sells for 2 cents, the
Parle G Tikki biscuit packs at 4 cents and the Coca‐Cola 200 ml glass bottle for 10 cents. Singh
notes that successes in rural areas can be transplanted to urban areas also. "The shampoo in
sachets created a new product segment," he says. "All shampoo manufacturers today retail in
sachets, and the demand from urban India for this category is very strong."
The sachet is as much a packaging (product) strategy as a price strategy. But, asks Garudachar
of Voltas, have companies done enough about the core product? The shampoo sachet is a case
in point. "Villages in India have hard water," he says. "But the shampoo that you get in sachets
sold in villages is the same that you get in towns. Manufacturers should have tailored the
products to suit the environment."

17. It doesn't apply across the board, of course, particularly as manufacturers have moved away
from the mindset that along with cutting price, you can cut quality. "Product re‐engineering
was an issue five years ago," says Bijoor. "I do not believe this is an issue at all today. The
quality on offer needs to be the same all over. One company tried to pass off inferior quality tea
leaves in rural markets and superior quality grades for urban markets under the same brand
name. This fell flat."
But re‐engineering is necessary in a different sense. According to Bijoor, "Companies are
realizing that the urban and rural want is largely the same. However, the rural person is savvier
and demands real value for money. To offer this, marketers are re‐engineering products. Look
at the auto segment. The urban man wants a car as does the rural man. Both have the same
amount of money. The rural person, however, believes spending US$12,000 on a car is a sin. He
wants it at US$3,000. The Nano is a solution. Every category needs to operate on the Nano
paradigm. The needs are all the same, across rural and urban. The solutions have to be
different."
Distribution and promotional channels also need to be different for rural markets. Companies
are getting their act together here, too. Private sector companies like ITC have set up the IT‐
enabled eChoupal network, and Hindustan Unilever has project Shakti, under which women's
self‐help groups act as the last link of the retail chain. (See Marketing to Rural India: Making the
Ends Meet.) As mentioned earlier, India Post wants to convert itself into a retail chain for a
variety of products. Even fair‐price shops, which form part of the government's rationing
system, are trying to expand beyond supplying just basic foods like rice and wheat.
In the area of promotion, television has invaded rural India. TV reaches even very small villages
through community sets. But advertising on national channels is wasteful if you are trying to
target rural areas. Garudachar of Voltas says his company is trying to sell air conditioners to the
rural rich. "Difficulties in penetration are due to the widespread and scattered nature of the
territory," he says. "At one time, basic conservatism and diehard thrift would also have been
factors, but exposure to TV has changed all that, and created aspirations where once there was
resistance to change."
From Four P's to Four A's:
Gupta of TSMG notes that the traditional four P's of marketing ‐‐ product, price, place and
promotion, as outlined above ‐‐ have been replaced by a different framework for analysis. "A
number of companies have worked on various elements of the marketing mix to improve the
four A's ‐‐ affordability, awareness, availability and acceptability ‐‐ for rural markets," he says.
"FMCG companies innovated on package sizes to introduce low price points. They have
customized promotional strategies for rural markets using local language and talent. Some
FMCG players continue to expand rural penetration [HUL's Project Shakti, Tata Tea's Gaon
Chalo]. Coca‐Cola's Parivartan program has trained more than 6,000 retailers to display and

18. stock products. Dabur has created a training module ASTRA [advanced sales training for retail
ascendance] in several regional languages. A number of auto companies have launched rural‐
specific campaigns."
Gupta of ruralnaukri.com offers more examples:
• Affordability ‐‐ Godrej introduced three brands of Cinthol, Fair Glow and Godrej (soap)
in 50‐gram packs, priced at 10 cents; Adidas and Reebok increased their sales by 50% in
rural markets by reducing prices.
• Size and design changes ‐‐ Videocon introduced a washing machine without a drier for
US$60; Philips launched a low‐cost smokeless chulha (stove); DCM Shriram developed a
low‐cost water purifier especially for rural areas.
• Improving product acceptance ‐‐ LG Electronics developed a customized TV (cheap and
capable of picking up low‐intensity signals) for the rural markets and christened it
Sampoorna. It sold 100,000 sets in the first year; Coca‐Cola provided low‐cost iceboxes
as regular power outages meant families could not depend on refrigerators.
Perhaps the ultimate sign that rural India has arrived is in the allocation of talent. "In the old
days, the weakest people in organizations, the ones without a star career path, held the reins of
the rural marketing divisions," says Bijoor. "Today, things have changed. Sharper and sharper
brains from within the organization are being diverted to rural strategy formulation." When the
whiz kids go to villages, you know the cows have come home.
If we try to observe the buying behavior and buying decisions of rural populations then it is
centered around two critical components: the reference group or opinion influencer and the
flexible finance option.
Starting from a high investment decision of buying a tractor to a normal day‐to‐day purchase of
clothes, oil, etc., is derived by influence groups like Sarpanch/fellow farmers and flexible
finance providers like an adhatiya/commission agent.
This is evident from the fact that brand dominance of a tractor or two‐wheeler differs as we
cross a 50‐ to 75‐kilometer radius in any rural geography. This dominance is actually derived by
the fact that how many in that locality possess a specific brand and how much of a personal
touch is involved in communicating the benefits, after sales support and relationship.
This should work for an FMCG or a telecom product also. If we combine all of these tools then
what comes as a viable and workable tool is a multilevel marketing team of influencers with a
loyalty program attached to it.

19. For example, Nokia can appoint Sarpanch as a brand ambassador and give them some incentive
for each referral. Once 10% of the population has experienced the product then the critical
mass would be created in that locality to make that brand a dominating brand there. Here to
give a personal touch, the after‐sales service requests could be entertained through the
Sarpanch by connecting a service center to him rather than connecting the customer directly
with the service center.
Rural for sure is a lucrative market, and the growth could be further, fueled by using the
correctchannel and finance option. The rural customer has a tendency of relying on the opinion
leader even for a small investment or buying decision. This coupled with an easy and flexible
finance option can make your brand win the race.
Sustainability of Demand:
There are primarily two reasons for this shift in marketing focus to rural India.
1. As existing markets reach saturation levels, marketers start moving into the interiors and find
that there is a vast untapped customer base out there.
2. As urban India grows, it needs more help from rural areas. When the new immigrants travel
back home, they carry with them stories of urban lifestyles. Awareness is thus created in the
potential markets.
However, this demand may not be sustainable for long, unless the sellers come out with
products specifically for the rural market, or the basic infrastructure is made available to rural
populations. Or both.
Once sales reach a critical mass in rural areas, demand would explode. Growth of critical
infrastructure (power, water, roads) cannot keep pace with the increased demand. Rural India
will need power to watch TV uninterrupted and clean water to machine‐wash clothes and
purify for drinking.
A serious marketer would need to tie up with other rural‐focused producers or
governmental/non‐governmental agencies to create this infrastructure. Onida teaming up with
Tata BP Solar to provide TV sets with solar generators would be able to capture the markets.
Similarly, water purifier sellers can engage NGOs to develop water table recharge projects in
rural areas. This would not only increase the consumption (as opposed to purchase) of their
products, but also generate goodwill in the rural market.
The rural marketers would need to think rural for long‐term success. If they can look beyond
their products and induce private initiatives to replace government intervention for providing
basic services, they would surely capture the first quantum growth in these areas.

20.
Rural Consumer Behavior Analysis:
If we really want to understand the rural consumer then we need to start thinking from their
angle. According to the National Council of Applied Economic Research, the majority of rural
people’s main occupation is agriculture‐related. Rural consumers and their buying habits are
different from their urban counterparts. They mainly buy when they sell their crops in the
market. It means twice or sometimes thrice a year.
Rural consumers generally buy all their products from one or two stores, and they generally
don’t change unless a major problem arises. They also decide their budget before purchasing
any product or service.
Rural consumers are price‐ and solution‐oriented. They think value means, "What did I get for
the price I paid?”
When rural consumers buy any new category of product, their decision is strongly influenced by
opinion leaders, who are seen as credible people in an entire region. Well‐educated users of
new products act as opinion leaders.
Rural consumers are also brand‐loyal. When rural consumers purchase a product or service
they perceive the functional, physical and financial risk in it
Rural Needs:
Life in rural India was simple and not complicated. They lived a happy life by keeping their
needs to a minimum and being happy with what they had. Therefore, it was a pleasure to be
there in the villages of India. Haven't seen more smiling faces ... even among riches in
Mumbai/Chennai.
While there's not a doubt that rural India also needs quality products and services at
reasonable costs and which do not damage the fragile rural environment, let the consumerism
not spread there. Let companies focus on delivering value to rural India ‐‐ value products and
services that would keep their smile.
Rural market for FMCG on
upswing:
Fast moving consumer goods (FMCG) companies can rejoice as the Rs 27,369 crore rural market in

21. the country registered a growth rate of 17 per cent in the first ten months this year.
About 34 per cent of the offtake for FMCG products came from rural areas. FMCG companies are
trying to tap the rural market with more vigour, given the fact that nearly 70 per cent of the
country’s population lives in villages.
The estimated number of households that are using FMCG products in rural India have grown from
13.6 crore in 2004 to 14.3 crore in 2007. This growth was achieved on an average year‐on‐year
growth of 1.8 per cent in the number of households, which use at least one FMCG product.
For some FMCG categories, the penetration levels have remained stagnant over the past three
years. In others, the growth has been faster.
A study by market research firm IMRB International shows that while the monthly consumption
categories comprising detergents and toilet soaps have remained largely stagnant with a 92 per
cent penetration, categories such as liquid shampoos have grown from 68 per cent in 2004 to 83
per cent in 2007. Moving to higher‐value products seems to have happened across categories,
from toothpowder to toothpaste or from unbranded to branded products.
RURAL TOOTS
Market penetration (in %)
Category
2004 2005 2006 2007
Household Care
Detergent/soap 93 92 92 92
Washing
95 96 96 97
powder/liquid
Insecticide 17 20 21 21
Personal Care
Toilet soap 98 98 98 99
Shampoo 68 77 80 83
Hair oil and
84 85 85 86
dressings
Skin cream 64 71 71 72
Food and Beverages
Tea 92 93 93 93
Coffee 14 15 15 15
Milk food drink 7 8 8 8

22. Oil/ghee/vanaspati 98 97 98 98
HH Universe
136043 138682 141321 143855
(000s)
Manoj K Menon, senior project director, IMRB International (media and panel group), says, “One of
the most significant changes includes growing preference towards branded products. For example,
in the food and beverages segment, penetration of branded atta has gone up year‐on‐year by 8 per
cent and branded salt by 3 per cent. The penetration of unbranded atta has decreased by 1 per
cent and salt by 3 per cent.”
FMCG companies Hindustan Unilever and ITC have worked on increasing rural penetration through
corporate social responsibility projects such as Project Shakti and e‐Choupal, respectively.
According to Vijay Sharma, head, Project Shakti, the growth in sales from the rural market has
been both in value and volume terms.
Speaking about his experience of the rural market, he said, “Through Project Shakti, the company
has been implementing programmes that aim at building the market by increasing usage of the
categories it is present in. The key here is to educate consumers about improving their lifestyle and
our brands play a role in enabling this. For example, Lifebuoy Swasthya Chetana is a rural health
and hygiene educational programme. Our Shakti network is growing and the company expects to
cover 600 million consumers across 5 lakh villages through one lakh Shakti entrepreneuers by
2010.”
Currently, Shakti has 45,000 entrepreneuers in the country.
Suchitra Potnis, associate director, Client Solutions (a Nielsen company), said, “Store density in
rural India is 5.4 stores per thousand persons compared with 10.1 in urban areas. The top‐20
categories account for around 70 per cent of the FMCG market. Categories such as batteries and
iodised salt have gained a slot among the top‐20 in the rural market since the consumption of
these categories is higher in rural than urban India.”
1.Introduction:Brand loyalty
Loyalty is dead, the experts proclaim, and the statistics seem to bear them out. On average,
the U.S. corporations now lose half their customers in five years, half their employees in four,
and half their investors in less than one (Reichheld, 1996). No, loyalty is not dead; it remains

23. a dominant key of success. In fact, the corporate leaders in loyalty – that apply a strategic
loyalty‐based management – have enduring records of productivity, solid profits and steady
expansion.
More than a limited customer approach, the loyalty effect should be viewed as a wide context
in which all the key players of a firm are far more powerful, further reaching, and more
interdependent than we have ever imagined. There would be no customer loyalty without
loyal employees as there would be no loyal employees without long term investors. We will
later focus on the customer side, but the employees and the investors problematic should be
kept in mind during the entire process. We will also, now and then, show the implications of
such a three dimensional environment in which creating value for customers has become a
strategic issue. The advantages of loyalty are numerous, but the implementation of such a
culture does not go without posing problems. What should be done, who should be
responsible for these changes, who should be targeted, and how should these changes be
conducted are some of the questions we will try to answer in this compilation of some
classical theories of the day (1998).
2. Definitions:
2.1. Loyalty
Reichheld opposes loyalty to the actual profit‐theory. This theory gathers the firm's resources
toward one unique goal: creation of profit. Reichheld views loyalty as a value‐creation theory.
The fundamental mission of a business is oriented toward the creation of value for the
customer and profit becomes a consequence of value creation. It turns out to be a mean rather
than an end. This theory will be developed in the loyalty model described in chapter 3.
2.2. Customer loyalty
Customer loyalty is not always easy to construe and many definitions have been proposed.
Let's first settle what customer loyalty is not (Prus & Randall, 1995):
Customer loyalty is not customer satisfaction. Satisfaction is a necessary but not sufficient
criterion. We know that "very satisfied" to "satisfied" customers sometimes switch to
competitors Customer loyalty is not a response to trial offers or incentives. Customers who
react to incentives are often highly disloyal and they often leave as fast as they came. They are
very much inclined to respond to a competitor's incentive.
Customer loyalty is not a strong market share. High level of market share can also be
influenced by other factors such as poor performance by competitors or price issues.
Customer loyalty is not repeat buying or habitual buying. Some of your consumers choose
your products because of convenience or habits and they can be tempted to defect for any
reason. Prus & Randall then describe customer loyalty as follows: "Customer loyalty is a
composite of a number of qualities. It is driven by customer satisfaction, yet it also involves a
commitment on the part of the customer to make a sustained investment in an ongoing
relationship with a brand or company. Finally, customer loyalty is reflected by a combination
of attitudes (intention to buy again and/or buy additional products or services from the same
company, willingness to recommend the company to others, commitment to the company
demonstrated by a resistance to switching to a competitor) and behaviors (repeat purchasing,
purchasing more and different products or services from the same company, recommending
the company to others)".

24.
2.3. Customer satisfaction
Satisfaction is often confused with loyalty. Satisfaction is an emotional or feeling reaction
(Westbrook, Newman, Taylor, 1978). It is the result of a complex process that requires
understanding the psychology of customers. The range of emotion is wide with, for example,
contentment, surprise, pleasure, or relief. Satisfaction is influenced, in the end, by
expectations and the gap between perceived quality and expected quality, called "expectancy
disconfirmation".
2.4. Satisfaction‐Loyalty link High‐quality products and associated services designed to meet
customer needs will create customer satisfaction. This high level of satisfaction will produce
increased customer loyalty. According to conventional wisdom, we would be tempted to
believe that the link between satisfaction and loyalty is a simple, linear relation. But reality
proves us wrong: it is neither linear nor simple.
3. Loyalty model
Most present‐day strategic plans focus on a profit target and work backward to arrive at
required revenue growth and cost reduction. Time spent on studying loyalty leaders has
convinced Reichheld to develop a totally different model. The decisive key in this model is not
profit but, instead, the creation of value for the customers. The three forces ‐ customers,
employees, and investors ‐ that play an important role in the enterprise form the forces of
loyalty. Since a linkage between loyalty, value, and profits exists, these forces can be measured
in terms of cash flow. "Loyalty is inextricably linked to the creation of value both as a cause and
an effect."
As an effect, loyalty measures permanently whether or not the company has delivered
superior value. Defects can doubtlessly be explained by a lack of value for the customer.
As a cause, loyalty creates a chain reaction. Reichheld describes it as follow:
Revenues and market share grow as the best customers are swept into the company's
business, building repeat sales and referrals. Because the firm's value proposition is
strong, it can afford to be more selective in new customer acquisition and to concentrate its
investment on the most profitable and potentially loyal prospects, further simulating
sustainable growth.
Sustainable growth enables the firm to attract and retain the best employees. Consistent
delivery of superior value to customers increases employee's loyalty by giving them pride
and satisfaction in their work. Furthermore, as long‐term employees get to know their
long‐term customers, they learn how to deliver still more value, which further reinforces
both customer and employee loyalty.
Long‐term employees learn on the job how to reduce costs and improve quality, which
further enriches the customer value proposition and generates superior productivity. The
company can then use this productivity surplus to fund superior compensation and better
tools and training, which further reinforce employee productivity, compensation growth,
and loyalty.
Spiraling productivity coupled with the increased efficiency of dealing with loyal
customers generates the kind of cost advantage that is very difficult for competitors to

25. match. Sustainable cost advantage coupled with steady growth in the number of loyal
customers generates the kind of profits that are very appealing to investors, which makes
it easier for the firm to attract and retain the right investors.
Loyal investors behave like partners. They stabilize the system, lower the cost of capital,
and ensure that appropriate cash is put back into the business to fund investments that will
increase the company's value‐creation potential.
4. Consequences of customers loyalty
Businesses with high customers' loyalty rates have proven to reach great financial results.
Buchanan & Gillies identified six reasons explaining why long‐term customers are more
profitable than others are:
ü Regular customers place frequent, consistent orders and, therefore, usually cost less to
serve.
ü Long‐established customers tend to buy more.
ü Satisfied customers may sometimes pay premium prices
ü Retaining customers makes it difficult for the competitors to enter a market or increase
their share.
ü Satisfied customers often refer new customers to the supplier at virtually no cost.
ü The cost of acquiring and serving new customers can be substantial. A higher retention
rate implies that fewer new customers need be acquired, and that they can be acquired
more cheaply. In fact, the acquisition cost of a new customer is three to five times more
expensive than retention cost.
We could also add that a loyal customer is more willing to give feedback on his
dissatisfaction and becomes this way a sort of quality controller. Finally, loyalty is an
excellent weapon, since it is almost impossible to measure a competitor's retention rate.
Target the "right" customers
Before retaining all the customers at any price, it is very important to identify your core
customers. There are three easy questions you can ask yourself (Reichhheld, 1996). First, who
are your more profitable and loyal customers? You will look for those who spend more, pay
promptly, require less service, and prefer stable, long‐term relationship. Second, which
customers place the greatest value on what you offer? Those for whom the product fits best to
their needs. Third, which of your customers are worth more to you than your competitors?
The more customers fitting one, two, or three of these groups you attract, and the more you
increase the chances to have loyal customers. All customers are not good to keep. That's why
it is critical to know the characteristics of the customers you target. Jones and Sasser have
identified four different ways consumers behave.
The Loyalist and Apostle. In most cases, the loyalist is a happy customer who has had good
experiences with the company and who is ready to return on a regular basis. This customer

26. has a need and the company provides exactly the product or service that fits him. It explains
why this customer is so easy to serve. Even more enthusiastic than loyalists, the apostle is so
overwhelmed, his experience brings him so much more satisfaction than he expected, that he
share his strong feelings with others.
The Defector and the Terrorist. Defectors' ranks include very dissatisfied, quite dissatisfied,
neutral, or even satisfied customers. The number of merely dissatisfied customers or satisfied
customers who have encountered failures and defect can be quite impressive. It would be a
huge error to let them go since the company has the tools to turn them into highly satisfied
customers. The worst defector a company can dream of is called the terrorist. This customer
has endured a bad experience and he cannot wait to communicate his frustration and anger to
others. These people are angry because no one was there to respond, listen or correct the
failure they encountered.
The Mercenary. This is a kind of customers having no rule and reacting in unpredictable
ways. Even if they are highly satisfied, they will show almost no loyalty. "These customers
are often very expensive to acquire and quick to depart. They chase low prices, buy on
impulse, pursue fashion trends, or seek change for the sake of a change" (Jones & Sasser,
1995).
The Hostage. These customers have endured the worst the company has to offer and still
have to accept it. These individuals are stuck in a monopolistic environment.
From there, Jones & Sasser enact what should be every company's ultimate objective:
"Turning as many customers as possible into the most valuable type of loyalist, the apostle,
and eliminating the most dangerous type of defector or hostage, the terrorist".
Research methodology
Data collection
Sample unit:
1. working people (including men & women)
2. college students
3. school students
4. senior citizens

27.
Sample size:
1. working people: 32%
2. college students: 29%
3. school students: 23%
4. senior citizens: 16%
Sampling region:
1. The researcher has selected BHOPAL, the Capital city of Madhya Pradesh as the area of
study.
2. He has chosen Sehore, Kolu khedi, Aashtha as her areas of research. In these areas she
can easily meet working people (both male & female), school students, college students
& senior citizens.
The population status of these areas can be shown in a tabulated manner, which is given as
follows:
Area Population
Sehore 12,97,570
Kolu khedi 8,12,230
Aashtha 8,75,640
Population is in approximate figures.
Source: http://www.mpgov.nic.in/mpinfo/census01/cen01‐1.htm

28. Note: As the examiner can see that the population of areas (areas that are chosen by the
researcher) is very large, therefore the researcher has stratified the area. She has chosen
various areas that come under these areas.
The Villages covered by the researcher are Baawadia kala, Dhaapi, karond. the population
level of these areas are:
Area: Population:
Baawadia kala 2,83,563
Dhaapi 3,93,768
karond 2,86,786
Source: Bhopal Development Authority
Note: the researcher took these areas because these areas are near to various school &
colleges. The researcher took school & college students as her sample unit.
Sampling procedure:
The researcher will take stratified random sampling as the sampling procedure.
Data collection method:
1. Primary data: it will be collected with the help of a self administered questionnaire.
This questionnaire aims to gather information related to various Branded products.

29. 2. Secondary data: it will be collected with the help of books, research papers, magazines,
news papers, journals, internet, etc.
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.
Panoramic View
India has a population of over 1 billion & 4 climatic Zones. Several religious & personal
beliefs, 15 languages, different social customs & food habits categorize Indian consumer
class. Besides this, India is also different in culture if compared with other Asian countries.
Therefore, India has high distinctiveness in demand and the companies in India can get lot
of market opportunities for various classes of consumers. Consumer goods marketers’
experience that dealing with India is like dealing with many small markets at the same time.
Indian consumer goods market is expected to reach $400 billion by 2010. India has the
youngest population amongst the major countries. There are a lot of young people in India
in different income categories.
Consumer goods marketers are often faced with a dilemma regarding the choice of
appropriate market segment. In India they do not have to face this dilemma largely because
rapid urbanization, increase in demand, presence of large number of young population, any
number of opportunities is available. The bottom line is that Indian market is changing rapidly
and is showing unprecedented consumer business opportunity.

30. As the restrictions on foreign investments were relaxed in 1991, Multi‐National Companies
have been entering India since then.
Market Size in $
Market Share in %
million
Indian Indian
15 MNCs MNCs
Companies Companies
1992 2004 1992 2004
Breakfast
2 25 100 0 52 48
cereals
Wafers,
potato 6 35 100 0 37 63
chips
Washing
40 570 98 2 51 49
Machines
TV 630 3,030 97 3 49 51
1992 $=30 rupees
2004 $=45 rupees
Source: Center for Monitoring Indian Economy (CMIE)
With a population of 1 billion 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.

31.
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
Indian consumer class can be classified according to the following criteria:
1. Income
2. Socio‐Economic status
3. Age demographics
4. Geographical dispersion

32.
Income based classification
India has a population of 1.095 billion people, comprising of 1/6th of the world population.
India's population can be divided into 5 groups on the basis of annual household income. These
groups are:
1. Higher income
2. Upper middle income
3. Middle middle income
4. Lower middle income
5. Lower income
The income classification does not represent a real scenario for an international business
because the purchasing power of currencies differs significantly. The real purchasing power of
Indian rupee is higher than the international exchange value. In addition to that, income
classification is not an effective tool to ascertain consumption and ownership trends in the
economy.
Consumer Classification
According to National Council of Applied Economic Research (NCAER) there are 5 consumer
classes that differ in their ownership patterns and consumption behavior across various
segments of goods.

33.
Consumer Classes Annual Income in Rs. 1996 2001 2007 Change
The Rich Rs. 215,000 and more 1.2 2.0 6.2 416%
The Consuming Class Rs 45‐ 215,000 32.5 54.6 90.9 179%
The Climbers Rs. 22‐45,000 54.1 71.6 74.1 37%
The Aspirants Rs. 16‐22,000 44 28.1 15.3 ‐65%
The Destitute Below Rs. 16,000 33 23.4 12.8 ‐61%
Total 164.8 180.7 199.2 21%
Source: NCAER
The 5 classes of consumer households (consumer classification) show the economic
development across the country based on consumption trends.
Socio economic classification
In addition to income classification and consumer classification, Indian households can also be
segmented according to the occupation and education levels of the chief earner of the
household (the person who contributes most to the household expenses). This is called as
Socio‐economic Classification (SEC), which is mainly used by market planners to target market
before launching their new products. SEC is made to understand the purchase behavior and the
consumption pattern of the households.
The urban area is segregated into: A1, A2, B1, B2, C, D, E1, E2

34.
Socio‐Economic Classification
Occupation Education
Less
5‐9 yrs
than 4 School Some Post‐
Illiterate of Graduate
yrs in certificate college graduate
school
school
Skilled E2 E1 D C C B2 B2
Unskilled E2 E2 E1 D D D D
Shop owner D D C B2 B2 A2 A2
Petty trader E2 D D C C B2 B2
Employer of‐
Above 10
B1 B1 A2 A2 A1 A1 A1
persons
Below 10
C B2 B2 B1 A2 A1 A1
persons
None D C B2 B1 A2 A1 A1
Clerk D D D C B2 B1 B1
Supervisor D D C C B2 B1 A2
Professional D D D B2 B1 A2 A1
Senior
B1 B1 B1 B1 A2 A1 A1
executive
Junior
C C C B2 B1 A2 A2
executive
Source: Indian readership survey (IRS)
Sections A & B refer to High‐class‐ constitutes over a quarter of urban population
Sec C refers to Middle‐class‐‐ constitutes 21% of the urban population

35. Sections D & E refer to Low‐class‐‐ constitutes over half the urban
population
To understand the table, consider an example: A trader whose monthly household income
(MHI) is more than that of a person in section A cannot be included in this SEC because his
educational qualification or occupations do not qualify him for inclusion.
Sec C constitutes households whose Chief Wage Earners are employed as:
Skilled workers 33%
Petty traders 12%
Clerk/Supervisor 37%
Shop owners 18%
3/4th of them have studied till 10th or 12th class while the remaining 1/4th have studied till 9th
class. Less than half of the Chief Wage Earners of households belonging to sections D & E are
unskilled workers. Petty Traders are 18%, while Skilled Workers are about 28%.
More than 80% of the population of upper strata consumers is living in the top 7 cities. Those
top 7 cities are Mumbai, Kolkata, Delhi, Chennai, Ahmedabad, Bangalore, and Hyderabad. With
increase in economic prosperity, this population (upper strata consumers) is growing at 10%
annually.
The rural area is segregated in to: R1, R2, R3, R4.
Education of chief Type of House

36. wage earner
Pucca Semi‐pucca Kuchcha
Professional
R1 R2 R3
degree
Graduation/ PG R1 R2 R3
College R1 R2 R3
SSC/HSC R2 R3 R3
Class 4‐Class 9 R3 R3 R4
Up to class 4 R3 R3 R4
Self‐learning R3 R4 R4
Illiterate R4 R4 R4
Age demographics
India is a very young nation, if compared with some advanced and developed
countries. Nearly two‐ thirds of its population is below the age of 35, and nearly 50 % is below
25.
Marketers explain that the boom in the consumption level and leisure related expenditure is
because of this young population. It will have a significant impact over the consumer goods
market. In addition to that, it is expected that this will generate trade opportunities and
continuous investment in the economy. There is huge potential for further consumption of
goods and services due to the increased level of disposable income. The expenditure on
essential goods and services has a higher share in developing countries as compared with that
of developed countries.
Age distribution if Indian population (In Millions)

37. Year/ Age 2006 2001 1996
Below 4 yrs
113.5 108.5 119.5
5‐14 yrs
221.2 239.1 233.2
15‐19 yrs
122.4 109.0 90.7
20‐34 yrs
279.1 246.8 224
35‐54 yrs
239.2 207.3 178.1
55 & above
118.7 101.7 88.7
Total
1094.1 1012.4 934.2
Consumption Trends
Food Essentials
45.68%
Essential Services (water, power, rent,
and fuels) 10.1%
Clothing
4.9%
Footwear
0.63%
Medicare
4.25%
Transport & Communication
14.51%
Recreation, Education, and Culture
Less than 4%
Home Goods
3.25%