A Case Study on Rural Marketing by Sourabh Tandon 23-2-2012

8/2/2019 A Case Study on Rural Marketing by Sourabh Tandon 23-2-2012

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A CASE STUDY ON RURAL MARKETING

READY TO RULE RURAL INDIA

Rural India constitutes the heart of India, generating more than half thenational income. According to the National Council of Applied Economic

Research (NCAER), with about 74% of its population living in its villages. India

has perhaps the largest potential rural market in the world.

A potential of 742 million rural consumers live in 6,38365 villages across

India. Rising incomes, improving infrastructure, and favorable government policiesoffer huge potential for rural marketing.

If you see a woman in a village milking a cow, do you see an opportunity?but that is exactly where Dr. Varghese kurien saw an opportunity and it gave birth

to one of the most successful organizations in India-Amul .

The need to look at rural markets:

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The Green Revolution has in turn, brought a socioeconomic revolution in

Indian villages. On account of the green revolution the rural areas are consuming a

large quantity of not just the essential commodities but premium products as well.The younger generation in rural areas is now spending more on personal care and

grooming products.

The above data [table 1] indicates, the Indian rural market with its vast

demand base, offers great opportunities to companies. FMCGs demand in India

nearly 53% comes from the rural market. For consumer durables the figure is 59%,these results has evidently helped, going by the significant share contributed by

rural areas to the total revenue of several leading consumer product companies.

[Table-2]

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Rural markets are already proving vital for companys growth, clearly indicating

that these markets can not be ignored by big players.

Industry analysts have projected that urban households will grow by 4%while their rural counterparts are expected to grow 11% by 2009-10, implying that

if the rural income rise by 1%, then the spending power of consumers will increase

by about Rs.10,000cr. According to FICCI, by the end of 2025, rural consumptionis expected to nearly three times of what it is today.

There is no denying the fact that Indian market is the fastest growingmarket in the world and the fact is that about 60% of the market considered rural

market is yet to turn into a real market.

What is Rural Market?

According to the Census of India 2001, there are more than 4,000 towns in the

country. It has classified them into six categories, class-I towns with one lake andabove population , Class-II towns with 50,000-99,999 population, Class-III towns

with 20,000-50,000 population and Class-IV towns with 10,000-19,999 population.

It is mainly Hindustan Unilever and ITC, most FMCG and consumer durablecompanies, define Class-II and III towns that are rural.[table-3]

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From this above data one can analyze the economics of cost involved in rural

distribution coverage.

Rural Marketing Challenges:

Poor Infrastructure

Non-availability of shops

High levels of poverty

UnemploymentPoor literacy rate

Poor media penetration

Skeptical customers (less use new brand )Rigid social customs

According to Dr. MS. Swaminathan of the swaminathanResearch Foundation, rural areas can only be developed if

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the financial, structural, economic and social aspects are addressed in a holistic

manner. This is possible if these areas are supported by adequate funds,

equipments, infrastructure and education.

Indian consumers are poor but not backward. The future lies with those

companies who see the poor as their customers. Companies should focus oncreative solution and product engineering to reduce their costs and offer

tremendous life time value to the Bottom of the Pyramid customers. Effective

rural marketing is one and only solution to reach the BOP segment.

Rural Marketing Strategies:Rural marketing concept is a customer-centered sence and respond

philosophy. The following section deals with how MNCs and local companies

have successfully established themselves in the rural market.

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[1] Product Strategy:

The rural consumer is very conscious about getting value for money.

Lowprice, high quality and multiple uses is basic principles rural product design.

Case 1: Nokia 1100 Nokia 1100 has so penetrated in to the rural market.Nokia had to stop its production of 1100 because as its ownproduct has become its toughest competitor. Nokias

low-end cell phones are used as radios, alarm - clocks and

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flash lights by the rural customers.

Strategy: digital convergence at the bottom of market

Case 2 : LG sampoorna TVLG Electronics launched a customized TV

sampoorna. A more important aspect of customizationis to make TV set which can appeal to local needs,

it facilitated on screen display in vernacular language like

Hindi, Tamil and Bengali. selling 1,00,000 sets in the veryfirst year.

Strategy: thinking locally, succeeding globally

Case 3: HUL Breeze 2-in-1HUL developed a combined soap and shampoo

that was cost-effective and also less harsh on hair than

ordinary soaps. HUL launched the new soap-cum

shampoo Breeze 2-in-1

Strategy: value-added product would create a loyal

customer

Case 4: HUL pure-it [a water purifier brand]

HUL launched a innovative product pure-it a

water Purifier brand. Pure-it is available at economical pricefor the rural consumer as there is no clean drinking water in

villages.

Strategy: Corporate social responsibility means

come up with business models to cater to the BOP

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Case 5: TATA NanoTata Motors launched ultra low cost Nano. Nano is a

low-end rural car, hence its creates a new segment of people

of buying car. It is a victory for all those who have beenadvocating making available cheaper products for customers at

the BOP.

Strategy: we needed to create a safer journey of transporting

a family

Suggestions:Innovative product designs and packaging.

Avoid the marketing myopia, which means the costumer will have the same need

but will want the new product.Application of value engineering, which means costly metal being replaced by

cheaper reinforced plastic. This technique does not sacrifice the functional

efficiency of a product but lower the product price.Using chinese product design strategy and raw material.

Be care full on product duplicates and using security features.

Marketers must often understanding rural customers needs and aspirations

even better than customers themselves do and creating products and services that

meet existing and latent needs, now and in the future. A fair amount of research isrequired to understand the latent needs and desires of rural customers and providesuitable products.

[2] Price Strategy:

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Rural markets are low price high volume growth markets. The rural

markets being intensely price-sensitive in comparison to urban markets, reaching ata lower cost is a major challenge.

Case 1: NirmaNirmas yellow detergent powder- a mass- market

Phenomenon. Nirmas low price policy has penetrated into

the deepest rural markets in India.

Strategy: value- for- money

Case 2: Cavinkares Chik shampoo Cavinkare launched Chik in 50 paise sachets. Cavinkaretargeted rural and small town customers who used soaps to

wash their hair. it became the market leader in the ruralmarkets with over 50% market share. It create a

sachet revolution.

Strategy: low unit price packs. (LUP)

Case 3: Mc Donalds

The Indian customers seek high value for every

rupee spent . so Mc Donalds has been highlighting the

Happy price menu- Rs. 20 to shackle entry barriers appeal toIndian customers.

Strategy: highlighting the value being delivered for a small

. price.

Case 4: P&G price cut strategy

P&G in 2004 started price cut strategy in theirdetergent brands. P&Gs increase in the market share wasmore at the cost of the low-priced detergents. There was

a 200% increase in Tide after the price cut .

Strategy: bring in the required Economies of Scale which

would lead to profitability.

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Case 5: Britannia Tiger biscuits Britannia also tasted success because of smallaffordable packaging of Tiger biscuits it is specially design

to the rural market, its helping the poor become consumers.

Strategy: low price strategy is begun to appeal target

segment

Case 6: Nestls Maggi Nestles rural initiatives have largely been based onPrice-led initiatives. Brand such as Maggi noodles arepriced at Rs.5. It helped Nestle in making in roads in to

rural market.

Strategy: small pack - lower price

Case 7: Marico parachute Marico launched parachute mini a bottle shaped

small pack being sold at an MRP of RS.1, 20 ml parachutea RS 5 that enables loose oil users ad to parachute.

Strategy: consumers to trail out the products with very little

risk

Suggestions:

Use backward and forward integration.Using value-based pricing strategy . That means fixing of price, starting with

customer and end with product.

Use psychological tricky pricing strategies. That means method of odd numberpricing etc.

Effective total quality management is helps to low price high quality product.

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Companies should focus on creative solutions and product engineering to

reduce their cost. Second, the company can design basic models minus frills to save

cost.

[3] Promotion Strategy:The challenge is to create communication that would help the rural

consumer in recognizing brands, logos, visuals and colors. To effectively tap the

rural markets, a brand must associate with their culture and personality.

Case 1: Idea cellularIdeas aggressive promotion campaigns what an idea sirjee

ad creates a real rural feel came through Strong advertisement.

Strategy: spreading a social message each one has aimed at the

changing someones life for better

Case 2: Coca-colaCoca-cola ad thanda matlab coca-cola caught

attention of the rural consumers so much. Aamir khan

playing foot sic with village bells.

Strategy: Using a renowned celebrity from in ruralbackground

Case 3: GodrejGodrej uses radio to reach to the local people in their language and push

its soap in interior and remote areas.

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Strategy: low-cost marketing technique to gain maximum result

Case 4: HUL LifebuoyHUL launched a direct rural contact program called

Lifebuoy Swasthya Chetana campaign, made sales goes

up by 20% in 17,000 villages.

Strategy: lifebuoy has always been positioned on the

platform of health and . hygiene

Case 5: MRF Bullock cart Tyres

MRF introduced nylon tyres for bullock carts withreal life pahalwans. MRF use the communication through wall

paintings in villages association with the muscleman symbol,(i.e.,Pahalwan=Muscleman).The result was that the MRF

bullock cart tyres became the brand leader in this segment .

Strategy: Rural consumers understands symbols better and

looks for . endorsement by icons

Case 6: HUL Vim

HUL launched a dish washing bar Vim. HUL Started to

communicated the brand in rural area through public

challenging campaigns. In this campaigns is succeed people

washing utensils with sand are being educated to shift to dishwashing bars.

Strategy: Brand awareness creates people using local unbranded products tonational brands

Case 7: Dabur Chyawanprash Dabur Chyawanprash was able communicate its corebenefits of energy and immunity by involving locals in a game

of bowling wherein, the nine pins, symbolizing various diseases,were demolished by a chyawanprash ball.

Strategy: For a brand to succeed in India, its communication and

image must respect Indian values and serve to uphold them.

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Case 8: HUL Surf Surf used the Lalita ji; campaign to communicate themessage of getting more for your money to housewives

and this message is well received by them.

Strategy: value for money need not necessarily mean

cheap

Suggestions:Provide social outlet campaigns, the outlet provide free to any one, what brand theychoose. Its creates a trust factors to the consumers.

Be care full on retail margins other wise they promoted local brands.Face-to-face below the line touch, that means feel and talk mode at heats, melas

and mandis.To capture the local sprit in the communication. Using local language.

Patience is the name of the game. That means a rural consumer is not in a hurry and

you can take your time in communicating the message.Developed a website, which gathers valuable feedback from satisfied customers

and also display the total amount saved by consumers with the product impact.

World-of-mouth communication strategy works better in rural marketsas these markets enjoy limited reach media. Once people become familiar with

these products, they would perceive them as necessities.

[4] Distribution strategy:

Planning physical distribution, managing logistics and controlling

marketing communication are major impediments for entering rural markets. The

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distribution structure involves stock points in feeder towns to service these retail

outlets at the village levels.

Case 1: Coca - Cola Coca -Cola is a pioneer company in distribution

network. Coca-Cola has evolved a hub and spokedistribution model for effectively reaching and serving

rural markets. Coca-Cola provides low-cost ice boxes to

the small distributors in rural areas because of the lackof the electricity. In this marketing strategy a wake up call

for cokes rural focus.

Strategy: Coke is available where, even water is not

available

Case 2: HUL

Hindustan unilever, the pioneer and a largeplayer in Indias FMCG market. HUL is the first company

to step into the Indian rural marketing. HUL launched operation

stream line, distributed HULs products in villages usingunconventional transport like bullock carts, tractors and

cycles. Today HULs products touch the lives of two out of

every three Indians.

Strategy: HUL product can reach a place, where you can not

reach

Suggestions:Best solution for enter into the rural markets, that is the company should start the

production in rural areas. Then it is easy to distribute and also its increase the localsprit.

Tieup with public distribution system (Fair Price Shops). In our country, the public

distribution system is fairly well organized. The revamped PDS places moreemphasis on reaching remote rural areas of hills and tribaks. So FMCG companies

collaborated with the PDS to utilize its well-established sales and distribution

network in the rural markets.

Develop rural shopping malls. Rural shopping malls act as a two-way supply chain.While selling goods to the farmers and also buy their farm produce.

Use a combination of wholesalers and retailers to penetrate every nook and cornerof rural market.

Going paces ahead of small packs and sachets the corporate world is now

coming out with Rural Malls and Self help groups as channel partners topromote consumer products in rural India. Unilever and ITC are working towards

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increasing their visibility and reach through marketing - cum social responsibility

projects such as shakti and e-choupal respectively.

Conclusion:A silent revolution is sweeping the Indian countryside. It has

compelled marketing whizkids to go rural. The marketing battle fields has shiftedfrom the cities to the villages, but in this battle both consumers and companies are

winners, it is a win-win situation. Go Rural seems to the latest slogan. Stop

depending on research number. Go and meet up with a million villagers and ask

what they want. Create the products and services that is relevant to their needs.Thus, it is quite clear value-for-money offerings companies could convert luxuries

in to necessities for the Indian rural consumers.

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A Case Study on Rural Marketing by Sourabh Tandon 23-2-2012

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