Rural Marketing and Communication Strategies FINAL

8/6/2019 Rural Marketing and Communication Strategies FINAL

1/48

Project Report

on

RURAL MARKETING

AND

COMMUNICATION STRATEGIES

Submitted in the partial fulfillment for the award of the degree

of

Bachelor of Journalism and Mass Communication, BJ(MC)

Submitted By:

Pallavi Bansal

BJMC-VI

0201422407

SESSION: 2007 2010

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL

Affiliated To Guru Gobind Singh Indraprastha University, Delhi


2/48


3/48

CERTIFICATE

This is to certify that Pallavi Bansal, a student of BJ(MC), Jagannath International Management School,

affiliated to GGSIP University, enrolled for the batch 2007-2010, with enrollment no. 0201422407, has

completed the research project under the supervision of Dr. Pooja Rana.

(Dr. Pooja Rana)


4/48

ii

Table of contents

* Acknowledgement... i

* Certificate ii

I. Introduction Pg. 1

I.1 Need and importance of the study Pg. 2

I.2 Definition of the technical terms... Pg. 3

II. Review of literature.. Pg. 5

III. Research Designs and methods. Pg. 12

III.1 Research methodology.. Pg. 12

III.2 Objectives.. Pg. 15

III.3 Hypothesis. Pg. 16

IV. General details Pg. 17

V. Case studies.. Pg. 20

V.1 Coca Cola Pg. 21

V.2 LG.. Pg. 34

VI. Conclusion.. Pg. 41

* Bibliography


5/48

CHAPTER I

INTRODUCTION

Promotion of brands in rural markets requires the special measures. Due to the social and backward

condition the personal selling efforts have a challenging role to play in this regard. The word of mouth is an

important message carrier in rural areas. In fact, the opinion leaders are the most influencing part of

promotion strategy of rural promotion efforts. The experience of agricultural input industry can act as a

guideline for the marketing efforts of consumer durable and non-durable companies. Relevance of Mass

Media is also a very important factor.

The Indian industries have the advantages, which MNC don't enjoy in this regard. The strong Indian brands

have strong brand equity, consumer demand-pull and efficient and dedicated dealer network which have

been created over a period of time. The rural market has a grip of strong country shops, which affect the sale

of various products in rural market. The companies are trying to trigger growth in rural areas. They are

identifying the fact that rural people are now in the better position with disposable income. The low rate

finance availability has also increased the affordability of purchasing the costly products by the rural people.Marketer should understand the price sensitivity of a consumer in a rural area. This paper is therefore an

attempt to promote the brand image in the rural market.


6/48

1

CHAPTER I.1

NEED AND IMPORTANCE OF STUDY

Indian Marketers on rural marketing have two understanding:

(i) The urban metro products and marketing products can be implemented in rural markets with

some or no change.

(ii) The rural marketing required the separate skills and techniques from its urban counter part.

The Marketers have following facilities to make them believe in accepting the truth that rural markets are

different in so many terms.

(i) The rural market has the opportunity for.

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

powers in rural markets.

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

problems.

(iv) The rural markets can be worked with the different media environment as opposed to press, film, radio

and other urban centric media exposure.

How reality does affect the planning of marketers? Do villagers have same attitude like urban consumers?

The question arises for the management of rural marketing effects in a significant manner so than companies

can enter in the rural market with the definite goals and targets but not for a short term period but for longer

duration. The Research paper will discuss the role of regard. The strategy, which will be presented in thepaper, can be either specific or universally applicable.


7/48


8/48

3

The function of an Internal Communications department is to ensure a cohesive communications culture

throughout the organization. Internal Communications may be labeled Employee Communications,

Engagement Communications, Communications, and other variants. The key theme running through these

titles is communication, in whatever format, among a firm's employees.

External communication is the exchange of information and messages between an organization and other

organizations, groups, or individuals outside its formal structure. The goals of external communication are

to facilitate cooperation with groups such as suppliers, investors, and shareholders, and to present a

favorable image of an organization and its products or services to potential and actual customers and to

society at large. A variety of channels may be used for external communication, including face-to-face

meetings, print or broadcast media, and electronic communication technologies such as the Internet.

External communication includes the fields of PR, media relations, advertising, and marketing management.


9/48

4

CHAPTER II

REVIEW OF THE LITERATURE

RURAL INDIA with its traditional perceptions has grown up over the years, not only in terms of income,

but also in terms of thinking. The rural markets are growing at about two time faster pace than urban

markets, not surprisingly, rural India accounts for 60 per cent of the total national demand.

According to a survey conducted by Mckinsey in 2007, rural India with a population of 630 million

(approximately) would become bigger than total consumer market in countries such as South Korea or

Canada in another 20 years and it will grow at least four times from its existing size.

Gone are the days when rural consumer went to nearby city to buy branded products and services. The

rural consumer is growing and this is an opportunity to grab the market share for all the global players in the

market -- whether it is into Fast Moving Consumer Goods (FMCG) sector or retail sector (either insurance

or banking or for that sake any other sector).

The FMCG sector includes companies like Indian Tobacco Corporation (ITC), Godrej, Hindustan Lever

Limited (HLL), Gujarat Cooperative Milk Marketing Federation (GCMMF-Amul) and Dabur India Limited.

All these have shown a strong global presence in the rural sector and it can be said that all the FMCG

companies should target the rural sector.


10/48


11/48

6

Some FMCGs products like toothpaste, hair oil and other like shampoos have done much better in the rural

areas than the urban and the semi urban areas. It has been a phenomenon that the sales of many companies

have gone up; Coca-Cola, Nestle and Godrej too have also reported better sales in rural areas.

7


12/48

The retail sector has a huge potential for growth as a study shows that opportunities in rural retail sector

were estimated to be over $34 billion in the year 2007, which is expected to touch $43 billion by the year

2010. It can be seen from the market that companies like Reliance, Subhiksha are expanding in the rural

market. ITC has launched its first rural mall Chaupal Sagar, which offers products ranging from FMCG to

electronic appliance to automobiles. Indian Oil is planning to invest $ 189.10 in the rural areas during the

financial year 2009.

8


13/48

Insurance sector has one of the biggest potential in the upcoming scenario and the fact lies in the statement

that only eight to 10 per cent of the rural households are covered by life insurance. Rural investments are

limited to their available option -- post offices and a few limited commercial banks rural extension counters.

The remaining 90 per cent offer a huge potential as such for the insurance companies. The rural market is

vibrant and holds tremendous potential for growth of insurance business, particularly because of the strong

saving habits. LIC has a target of selling four million policies in the current financial year.

Telecom sector is one of the booming sectors of the economy.

There are a large number of mobile subscribers in India and with the next 100 million to come from non-

urban areas, many Indian mobile service providers are targeting the rural market with aggressive tariffs and

low cost hand sets. In this regard Reliance Communication has targeted the rural segment by its Grameen

programme for rural subscribers. Spice Telecom is into the process of launching local market rates for the

commodities across Karnataka to connect with rural customers. BSNL plans a $ 125.38 million to be spent

on its rural infrastructure.


14/48

9

Consumer durable industry is also on the verge of making a foray into the rural India as it is all set to

witness 12 per cent growth in the year 2008. Many companies like LG, Samsung are all set to put

themselves into rural sector.

The Indian established Industries have the advantages, which MNC don't enjoy in this regard. The strong

Indian brands have strong brand equity, consumer demand-pull and efficient and dedicated dealer network

which have been created over a period of time. The rural market has a grip of strong country shops, which

affect the sale of various products in rural market.

The companies are trying to trigger growth in rural areas. They are identifying the fact that rural people are

now in the better position with disposable income. The low rate finance availability has also increased the

affordability of purchasing the costly products by the rural people. Marketer should understand the price

sensitivity of a consumer in a rural area. The small sachet packs are the examples of price sensitivity.

Colgate has done this experiment with launching of sachet packs for rural markets.


15/48

10


16/48


17/48

12

Talkingwith people is a good way to get information during the initial stages of a research project. It can be

used to gather information that is not publicly available, or that is too new to be found in the literature.

Examples might include meetings with prospects, customers, suppliers, and other types of business

conversations at trade shows, seminars, and association meetings. Although often valuable, the information

has questionable validity because it is highly subjective and might not be representative of the population.

Afocus group is used as a preliminary research technique to explore peoples ideas and attitudes. It is often

used to test new approaches (such as products or advertising), and to discover customer concerns. A group

of 6 to 20 people meet in a conference-room-like setting with a trained moderator. The room usually

contains a one-way mirror for viewing, including audio and video capabilities. The moderator leads the

group's discussion and keeps the focus on the areas you want to explore. Focus groups can be conducted

within a couple of weeks and cost between two and three thousand dollars. Their disadvantage is that the

sample is small and may not be representative of the population in general.

Personal interviews are a way to get in-depth and comprehensive information. They involve one person

interviewing another person for personal or detailed information. Personal interviews are very expensive

because of the one-to-one nature of the interview. Typically, an interviewer will ask questions from a

written questionnaire and record the answers verbatim. Sometimes, the questionnaire is simply a list of

topics that the research wants to discuss with an industry expert. Personal interviews (because of theirexpense) are generally used only when subjects are not likely to respond to other survey methods.

Telephone surveys are the fastest method of gathering information from a relatively large sample (100-400

respondents). The interviewer follows a prepared script that is essentially the same as a written

questionnaire. However, unlike a mail survey, the telephone survey allows the opportunity for some opinion

probing. Telephone surveys generally last less than ten minutes. Typical costs are between four and six

thousand dollars and they can be completed in two to four weeks.

Mail surveys are a cost effective method of gathering information. They are ideal for large sample sizes, or

when the sample comes from a wide geographic area. They cost a little less than telephone interviews,

however, they take over twice as long to complete (eight to twelve weeks). Because there is no interviewer,

there is no possibility of interviewer bias. The main disadvantage is the inability to probe respondents for

more detailed information.


18/48

13

Email and internet surveys are relatively new and little is known about the effect of sampling bias in

internet surveys. While it is clearly the most cost effective and fastest method of distributing a survey, the

demographic profile of the internet user does not represent the general population, although this is changing.

Before doing an email or internet survey, carefully consider the effect that this bias might have on the

results.

The research methodology for this research work is based on the case study technique. Some successful and

unsuccessful Indian rural marketing initiatives in recent times have been chosen to conduct the research

work. Also published or circulated literature related to the same rural marketing initiatives have been

studied and analyzed.

The research design applied for this purpose is descriptive. The experimental design was suitable as it

depends on the explanation past about the campaign of these Brands.


19/48

14

CHAPTER III.2

OBJECTIVES

The research paper consists of following objectives:

1) to find what are the prospects for the companies planning to enter the rural market

2) to find what are the challenges faced by them

3) to study and analyze the communication strategy for rural marketing in India and,

4) to find what are the factors that will decide the success of a rural marketing initiative


20/48


21/48

16

CHAPTER IV

General Details

What makes Rural Market Attractive?

* Rural Population:

The Indian rural consumer lives in over 600,000 villages across the country and they account for over 70%

of the population of the country. For several product categories, rural markets account for well over 60 per

cent of the national demand.

* Expansion of middle Income household:

As per NCAER projections, the number of middle and high income households in rural India is expected to

grow from 80 million to 111 million by 2007. In urban India, the same is expected to grow from 46 million

to 59 million. Thus, the absolute size of rural India is expected to be double that of urban India. According

to a National Council for Applied Economic Research (NCAER) study, there are as many 'middle income

and above' households in the rural areas as there are in the urban areas. There are almost twice as many

'lower middle income' households in rural areas as in the urban areas. At the highest income level there are

2.3 million urban households as against 1.6 million households in rural areas.

* Improvement in Infrastructure:

In 50 years only, 40% villages have been connected by road, in next 10 years another 30% would be

connected. More than 90% villages are electrified, though only 44% rural homes have electric connections.Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected by STD.

* Low penetration rate:

Low penetration rates in rural areas, so there are many marketing opportunities


22/48

17

Durables Urban Rural Total (% of Rural HH)

CTV 30.4 4.8 12.1

Refrigerator 33.5 3.5 12.0

FMCGs Urban Rural Total (% of Rural HH)

Shampoo 66.3 35.2 44.2

Toothpaste 82.2 44.9 55.6


23/48

18

Myths About Rural Market

Myth 1: Rural Market is a Homogeneous Mass

Reality: It's a heterogeneous population. Various Tiers are present depending on the incomes like Big

Landlords; Traders; Small Farmers; Marginal Farmers: Labourers; Artisans. State wise variations in rural

demographics are present viz. literacy (Kerala 90%, Bihar 44%) and population below poverty line (Orissa

48%, Punjab 6%).

Myth 2: Disposable Income is Low

Reality: Number of middle class HHs (annual income Rs. 45,000 - 2,15,000) for rural sector is 27.4 million

as compared to the figure of 29.5 million for urban sector. Rural incomes CAGR was 10.95% compared to

10.74% in urban between 1970-71 and 1993-94.

Myth 3: Individuals Decide About Purchases

Reality: Decision making process is collective. Purchase process - influencer, decider, and buyer, one who

pays - can all be different. So marketers must address brand message at several levels. Rural youth brings

brand knowledge to Households (HH).


24/48

19

CHAPTER V

CASE STUDIES

(Coca Cola & LG)


25/48

20


26/48

21

CHAPTER V.1

'Thanda' Goes Rural

In early 2002, Coca-Cola India (CCI) launched a new advertisement campaign featuring leading bollywood

actor - Aamir Khan.

The advertisement with the tag line - 'Thanda Matlab Coca-Cola' was targeted at rural and semi-urban

consumers. According to company sources, the idea was to position Coca-Cola as a generic brand for cold

drinks.

The campaign was launched to support CCI's rural marketing initiatives. CCI began focusing on the rural

market in the early 2000s in order to increase volumes.


27/48

22


28/48

23

This decision was not surprising, given the huge size of the untapped rural market in India. With flat sales in

the urban areas, it was clear that CCI would have to shift its focus to the rural market. Nantoo Banerjee,

spokeswoman - CCI, said, "The real market in India is in the rural areas. If you can crack it, there is

tremendous potential."

However, the poor rural infrastructure and consumption habits that are very different from those of urban

people were two major obstacles to cracking the rural market for CCI.

Because of the erratic power supply most grocers in rural areas did not stock cold drinks. Also, people in

rural areas had a preference for traditional cold beverages such as 'lassi' and lemon juice.

Further, the price of the beverage was also a major factor for the rural consumer.

24


29/48

CCI's Rural Marketing Strategy

CCI's rural marketing strategy was based on three A's - Availability, Affordability and Acceptability.

The first 'A' - Availability emphasized on the availability of the product to the customer;the second 'A' - Affordability focused on product pricing, and

the third 'A'- Acceptability focused on convincing the customer to buy the product.

Availability

Once CCI entered the rural market; it focused on strengthening its distribution network there. 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.

The company instead opted for a hub and spoke distribution system. Under the hub and spoke distribution

system, stock was transported from the bottling plants to hubs and then from hubs, the stock was transported

to spokes which were situated in small towns. These spokes fed the retailers catering to the demand in rural

areas.

CCI not only changed its distribution model, it also changed the type of vehicles used for transportation.

The company used large trucks for transporting stock from bottling plants to hubs and medium commercial

vehicles transported the stock from the hubs to spokes.

25


30/48

For transporting stock from spokes to village retailers the company utilized auto rickshaws and cycles.

Commenting on the transportation of stock in rural markets, a company spokesperson said, "We use all

possible means of transport that range from trucks, auto rickshaws, cycle rickshaws and hand carts to even

camel carts in Rajasthan and mules in the hilly areas, to cart our products from the nearest hub."

26


31/48

27


32/48

28


33/48

In late 2002, CCI made an additional investment of Rs 7 million (Rs 5 million from the company and Rs 2

million from the company's bottlers) to meet rural demand. By March 2003, the company had added 25

production lines and doubled its glass and PET bottle capacity....

Affordability

A survey conducted by CCI in 2001 revealed that 300 ml bottles were not popular with rural and semi-urban

residents where two persons often shared a 300 ml bottle. It was also found that the price of Rs10/- per

bottle was considered too high by rural consumers...

So CCI introduced 200 ml bottle for the price of Rs5/- each.

29


34/48

Acceptability

The initiatives of CCI in distribution and pricing were supported by extensive marketing in the mass media

as well as through outdoor advertising.

The company put up hoardings in villages and painted the name Coca Cola on the compounds of the

residences in the villages.

30


35/48

31


36/48

Further, CCI also participated in the weekly mandies by setting up temporary retail outlets, and also took

part in the annual haats and fairs - major sources of business activity and entertainment in rural India...

32


37/48

Future Prospects

CCI claimed all its marketing initiatives were very successful, and as a result, its rural penetration increased

from 9% in 2001 to 25% in 2003. CCI also said that volumes from rural markets had increased to 35% in

2003.The company said that it would focus on adding more villages to its distribution network. For the year 2003,

CCI had a target of reaching 0.1 million more villages.

Analysts pointed out that stiff competition from archrival PepsiCo would make it increasingly difficult for

CCI to garner more market share.

PepsiCo too had started focusing on the rural market, due to the flat volumes in urban areas.

Like CCI, PepsiCo too launched 200 ml bottles priced at Rs. 5. Going one step ahead, PepsiCo slashed the

price of its 300 ml bottles to Rs 6/- to boost volumes in urban areas...

33


38/48

34


39/48

CHAPTER V.2

LG

Established in 1997, LG Electronics India Pvt. Ltd., is a wholly owned subsidiary of LG Electronics, South

Korea. In India for a decade now, LG is the market leader in consumer durables and recognized as a leading

technology innovator in the information technology and mobile communications business .LG found the

untapped potential in the rural market in India and to en cash the opportunity it comes with rural marketing

strategy. The company's top brass was debating how to reach out to rural India. At one level, the company

figured it needed new cheaper products to lure the rural buyer. At another level, it figured that more offices

in smaller towns and cities were the need of the hour. LG moved quickly on both fronts.

35


40/48

A). Availability Place

LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban

market. To tap these unexplored country markets. The company has also taken initiatives like

A) 65 Remote Area Offices under the branch offices that are empowered to directly link to the central

billing system for orders.

B) 230 service centers.

C) 2,600 mobile authorized service personnel for villages having below 10,000 residents.

All these moves are part of LG's efforts to push turnover to a whopping Rs7,000 crore (Rs70 billion) by

year-end.

B). Affordability Price

LG India has taken full advantage of a booming demand for colour TVs in rural India by launching

Sampoorna, a color TV whose operations booklet was in the Devnagari script. For this model, LG also

introduced technology that provided better a reception in low signal locationswhich is a common problem

in rural areas. Today, LG claims that Sampoorna series accounts for about 30 per cent of its color TV

volumes. In 1998, LG launched its first low priced TV for rural consumers

Sampoorna- Rs.3000

Cineplus- RS 4900

36


41/48

37


42/48

C). Acceptability Product

LG Electronics. In1998, it developed a customized TV for the rural market and christened it Sampoorna. It

was a runway hit selling 100,000 sets in the very first year.

1. Product localization is the key strategy used by the LG2. LG came out with Hindi and regional language menus on its TVs.

3. Introduced the low-priced Cineplus and sampoorna for the rural market.

4. LG was the first brand to introduce gaming in TVs in continuations of its association with cricket LG

introduce cricket game in CTVs

38


43/48

D). Awareness- promotion

The word of mouth is an important message carrier in rural areas. Infect the opinion leaders are the most

influencing part of promotion strategy of rural promotion efforts. The experience of agricultural input

industry can act as a guideline for the marketing efforts of consumer durable and nondurable companies.Relevance of Mass Media is also a very important factor. Some of promotional strategies used were

Exhibitions, road shows, Mobile Vans.

39


44/48

40


45/48

CHAPTER VI

CONCLUSION

The case study exercise has given the various inputs about the rural consumers. This experience was unique

from a marketer's point of view that the companies must have a proper understanding of rural marketing

environment at a region wise basis.

The poor rural infrastructure and consumption habits that are very different from those of urban people are

two major obstacles to cracking the rural market.

The Ad plays an important role for giving boost to rural consumers feeling. The feeling plays very important

role. The Language and content and expression style play significant role.

The endorser or the celebrity is a leading player in the ad feature. The style of Aamir Khan as an example is

a very delighted factor for rural Consumers.

Style of presentation plays an important role. It constitutes a high figure as this affects the whole creativity

aspect of any advertisement. The total concept and delight fullness is a strong factor for an advertisement.

Hats and Melas play a very important role in this regard. Even road shows or other kinds of displays also

work in its favour.

41


46/48

It can be summarized as following:

1) The Language and content must be according to the suitability of rural environment.

2) Background figures are also a deterministic factor.

3) Admissibility of brand ambassadors plays an important role in this regard.

4) Special promotion measures are the strong applicable factors in this regard.

Rural market has an untapped potential like rain but it is different from the urban market so it requires the

different marketing strategies and marketer has to meet the challenges to be successful in rural market.

42


47/48

Following are some of the suggestions:

1) Rural consumer environment must be understood before the creation of advertisement.

2) Rural mindset accepts the brands easily, which are close to their culture. This point must be reflected in

advertisements for rural markets.

3) Sponsorships to the Melas and Hats must be considered in a significant manner.

4) Selection of brand ambassadors, lyrics must not be ignored in this regard. They have a special liking for

folk culture so this can be taken in an effective utilization of brand promotions.

43


48/48

BIBLIOGRAPHY

1) Monish Bali, "The rural market likes it strong", The Economic Times, [Interview by An Awasthi],

August 23, 2000.

2) Neeraj Jha, "Gung-ho on rural marketing", The Financial Express, June 19, 2000.

3) T. P. Gopal Swamy," Rural Marketing, Environment-Problems and strategies,Wheeler publishing,

1997.

4) Simon Pitman, Research indicates growth potential in rural India, August 9, 2007.

5) www.hill.com

6) www.indiainfoline.com

7) www.google.com

8) The Marketing Mastermind Case study HLL- Rural Marketing Initiatives ICFAI Press, PP. 62, and

February 2003.

9) Sukhpal Singh - Rural Marketing Management.

Documents

Rural Marketing and Communication Strategies FINAL