A project report on rural marketing

Marketing strategies redefined “ go rural “
INTRODUCTION TO RURAL MARKET
GONE ARE the days when a rural consumer went to a nearby city to buy
branded products and services. Time was when only a select household
consumed branded goods, be it toothpaste or soap. There were days when
big companies flocked to rural markets to establish their brands. Today, rural
markets are critical for every marketer - be it for a branded shampoo or an
automobile.
To open a business daily or business magazine today, you will read about
some company or other announcing its intention to `go rural'. Is going rural
that simple? Apart from the distribution nightmare of reaching the products to
rural markets, with 13 major languages and thousands of dialects, 1,700
ethnic groups and hundreds of caste groups, reaching the right
communication to the rural community is mind-boggling.
A number of today's marketers who believe that consumers in rural India are
less demanding and easily satisfied are in for a rude shock. It is high time
these marketers realize that an indiscriminate marketing strategy, a replication
of that used for the urban customer, will not work with his rural counterpart.
The latter have a different set of priorities, which necessitates a different
approach, both in terms of developing appropriate products to suit them and
using appropriate communication strategies, which they will comprehend
better.
There is a debate in some quarters that the rural market is mature enough to
understand communication developed for urban markets, especially in the
case of FMCGs. This is partly true, if the communication is such that it makes
the product promise in a simple and easy-to-understand style.

It is also true that the section of rural society, which is exposed to urban
lifestyles because of employment, is beginning to appreciate and understand
all types of communication aimed at it. But they are in small numbers and the
vast majority of rural folks, even today, cannot understand clever
communication. What to communicate and how to communicate to the rural
audience is a subject which must be understood clearly before any attempt to
develop a communication package aimed at them is undertaken.
“Real India lies in Rural India”, ‘India is a land of ‘villages’, ‘Rural economy
is the backbone of the Indian economy’, ‘India lies in its villages’, etc, are the
perpetual and common slogans. India is predominantly an Agricultural
Economy and the rural markets hold immense potentials for any company to
expand.
Thus the next word after “expanding sales” today is “targeting the rural
markets”. Also, intensified competitions in the urban-markets have resulted in
increase in costs but not higher market share and profits. This has resulted in
change of focus by a host of organizations. Thus, rural bazaars are becoming
more important than urban markets and many organisations have realized
that in a host of product classes the winners of tomorrow are going to be
those who focus on rural India. Industrial giants and other savvy small to
medium firms are awakening to the potential of India’s jackpot rural market of
nearly 733 million consumers, more than twice the population of the USA. It
has thus become very necessary to study the rural markets because this
market, which is mostly underestimated, is drastically changing.

CHAPTER II
Background of Rural Marketing
It was in the late 1960s and 1970s that rural marketing became a topic of
general discussion. The Green Revolution and the consequent pockets of
rural prosperity that appeared on its wake awakened many manufacturers to
the new purchasing power. The NCAER’s Market Information Survey of
Households (MISH) shows that the 1980’s saw a rapid improvement in the
distribution of income in the rural as compared with urban India. In 1989-90,
the number of households with income over Rs. 25,000/- per annum was 9
million (around 50 million people), and above Rs. 12,500 per annum was 35
million households (around 160 million people).
However, aggressive Rural Marketing is not a recent activity. With the Green
Revolution, companies like Siemens with a package of products for water
drilling marketers of fertilizers, pesticides, seeds, bicycles, etc., were followed
by manufacturers of motorcycles, and many others who took their products to
the rural consumers.
Earlier, consumers who were illiterate or unable to read English created
symbols to identify their favourite products-Red Soap for Lifebuoy, Palm tree
for Dalda, etc. Manufacturers now began to deliberately build symbols and
colours into their products to enable identification of their brands.
Nineties was a phase when the advocates of rural marketing convinced
corporate India that villages were big, this decade is differentiating between
companies that can unlock the potential of the rural market and those that
cannot.

Today rural population is 7,41,660,293, while that of urban India is
285,354,954 (Census of India 2001). There is a 241 million strong working
population, spread across 6.38 lakh villages in the rural hinterlands. The rural
population has been dependent primarily on agriculture as their main source
of income. However, after 50 years of independence, and the advent of
industrialization, the agriculturally skewed income of rural India is steadily
normalizing. Horticulture and fishery are also fast becoming income-
generating activities in rural India.
Activity 1972-73 1993-94
Agriculture 85.6 78.0
Mining 0.3 0.6
Manufacturing 5.4 7.1
Construction 1.4 2.3
Trade 2.5 4.4
Transport 0.6 1.4
Services 4.1 5.8
Table: Profile of the Rural Working Class (%)
Particulars North South East West
Villages with >5,000 people 2,00,106 73,585 1,81,982 1,35,936
Villages with Pucca Roads 78,217 45,102 41,348 44,693
Villages with number of outlets 9,75,111 9,80,728 10,89,603 6,51,285
Villages with number of haats 11,436 3,167 18,905 8,380

CHAPTER III
What is rural marketing?
‘Rural marketing is a process of developing, pricing, promoting, distributing
rural specific goods and services leading to exchanges between urban and
rural markets, which satisfies consumer demand and also achieves
organizational objectives’.
Rural marketing involves a two way marketing process, however, the
prevailing flow of goods and services from rural to rural areas cannot be
undervalued.
The process should be able to straddle the attitudinal and socio-economic
disparity between the urban and rural customers.
URBAN TO RURAL (U 2 R)
A major part of rural marketing falls into this category. It includes the
transactions of urban marketers who sell their goods and services in rural
areas. The following are some of the important items, which are sold in rural
areas and manufactured in urban areas: pesticides, fertilizers, seeds, FMCG
products, tractors, bicycles, consumer durables, etc.
URBAN RURAL
RURAL URBAN
RURAL RURAL

RURAL TO URBAN (R 2 U)
Transactions in this category basically fall under agricultural marketing where
a rural producer seeks to sell his produce in an urban market. An agent or a
middleman plays a crucial role in the marketing process. The following are
some of the important items sold from the rural to urban areas: seeds, fruits
and vegetables, milk and related products, forest produce, spices, etc.
RURAL TO RURAL (R 2 R)
This includes the activities that take place between two villages in close
proximity to each other. The transactions relate to the areas of expertise the
particular village has. The items in this category include: agricultural tools,
handicrafts and bullock carts, dress materials, etc.

CHAPTER IV
RURAL MARKET ENVIRONMENT
► Untapped Potential
Rural markets offer a great potential for marketing branded goods and
services for two reasons:
→ The large number of consumers. A pointer to this is the larger volume
of sales of certain products in rural areas as compared to the sales of the
same products in urban areas.
→ Largely untapped markets. The penetration levels for many products
are low in rural areas.
► Market Size and Penetration
The estimated size of India’s rural market stated as the percentage of world
population is 12.2 percent. This means 12.2 percent of the world’s consumers
live in rural India. In numbers, this works out to about 120 million households.
In India, the rural households form about 72 percent of the total households.
This is a huge market by world standards.
Rural consumers own only 52 percent of available consumer durables, even
though they form 72 percent of the total households in India. On an average,
rural household own three consumer durables as compared to seven
consumer durables owned by an average urban household (NCAER, 1998).
The gap clearly indicates the untapped potential among the large number of
rural households.
► Increasing Income and Purchasing Power
The agricultural development programs of the government have helped to
increase income in the agricultural sector. These in turn have created greater
purchasing power in rural markets. Households in the lower income group
have reduced while there is a strong growth in the number of households in
upper middle and higher income households.

► Accessibility of Markets
The attraction of a market depends not only on its potential but also on its
accessibility. A market that cannot be exploited is a case of “sour grapes”.
Development of infrastructural facilities and marketing institutions has
increased the accessibility of these markets.
The road network has facilitated a systemized product distribution system to
villages. In the past, companies relied on a ‘trickle down’ of stocks to the
buyer in interior villages that resulted from the active participation of channel
members. In this system, the village retailer made fortnightly purchase visits
to a bigger retailer in the nearest tehsil (sub-division of a district) level town.
The large retailer in the tehsil town procures goods from district headquarters.
The district headquarters were therefore the terminal point of the company
distribution channel.
Today, an increasing number of companies are supplying village markets
directly. Increasing direct contacts to villages helps product promotion and
availability of the product in the village shop. Marketers of durable goods use
direct contacts as a means to promote and attract rural consumers to dealer
points in large feeder villages or towns. Feeder villages or towns are locations
from where a large number of interior villages get their products. Delivery-
cum-promotion vans traversing 8 to 10 villages a day and covering haats or
mandis, is the widely used method of direct control in rural areas.
► Competition in Urban Markets
Intensified competition in urban markets increases costs and reduces market
share. The rural markets are therefore increasingly attractive in relation to
urban markets. The automobile market brings this out clearly. Rajdoot
motorcycles, Bajaj scooters or Ambassador Cars find ready acceptance in
rural markets as compared to urban markets where there is a proliferation of
brands.
► Consumer Behavior Changes
Increased literacy and greater awareness in rural markets create new
demands and discriminating buyers. This is observed more in the younger
generation. In villages today, this segment of buyers consumes a large variety
of products, both durables and non-durables. There is a visible increase in the
consumption and use of a variety of products, which is easily observed. The

younger generations appears to seek variety and are more discriminating
buyers. The young adult in a village likes to sport a fashionable watch. The
preferred brand of toilet soap for the youth is not necessarily Lifebuoy, the
brand preferred by the elders.

CHAPTER V
CHANGING PATTERNS IN RURAL DEMAND
- REASONS
To gain from a market where demand is expected to grow from 11% in 1995-
96 to 21% in 2006-07, marketers have to come to terms with the poor
transport and communications that characterizes this market far more quickly
and competitively than before.
► New Employment Opportunities
Government schemes like IRDP (Integrated Rural Development Programme),
JRY (Jawahar Rozgar Yojana) and TRYSEM (Training Rural Youth for Self
Employment) have created new employment opportunities in Rural India. Co-
operative banks and Public sector banks are extending loans to rural people,
thereby creating job opportunities for them. As a result very few rural people
are now flocking to urban centres. This creates more purchasing power for the
people.
► Green Revolution
The vision of Dr. Swami Nathan, the father of the green revolution to achieve
self-sufficiency in food grain production in 1995, gave a major breakthrough in
food grain production by the use of scientific methods in agriculture. At
present, Rural India generates 299 million tones annually.
► Various Government Policies
The government’s stress on self-sufficiency resulted in various schemes like
Operation Flood (White Revolution), Blue Revolution, Yellow Revolution, etc.
resulted in the production of 15 million tones of milk per annum.

► Better credit facilities through banks
With co-operative banks taking the lead in the rural areas, every village has
access to short, medium, long-term loans from these banks. The credit
facilities extended by public sector banks through Kisan Credit Cards help the
farmers to but seeds, fertilizers and every consumer goods on installments.
► Green Card / Credit Card for farmers
The government initiated credit cards for farmers through public sector banks.
Canara bank and Andhra bank were the pioneers in the launch of the Kisan
Credit Card. The farmer had a choice to take short or medium term loans
through these credit cards to buy seeds, fertilizers, etc. This enabled him to
produce more and thereby increase his income.
► Improved exports due to Export Policy
The new Export Policy 2000 paves the way for open market (OGL- Open
General License System) status for agriculture. The World Trade
Organization’s (WTO) Policy for agro-exports has increased exports of Indian
agricultural produce thereby increasing incomes of the rural population.
► Remittances from Indians working abroad
These remittances are a sizeable contribution to growing rural income &
purchasing power.
► Expectation Revolution among Rural Masses
Expectation Revolution brought about a powerful change in the environmental
dynamics.
Awareness Kindled Strengthened Earn Consume
of the their their motivation more more
rural people hopes to work

► Political & Social changes through favourable Government
policies
The Indian Government launched a number of schemes like IRDP (Integrated
Rural Development Programme) and REP (Rural Electrification Programme)
in the 1970’s, which gave a boost to the agrarian economy. This resulted in
changes in people’s habits and social life. REP gave impetus to the
development of consumer durable industry.
► Marketing Efforts
FMCG players like HLL, Marico Industries, Colgate Palmolive, Britannia
Industries, etc. have been gung-ho about rural marketing. MNC’s in consumer
durables like Samsung, LG are designing products targeted at rural
customers. These companies are changing the lifestyles of rural Indians.
► Media
Mass Media has created increased demand for goods and services in rural
areas. Smart marketers are employing the right mix of conventional and non-
conventional media to create increased demand for products. The role cable
television has been noteworthy in bringing about the change in rural people’s
mindset and influencing their lifestyles.

CHAPTER VI
RURAL CUSTOMER PROFILE
The rural customer shows distinctive characteristics, which makes him
different from the urban buyers.
► Education Profile
Nearly 45% of the rural Indians are literate (men 59%, women 31%). The rural
customer has much lesser education than his/her urban counterpart.
Generally, the maximum education that one sees among rural areas is still
primary school or high school level. Though rural literacy programmes have
made significant headway, we are still confronted with a customer who is
illiterate. This comes in the way of the marketer using print media and
handbills to promote the product. Visual displays and phonetics become
important in promoting the product in the rural areas. Demonstration on
product usage and even on how to use it becomes integral to the marketer’s
promotion strategy.
► Low income levels
Though rural incomes have grown manifold in the last one decade, still an
average rural consumer has a much lower income than his or her urban
counterpart. Still a large part of his income goes to provide the basic
necessities, leaving smaller income to be spent on other consumer goods.
This makes the rural consumer more price sensitive than the urban consumer.
Marketers have evolved various strategies to lower the final prices. One such
strategy is designing special products as reflected by Hindustan Levers
strategy of developing Sunlight Detergent Powder and the other in even
reducing the size of the product. Another aspect of this low income is that an
average rural customer buys a single unit of the product and not in bulk.

► Occupations
Typically, in the rural area one finds that the principal occupation is farming,
trading, crafts, and other odd jobs like plumbing, electric works, etc. One also
finds primary health workers and teachers in the rural areas. Since farming,
animal husbandry and poultry farming are the principal occupations we find
that even here we have different types of farmers. The basis for
differentiation is obviously their size and ownership of land. We have their
consumption patterns differ mainly because of their income levels. For
example, a large or a big farmer will have almost everything that an urban
consumer will have. He is an affluent farmer and represents the highest end
of the rural income continuum.
► Reference Groups
Typically in rural area, the reference groups are the primary health workers,
doctors, teachers and the Panchayat members. One may even observe that
the village trader or the grocery shop owner, commonly called the “baniya” or
the “mahajan”, may also be an important influencer in the rural customers
decision-making. This is because the trader extends credit to the farmers.
Today, another person is also considered as a change agent and that is the
rural bank’s officer or manager. A marketer needs to be aware of these
influences that can effect a change in the rural customers consumption
patterns.
► Media Habits
A rural customer is fond of music and folklore. In a state like Maharashtra the
rural theatre called “Tamasha” has held sway with the people. Likewise,
“Nautanki” in which the artists are a part of the audience entertains the rural
Uttar Pradesh. Today, television and radio are important forms of media,
which hold the attention of rural folks, so is the video. Radio Programmes
reach almost 95% of the Indian population, while television programmes is
now as high as 85%.
As we mentioned earlier because of a low education level print media does
not have that much of an impact as the audio and the audiovisual media does.

► Importance of customs
Basic cultural values have not yet faded in rural India. Buying decisions are
still made by the eldest male member in the rural family whereas even
children influence buying decisions in urban areas. Further, buying decisions
are highly influenced by social customs, traditions and beliefs in the rural
markets. Many rural purchases require collective social sanction, unheard off
in urban areas.
The rural attitude towards consumption has been traditionally based on the
values of restrain and self-denial. But the high exposure to T.V advertising in
recent years where brands are working relentlessly to loosen this restraint by
communicating escape/release and self-confidence messages is having its
effect, particularly on the youth. But Caste and family are still paramount in
rural life.
But we should bear in mind that with more and more marketers eyeing for a
piece of the rural cake, the awareness of the rural consumer is on the rise. He
is moving towards branded purchases and is becoming more and more
demanding in his purchase decisions.

CHAPTER VII
The Problem Areas in Rural Marketing
Where the rural market does offer a vast untapped potential, it should also be
recognized that it is not that easy to operate in rural market because of
several attendant problems. Rural marketing is thus a time consuming affair
and requires considerable investments in terms of evolving appropriate
strategies with a view to tackle the problems.
► Underdeveloped People and Underdeveloped Markets
The number of people below poverty line has not decreased in any
appreciable manner. Thus underdeveloped people and consequently
underdeveloped market by and large characterize the rural markets. Vast
majorities of the rural people are tradition bound, fatalistic and believe in old
customs, traditions, habits, taboos and practices.
► Vastness and uneven spread
The number of villages in India is more than 6 lacs. Again, the villages are not
uniform in size. Nearly 50% of the villages have a population of less than 500
persons which account for 20% of the rural population. This type of
distribution of population warrants appropriate strategies to decide the extend
of coverage of rural market.
► Lack of Proper Physical Communication Facilities
Nearly fifty percent of the villages in the country do not have all weather road.
Physical communication of these villages is highly expensive. Even today
most villages in the eastern parts of the country are inaccessible during the
monsoon. Moreover, 3,00,000 villages in the country have no access to
telephones. Local telecom companies are working with the Department of
Telecommunications (DOT) to provide service in rural areas at local costs
which could be a costly affair considering the underdeveloped infrastructure.

► Low Growth Rate
The slowdown in the economy is of serious concern to everyone in
Government, industry and every other sector of the economy. Our GDP
growth target for the Tenth Plan is 7.7%, rising to 8.1% in the subsequent
one. Today we are at a 6% level, which is itself below the current Plan. Even
more worrying is the fact that our growth rate has been trending down for the
last 3 years. The sectoral components of this slowdown are very telling.
Agricultural growth has dropped to 0.9% from an average of 3.9% in the
1980's and 3.3% in the 90's. Industrial growth too has slowed to below 6%
from 6.6% in the last decade. We believe there is an urgent need to lift overall
GDP growth sustainable by addressing a central issue - the slowdown in rural
incomes.
► Low Per Capita Income
Even though about 33-35% of gross domestic product is generated in the
rural areas it is shared by 74% of the population. Hence the per capita
incomes are low compared to the urban areas. High costs in finance is a
stumbling block while higher purchase is unheard of, the small town culture
works against financing of products. The sprawling unorganized market offers
prices that the organized industry finds difficult to match. Many existing
product lines continue to be too expensive or irrelevant.
► Many languages and dialects
The number of languages and dialects vary widely from state to state, region
to region and probably from district to district. Messages have to delivered in
local languages and dialects. Even though the number of recognized
languages is only 16, the dialects are estimated to be around 850.
► Low levels of literacy
Literacy rate is low in rural areas as compared to urban areas. This again
leads to problem of communication. Print medium becomes ineffective and to
an extend irrelevant in rural areas since its reach is poor.

► Different way of thinking
There is a vast difference in the lifestyles of the people. The rural customer
usually has 2 or 3 brands to choose from whereas the urban one has many
more choices. The rural customer has fairly simple thinking as compared to
his urban counterpart. Life in rural areas is still governed by customs and
traditions and people do not easily adopt new practices.
► Transport
Many rural areas are not connected by rail transport. Around 68% of the rural
roads have been poorly surfaced, and many are totally destroyed or severely
damaged by the monsoon and remain unserviceable leaving interior villages
isolated. Though it would be desirable to connect all villages by all-weather
roads, use of bullock carts is inevitable for many years.
► Distribution problem
Rural markets typically signify complex logistical challenges that directly
translate into high distribution cost. Coupled with relatively slower growth of
incremental demand and lack of adequate institutional mechanism for retail
operations, margins are squeezed to the utmost. Infrastructure also poses a
major problem when a marketer thinks of targeting the rural markets.
► Market organisation and staff
The size of the market organisation and staff is very important, to have an
effective control. Comparatively, catering to rural market will involve large
marketing organisation and staff. Most of the manufacturers cannot effort
huge investments in terms of personnel and also keep an effective control on
it.
► Media for Rural Communication
Among the mass media at some point of time in the late 50's and 60's radio
was considered to be a potential medium for communication to the rural
people. Another mass media is television and cinemas it has been observed
that cinema viewing habits in rural areas is very satisfactory were ever
available. Again statistics indicate that the rural areas account for hardly 2000
to 3500 mobile theatres, which is far less when compared to the number of
villages.

Exploring the available media
Promotion media may be classified broadly into 3 categories:
Mass Media Local Media Personalized Media
Radio Haats, Melas, Fairs Direct Communication
Cinema Wall Paintings Dealers
Press Hoardings Sales Persons
TV Leaflets Researchers
Video Vans
Folk Media
Animal Parade
Transit Media
► MASS MEDIA
A medium is called mass media when it reaches 50 million people. A rural
market is difficult to reach. Their exposure to mass media is very less. Further
a universalized communication, which comes through mass media, would
become ineffective when it comes to rural audience since they are
heterogeneous – varying from region to region.
Let us examine the utility of mass media.
→ Radio
Irrespective of the literacy levels of the people, topography and geographical
location of the area of residence, the radio reaches rural people easily. It
continues to be the principal source of information by habit and choice for
many rural people.

→ Cinema
The cinema is the theatres attract good number of people and provide an
opportunity to disseminate product information by way of short one or two reel
advertising films. These films are exhibited just before the start of the movie
and during interval time.
→ Press/Print media
Newspapers, magazines and other publications have both reach and access
problems in rural areas. Very few households subscribe to magazines and
newspapers. Literacy levels are also low. Thus press is not a very good media
for promotion.
→ Television
Ogilvy Rural dismisses the talk of huge TV audiences in rural India. According
to them, media exposure in rural areas is just about 50%. Half are secondary
viewers and many watch TV just for 5minutes per week. TV exposure would
just about touch 100 million people, of which only 30-40 million would really
get impacted.
► LOCAL MEDIA
Though mass media is powerful it does not work as effectively as the local
media.
→ Haats & Melas
It is the countries oldest tradition and holds the key to solving the problems. It
is called the weekly mobile supermarkets of rural India.
Facts & Figures: -
→ Over 47,000 haats and 25,000 melas are held annually.
→ The average daily sale at a Haat is about Rs.2.25 Lakhs
→ Annual sales at melas amount to Rs.3, 500 Crores.
→ Over half the shoppers at haats have shopping lists.
→ More than 10,000 melas draw visitors from all over India.

→ Nearly half the outlets at melas are for manufactured goods.
→ Haats is a better opportunity for promotion after brand building has
been done at Mela.
→ Melas are organized after harvest season, so the villager has enough
money, which he will be ready to spend.
→ Demonstration at Haat is essential to convert customers at haats since
their attitude is far more utilitarian than that of visitors to a fair.
→ Wall Paintings
Wall Paintings are an effective and economical medium for advertising in rural
areas. They are silent unlike traditional theatre .A speech or film comes to an
end, but wall painting stays as long as the weather allows it to.
Retailer normally welcomes paintings of their shops, walls, and name boards.
Since it makes the shop look cleaner and better. To get one's wall painted
with the product messages is seemed as a status symbol.
The message should be simple, direct and clear. It should be peaked up
during the festival and post harvest season. To derive maximum mileage their
usage needs to be planned meticulously.
→ Folk Theatre
Folk theatres are mainly short and rhythmic in form. The simple tunes help in
informing and educating the people in informal and interesting manner. It has
been used as an effective medium for social protest against injustice,
exploitation and oppression.

→ Puppetry
Puppetry is the indigenous theatre of India. From time immortal it has been
the most popular form and well-appreciated form of entertainment available to
the village people. It is an inexpensive activity. In rural India puppetry is a
source of livelihood, avenue for entertainment and creative expression, which
is ritually sacred and meaningful as a means of social communication and
vehicle of social transformation.
Indian Institute of mass communication, New Delhi made a study of
comparative impact of puppetry and documentary films, in two villages near
Delhi. People in both the villages responded more favorably to the puppet
shows then the films.
→ Video Van
The pioneer of the medium in India was Sadhna Bharadwaj, Director, and
Video on Wheels. It started commercial operations in 1989. This is a vehicle
that goes to selected villages and towns on weekly markets days to
communicate the benefits of the product. Its repertoire includes audio, video,
film playback equipment, etc.
→ Animal Parade
Companies can resort to parading of animals with the banners highlighting the
product messages. For example, in the Pushkar mela held annually in
Rajasthan, the camels participating in the camel race are painted with colours
or have banners displayed on them like blue for Rin, green for Wheel
detergent, etc.
→ Mobile Displays
Dabur used this novel way of communication. It selected a cluster of 300
villages in Banda district and sent in 3 bowling alleys. The bowling pins
represented the various germs that Chawanprash protects against.

→ Hoardings
They are of 2 types – stationary and mobile. Large sized hoardings placed at
strategic locations have a huge impact.
► PERSONALIZED MEDIA
→ Direct Contact
Direct contact is a face-to-face relationship with people individually and with
groups such as the Panchayats and other village groups. Such contact helps
in arousing the villager's interest in their own problem and motivating them
towards self-development.
HLL is going in for direct marketing in an attempt to attract first-time users.
HLL has launched a door-to-door campaign selling hampers of its detergent,
toothpaste and talcum powder for Rs 15.
Companies can also establish contact with their customers in several other
ways using conventional channels like dealers, salesperson and researchers
and non-conventional channels like telephone and Internet.

CHAPTER VIII
INTERESTING OBSERVATIONS
India's rural market is characterized by its vast spread –
► Over 6,38,365 villages with a total population exceeding 733 million.
→ 145,098 villages have population less than 200
→ 1,70,475 have population between 200 and 500
→ 3,50,000 villages have population between 500 and 2000.
→ 60,000 villages have population between 2000 and 5000.
► A total of 13,113 villages have population over 5,000. Of these 9,988
villages or 76% are in seven states - Uttar Pradesh, Bihar, West Bengal,
Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu.
► Kerala is characterized by large villages; 1,259 out of the total of 1,384
have population over 5,000. While the average population in Kerala is 15,475
per village, for rest of the country the figure is 954.
► Overall literacy rate (7 years and above) in rural India is 45%: literacy
among men is 59% and among women is 31%.
► There are a total of 3,697,527 shops (retail outlets) in the rural sector,
leading to an average of 5.85 shops per village. Number of shops per village
is lowest, around 1.5 - in Himachal Pradesh, Arunachal Pradesh and
Meghalaya. On the other extreme, Kerala has the largest number of shops -
192 per village. In Punjab, West Bengal, Goa, Gujarat, Andhra Pradesh, Tamil
Nadu and Pondicherry there are 7 or more shops per village. Data on rural
consumer buying behaviour indicates that the rural retailer influences 35% of
purchase occasions.

► In India, there are 50,000 Haats catering to villages having population
over 2000 people. Haats operate once a week or more often in a total of
41,888 villages. 45% of the villages with haats are in the east, 27% in north,
20% in west and 8% in south. At the national level, Uttar Pradesh and Bihar
have the maximum number of haats, i.e., 25% and 18% respectively. In Uttar
Pradesh, Bihar, West Bengal and Maharashtra, villages holding haats form
10% of total villages in the respective states. The data indicates that with
establishment of (permanent) shops, haats are moving out.85% of rural
population prefer buying at Haats.
► At an all India level, pucca roads connect 209,360 villages or 33% of
total villages. This proportion is maximum at 57% in south zone and minimum
at 20% in east zone. Pucca roads connect almost all villages in Punjab,
Kerala and Pondicherry.
► There are only 7,271 villages with railway stations. This forms 1.2% of
total villages. Kerala is the best state in this regard with 8% of villages having
a railway station.
► 5% of the total villages have a bank within the village. As on 31st
March 1995, the bank deposits and advances in the rural banks were Rs.
481.19 billion and Rs. 242.78 billion, respectively. This works out to - per
capita deposits and advances figures of Rs.773 and Rs.390, respectively.
► In Rural India, there are a total of 79,448 doctors. This implies that
there are 12.76 doctors per hundred thousand of rural population.
→ The distribution of number of doctors over the zones is seen to be 30%
each in north, east and west and only 10% in south.
► There are a total of 15,039 hospitals in Rural India. This works out to
2.4 hospitals per 100 villages.
► In India there are 1,34,582 PACS (Primary Agricultural Credit Co-
operative Society).

ITC- e-CHOUPAL

THE CONCEPT
WHAT IS A CHOUPAL?
In Hindi choupal means a village place where people gather, gossip,
smoke hookah, discuss or interact with each other. There may be a
Sanchalak or leader who heads the proceedings.
WHAT IS AN e–CHOUPAL?
When a choupal is equipped with a computer & internet connectivity
it is called an e-choupal. Since power is a cause for concern in rural areas
it involves backing the computer with solar power.
ITC’S e-CHOUPAL: -
The project e-Choupal is ITC’s unique click & mortar initiative. e-
Choupal is an ITC platform for carrying out trade at a number of locations.
The e-Choupal redefines choupal, which as mentioned earlier, is the Hindi
word for village square where elders meet to discuss matters of
importance. The all-important letter in the word is "e". It stands for a
computer with an Internet connection for farmers to gather around and
interact not just among themselves but with people anywhere in the
country and even beyond.
It begins with ITC installing a computer with solar-charged
batteries for power and a VSAT (Very Small Aperture Terminal)
Internet connection in selected villages in the house of one of their key
links called the Sanchalak. The computer's functioning is freed from the

notorious power and telecom facilities at the village level. e-Choupal
delivers real-time information and customized knowledge to improve the
farmer's decision-making ability, thereby better aligning farm output to
market demands; securing better quality, productivity and improved price
discovery.ITC accumulates information regarding:
 Weather,
 Modern farming practices
 And market prices etc.
From sources like the Meteorological Department; Agro-universities,
mandis (regional markets) etc., and upload all information on to the
e-Choupal web site.
This helps the farmers to gather Information regarding weather and
scientific farming helps farmers to select the right crop and improve the
productivity of their farms. Availability of market information helps
farmers to become market oriented.
They know what price ITC is quoting and the price prevalent in the
local market, thereby helping better price realization for farmers. If the
farmer decides to sell to ITC, the Sanchalak works as the aggregator of
the small farmer’s produce to sell them to ITC. The Sanchalak also
aggregates the farmers’ input purchase orders for various items like
seeds, pesticides and places them directly with the suppliers through the
internet and thus facilitates the supply of high quality farm inputs as well
as the purchase of farm produce at the farmers’ doorstep with the help of
intermediaries.

All information is customized according to the local farmer’s
requirements and provided in the local language through computer set up
by ITC in the Sanchalak’s house.
Thus the e-choupal model helps aggregate demand in the nature of
a virtual producers' co-operative, in the process facilitating access to
higher quality farm inputs at lower costs for the farmer. The e-Choupal
initiative also creates a direct marketing channel, eliminating wasteful
intermediation and multiple handling, thus reducing transaction costs and
making logistics efficient. The e-Choupal project is already benefiting over
3.5 million farmers.
e-CHOUPAL AT A GLANCE
Commencement of initiative: 2000
• States covered: 9
• Villages covered: 36,000
• e-Choupal installations: 6000
• Empowered e-farmers: 3.5 million
ITC OPERATES THE e-CHOUPAL THROUGH: -
‘THE SANYOJAK’
The Sanyojak is the main link between ITC and the Sanchalaks.
Each Sanyojak acts as a co-coordinator for an e-choupal hub which
consists of around 50 odd e-choupals. He is either a former ‘Mandi’ dealer
or a local ITC product dealer. The Sanyojak earns a certain commission on
every e-choupal deal.

‘THE SANCHALAK’
The Sanchalak is a lead farmer, who acts as the interface between
the computer and the acts as the interface between the computer and the
farmer. He operates the computer on behalf of ITC, but exclusively for
farmers. The Sanchalak also known as the ‘Pratinidhi’ is the most
important link between the Sanyojak and the farmers. Sanchalaks are
required to take a public oath of serving their community without
discrimination and sign a social contract to spend a part of the income
they earn from e-choupal on community welfare.
As stated earlier, all the information to be uploaded on the e-choupal site
is customized according to the local farmer’s requirements and provided in
the local language through the computer set up by ITC in the Sanchalak’s
house. The Sanchalak accesses this information and facilitates its
dissemination to the farmers.
These Sanchalaks are considered to be the most important link
in the whole chain as it is the sanchalak who interacts with the farmers.
Within 2-3 years of implementing e-choupal, these Sanchalaks have
earned a certain status. They have become agents of change as the
farmers now consult the Sanchalak for all critical decisions.

ITC provides the
farmer
appropriate
documentation
which records
the quantity and
quality of his
output. Payment
is instant.
ITC's mobile vans take the
message of e-Choupal to new
villages. Thereafter, virtual
helpdesks enable the farmer
to find solutions to his
problems through online
interactions. ITC has set up
VSAT links to overcome
connectivity problems.
MARKETING STRATEGIES
As stated earlier, to a large extent, it is the Sanchalak’s
influence on the farmers that can turn the sales in ITC’s favor or the
opposite way. Hence one of the most important things ITC needed to
consider before entering the market was the strategy they needed to use
to promote their project.
ITC realized the importance of the role the Sanchalak can play in
helping their project become successful.
This is clear from their whole idea of appointing one of the farmers/
villagers as the Sanchalak. They knew very well that if they appointed
some outsider as the Sanchalak, the farmers may have not taken to the
project in the same way due to the presence of an outsider. But,
appointing someone from the village would only re-emphasize the fact
that e-choupal was here only by the farmers and also only, for the
farmers. Also, even the smallest of farmers would be comfortable in
speaking to the Sanchalak rather than some outsider.
Once, ITC developed this strategy to assure the farmers, they had
to develop a strategy to ensure that the Sanchalaks would convince the
farmers to sell their produce to ITC and also buy ITC products. Hence, for
every quintal of produce sold to ITC through an e-choupal, the Sanchalak,

get Rs. 5. Also, in 2003-2004; ITC had distributed Rs. 3 crore as
commission.
Besides this, every Sanchalak also gets a commission for every
product bought by the farmers from ITC. Also, the farmers who sell their
produce to ITC are required to follow a certain, minimum quality standard.
When the quality of their produce exceeds this required minimum
specification, then, they are given a certain discount on any product they
would like to buy from the ITC Company.
Hence the ITC Company has implemented various steps which are
mutually beneficial to both, the company and the farmers.
But ultimately, it is upto the Sanchalak who can maximize his
profits as well as the farmer’s. But while doing this he has to retain the
trust of his villagers as he becomes responsible for all the transactions
which take place with ITC.
Thus ITC has developed a very good system, where they provide
the farmers with every possible facility and service, but at the same time;
the farmer is free to sell his produce to whomever he wants.
CHAUPAL SAGAR

Chaupal Sagar is one of the first organized retail forays into the
hinterland. One of the first Chaupal Sagars was soft-launched in a small
village in Madhya Pradesh, 40 km. from Bhopal. The company had
promised to open 1,000 rural malls in India and this is one of the first. It
is located just next to the ITC warehouse where the farmers bring in their
produce to sell to ITC. The whole idea behind this is that the farmer will
be tempted to go visit the Sagar Chaupal once he has money in his hands
and also, his money will be spent in a wise manner.
The Chaupal Sagar has opted for self service, stocking its
merchandise on shelves lining the neat aisles, it stocks a breadth of
products no supermarket can. It offers almost everything - from
toothpastes to televisions, hair oils to motorcycles, mixer-grinders to
water pumps, shirts to fertilizers; mostly all of them being national
products like Marico, LG, Philips, torches from Eveready, shirts from ITC's
apparel business, bikes from TVS, and tractors from Eicher etc and many
other companies ITC has tied up with. It is a very sharply thought-out
rural store.
Next to Chaupal Sagar, ITC is setting up a bank, a
cafeteria and a learning room to offer more services to
farmers
One of the main reasons why ITC started on this foray is with the
hope of capturing the rural folks' out-of-village shopping. The warehouse
is one part of its strategy, obviously. But the farmers will come here only
after every harvest. To ensure that they keep coming to Chaupal Sagar

even at other times, the company is offering a slew of other goodies.
Another building is coming up next to the main warehouse. When
completed, it will house a bank, a cafeteria, apart from an insurance office
and a learning centre. ITC has tied up with agro-institutes to offer farmer
training programmes. Then, plots of land have been earmarked to display
large agricultural machinery like threshers. Other parcels of land have
been earmarked for pesticide and fertilizer companies for demonstrating
their products. A petrol pump is coming up as well.
ITC is tentatively planning to open another 4-6 malls this year and
not more than that, as it is waiting to see how well the malls do.
If these malls are picked up well by the rural Indians, not only will
ITC prosper, but even the rural areas will prosper. Already, with the
advent of e-Choupal, many of the rural areas are prospering; thus
increasing the buying capacity, which will thus encourage new
entrepreneurs to focus on rural India as well.
AGENDA FOR THE NEXT DECADE
• States to be covered: 15
• Villages to be covered: 1, 00,000
• e-Choupals to be installed: 20,000
• Farmers to be e-empowered: 10 million

‘SHAKTI-EMPOWERING WOMEN IN RURAL INDIA’
The term Shakti refers to empowering women in rural India.
The objective of Project Shakti is to create income-generating
capabilities for underprivileged rural women, by providing a
sustainable micro enterprise opportunity, and to improve rural living
standards through health and hygiene awareness.
The Company behind the creation and success
of Shakti: -
HLL i.e. Hindustan Lever Limited; one of India’s largest
companies is the brain behind ‘project Shakti.’
Hindustan Lever Limited (HLL) is India's largest fast moving consumer
goods company with leadership in Home & Personal Care Products and
Foods & Beverages. HLL's brands, spread across 20 distinct consumer
categories, touch the lives of two out of three Indians.
If Hindustan Lever straddles the Indian corporate world, it is because of
being single-minded in identifying itself with Indian aspirations and needs
in every walk of life.

HLL's INITIATIVE IN RURAL DEVELOPEMENT:
Over the decades, while HLL has benefited from the developments
in the country, it has contributed equally to these developments .The
company’s main contributions include
developing and using relevant
technologies, stimulating
industrialization, boosting exports,
adding value to agriculture and
generating productive employment
and income opportunities.
THE IDEA BEHIND PROJECT SHAKTI
Despite being the largest consumer product marketer, HLL's much-
admired distribution machinery was directly servicing less than a fifth of
India's villages. This was the fallout of uneconomical last-mile logistics.
The business generated by retailers in these half a million villages was
less than that incurred by the company to service them. That meant Lever
could not reach out to nearly 87 per cent of India's villages, which have a
population of 2,000 or less. Retailers in these villages relied on the
wholesale channel - easily one of the most cost-effective mass distribution
systems. So products did get through, but only fast-moving brands like
Life-buoy. Without a direct distribution system in place, Lever knew that
only a handful of its brands would reach rural shop shelves.

CATALYSING PROSPERITY IN INDIAN
VILLAGES
Under the project, HLL offers a range of mass-market
products to the SHGs, which are relevant to rural customers. HLL is
investing significantly in resources who work with the women on
the field and provide them with on-the-job training and support.
This is a key factor in ensuring the stabilization of their fledgling
businesses.
HLL imparts the necessary training to these groups on the basics of
enterprise management, which the women need to manage their
enterprises. For the SHG women, this translates into a much-
needed, sustainable income contributing towards better living and
prosperity. Armed with micro-credit, women from SHGs become
direct-to-home distributors in rural markets.
RISK-FREE MICRO ENTERPRISE THAT YIELDS
HIGH RETURNS
A typical Shakti entrepreneur conducts a steady business
which gives her an income in excess of Rs.1,000 per month on a
sustainable basis. As most of these women live below the poverty
line, and hail from extremely small villages (with populations of less
than 2000), this earning is very significant, and almost twice the
amount of their previous household income.

For most of these families, Project Shakti is enabling families to live
with dignity, with real freedom from want.
In addition to money, there is a marked change in the woman's
status within the household, with a much greater say in decision-
making. This results in better health and hygiene, education of the
children, especially the girl child, and an overall betterment in
living standards.
The most powerful aspect about this model is that it creates a win-
win partnership between HLL and the consumers, some of whom
will depend on the organization for their livelihood, and builds a
self-sustaining cycle of growth for all.
HOW IT ALL STARTED
HLL has operated Project Shakti through these self-help groups; AP
was chosen for the pilot project as its has the most number and better
established SHGs - there are about 4.36 lakh SHGs in AP covering nearly
58.29 lakh rural women. C.S. Ramalakshmi, Commissioner, Women
Empowerment & Self employment, Govt of AP, points out that AP alone
has about half of the SHGs organised in the country.
Five years ago, Sujathamma had joined a self-help group (SHG),
formed by the district rural
development authority. The likes of
Sujathamma, among the first Shakti
entrepreneurs, have been chosen
from these SHGs. She, HLL officials
explain, is a shining example of the
success of the model - Sujathamma,
on an initial loan of Rs 10,000 from her SHG to start the enterprise, has a
turnover of Rs 10,000-Rs 25,000 a month earns a profit of Rs 750-Rs

2,000 a month, an average return of 8 per cent. Besides, she now also
sells staples, sugar, edible oil and a variety of other household items.
OBJECTIVES OF HLL SHAKTI:
 To create income-generating capability among underprivileged rural
women by providing a sustainable micro-enterprise opportunity to
them.
 To improve rural living standards through health and hygiene
education.
 Avail micro-credit from government/banks/loans for Self Help
Groups; (SHG) and a stable “income-generation activity” offered by
HLL will stimulate wealth creation in the village.
 Women from SHGs have to operate like rural direct to home sales
distributors for HLL products.
SOME OF THE PRODUCTS SOLD THROUGH
PROJECT SHAKTI
HLL has developed low-cost value-for-money branded products, like
Wheel. The company has also taken initiatives to create markets even for
apparently premium products, by offering them in pack sizes, like sachets,
whose unit prices are within the reach of rural consumers. For example,
initiated in the 1980s, sachets (Rs.2, Re.1, or 50 paise) today constitute
about 55% of Hindustan Lever's shampoo sales.
HLL has responded to the trend with low unit price packs of even
other products –
 Lux at Rs.5,
 Lifebuoy at Rs.2,
 Surf Excel sachet at Rs.1.50,
 Pond's Talc at Rs.5,
 Pepsodent toothpasteat Rs. 5,
 Fair & Lovely Skin Cream at Rs.5,

HOW DOES IT WORKS
Typically, a woman from a SHG selected as a Shakti entrepreneur
receives stocks at her doorstep from the HLL rural distributor and sells
direct to consumers as well as to retailers in the village.
Each Shakti entrepreneur services 6-10 villages in the population
strata of 1,000-2,000 people
Typically, a Shakti entrepreneur sets off with 4-5 chief brands from
the HLL portfolio - Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic
Plus. These are the core brands; they layer it with whatever else is in
demand like talcum powder or Vaseline during winters. These brands
apart, other brands which find favour with a rural audience are: Lux,
Ponds, Nihar and 3 Roses tea. Typically, unit packs are small. All the
brands are national and HLL is cool to the idea of creating a rural-specific
brand as it will only scatter the advertising media effort for the brands. To
get started the Shakti woman borrows from her SHG and the company
itself chooses only one person. With training and hand-holding by the
company for the first three months, she begins her door-to-door journey
selling her wares.
A typical Shakti entrepreneur conducts business of around
Rs.10,000 – Rs. 15,000 per month, which gives her an income of about Rs
700 - Rs.1000 per month on a sustainable basis. As most of these women
are from below the poverty line, and live in extremely small villages (less
than 2000 population), this earning is very significant, and is almost
double of their past household income.
The impact is slow and HLL too is not expecting any quick returns
on this project. HLL contributes 20 per cent of the total FMCG
business in the country. So, clearly, the onus is on HLL to grow the
market. Returns may not happen in the next five years, but a lot of
consumer understanding and insights comes from an exercise like Project
Shakti, which in turn can lead to product innovation. The full benefit of
Project Shakti will be realized after some years.
Hindustan Lever will further strengthen its rural distribution through
mutually beneficial alliances with rural Self Help Groups (SHGs). Over the

last five years, financial institutions, NGOs and government organisations
are working closely to establish SHGs, whose objective is to alleviate
poverty through sustainable income-generating activities. Since 2001,
Hindustan Lever is implementing Project Shakti, whereby SHGs are being
offered the option of distributing relevant products of the company as a
sustainable income-generating activity. The model hinges on a powerful
win-win relationship; the SHG engages in an activity which brings
sustainable income, while Hindustan Lever gets an interface to interact
and transact with the rural consumer. HLL's vision for Project Shakti is to
scale it up across the country by 2005, creating about 25000 Shakti
entrepreneurs, covering 100,000 villages, and touching the lives of 100
million rural consumers. Begun with 50 groups in Nalgonda district of
Andhra Pradesh, with the support of local authorities, the project has been
extended, as of now, to about 50,000 villages in 12 states. A typical
Shakti entrepreneur conducts business of around Rs.10,000 - Rs 15,000
per month, which gives her an income of about Rs 700 - Rs.1000 per
month on a sustainable basis. As most of these women are from below
the poverty line, and live in extremely small villages (less than 2000
population), this earning is very significant, and is almost double of their
past household income. The full benefit of Project Shakti will be realised
after some years.

I-SHAKTI
A key factor that has inhibited the development of rural
India has been lack of access to critical information and services.
Given India’s large geography and weak infrastructure, it is often
difficult to reach out to the rural areas. In order to impact both
livelihood opportunities and living standards of rural communities ‘I-
Shakti’ - an IT-based rural information service has been developed to
provide information and services to meet rural needs in agriculture,
education, vocational training, health and hygiene.
The premise of the I-Shakti model is to provide need based
demand driven information and services across a large variety of
sectors that impact the daily livelihood opportunities and living
standards of the village community.
The I-Shakti kiosk will be operated by the Shakti

Entrepreneur, which further strengthens the relationship we have
already cultivated and builds new capacity. HLL expects that the
information provided would improve the productivity of the rural
community and unlock economic and social progress.
‘I-Shakti’ kiosks have been set up in 8 villages in Andhra
Pradesh, and have been functional since August 2003. The kiosks
have received an overwhelming response from the local populace.
During the launch of these kiosks, important village members like
the Sarpanch, schoolteacher and doctor are invited to help reinforce
relationships with the villagers.
The kiosks remain open from 9 a.m. to 7 p.m., six days of the
week. To enable access to the services, users have to register
themselves first and obtain the unique registration number. An id
card with the registration number is provided for use every time
they visit the kiosk.
The kiosks offer information chiefly in the form of audio-
visuals in the following areas:
 Health & Hygiene
 E-Governance
 Education
 Agriculture
 Employment
 Legal services
 Veterinary services
The information provided in the above areas is culled from the
best available resources, taking additional care to ensure that
information, especially in areas like agriculture, is locally relevant
and includes inputs from home-grown experts. These experts are
also available on request, to help provide solutions to problems
raised by users through a query mailing system.

THE VISION
'I-Shakti’ has also tied up with Azim Premji Foundation to
deliver innovative educational modules to students of classes VIII-
XII through the kiosk. Local schoolteachers have also been involved
in the process. A similar partnership is in place with Tata Adult
Literacy for adult education.
Through I-Shakti kiosks, ICICI Bank and HLL will work together
to provide a new delivery channel for rural India, which offers a
multitude of products and services to the rural customer. In the first
phase, Life and General Insurance will be offered through this
channel. Other financial services including Investment products
(Equity, Mutual Funds, Bonds) ICICI Bank Pure Gold (gold coins),
Personal Credit, Rural Savings Accounts and Remittances will be
introduced subsequently.
FUTURE OF PROJECT SHAKTI
The I-Shakti vision is to scale up operations to 1500 kiosks by
2005, delivering information services to over 10 million rural people
across 7500 villages. I-Shakti’s strength’s lies in the unparalleled reach it
offers in reaching out to the rural populace. The need for such services
across most of India’s villages is beyond doubt and the benefits immense.
One of the plans is to allow companies, which do not compete with
HLL to get into the Shakti Network to sell their products. There have been
talks on with various companies selling batteries, mopeds and insurance
companies for LIC policies. The most powerful aspect of about this model
is that it creates a win-win situation for HLL and its consumers, some of
whom will also draw on the organization for their livelihood, and it builds a
self sustaining virtuous cycle of growth for all.

Lifebuoy
INTRODUCTION
Lifebuoy Swasthya Chetna is an HLL initiative in rural health and
hygiene, launched in 2002, which has covered more than 17,000 villages
across the country. Lifebuoy Swasthya Chetna was conceived by HLL as a
hygiene practice to combat preventable diseases with a high mortality
rate in rural areas like diarrhea in rural India.
Diarrhoea causes over three million deaths a year worldwide,
mostly among children under five years old. To put that into perspective,
that is the equivalent of one child dying every ten seconds.
Unilever is one of the world’s major soap manufacturers, with
brands such as Lifebuoy, Lux and Dove. The company is no stranger to
the life protecting potential hand washing with soap can have on poor
communities. Soap was the product on which Lever Brothers, one of
Unilever’s two founding companies, was built. The company found that the
widespread availability of good quality, low-cost, branded soap can do
much to improve levels of hygiene in rural India.
While Unilever has supported hygiene education programmes in
India for many years, in 2002 the Lifebuoy brand team decided that, to
have any real impact on reducing diarrhea disease, something bigger was
needed. Much bigger. It was decided to create a new programme with the

bold objective of educating 200 million Indians – 20 per cent of the
population – to wash their hands with soap after defecating and to achieve
this goal within five years. The campaign, called Swasthya Chetna,
meaning ‘Health Awakening’, is the single largest rural health and hygiene
education programme ever undertaken in India.
INDUSTRY REVIEW
Lifebuoy has a sizeable share of the Indian soap market; and so, in
order to conquer the entire Indian market, the company could simply
focus its attention on persuading the millions of Indians who currently use
soap made by its competitors to switch to Lifebuoy. For Unilever to build
its business in India over the long term, though, it must attract new
consumers, including the estimated 70 million people who never use soap.
SWASTHYA CHETNA (‘HEALTH AWAKENING’)
“Swasthya Chetna is not about philanthropy. It’s a marketing
programme with social benefits”, explains Hindustan Lever Lifebuoy Brand
Manager Harpreet- Singh Tibb.
The Swasthya Chetna programme started in 2002 in the eight
Indian states where deaths from diarrhea diseases are highest and soap
sales are lowest. In its first year 9,000 villages were visited by 150 teams
of outreach workers speaking seven dialects and with leaflets and posters
printed in four languages. In 2003, another 9,000 villages were added,
including Gangijoodi, and in 2004 the emphasis was on introducing new
phases to these 18,000 villages. By the end of 2004 the campaign had
reached 70 million people, including 20 million children at a cost to
Hindustan Lever of 22.25 million.

While Hindustan Lever has committed to funding Swasthya Chetna
for five years at a cost of 24.5 million, the company has already started to
see a return on its investment. In 2003-4 sales of Lifebuoy grew by 20%,
with particularly strong sales in the eight states where the programme
operates.
MARKETING MIX
PRODUCT
As stated earlier, Diarrhea causes over three million deaths a
year worldwide, mostly among children under five years old. In India this
is important, because diarrhea, caused by invisible germs, is the second
largest cause of death among children below the age of 5. The
Swasthya Chetna project will help reduce incidence of such diseases, by
raising awareness of preventive hygienic practices.
Key facts: -
 Today Lifebuoy is mainly sold in Asia and parts of Africa. It is market
leader in every Asian market where it is sold.
 Lifebuoy soap has been proven in laboratories to provide 100% more
effective germ protection than ordinary soaps.
 To date, 70 million people in rural India alone have experienced the
pioneering, Lifebuoy sponsored Health Education programme – the
single largest private hygiene education programme in the world.
 Nearly half of the Lifebuoy brand's consumption is in rural Asia, where
most of the population lives on less than US$1 per day.

DISTRIBUTION
Hindustan Lever's distribution network is recognized as one of its
key strengths. Its focus is not only to enable easy access to their brands,
but also to touch consumers with a three-way convergence - of product
availability, brand communication, and higher levels of brand
experience.
HLL's products, manufactured across the country, are distributed
through a network of about 7,000 redistribution stockists covering about
one million retail outlets. The distribution network covers the rural
population as well.
HLL has also revamped its sales organization in the rural markets to
fully meet the emerging needs and increased purchasing power of the
rural population. The company has brought all markets with populations of
below 50,000 under one rural sales organization. The team comprises an
exclusive sales force and exclusive redistribution stockists, under the
charge of dedicated managers. The team focuses on building superior
availability, while enabling brand building in the deepest interiors. HLL's
distribution network in rural India already directly covers about 50,000
villages, reaching about 250 million consumers, through about 6000 sub-
stockists.
Generating awareness pays dividends only when steps are taken to
ensure constant availability of products. In rural India particularly,
availability determines volumes and market share, because the consumer
usually purchases what is available at the outlet, influenced very largely

by the retailer.
Therefore, over the decades, Hindustan Lever has progressively
strengthened its distribution reach in rural India, which today has about
33 lakh outlets. Direct rural distribution in Hindustan Lever began with
the coverage of villages adjacent to small towns. The company's
stockists in these towns were made to use their infrastructure to distribute
products to outlets in these villages. But this distribution mode could only
be extended to villages connected with motorable roads, and it could
cover about 25% of the rural population by 1995.
Therefore in 1998, Hindustan Lever launched Project Streamline to
further extend its distribution reach. Under this initiative, the company
identifies sub-stockists in a large village, connected by motorable road
to a small town. This sub-stockist in turn distributes the company's
products to outlets in adjacent smaller villages using transportation
suitable to interconnecting roads, like cycles, scooters or the age-old
bullock cart. Hindustan Lever is thus trying to circumvent the barrier of
motorable roads. As a result, the distribution network, as of now, directly
covers about 50,000 villages, reaching about 250 million consumers.
The company simultaneously uses the wholesale channel, suitably
incentivising them to distribute company products.
HLL has in the recent past established a common distribution
system in rural areas for all its products. Given the number of brands and
their packs the rural retailer usually requires, one HLL representative can
take all the products from the company portfolio that he needs. This
common distribution system is now fully operational, under one Regional
Sales Manager exclusively dedicated to rural markets of each region of the
country.
PROMOTION
To ensure that the Swasthya Chetna initiative has a sustainable
impact, the Lifebuoy team worked with advisers to develop a multistage
programme, designed to involve and educate whole rural communities.

After seeking permission from village elders, the Swasthya
Chetna teams, consisting of a health development officer and an
assistant, visit village schools to teach children about germs and the
importance of hand washing with soap. To drive the message home,
children are invited to take part in a ‘glow germ’ demonstration. This
involves applying a white powder to the palms of hands, then washing
with water only. Hands are then held under an ultra-violet light and the
powder glows where dirt remains, showing that hand washing without
soap is not enough. The children then repeat the process, this time using
soap, only to discover the UV light shows no trace of the powder – a
simple but highly effective demonstration. Some weeks later the school
puts on a Swasthya Diwas (‘Day’) show for parents, village elders and
the community,
acting out sketches and songs that extol the virtues of hand washing with
soap. In the third phase, the Swasthya Chetna team visits every house
in the village, inviting mothers of young children to attend a health
education session at which the hand washing message is reinforced and
local health workers give children a height and weight check-up.
The next phase involves recruiting schoolchildren, parents and
other villagers as volunteers to start up health clubs that, in turn,
organize events such as community bathing at the pond villagers use for
washing. The whole process, from initial contact to self-managed health
club, takes two to three years. While this represents a significant time
investment, it is felt this is essential to ensure the hand washing habit
becomes part of everyday life.
PRICING: -

To help people on low incomes afford to buy soap, an 18 gram bar
of Lifebuoy soap has been introduced, enough for one person to wash
their hands once a day for 10 weeks. This sells for two rupees,
equivalent to the price of four cups of tea or enough wheat for a meal
for one person. Once the Swasthya Chetna program is implemented and
people become aware, they are ready to spend this price on a soap of a
Lifebuoy. Hence the pricing strategies of Lifebuoy were effectively
designed in accordance with its promotional campaign.
FUTURE OF LIFEBUOY SWASTHYA CHETNA: -
The vision of this on-going project is to make a billion Indians feel
safe and secure by focusing on their health and hygiene needs. It is too
soon to say what the impact has been on community health or the
programme’s long-term sustainability, but the campaign has prompted a
lot of media interest in India and discussions are taking place with the
Indian government at national level about extending the programme to
other states and beyond Lifebuoy’s initial five-year commitment.
Started in 2002, the programme has as of now covered about
15000 villages in 8 states - Uttar Pradesh, Bihar, Jharkhand, West
Bengal, Orissa, Madhya Pradesh, Chattisgarh and Maharashtra; it has
already touched about 70 million people, imparting hygiene education to
over 25 million children.

The Sapat Group of companies founded in 1897, consists of
diversified businesses in tea. The various Indian manufacturing units are
located in and around Nashik, with its marketing office and IT facilities
located at Mumbai. Sapat has been one of the very first companyies to
launch the rural marketing van scheme. It was also the first to introduce a
low unit pack (LUP) range as well as the flavored tea range in India. With
innovation strategies over the last decade the company has grown five
times touching a turnover of almost Rs100cr., making it the largest packet
tea company in the Rs500cr tea market of Maharashtra. Currently, Sapat
has over 250 distributors in Maharashtra and plans to expand to other tea
drinking states.
When Parivar tea was being developed, the Maharashtra tea market
was mainly dust tea and leaf tea. (After tea leaves are picked, they
are dried and fermented to make granules. The bigger granules
are packed as leaf tea while smaller granules are passed off as
dust tea). Say around 1800tons of dust and similar volume of leaf. Also,
there were many competitors who had products in both these categories.
When the Sapat Company did a price sensitivity analysis, they found that
the dust tea users were willing to pay lot more for getting a leaf tea if it
was strong and also, the products available as leaf were not strong. So
Parivar Tea was created.

TEA INDUSTRY
The overall tea market in India consists of premium tea which are
the top end which are mostly in tea bags etc. Then there are the popular
tea at two levels, one is the higher popular that is Society, Taj Mahal and
then you have Red Label, Double Diamond or Sapat Parivar. Below that is
the economy segment where there are a number of brands, which are like
Goodricke and a whole lot of regional / local players in that market.
Whereas the dust tea market, has a premium dust and a low dust
segment.
MARKETING MIX
PRODUCT
The Sapat Company launched its new brand of leaf tea, Parivar, in
1999-2000 The Sapat Parivar Family Blend is a unique 'marriage' of large
and small grain CTC teas for exceptional flavor and strength.
Its fast-moving brand, Parivar, has helped the company shoot up
the rankings, making it one of the fastest-growing top 10 tea companies
in India in 2004. While the industry grew by 1% in volume in 2004, Sapat
grew by 41%.
DISTRIBUTION
One of the most difficult tasks for any company working in the rural
areas is the distribution. The Sapat Company knew that the villagers
wouldn’t take likely to a company salesman and so the company made a

research and found that each village had a population of youth with
spare time on their hands. Sapat recruited these young men, all of
whom met one simple precondition -- they had to pass their twelfth
grade and possess decent communication skills. The youth called CAs
(communication agents) played the role of brand ambassadors in their
villages. The company used its brand name, Parivar, which means family,
to good effect. The CAs visited every house and welcomed residents to be
a part of the Parivar. To supervise the efforts of its CA network, the
company established a team of auditors who verified the work of the CAs.
These auditors were village elders.
PROMOTION
The company knew that television gives little reach in the rural
regions. Products advertised on outdoor hoardings are perceived as costly
in the rural areas.
So Sapat created Parivar-branded nameplates on which the CAs
wrote the household's name. Families who agreed to fix this nameplate on
their doors were given a free sample pack of tea. Soon, most families in a
village wanted to have their names written on Parivar's metal nameplate.
The company contacted close to 500,000 households across 1,600 villages
in Maharashtra through this programme. Sapat executives claim that this
initiative earned them some brownie points. Villagers began to look at
Parivar as a bonding factor, as the entire village started showing off
uniform nameplates.
Having put its name on the doors, the company decided to get into
the mind of rural consumers. This was best done through village schools,

given that teachers and principals are largely appreciated by the
community. The CAs contacted school principals and handed them
quiz sheets that were distributed to students. The questions covered
subjects ranging from politics, mathematics and tea habits. Students were
given erasers and sample packets of tea when they returned these
questionnaires. At the same time, the company vans visited villages
distributing discount coupons.
Sapat also enlisted the support of its stockists and retailers with
extra incentives. In all household deliveries, retailers were asked to
deliver only Parivar tea packs.
With Pariver Tea, the company hit on an insight: that the Indian
tea drinker loved to slurp when drinking tea.” So the company
produced advertising using the ‘Surr ke piyo’ line, which gave consumers
the social sanction to enjoy their tea while slurping it.
The company, in a bid to tackle the problem of consumer resistance
(which is often seen in the rural areas) offered a money-back
guarantee to dissatisfied customers. It backed this offer with a
complimentary packet of Britannia's Tiger biscuits, as tea with
biscuits is a perfect fit across the country. To ensure repeat purchases,
used packs of Parivar tea could be redeemed at retail shops, for
discounts on the subsequent purchase.
PRICING
As said earlier the largest-selling variety of tea in the rural markets
(60%) is ‘dust’ tea, as it was considered to be cheaper and stronger.
Sapat, however, felt the time was ripe to convert the markets to ‘leaf’ tea.
Hence the real challenge was now to take on the dust brands which
were cheaper than leaf tea, and to not only convert and upgrade, but also
get consumers to pay extra for it. Each 1 kg. pack of Parivar tea is
priced at Rs. 159 as compared to the other brands which are priced at Rs.
125 per kilo.
Even though the Parivar tea brand was priced much higher
than the other brands, it was not only accepted but was also more
preferred because of its uniqueness. The taste was catered to;
keeping in mind the customer’s needs (the rural Indian consumer likes his

leaf tea to be strong and so Sapat created such a tea). Also, the
marketing strategies framed, all-together made Parivar Tea a unique and
preferred brand.
CONCLUSION
At present, Sapat earns 60 per cent of its revenue from Parivar. In
2004, the company entered the markets of Madhya Pradesh also. For
Sapat, the eighth largest tea-maker in the country, gunning for the top
slot might be a distant dream. But for now, the villages in Maharashtra
have given it enough reason to throw a tea party.
Parivar Tea is one of those products which show that only pricing is
not an important factor. In spite of being a tad costlier than the other
products, its effective marketing and distribution strategies helped this
unique product to reach the position it is at, right now.

Coca – Cola:
In India, Coca-Cola was the leading soft drink till 1977 when govt.
policies necessitated its departure. Coca-Cola made its return to the
country in 1993 and made significant investments to ensure that the
beverage is available to more and more people, even in the remote and
inaccessible parts of the nation.
As we all know, where there is a consumer, there is a producer &
this results into completion. Bigger the player, the harder it plays. In such
a situation brand identity is very strong. It takes a long time to make the
brand identity famous.
Coca – Cola has its beginning in 1981 & since then has been one of
the three most dominant players in this soft drink industry.

COKE’S VENTURE INTO THE RURAL MARKET
Coca Cola India (CCI) suffered a humiliating loss of 400 Million USD
in the 2000 and a flat 2001. The flat sales in the urban areas made it clear
for the CCI that they would have to shift focus to the untapped rural
markets. Sanjeev Gupta, the deputy president of Coca Cola India realizing
the potential of the rural market, restructured the strategies and targeted
the common man of the village which resulted in a spectacular growth of
35 % in urban areas as compared to the 65 % growth in rural areas.
Growth of Coca-cola sales
RURAL
URBAN
SOFT DRINK INDUSTRY
The main production of soft drink was started in 1830’s & since
then from those experimental beginning there was an evolution until in
1781, when the worlds first cola flavored beverage was introduced. These
drinks were called soft drinks, only to separate them from hard alcoholic
drinks. These drinks do not contain alcohol & broadly specifying these
beverages, includes a variety of regulated carbonated soft drinks, diet &
caffeine free drinks, bottled water juices, juice drinks, sport drinks & even
ready to drink tea/coffee packs. So we can say that soft drinks mean
carbonated drinks.
Today, soft drink is a more favourite refreshment drink than tea,
coffee, juice etc.

MARKETING MIX
PRODUCT
The two global majors Pepsi & Coca – Cola dominate the soft drink
industry market. Coca – Cola, which had wound up its business in 1977
from India reentered in India after 16 years later in 1993.Coca – Cola has
acquired a major soft drink market by buying out local brands like Thums
up, Limca & Gold Spot from Parle Beverages.
DISTRIBUTION
Coca-cola focused on strengthening its distribution network there.
Rural India meant reaching 6,27,000 villages spread over 32,87,263
square kms; it meant getting distributors to travel 200 kms to reach
five shops with drop sizes of less than a case.
It realized that the centralized distribution system used by the
company in the urban areas would not be suitable for rural areas. In the
centralized distribution system, the product was transported directly from
the bottling plants to retailers.

However, CCI realized that this distribution system would not work
in rural markets, as taking stock directly from bottling plants to retail
stores would be very costly due to the long distances to be covered.
CCI started making a hit list of the potential villages from various
districts. It doubled the number of outlets in rural areas from 80,000
in 2001 to 160,000 in 2003, which increased market penetration from
13 per cent to 25 per cent. To ensure full loads, large distributors
(Hubs) were appointed, and they were supplied from the company's
depot in large towns and cities. Full load supplies were offered twice
weekly against payment by demand draft. On their part, the hubs
appointed smaller distributors (Spokes) in adjoining areas.
The smaller distributors undertook fixed journey plans on a weekly
basis and supplied against cash. The distributors also hired rickshaws
(cycle operated vans) that traveled to villages daily.
HUB
(THE HUB AND SPOKE MODEL -Coca-cola distribution system in rural areas)
VILLAGE
3
VILLAGE
2
VILLAGE
1
SPOKE
1
VILLAGE
3
VILLAGE
2
VILLAGE
1
SPOKE
2

PROBLEMS FACED IN DISTRIBUTION
Problem of electricity in the rural markets
Almost half of rural India experiences large amount of power cuts
during summer and also some amount of power cuts during winter. Hence
in every village, keeping a refrigerator would not be effective in
maintaining the drinks at a temperature at which it is enjoyed the most.
To counter this problem, Coca-Cola provides low-cost ice boxes
— a tin box for new outlets and thermocol box for seasonal outlets,
throughout all the outlets located in the rural areas.
PROMOTION
The promotion strategies Coca-cola used to enter the rural market
can be given as under:
As far as the TV media is concerned, it doubled the spend on
Doordarshan, increased price compliance from 30 per cent to 50 per cent
in rural markets and reduced overall costs by 40 per cent.
Many of us can remember the advertisement with the tag line -.
'Thanda Matlab Coca-Cola’
This ad was targeted mainly at the rural and semi-urban
consumers. The series of Aamir Khan Ads on a hill station acting like
a Nepali and those in a Punjabi ad ‘Yaara da

Tashana’ were a great success and an important aspect focusing on
acceptability of the product in the rural areas.
Besides this, CCI also concentrated on 47,000 haats (weekly
markets) and 25,000 melas (fairs) held annually in various parts of the
country which are local forms of entertainment. Thus it made huge
investments in infrastructure for distribution and marketing.
PRICING
The average income of a rural worker is about Rs. 1500-1600 per
month. It brought down the average price of its products from Rs 10 to Rs
5, thereby bridging the gap between soft drinks and other local options
like tea, butter milk or lemon water.
Coca Cola launched a 200 ml bottle for just Rs.5, which is an affordable
amount on the pockets of the rural audience. The launch of the Rs 5 pack
has reaped rich dividends in terms of sales and the bottles have
accounted for 50 per cent of the company's sales in 2003.
BRAND 200ml 300ml 500ml
Coca-cola Rs.5 Rs.7 Rs. 15
BRAND 25g 200g -
Sunfill Rs.2 Rs.15 -
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
available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve
sachet of 200 gm priced at Rs 15.

PROBLEMS FACED FOR EFFECTIVE
PRICING: -
Purchase patterns along with AFFORDABILITY
also vary frequently due to daily wage earnings.
COKE found that there are spikes in sales during festivals, the
wedding season and during post harvest, while there are troughs during
other periods. As a rule, the retailer has to sell on credit and has to factor
in high defaults during bad monsoon years.
Look-alikes and counterfeits
The problem
Spurious manufacturers are of two
kinds in the case of Coca Cola, informs the company spokesperson. One
who manufactures a pass-off product of a similar name and the other who
fills spurious stuff into their bottles like during summer, fakes abound in
cold drinks.
Though raids have been conducted against such manufacturers, to
counter the problem, Coke has put into place another elaborate system.
WHAT IS COKE DOING ABOUT THE COUNTERFEITS AND
LOOKALIKES?
Besides, they have a large network of Route Salesmen who have a
one-to-one relationship with the retailers on their beat and keep their ear
to the ground. When these route salesmen spot suspicious activity going
on, they inform the company immediately about it.
Coca Cola is also in the process of exploring changes in its
packaging. They are trying to create technology to incorporate certain
features that will make their bottles tamper-proof.
Though Pepsi and Coke have dropped prices substantially to make
their products the flavor of the masses, spurious products still score
because of poor consumer awareness. And fake product manufacturers
reap windfalls because there are barely any input costs, no safety
standards involved, excise or taxes paid.

Conclusion
Marketing according to a leading management theories Peter Druker can be
put in this way " There will be always, one can assume, be need for some
selling. But the aim of marketing is to make selling superfluous. The aim of
marketing is to know and understand the customer so well that the product or
service fits him and sell itself. Ideally, marketing should result in a customer
who is ready to buy. All that should be needed then is to make the product or
service available."
Rural India is a marketer’s dream given its tremendous potential and
increasing money power. The formula of success for companies entails a
complete shift in marketing and advertising strategies.
"To be successful in the rural market, remember- there is no unity in
diversity, but act local while thinking global."
A generic strategy can never be selected for rural marketing. The strategy as
well as the distribution channel will vary from product to product, industry to
industry. For an FMCG product, it may be imperative to reach a settlement
with a population of 5,000, were as for a durable manufacturer, a settlement
with a population of 25,000 would suffice.
The trick of the trade is to reduce the number of intermediaries, so as to cut
costs and margins. Also logistics management is crucial as it will erode into
the margins of the company and the goods will be available to the consumers
but the cost of providing it will be very high.
Innovative strategies can only be created if managers are continuously in
touch with the rural markets and they do not have urban blinkers but use their
creativity to the maximum extent. This however raises a fundamental problem
of fathoming the differences between urban and rural markets in India.
Corporate marketers should refrain from designing goods for the urban
markets and subsequently pushing them in the rural areas. The unique

consumption patterns, tastes, and the needs of the rural consumers should be
analysed at the product planning stage so that they match the needs of the
rural people. Also while planning promotional strategies in rural markets,
marketers should be very careful in choosing a medium of communication.
A radical change in the attitudes of marketers towards the vibrant and
burgeoning rural markets is called for, so that they can successfully impress
millions of rural consumers spread over six hundred thousand villages in rural
India.
In rural area we find more of a stereotype because of similar socio-economic
background. But in an urban area it is a multitude of people & personalities &
variance in income, background & lifestyle. We found that the movies, which
were hit in cities, were doing as well in the rural areas. (E.g. Lagaan, Gadar)
But movies, which are hit in rural areas, may not be successful in cities. (E.g.
Mithun movies) We also found that people in cities spend more on
entertainment than people in rural areas.
In many respects, rural marketing today is much easier than it was for the
pioneers. As just seen, markets are better connected by road and rail, with
regular bus and lorry routes. Storage capacity is better and dealers with
financial capacity do not have to be created in as many places. There is a
bank branch in the village or nearby, obviating the need for a long journey by
the rural dealer to clear the documents from the neighbouring big towns. The
rural cinema, television and radio now make it easier to communicate to the
rural consumer. There are a growing number of marketing companies that
offer their sales vans, cinema vans and video vans on hire. This helps small
companies to avoid large capital expenditures while developing rural markets.
The nature of rural consumer has to be understood.

CHAPTER IX
Bibliography

A project report on rural marketing

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Similar a A project report on rural marketing

Similar a A project report on rural marketing (20)

Más de Babasab Patil

Más de Babasab Patil (20)

A project report on rural marketing