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Advances In Management ,,, "Vol. 4 (8) Aug. (2011)Case Study:

Fortune in Rural India -An OverviewKulkarni Preeti M.

Navjeevan Institute of Management, Nasik 422 008 (M.S.), INDIApreet imaheshk@gmail .com

AbstractMarketing Management always deals in the

ever changing marketing environment. The ruralenvironment is in paradigm shifls and managementneeds to deal with the changing consumer behavior,TJie basic challenge in front of the rural marketer is todeal with the rural consumer who is undergoingtransformation. Many marketers perceive that the ruralmarkets are the protrusions of the urban slums or poormarkets. The truth is that the rural consumer's conceptof value is different from the urb^n consumers. Theculture of rural is not of display of the wealth andmodality. The symptoms of modernity are different thanthe urban counterparts. The rural consumer purchasesonly when it is extremely needed by them, not becauseof tempting promotional offers. The rural market inIndia is quite charming and demanding in spite of allthe difficulties exi.sting. Tlie potential is enormous. Eventhough, these markets have imperfection, they also havetremendous opportunities which should be availed bythe marketers. The marketers have to come up withinnovative ideas to win the customers.Keywords: Ruralparadigm shifts.

markets, rural consumer behavior.

IntroductionIf one wants to see and experience the real India, it isin the rural India. Near about 11 percent of the world'spopulation resides in the rural parts of India. The hugepopulation mountain is the point of attraction for manycompanies. In case of India, urbanization is not uniform, themarket mosaic shows the patches and pockets pattern. Thereare stratums which are completely urban and some areextremely rural.It is a hot topic of discussion in the corporate housesto go rural. The reason behind is shrinking urban markets andpush towards rural. In the early 2000s, around 700 millionpeople, (70% of the Indian population) lived in 627,000villages, in rural areas. Of this, 90% were concentrated invillages with population less than 2000. Today, real growth istaking place in the rural-urban markets or in the 13,113villages with a population of more than 5,000.According to a study conducted in 2001 by theNational Council for Applied Economic Research (NCAER),there were as many "middle income and above" householdsin rural areas as there were in urban areas. There were almost

twice as many "lower income households" in rural areas as inurban areas. There were 2.3 million "highest income"households in urban areas as against 1.6 million in ruralareas.NCAER projections indicated that the number of"middle income and above" households was expected to growto 111 million in rural India by 2007, compared to 59 millionin urban India. Gone are the days when a rural consumer hadto go to a nearby town or city to buy a branded product. Thegrowing power of the rural consumer is forcing bigcompanies to flock to rural markets.'The rural markets of today are the most promisingon e for the marketers as various reports pointed out that theurban markets are getting saturated. The Indian FMCGsector, with a market size of US$ 25 billion (2(X)7-O8 retailsales), constitutes 2.15 per cent of India's GDP. A well-established distribution network spread across six millionretail outlets (including two million in 5,160 towns and fourmillion in 627,000 villages), low penetration levels, lowoperating costs and competition between the organized andunorganized segments are key characteristics of this sector.Rural India accounts for close to one-third of the

total consumption pie. Robust consumption in the ruraleconomy is a key driver of India's sustained growth. Thepenetration of companies into rural north India increasedfrom 9.5 per cent in 2000 to 46 per cent in 2008, due tocompanies selling their products in small packets or sachets.FMCG companies are devising exclusive rural marketingstrategies to tap the rural consumer base.T able 1Revenue generated from rural markets of India

CompanyHindustan UnileverLtd (HUL)

Dabur India Ltd.

CategoryHousehold

Personal products

% sales fromrural marke t s454 0

A large number of FMCG companies derive asignificant proportion of their overall sales from outside thetop few 100 towns and cities, which reflects the growingeconomic importance of India's rural consumer base. Withmore than 33 per cent of the Indian consumer base present inrural areas, the rural market will be a key growth driver forFMCG majors planning to expand their domestic business. It(43)

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Advances In Managem ent Vol. 4 ( 8 ) Aug. (201is estimated that more than two-thirds of the next generationyouth will come from rural India.

According to a study by NCAER (National Councilfor Applied Economic Research), the number of middle andhigh income households in rtiral India is expected to growfroml30 Million to 172 Million by the end of year 2012 ascompared to Urban India that is nearby 71 Million."

The increase in rural purchasing power is reflectedin many ways. Rural incomes have been growing at morethan 7 percent over the past few years, helping to account foraltnost 40 percent of India's total consumption of goods andservices.** Non-food exp enditu res are grow ing at an 8.2 percent annual compound rate. Rural households are purchasinga wide range of products cars, flat-screen televisions,microwavesthat until recently would have been beyondtheir reach. Some industrial sectors have seen surprisinggrowth coming from rural consumers. Eifty percent ofrevenues from the fast moving consumer goods (FMCG)sector now come from rural sales. In the case of the telecomsector, subscriber base in the semi-urban and rural markets(Circle C geographies) has grown at a phenomenal 98 percentover the last five years in comparison to other circlesrepre.senting metros.'

Rural markets can bring the prosperity to thecompanies. If the picture of the rural markets is so glossythen why the failures are faced by most of the companiesquite successful in urban ma rkets?. Many markete rsmistakenly assume the rural markets as the replica of theurban markets. They apply the urban market strategies in therural markets. This leads to the collapse and their growth seesthe bottom in the rural markets. Then how to solve theclutter?The fewer prices, small packs and less qualitysyndrome has created the bumpy roads for the companies topenetrate in the rural markets. The rural consumers are notthe slum dogs, the way majority of the companies treat them.They are unique and present all together different behavio ralpatterns. There are external as well as the internal factorswhich are dictating the operations of the companies in thertiral hinterland. Table 2 and 3 present the risk elements need

to be considered by any company willing to enter the ruralmarkets of India. The grade A represents the high attentionfactors with some solutions while B grade represents thefactors with exceptional solutions.Understanding the rural markets andconsumers

Rural markets are the living markets; they aregrowing and ever changing. The marketers who want theeffective penetration and reach in the rural markets need tounderstand the ever-changing nature of the rural markets.Rural markets are in the phase of paradigm shifts. The

superficial understanding of the rural markets is the cause othe majority of the problems for the companies. The rurmarkets are scattered markets. They are not homogeneoumasses. Each rural market is unique and special. The rurmarkets are not the projections of the urban slums.T a ble 2

External risk factors for the companies entering inthe rural markets of IndiaParticulars

Less information about themarkets and consumer behaviorUnavailability of skilled localtalent

Uneven demandImperfect local distributionchannel

Pathetic infrastructureScarce access to money market

Socio cultural mosaicLack of adequate logistic support

Legal hasslesConfrontation of local businesscommunitiesParadigm shifts in the consum erbehavior

CategoryControllableControllable

Non controllableControllable

Non controllahicControllable

Non controllableControllable

Non controllableNon controllableNon controllable

GradABAABBAAABA

Table 3Internal risk factors for the companies entering in therural markets

ParticularsLess experience of the ruralareasOrganization structure andculture

Sales force bottlenecksDoubt about the feasibility of therural market conditions

Large window periodHuge investment

Leadership qualities andmotivational ability of themanagementLocal comp etition

Imitated goods

CategoryNon controllable

ControllableControllable

Non controllableNon controllableNon controllable

ControllableNon controllableNon controllable

(iradcBAABBAAAB

Untapped rural markets are still untapped marketThere are many commodities which are not used by the rurconsumers e.g. all the rural consumers are not using th(44)

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Advances In Management K ' - ; . ? ? - ? '- -' * ' 'shampoo. The rural markets are ignored and underserved butthey aie not aloof markets. The rural retailers are traditionalin the practice they are not following the sophisticatedtechniques of marketing. The rural media is underutilized. 12. 1

Rural consumers are in the stage of metamorphosisthe changing paradigm making them goaded for the change.The rural consumer of today is not like the ancestors. Theyare adapting the faster speed of growth. They are intelligent.Gone are the days when anyone can fool the rural."The rural middle class is growing at 12 per centagainst the 13 per cent growth of its urban counterpart. Theupper income class with household incomes of over Rs. onemillion [$22,700] per annum is projected to go up to 21million by 2009-10 from four million in 2001-02. It will havea 22 to 23 per cent rural component. Higher rural incomeshave meant larger markets. Already, the rural tilt is beginningto show. A study by the Chennai-based Francis Kanoi

Marketing Planning Services says that the rural market forFMCG is worth $14.4 billion.""Research Methodology

The researcher used stratified random sampling forcollecting the data. The data are collected by a survey method

. - I n

Vo l.4( 8) Aug. (2011)through structured questionnaire. The seven different districtsfrom Maharashtra are selected. The sample is collected from70 different villages having population near 5000.HypothesisNull hypothesis 1:There is no potential in the rural areas.Null hypothesis 2: No more organized efforts are required tounderstand the rural markets.

Hair oil related data were collected through surveyfrom 70 different villages from seven different districts ofMaharashtra. The research tool used was structuredquestionnaire. Table 4 shows the observed values of the hairoil brand spread across the Maharashtra and table 5 shows theexpected values. The result of chi squarer is that the observedvalue is greater than the table value so the null hypotheses arerejected and the alternative hypothesis is accepted.At 95% level of confidence table value of Chi squareat n=36 is 50.999. Chi square value observed is 297.9067which is greater than table value. Hence Null hypothesisnumber 2 which is 'No more organised efforts are needed tounderstand the rural markets" is rejected.

T a ble 4Hair Oil Brands -Observed ValuesHair Oil Brand

AurangabadKolhapurNagpurNandedNashikPuneRatnagiriTotal

Any12094001944

Local2

6209

2365

107

Parachute72408364747761

471

Vatika9043128

27

Dabur304000310

Do not use00I00012

Mise4602148438

Total1021081018211293101699

T a ble 5Hair Oil Brands -Expected ValuesHair Oil Brand

AurangabadKolhapurNagpurNandedNa.shikPune

RatnagiriTotal

An y6.42066.79836.35775.16177.05015.85416.3577

44

Local15.613716.532215.460712.552217.144514.236115.4607

107

Parachute68.729672.772568.055855.253275.467862.665268.0558

471

Vatika3.93994.17173.90133.16744.32623.59233.9013

27

Dabur1.45921.54511.44491.17311.60231.33051.4449

10

Do not use0.29180.30900.28900.23460.32050.26610.2890

2

Mise5.54515.87125.49074.45786.08875.05585.4907

38

Total102108101821129310169 9

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Advances In Management ;Table 6

Per Capita Consumption of Hair OilVol. 4 ( 8 ) Aug. (201

Hair oil per capita consumptionLess than 47 ml

Between 48 to l(X)mlBetw een 101 to 150 miBetween 151 to 200 mlBetween 201 to 250 mlBetween 251 to 300 ml

More than 301 ml

% of Respondents061115II1938100

Morcthati301 ml38%

Bcween 251to 300 ml

19%

Between 48to 100 ml

6%Between 101to 150 ml

11%Between 151to 200 mi

15%Between 201

to 250 ml11%

Fig. 1: Per Capita Consumption of Hair OilPer Capita Consumption of Hair Oil

As per ORG for period 2002-03 the consumption ofhair oil for urban area was 21 lgm s and for rural area it was47 gms. But below chart shows that even in 2007-08 there arestill 31 per cent respondents who are lagging behind the

urban consumption of 2002-03.Thus Null hypothesis number I. which is, "there no potential in rural market' is rejected.

Chi-Square for Shampoo: The rural India is getting moand more aware about the hair care products like shampooThe observed values for the shampoo are shown in table anexpected values are shown in table 4.31. In case of shampoothe observed values are greaur than the table value whicshows that the alternate hypothesis shall be accepted and thnull shall be rejected.

At 95% level of confidence table value of Chi squaat n=48 is 65.171. Chi square value observed is 183.933which is greater than table value. Hence Null hypothesnumber 2 which is 'No more organised efforts are needed tunderstand the rural markets' is rejected.

Per Capita Consumption of Shampoo:As per data available on "www.authorstream.comPresentation/Siro-40589-industry-shampoo-Presentation-Covers-FMCG-Products-Typical-Characteristics-shampo-Entertainment-ppt-powerpoint/' published on 13th Jan 0accessed on 16th Dec 2009, per capita consumption oshampoo in India is 13 ml compared to other developincountries like Indonesia which consum es 160 ml anThailand 300 ml.

Thus in Maharashtra apart from 26 per cent of nousers of shampoo, more than 39 per cent are still consuminless than Indonesia. Thailand market with 300 ml per capitconsumption is much ahead than Indian rural market in ca.sof shampoo, hence there is huge potential for growth in ruramarket along with unexplored markets in the form of nousers for shampoo in rural Maharashtra. Thus Null hypothesinumber 1, which is, 'there is no potential in rural market" rejected.^"'

Table 7Shampoo Brands -Observed ValuesShampoo

BrandAurangabadKolhapurNagpurNandedNashik

PuneRutnagiri

I otal

ClinicPlus33

4138224 03536

245

Chick131

2426130139 0

H e a d &Shoulder4

7747II6

46

Pantene143114028

42

Vatika0308970

27

Shikakaivar iants0

704550

21

Nyle10011014

AnyO ther19

63159112 689

None18351810292512

14 7

Total10210 31019411 39 610271 1

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Advances In Managem ent Vol. 4 (8) Aug. (2011)T a ble 8

Shampoo Brands -Expected ValuesShampooBrand

AurangabadKolhapurNagpurNandedNashikPune

RatnagiriTotal

ClinicPlus35.147735.492334.803132.391038.938133.080235.1477

24 5

Chick12.911413.038012.784811.898714.303812.151912.9114

90

H e a d &Shoulder6.5992

6.66396.53456.08167.31086.21106.5992

46

Pantene6.0253

6.08445.96625.55276.67515.67096.0253

42

Vatika3.8734

3.91143.83543.56964.29113.64563.8734

27

Shikakaivariants3.0127

3.04222.98312.77643.33762.83543.0127

21

Nyle0.57380.57950.56820.52880.63570.54010.5738

4

AnyOther12.767912.893112.642811.766514.144912.016912.7679

89

None21.088621.295420.881919.434623.362919.848121.0886

147

Total1021031019411396102711

Table 9Per Capita Consumption of ShampooPer capita consumption of shampoo

Do not use shampooless than 50 ml

between 51 & 100 mlbetween 101 & 200 ml

More than 200 ml

% of Respondents261425269

100More than200 ml9%

between 101& 200 ml

26%

between 51 &10 0 ml25%

Do not useshampoo26 %

less than 50ml14%

Fig. 2: Per Capita Consumption of Shampoo |Currently, according to Data monitor, Indian hair

care market is valued at INR 7000 crores (US$ 1625 million)for the year 2009. However, the excitement in the industrylies in its enormous untapped potential. Developed economiesof the world such as USA, UK, and Japan etc. have per capitaexpenditure in the range of $25-$40 per annum. At per-capita-expenditure of less than $2, India lies behind evenamongst emerging markets such as Russia, Brazil etc.Traditional usage of hair oil for nurturing and hairstyling makes it the biggest segment in the Indian hair caremarket. Due to this. Conditioner category (including hair oil)

dominates the Indian hair care market with 48% share whileShampoo & Hair colorants form 3 8% and 11% sharerespectively. Styling and Perms & Relaxers category are stillat a nascent stage and contributes only miniscule 3% of thehair care market. Due to its strong presence in hair oilsegment, domestic player Marico with its Parachute brandleads the Indian hair care market with around 19% share.Unilever is the close second and contro ls around 17% shareof the Indian hair care market. Dabur, Procter & Gamble,Cavin Kare and Godrej are other key players in the Indianhair care market.The chi square result rejects both the null hypothesesand accepts the alternates' hypotheses that "There is a

potential in the rural areas. Organised efforts are required tounderstand the rural markets."Table 10Profile of rural consumer

The youth of the rural area is different than the middle andage old.The consumer of rural area is aware about many things butnot hundred percent.They are literate in vernacular language.They may not be able to differentiate betw een the spell alikegoods.Not interested in inventory of the products.Small size packs are preferred for many com modities.The value system is different in the rural areas.Rural consumers are concerned about the quality of theproduct.The rural purchase is maximum time need based purchase.The value conception of the rural is associated with qualityat affordable price.The rural consumer needs freedom of quantity.

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Advances In Managem ent Vol. 4 (8) Aug. (2011

enlistsAfter studying the rural consumer, the researcherthe following characteristics' of the rural

consumers. Strategies for the companies to penetrate intothe rural markets Companies need to position the product in the marketwith the help of socio cultural factors. In the ruralmarkets the socio cultural acceptance of the product isvery important. It is also observed that majority of thecompanies adapt less price or economy pricing strategy.The price based on value is needed in the rural areas. Therural consumer also thinks about the quality propositionwhile selecting the product. Majority of times the rural

consumer demands the product in the rupee units like "ekrupaye wala arial.' These tendencies need to be takeninto the consideration for designing the pricing strategy. The rural areas are no more in the media darks. TV hasspread its magic on the rural parts of the India. Themedia .scale developed by the researcher indicates thatTV is most appreciated media in the rural parts of thecountry. The researcher developed the following scale on the

basis of survey done by the researcher for doctoral study.The feedbacks from the rural respondents related withthe media exposure are used for development of thescale.

It is observed that TV is most appreciated mediumand retailer is at the .second number. The TV is broadcastingmedia. It is also interesting to see retailers and friendsfollowing the TV on the scale. Comm unication through local language. Proper segmentation Understanding the consumer needs properly Using Indian endorsers

Ma de for rural prod ucts Indianised brand name like shudh, sampurna. dand

Annapurna Local way of distribution Use advance technology

The role of the intermediaries plays a very cruciabecause they work as the physical distributer as well apromoter in case of rural India. Rural retailer plays uniqurole as advisor, family friend and micro creditor.Conclusion

After considering the set of the risk factors it mighbe thought that the companies should not enter the ruramarkets. The saturation of the urban markets has created push to the companies for entering in to the rural marketsThe companies need to work on the controllable factors andminimize the risk.

There is a master key for opening the gates of ruramarkets. The steps needed to follow are furnished below: Understand the rural markets Understand the rural consumers Understand the needs of the rural consum ers Understand the value perception of the rural consume rs Prepare made for rural goods Mea sure strategies for the rural mark ets Develop optimally functioning marketing mix

The rural market in India is quite fascinating anchallenging in spite of all the difficulties existing. Thpotential is enormous. Even though, these markets havweaknesses, they also have tremendous opportunities whicshould be availed by the marketers. It is well known tha"Markets are created and not born". The market so createshould be tapped effectively. The rural consumers arTable 11

Scale of the Media RatingMedia

IVRetailerFriends

News papersWall paper

OthersMagazine

Total

Per cent ofFavourable response

(1)87857664131206

Frequencyper day(2)10010201020301

Total frequency(3=1x2)

870851526426366

1239

% frequency70.226.8612.275.172.12.90.5100

Ranking ofmedia e.Yposure

1324657

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Advances In Management Vol.4(8) Aug. (2011)different than the urban one. It is important for the ruralmarketers to understand the rural markets and consumers tobe successful in the rural markets. There are companies likeHUL, ITC and LG which are successful in the rural markets.The rural tiger is awaking the companies need to work on thecontrollable factors to face the challenge successfully.References1. NCAER (National Council for Applied Economic Research)(2000)2. Ramkrishn Y., New perspective in Rural and Agriculturalmarketing, 2'"" edition, Jaico publishing house (2005)3. Desai Vasant. Rural development in India, past, present &future, a challenge in the crisis, Himalaya Publishing House (2003)4. Prahalad C.K., The fortune at the bottom of the pyramid,Pearson power, Wharton school publishing (2003)5. Kashyap Pradeep and Raut Siddhartha, Rural marketing booktext and cases. Biztantra new Delhi, 165 (2006)6. Krishnamm acharyulu C.S.G. and Ramakrishnan Lalitha. Ruralmarketing. Text and cases, Pearson Publication (2005)

7. Gopalswam i T.P., Rural Marketing Environm ent, Problem s andStrategies second edition, Vikas Publishing House Pvt. Ltd. (2005)8. Bijapurkar Rama, We Are Like That Only, Penguin group. NewDelhi, India (2007)9. Dasgupta Jayatri, Innovations in airal India -Tapping RuralMarkets Concepts & Cases, ICFAI University Press (2005)10. Gopal V.V., Rural Marketing - The road ahead- Tapping RuralMarkets Concepts & Cases, ICFAI University Press (2005)11. Rajeswari Sheth, To buy or not to buy, tndian Manageincni.June(2006)12. Challapalli Sravanthi, The Rural Promise, August 12, The HinduBusiness Line (2004)13. Rohit Sharan A., Ram Mohan Rao and Mishra Neeraj, Call ofthe country side. Rural markets, tndia Today. December (2004)14. Rao Raghavendra K., The rise and rise of regional Brands,Indian Management. Oct. (2003)15. Jain Sweta, 'Can Power Brands Fly High? Indian Management.October, 32-43 (2003).

(Received 19" April 2011, accepted 12 * July 2011 )

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