The Distant Voices_Revised

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The Distant Voices Potential of Rural India Whitepaper on the potential of Rural India, in terms of demand for urban products. The voices of rural India asking for the brands not up-till available to them. And how the companies do and should react to their voices?

2010

Samrat Gupta IBA Alumni. 2003-05 Batch

12/30/2010

2 The Distant Voices - Whitepaper

1. Abstract

Thatched roofs, cow-dung plastered walls, farmers tilling paddy fields, all form a backdrop for a US $

100 million market. Enter rural India, which accounts for around 70 percent of Indias total population

and 50 percent of total GDP. With rural consumption expected to reach US$ 577 billion by 2020, this

market offers a cornucopia of opportunities for companies who venture to brave it.

Social and Economic fabric of Rural India has been often termed as backward. With a life revolving

around deep-rooted community values, joint families, social customs and taboos (women, for example

are not allowed to wear trousers), marketers realize that the traditional routes of market entry and

brand building employed in urban India are often not feasible here. Therefore, promotion of a brand in

rural markets requires special measures.

The rural market is limited to the country shops (Kirana stores, as we call them in north-Indian

vernacular) and are the consumers destination for practically anything from Cereals to Shampoo. In-

shop branding and Visual Merchandising are the terms not know to these shop-owners. Therefore,

consumerism in rural market has some key driving forces, like;

1. Word-of-mouth: This is a very important message carrier. To an extent, opinion leaders are

the most important influencers in the promotion strategy.

2. Mass-media: Relevance of Mass-media is also an important factor. It spreads awareness and

communicates the brands proposition in to the minds of the rural consumer. Therefore,

creating aspirations and emotional connect.

3. Affordability: Increase in agricultural output, government schemes, low interest-rate financing

etc., has helped people with higher disposable income and purchasing power.

4. Dealer Network: A strong dealer network of brands today has a positive effect on reach and

availability thereby, augmenting the brand equity. Its important to mention here that the

Indian established industries have an advantage with stronger consumer demand-pull; which

the MNCs dont enjoy.

As Adi Godrej, Chairman of the Godrej Group, says,

The challenge [for brands] is to understand the [psyche] of the rural consumer, create better

distribution, and [appreciate] the heterogeneity.

2. Introduction

A brand is a name that distinguishes a product from others. It has its own identity in the market with

its symbol and tagline. When we talk about brands in rural markets some of the names which come to

our mind are Rajdoot Bikes, Ghari Detergent, Dolly TV, Chik Shampoo etc,.

Findings indicated that good quality, value for money and sense of identity with brand were likely to

act as key determinants of a FMCG brand in rural India. Better finish and good looks,

recommendations from retailers were found be key determinants of a consumer durable brand in rural

India.

It is a known fact in rural areas that price plays an important role in rural markets for purchasing the

products. Now the New Era of marketing is changing the scenario of the Rural India. With Cola

companies penetrating these markets with low prices (e.g. Chota Coke) the rural consumer has now

realized the benefits of branding.

Indian Marketers on rural marketing have two understanding;


1. The urban metro products and marketing products can be implemented in rural markets with

some or no change.

2. 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.

1. Low priced products can be more successful in rural markets because of the relatively low

purchasing power.

2. Rural consumers are mostly homogeneous group with similar needs, economic conditions

and problems.

3. The rural markets can be worked with the different media environment as opposed to press,

film, radio and other urban centric media exposure.

4. Companies/ brands can enter in the rural market with definite goals and targets; but not for a

short term period but for longer duration.

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

consumers? These are important questions for the rural marketing managers to contemplate on.

3. What is Rural?

This is important to know, what is the definition of Rural India? It would be interesting to know the

different perspectives.

As per government census, following attributes defines rural India.

1. Not having a municipality or corporation.

2. Having population density area not more than 400 sq.km.

3. 75% of male population is engaged in agriculture and allied activities.

According to this definition, there are 6,38,000 villages in the country. Of these, only 0.5% has a

population above 10,000 and 2% have population between 5,000 and 10,000. Around 50% has a

population less than 200.

According to the census of India 2001, there are more than 4,000 towns in the country. It has

classified them into six categories; around 400 class-I towns with one lakh and above population

(these are further classified into 35 metros and rest non-metros), 498 class-II towns with 50,000-

99,999 population, 1,368 class-III towns with 20,000-50,000 population, 1,560 class-IV towns with

10,000-19,999 population.


Interestingly, for FMCG and consumer durable companies, any territory that has more than 20,000

and 50,000 population, respectively, is rural market. So, for them, it is not rural India which is rural.

According to them, it is the class-II and III towns that are rural. And that partly explains their

enthusiasm about the so-called "immense potential" of rural India.

4. Demographic Details

Following are some demographic details of the Indian Rural Market;

Urban Vs. Rural population divide is 3:7. That means 70% (approximately) of Indias

population resides in 6,38,000 villages.

90% of the rural population is concentrated in villages with a population of less than 2000,

with agriculture being the main business.

Size of rural market is estimated to be 60 million households and rural market has been

growing at five times the pace of the urban market.

More government rural development initiates.

Low literacy rate.

Increasing agricultural productivity leading to growth of rural disposable income.

Lowering of difference between taste of urban and rural customers.

As per the National Council for Applied Economic Research (NCAER) study;

There are as many 'middle income and above' households in the rural areas as there are in

the urban areas.

There are almost twice as many' lower middle income' households in rural areas as in the

urban areas.

At the highest income level there were 2.3 million urban households as against 1.6 million

households in rural areas in 2007.

The number of middle and high-income households in rural India is expected to grow from

120 million to 150 million by 2015. In urban India, the same is expected to grow from 60

million to 80 million. Thus, the absolute size India is expected to be doubles that of urban

India.

5. Realities before the Marketers

Former HUL chairman, MS Banga once said,

"This exercise may not pay in the immediate future, but will definitely give long-term dividends.

Incidentally, over 50 percent of the sales of HUL's fabric wash, personal wash and beverages are in

rural areas. And we see a future in going rural in a major way".

The improved agricultural growth is expected to boost rural demand, through not at too sizzling a rate.

Moreover, the price drop in personal products, after the recent excise duty reductions, in also

expected to drive consumption. Better agricultural yields will give farmers more spending power,

making the rural markets bullish.

As a result, HUL has planned a rural marketing program that is expected to result in a marked growth

in the consumption of the company's products in the rural market. HLL will adopt three-pronged

marketing strategy - new price points, sizes and awareness campaigns for its detergents and soaps

segment to augment rural growth.


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

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

dealer network which have been created over a period of time. The rural market has a grip of strong

country shops, which affect the sale of various products in rural market.

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

people are now in the better position with disposable income. The low rate finance availability has

also increased the affordability of purchasing the costly products by the rural people. 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 in case of Toothpaste.

6. Rural Initiators

"Going rural" the new marketing mantra-all corporate companies agreed that the rural market the key

to survival in India. This is where the fortunes of many of Indian biggest corporations are likely to be

shaped. To expand the market by tapping the countryside, more and more MNC`s are foregoing into

rural markets. Among those that have made some headway are HLL, Coca-cola, LG Electronics,

Britannia, Standard life, Philips, Colgate Palmolive, ITC and the foreign-invested telecom companies.

Gone are the days, when a rural consumer went to a nearby city to buy branded Products and

services. There was a time when only a select household consumer branded goods, be it tea or

jeans. 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. Time was

when marketers thought van campaigns, cinema commercials and a few wall paintings would suffice


to entice rural folks under their folds. Thanks to television, today a customer in a rural area is quite

literate about myriad products that are on offer in the market place. An Indian farmer going through

his daily chores wearing jeans may sound idiotic. Not for Arvind Mills, though. When it launched the

Ruf & Tuf kits, it had created quite a sensation among the rural folks as well within few months of their

launch.

7. Industrys Role in Building Market Linkages

To make an effective market linkage, industries have to play as an engine of market, which can

generate a brand image of the rural products. This initiative of industries will also strengthen the

backward and forward linkages of the rural market, besides, accelerating the innovations of the rural

products. Definitely, this strategy will also give a remarkable dividend to the industries & profit making

companies. In micro level, it is observed that to create a sustainable market linkage for rural products,

industries can develop an ecosystem of Self Help Groups (SHGs) by involving the local communities

through village level empowerment. It is nothing less than the next phase in the democratization of

commerce. Under this paradigm, industries can create a network with viable marketing channels

covering all the linkages from villages to the global level. This architecture provides the right value of

procurement through the village procurement centers and rural entrepreneurs can sell their products

faster with better price realization. This model is also capable of generating a consumer business and

an output business in a win-win scenario, where rural producers can get a wide marketing horizon

and the industries shall get a new, lower cost sales-force.

Another role of industries in building market linkages for agro-based rural products can be the

dynamic contract farming'. If a conventional industry can kick off a contract farming business, and


export niche horticulture crops like cucumbers, the small and marginal farmers who could grow these

small cucumbers would make Rs.30,000 in profits in a year. KRBL, one of India's largest basmati

exporters, has contract farming agreements with 24,000 farmers; Global Green buys from about

12,000 farmers. Moreover, in the current era of information technology, industry and private

companies can also creatively use ICT for building sustainable marketing linkages. This approach

creatively leverages information technology (IT) to set up a meta-market in favour of small and poor

producers/rural entrepreneurs, who would otherwise continue to operate and transact in 'un-evolved'

markets where the rent-seeking vested interests exploit their disadvantaged position. ITC eChoupal is

the best example in this context. Through creative use of Information Technology, ITC eChoupal has

been creating sustainable stakeholder value by reorganizing the agri-commodity supply chains

simultaneously improving the competitiveness of small farmer agriculture and enhancing rural

prosperity. eChoupal also sidesteps the value-sapping problems caused by fragmentation, dispersion,

heterogeneity and weak infrastructure. ITC takes on the role of a Network Orchestrator in this meta-

market by stitching together an end-to-end solution. It eliminated the traditional 'mandi' system which

involved lot of middlemen as a result of which farmers failed to get the right value for their produce.

The solution simultaneously addresses the viability concerns of the participating companies by

virtually aggregating the demand from thousands of small farmers, and the value-for-money concerns

of the farmers by creating competition among the companies in each leg of the value chain.

8. Rural Storming A Wave of Change

In recent times, rural India has witnessed a wave of change.

Dinesh Malhotra, general manager of Linterland (rural arm of Lintas), points out,

With media exposure and increasing literacy levels, people in rural India are now demanding a better

lifestyle.

The educated rural yuppie (males in the 15-34 age group) is moving out to work in nearby towns

and cities, and sending money home to his family. This has created an indirect increase in disposable

incomes and a surge in demand for consumer goods. The rural youth are slowly evolving as opinion

leaders in influencing brand and product decisions in a market that was swayed by village elders for

centuries.

When building a brand in rural India, word-of-mouth is a huge motivator. Focused brand-building

initiativeslike participation at community events such as melas (village fairs), haats (markets),

street theater, van campaigns, and puppet showsgenerate positive word-of-mouth and influence

buying decisions.

Cholayil Ltd., a purveyor of the herbal soap Medimix, campaigned in mobile vans to promote its

brand. They ran a van campaign which visits the interior villages where there are no distributors. We

halt the van at specific points (where village folks congregate and watch videos shown on these vans)

and give out product samples. However, contrary to claims of Medimixs success, its generally

believed that van campaigns can be very expensive. Alternatively, promoting ones brand in large

congregation points like village markets and fairs has a far wider reach, and is more cost effective.

Direct media promotions have helped build knowledge of product categories and change long-

entrenched living habits. Colgate-Palmolive, a leading oral hygiene product manufacturer, entered the

rural market at a time when Neem twigs (the Neem tree has herbal properties) and non-dentifrice

products like ash, charcoal, or salt were the norm for brushing teeth (in fact in some rural pockets, this

tradition still continues). In 2001, Colgate-Palmolive launched Operation Jagruti to educate villagers


about oral hygiene and its benefits vis--vis traditional products like Neem. Through product trials

and free samples, the company was able to generate awareness in this new market. On a similar

note, When Cavin Kare entered the rural areas in South India, people used to wash their hair with

soap. When they launched the Chik brand of shampoo they educated the people on how to use it

through live touch and feel demonstrations and also distributed free sachets at fairs. This strategy

worked wonders in the rural areas of Tamil Nadu and Andhra Pradeshtwo important states in India.

Colgate and Cavin Kare have shown that communication is key when it comes to building brands in

rural markets. To communicate effectively, it is important to understand the fears, aspirations, and

hopes of the rural consumer. Not to mention the traditions and stereotypes that has governed their

lives for centuries.

While communicating the brand message, marketers must realize that language plays a prime role.

Though a large part of urban India is well versed in English (thanks to the British and modern

television), in rural India, heritage plays a powerful role and regional languages are pre-dominant.

There are 15 regional languages, and 1600 dialects in India, and as one moves into the countryside,

English is replaced with regional tongues.

V. S. Sitaram, Dabur India executive director, explains,

Often people treat India as one big market, but the reality is that India is more like the European

Uniona mix of different cultures, habits and languages.

Dabur is also considering the use of South Indian celebrities to propagate the brand message in

South India. Marketing companies not only need to customize their communication, but in some

cases they must also change their product names to match regional differences. Take toothpaste, for

example: Daburs Lal Dant Manjan (red toothpowder in Hindi) was rechristened as Dabur Sivappu

Pal Podi (red toothpowder in Tamil, the local language) for the South Indian market.

Affordability of the product is also a critical success factor when building brands. Rural folks think of a

purchase in terms of how it serves their needs and how well its suits the family, rather than the

individual. Products must be affordable and immensely practical. Furthermore, since the rural

consumer often survives on daily wages, he engages in daily purchases. Several companies like

Cavin Kare, Godrej, and Dabur adopted the single use sachet strategy, which has worked in their

favor.

Though pricing is important, rural consumers favor quality as well. For rural consumers, a purchase is

a bigger investment than it is for the urban, veteran consumer. Hence, a particular brand will be

rewarded only if it earns the rural consumers trust through consistent product quality. The rural

consumer is conscious of value for money, and it might be difficult to convert him to a new brand.

However, once converted he is fiercely loyal to the brand. This issue will be a challenging one for

corporations when they strategize their brand entry and decide how to balance pricing with brand

quality.

The challenge doesnt end with just building brand awareness. While television and direct marketing

activities help rural consumers learn about different brands, ensuring product availability is even more

critical. Marketers in rural India claim that setting up a supply chain that reaches the remotest rural

areas is extremely arduous given the infrastructure in the country. To overcome the distribution

challenge and increase penetration in rural hinterlands, HUL launched a unique operation called

Project Shakti in 2001 (Shakti is a Hindi word which means strength). The project targeted rural

women from existing self-help groups to work as direct-to-home distributors for HUL products, and

helped the company break into a market they were unfamiliar with.


In short, customized and affordable products, effective distribution, and focused marketing initiatives

are essential factors in building credibility for a brand in rural India. Brand awareness and trust will

play a key role in combating the blitz of local copycat brands that are formidable competition. If

marketers tailor make their brand building initiatives according to the dynamics of the rural market, it

may no longer come as a surprise to see the rural Indian consumer sitting before a Samsung

television, enjoying a bag of Frito-Lay potato chips, and drinking a bottle of Coke.

9. Rural Trends in India

Tends indicates that the rural markets are coming up in a way and growing twice as fast as the urban,

witnessing a rise in sales of hitherto typical urban kitchen gadgets such as refrigerators, mixer-

grinders and pressure cookers. According to a National Council for Applied Economics 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 'low middle income' households in rural areas

as in the urban areas. At the highest income level there are 2.3 million urban households as against

1.6 million households in rural areas. According to HUL, the money available to spend on FMCG

(Fast Moving Consumer Goods) products by urban India is Rs.49,500 crores as against is Rs.63,500

crores in rural India.

As per NCAER data, the number of middle and high-income households in rural India has grown from

80 million to 111 million by 2007. In Urban India, the same has grown from 46 million to 59 million.

Thus, the absolute size of rural India is expected to be double that of urban India. Rural income

levels are largely determined by the vagaries of monsoon and, hence, the demand. Apart from

increasing the geographical width of their product distribution, the focus of corporate should be on the

introduction of brands and develop strategies specific to rural consumers. Britannia industries

launched Tiger Biscuits especially for the rural market. An important tool to reach out to the rural

audience is through effective communication. A rural consumer is brand loyal and understands

symbols better. This also makes it easy to sell look-alike. The rural audience has matured enough to

understand the communication developed for the urban markets, especially with reference to FMCG

products. Television has been a major effective communication system for rural mass and, as a

result, companies should identify themselves with their advertisements. Advertisements touching the

emotions of the rural folks, it is argued, could drive a quantum jump in sales.

10. Challenges & Opportunity

The Indian rural market with its vast size and demand base offers great opportunities to marketers.

Two-thirds of countries consumers live in rural areas and almost half of the national income is

generated here. It is only natural that rural markets form an important part of the total market of India.

Our nation is classified in around 450 districts, and approximately 6,30,000 villages which can be

sorted in different parameters such as literacy levels, accessibility, income levels, penetration,

distances from nearest towns, etc.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always been

difficult to gauge the rural market. Many brands, which should have been successful, have failed

miserably. More often than not, people attribute rural market success to luck. Therefore, marketers

need to understand the social dynamics and attitude variations within each village though nationally it

follows a consistent pattern. While the rural market certainly offers a big attraction to marketers, it

would be naive to think that any company can easily enter the market and walk away with sizable

share. Actually the market bristles with variety of problems. The main problems in rural marketing are:


Physical Distribution

Channel Management

Promotion and Marketing Communication

The problems of physical distribution and channel management adversely affect the service as well

as the cost aspect. The existent market structure consists of primary rural market and retail sales

outlet. The structure involves stock points in feeder towns to service these retail outlets at the village

levels. But it becomes difficult maintaining the required service level in the delivery of the product at

retail level.

One of the ways could be using company delivery vans which can serve two purposes - it can take

the products to the customers in every nook and corner of the market and it also enables the firm to

establish direct contact with them and thereby facilitate sales promotion. However, only the bigwigs

can adopt this channel. The companies with relatively fewer resources can go in for syndicated

distribution where a tie-up between non-competitive marketers can be established to facilitate

distribution. As a general rule, rural marketing involves more intensive personal selling efforts

compared to urban marketing. Marketers need to understand the psyche of the rural consumers and

then act accordingly. To effectively tap the rural market a brand must associate it with the same things

the rural folks do. This can be done by utilizing the various rural folk media to reach them in their own

language and in large numbers so that the brand can be associated with the myriad rituals,

celebrations, festivals, melas and other activities where they assemble.

One very fine example can be quoted of Escorts where they focused on deeper penetration .In

September 1998 they established rural marketing sales. They did not rely on T.V or press

advertisements rather concentrated on focused approach depending on geographical and market

parameters like fares, melas etc. Looking at the 'kuchha' roads of village they positioned their mobike

as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punchline 'Jandar

Sawari, Shandar Sawari'. Thus, they achieved whopping sales of 95,000 vehicles annually. One more


example, which can be quoted in this regard, is of HLL (now HUL). A year back HUL started

'Operation Bharat' to tap the rural markets. Under this operation it passed out lowpriced sample

packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million

households. Thus, looking at the challenges and the opportunities which rural markets offer to the

marketers it can be said that the future is very promising for those who can understand the dynamics

of rural markets and exploit them to their best advantage.

The basic scope of this novel initiative will be the mutual benefits of the rural entrepreneurs and

industries. The entrepreneurs - primary beneficiaries, SHGs - bridge with the community, participating

companies/industries and rural consumers have befitted through a robust commercial relationship.

These models of marketing linkages demonstrate a large corporation which can play a major role in

reorganizing markets and increasing the efficiency of a rural product generation system. While doing

so it will benefit farmers and rural communities as well as shareholders. Moreover, the key role of

information technology provided and maintained by the industry/company for building linkages, and

used by local farmers brings about transparency, increased access to information, and rural

transformation. Besides, this strategy of market linkage, addresses the challenges faced by rural

entrepreneurs due to institution voids, numerous intermediaries and infrastructure bottlenecks.

Moreover, the prime scope of this model is the creation of opportunities for the rural entrepreneurs for

product differentiation and innovation by offering them choices. Because of this sustainable market

linkages, rural producers can participate in the benefits of globalization and will also develop their

capacity to maintain global quality standard. Nonetheless, it creates new stakeholders for the industry

sector. And subsequently, they become part of the firms' core businesses. The involvement of the

private /industry sector at the rural product and market development can also provide opportunities for

the development of new services and values to the customers, which will find application in the

developed markets. It will be worth mentioning that building a sustainable market linkage through

industry's intervention will also empower the rural mass (producers, farmers & entrepreneurs) to cope

with socio-economic problems in the rural society and will ensure economic self-reliance.

Sources & References:

1. Rural Marketing- A World of Opportunity The Hindu, October 11 2009

2. ICFAI Marketing Mastermind, February 2007

3. Rural Marketing, Pradeep Kashyap, Biztantra publications 2006

4. NCAER Report 2007

5. Rural Sales Drive Growth Business Standard, April 12 2004

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The Distant Voices_Revised