Ruralmarketing India

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TheChallengeforIndianMBA:Bridgingthegapbetween

PhilipKotlerandCountrysideIndia

PREPAREDBYSUMITD.GUPTAE-mailandPh: ([email protected])College: IndianInstituteOfForeigntrade,

B-21,QutabInstitutionalArea,NewDelhi.


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ExecutiveSummaryIndiaswayisnotEuropes.IndiaisnotCalcuttaandBombay.Indialivesinhersevenhundredthousandvillages.....................MahatmaGandhi,1926

MarketingindevelopingcountrieslikeIndiahaveoftenbeenborrowedfrom thewesternworld. Concepts like Brand identity, Customer relationship management, 4 Ps ofthe marketing mix, Consumer behaviour process; Segmentation, targeting and

positioning etc. have oftenbeen lifted straight from the marketing intelligentsia abroadand adopted in Indian conditions, often with minimal success. Reason lies not in thefaultofsuch concepts,buttheirintegrationwiththeIndianethosandculture.

The rural India offers a tremendous market potential. Nearly two-thirds of allmiddle- incomehouseholdsinthecountryareinruralIndiaandrepresentshalfofIndias

buying potential. Despite, the strongpotential the rural markets areby and large lessexploited. Considerthemarket,outoffivelakhvillagesinIndiaonlyonelakhhavebeentappedso far. According to us if the rural market has tobe adequately tapped, therehas to be a change in the way marketing concepts learnt in B-schools withadequate adoption according to scenariosprevalent in rural India. Thepaper thereby

present the modified version of Philip Kotlers famous marketing mix consisting of4Ps. The focus is on its modification and subsequent customization to Indian ruralmarketsperspective. The 4Pshavetobemodifiedtoinclude1Pi.e.Packagingand1Ri.e.Retailerasspecialfocusareas.FurthertoensurethesustainabilityofthemarketingmixtwoEsi.e.EducationandEmpowermenthave tobeat thecoreas theyhelp ingeneratingwidespreadparticipationfromtheruralclientelebyenhancingtheirstandardofliving.

TheProducts

in

the

rural

market

should

essentially

operate

at

the

basic

and

expected

levelofproduct classification. They should essentially meet thebasic needs of the consumer

andshouldbeano-frillproduct,astheconsumerwouldnotbevaluingmuchanyfurtheraddition to theproductconcept.Companiesalso face adaunting task incommunicatingabout their products to the consumer due to lack of literacy and failure oftraditional media to penetrate in the rural households. Hence, the advertising mixhas tobe more

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towards non-conventional yet effective medium like Puppetry, Folk Theater & Song,Wall Painting, Demonstration, Posters, Agricultural Games, NGOs network, etc.Thus overall either the product or communication or preferably both need to becustomizedto targettheruralcustomer.

Intermsofphysicaldistributionduetolackofinfrastructurethecostsareveryexorbitantto reach the ruralcustomer.Thus,mediums likeruralmarketingvehiclesandmelasandhaatsprovidebetteropportunities tomeetcustomerneeds.Also theexistingdistributionwould need a transformation to achieve the required penetration levels as successof Project Streamline of HLL has shown. Since, the value for money concept ismore important rural customers, there has tobe an approach of treating customer as

budget seeking consumer. Here, fitting the consumer needs into an affordablepricepoint is pursued first and then other features of product are fitted in. Similarly,packaging has to meet customer needs ofbetterbrand recall and introducing favorablepricepoints.Atthe same time the importance of retailer has tobe recognized where heis one of the most major influencer is customers decision makingprocess. He acts asthefriendandguide in this process and hence, needs to be managed effectivelythrough promotion programmesandincentivestopromotethebrandofacompany.

In order tobridge thegapbetweenPhilipKotlerandcountryside Indian what isneededtheappreciationofuniquefeaturesofruralIndiaandthus,respondingtothembymakingadequate improvements in the application of the marketing concepts learnt in the class.For achieving the desired results of capturing the rural customer a comprehensiveapproachtothetraditionalmarketingconceptshastobetaken.Thismarketingmixhasto

beresponsive tocustomersneedsand fit intohis lifeasa toolofself-enhancement.Tobesuccessfultheconceptofmarketinghas tobetakeninconjunctionwith itseconomic,psychologicalandsocialimplications.

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UniquefeaturesofruralmarketinginIndiaMarketingaccording to a leadingmanagement theoriesPeter Druckercanbeput in thisway The aim of marketing is to know and understand the customerso well thatthe productorservicefitshimandsellitself."

Wefeel that theabovequote is thegistofmarketing,be it inruralareasorurbanareas,westernworldordevelopingworld.Marketinginnothingbutcreatingcustomersandthusitsconceptsremainthesame.But,due to thedifferences intheneeds,buyingbehaviour,valuesandaspirationsofthecustomersthemarketingconceptshavetobemodifiedtobesuccessful. The unique features of rural India which call for special attention and thus,subsequentchangesintheapplicationofmarketingconceptsareasfollows:

a) Traditional Outlook: The rural consumer values old customs and tradition.Basic cultural values have not yet faded in rural India. Buying decisions are highlyinfluenced bysocialcustoms,traditionsandbeliefsintheruralmarkets.

b)LevelsofLiteracy:-Theliteracyrateislowinruralareasascomparedtourbanareas.This comes in way of the marketer in promoting the product. Advertising is veryexpensivemakingitdifficulttocommunicatewiththetargetaudience.

c)LackofProperCommunicationandinfrastructurefacilities:-Nearlyfiftypercentof thevillages in thecountrydonothaveallweatherroads.TheInfrastructureFacilitieslikeroads,warehouses,communicationsystem,financialfacilitiesareinadequateinruralareasmakingphysicaldistributionbecomescostly.

d)ManyLanguagesandDialects:-Thenumberoflanguagesanddialectsvarywidelyfromstatetostateregiontoregionandprobablyfromdistricttodistrict.Eventhoughthenumbers

of

recognized

languages

are

only

16,

the

dialects

are

estimated

to

be

around

850.

e)LowPerCapitaIncome:-Eventhoughabout33-35%ofgrossdomesticproductisgenerated intheruralareas it issharedby74%ofthepopulation.Hence thepercapita

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incomes are low compared to the urban areas.Normally the rural consumers spenta majorityoftheirincomeinbasicnecessities,whichmakesthemverypricesensitive.

Theabovepoints indicate theneed forsubsequentadoptionofMarketingprinciplesaspropoundedbyKotlerandothermanagement thinkers,withrequisitechangessuiting theIndianMarket.ThemarketingmixinthecaseofIndianruralmarketsconsistsof4Psi.e.Product, Price, Promotion, Place combined with 1 P that is Packaging and one Ri.e. Retailerasspecialfocusareas.However,atthebaseofthismarketingmixwillbe2Es ofEducationandEmpowerment.

CUSTOMISATION

Retailer

Packaging

Product,Place,PriceandPromotion

EDUCATION EMPOWEREMENT

TheMarketingMixforRuralIndiaThe traditional marketing hypothesis tends to ignore the requirement of adeveloping countrys rural needs. The concept of marketing has to be taken inconjunction with economic,psychologicalandsocialimplications.Hence,theconceptofMega-Marketing whereallsuchfactorsaretakenintoconsiderationwhiledevelopingtheMarketingMix is more relevant to succeed andbuild enduringbrands. In rural Indiascase the twomost important considerations are Education and

Empowerment opportunities which

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traditional approaches of marketing fail to acknowledge. Then only the opportunityprovidedbytheruralmarketcanbefullytapped.(SEEAPPENDIX1)

1. ProductAuthentic marketing is the art of identifying and understanding customerneeds and creating solutions that deliver satisfaction to the customers, profitsto the producersandbenefitsforthestakeholders. ...................PhilipKotler

Theproduct offerings have tobe not only customizedbut also at a differentplanealtogether in case of rural markets. The various product levels as outlined byPhilips Kotler, namely Core Benefit, Basic Product, Expected product, augmented

product and Potential Product shouldbe adequately taken into consideration and theproductofferings shouldbehenceforthcustomizedaccordingtotheneeds.

Potential

Product

Augmented

Product

Expected

Product

Basic

Product

CoreBenefit

Mostofthe timesintheurbanmarkettheproductisofferedat theaugmentedproductlevel where theobjectiveof theproduct offering is toexceed thecustomer expectation.ButintheruralmarketsofIndiawhichhavebeentilldatecharacterizedbytheabsenceof the choice, sub-standard products and cheap clones of their urban counterparts;the

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immediate level tobeoperated is theExpectedproductwherehisexpectationsaremet.Also,due to the low levelof incomesand literacy levels, it is imperative that thebasicneeds of the consumer are met. For e.g. Today, in India, 70 percent of theshampoo market is in sachets. Fortypercent of rural workers are daily wage earnersand have a dailypurchase habit and could do sobecause of low unitpricepacks.

In real termsbecause of thesepacks, shampoos cost less than 14 years ago. Here theproduct ismeeting thebasic level of need andproviding thebenefit of convenience and economywithoutenthrallingorovertlyexceedinghisexpectation.

In case of durable goods the rural customers essentially look for aproduct that is frill-free, sturdy and long lastingand in case of consumer goods he looks forproducts thatoperateatthebasiclevelandcanprovideadditionalbenefitsinsynchronizationwiththeirhabitsandlifestyle.Fore.g.successofHLLinthesoapcategoryindicatetheneedtonewproduct development after listening to customers needs and not blindly applyingthe urbansolutionstoruralproblems.(SEEAPPENDIX2)

2.Promotion:EffectiveCommunicationIfyou'retryingtopersuadepeopletodosomething,orbuysomething,itseemstomeyoushouldusetheirlanguage,thelanguageinwhichtheythink.-DavidOgilvy

Companies cannot rely on conventional advertising techniques in Indias rural areaswhereonlyoneineverythreehouseholdsownsa televisionsetandmorethanhalfofallvillagers are illiterate. Instead, companies need to turn to more innovative methodsof advertising to reach their potential customer base. Also what appeals to theurban customermaynotappeal to theruralcustomerdue tovarying lifestyles.Soagain,evenif themediareacheshim,theremightnotbean impactas itmayfail toattracthimasfails toconnect to itdue tothe lifestylesbeingdifferent.Fewof theavailableoptionsinthe traditionalmediaare

Puppetry, FolkTheater&Song, WallPainting,

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Demonstration,Posters, AgriculturalGames, NGOsnetwork

Theneedforinnovativemeansofcommunicationinruralareacanbeappreciatedbythecasestudy(SEEAPPENDIX3)whereadvertisementonhandpumpsandpondshelpedinsellingmoresoapstoruralcustomers.

Customization: Combining the above twopoints we would like to stress the needto concentrate onbothproduct development and communication in order to win themind space of the average rural Indian. Again a concept touted by the marketinggurus regarding product and promotion strategies in International markets (analogyextendable todomesticcompaniesmovingfromurbantoruralareasaswell)canbeused.

Product

Donotchange Adapt DevelopnewProduct Product Product

DonotchangePromotion

PromotionAdapt

Promotion

Straight

Extension

Communication

Adaptation

Product

Adaptation Product

InventionDual

Adaptation

In order toachievesuccesscompanyshouldavoidstraightextension.Rathersome formof adaptation be it in preferably product or communication or both. In case ofdeep pockets,product inventions suited for Indian conditions wouldbeable to generatemore returnsratherthenasimplecopiedstrategyfromabroadorurbanmarkets.

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3.Place:PhysicalDistributionandChannelManagementFor most companies wanting to enter the rural markets, distributionposes a serious

problem.Distributioncostsandnonavailabilityofretailoutletsaremajorproblemsfacedbythemarketers.Thevariousoptionsindistributionin theruralmarkets,whichwillbeoutoftheambitproposedtraditionallybythemarketingguruswouldbe:-

a.)RuralMarketingVehicle (RMV)Marketersneed tomakemoreon-groundcontactwith their target audience as well as make demonstration ofproducts as consumersin rural markets rely on the 'touch and feel' experience. One of the ways couldbeusing companydeliveryvanswhichcanserveboththepurposes.

b.) Melas and Haats:- According to the Indian Market Research Bureau, around 8000melas are held in rural India every year and annual sales at melas amount toRs.3,500 crore. Besides these melas, rural markets have thepractice of fixing specificdays in a week as Market Days when exchange of goods and services are carried out.Also,every region consisting of several villages is generally servedby one satellitetown where peopleprefer to go tobuy theirdurablecommodities.Marketingmanagerscan use these feeder towns theywilleasilybeable to cover a large sectionof the rural

population.

The need for innovative distribution techniques to reengineer the existingdistribution processes canbe appreciatedby studying the Project streamline as used

by HLL in increasingitsreachbyaddingsub-stockists in itsexistingdistribution(SEEAPPENDIX

4 .

4.PricingtheproductA significantportionof the ruralpopulation ispaid in dailywages. Dailywage earnerstend to have little stock of money, and therefore tend to make purchases only tomeet theirdailyneeds.The implication is thatpack sizesandpricepointsarecritical tosales, andimportantly,thatruralconsumersviewthepurchase-tradeoffdilemmaacrossamuch wider rangeofproduct categories. As a result, the nature ofcompetition is muchgreater; abeverage manufacturer is not only competing with other manufacturers in itscategory,

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but also otherproducts that consumers may consider one-off luxurypurchases suchas shampoo. So marketer will have to examine methodby which he can make the

product more affordable. In the case of consumer durable one way is to work throughruralbank andofferhigherpurchase terms toconsumer. In short, theValue formoneyisthemost importantconceptthatwilldifferentiatethesuccessfulbrandfromtherest.

Status-seeking

Consumer

BrandNameBudget-conscious

Consumer

Budget

Model Warranty

Technology After Sales

Image Brandname

Budget Model

Asexplainedabove in thediagram,abudget seekingconsumer in the rural India, takesintoconsiderationfirstofallthebudgetavailabletohimandthenwarrantyandaftersalesservicebefore settling on thebrand name and model. Thus, the concept of theproductfitting into ones budget is most important consideration while making a purchasedecision.

5.The5thePOFMARKETING-i.e.PackagingThereasonforputtingpackagingoutoftheproductasaspecialfocusareaisthatduetolow literacy levels the importanceofsymbols andpackagingbecomemore important inhavingahighbrandrecall(SEEAPPNDIX5forcaseonAsianPaints).Thus,afterthe4

pofmarketing, it is5th Pwhich ispackaginggoing toplayakeyrole inruralmarkets.Also since the rural customers are usually daily wage earners and they dont have

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monthly incomes like theones in theurbanareas have.So thepackaging is insmallerunits and lesser-pricedpacks that they can afford given their kind of incomestreams.

6. Retailer:Thecoginthewheel

Personal&EnvironmentalFactorsP sy cho log ical Personal Social C u ltural

Proble

RETAILER

Informatio E valu ationof Purchas PostRecognitio Seekin Alternatives D ecisio E va luatio

MarketingFactorsP roduc t P ricing P romotion

Dataon ruralconsumerbuyingbehaviour indicates that theruralretailer influences35%ofpurchaseoccasions.Therefore,sheerproductavailabilitycandeterminebrandchoice,volumesandmarketshare. So,roleof retailer isalsovery important in ruralmarkets,

because

he

would

be

one

who

provides

information

regarding

quantity

ofpack, promotional schemes, influences of advertisement, consumer feedback etc tocompany. So the retailerplays a verybig role here. The rural customer goes to thesame shop alwaystobuyhisthings.Andthereisaverystrongbondingintermsoftrust

between the two. Thebuyingbehaviour is also such that the customer doesn't ask forthe thingsby brandbut like -- "paanch rupey waali chaye dena".Now it is on theretailer to push whatever brand he wants topush as they can influence thebuyervery easily and very strongly on thepreferences. Hence, there is the need to get hissupport throughproper tradepromotionactivities togetmoreretailshelfandconvincingonhissidetomakethe customerbuythebrand.

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TheCore:Thetwobiggestproblems that theruralIndiafacesareIlliteracyandUnemployment.TointegratetheminonesMarketingmixensuresthattheproductorserviceofferedensureswiderparticipationandbetterchancesofsuccess.Hence, itgives therise to theconceptof two Es: Education and Empowerment at the core of our improved MarketingMix. Thisconceptpresentsanopportunity to improve the lifeofrural Indiansand thus,ensure thattheyactivelypatronizethecompanysproducts.

1.) Education: Since vast majority of rural India lacks even basic educationlevels and modern outlook, it is important that the company introducing a new

product should look atbuilding category and notjust sellingproducts. It isimportant to consistentlydrivehomethepoint thatthecustomerslifeisgoingto

beenhanced becauseofproductsconsumption.

2.) Empowerment: Because of huge disguised unemployment levels inagriculture and lack of employment opportunities in other sectors, any conceptwhich uses any scope for income generation would be favored more than thetraditional marketing mix concepts. For eg HLL runs the program of Self-HelpGroups (SHG), which operate like direct-to-home distributors. The modelconsists of groups of (15-20) villagersbelow thepoverty line (Rs.750per month)takingmicro-creditfrombanks, andusingthat tobuyHLLproducts,which theywillthendirectlysell toconsumers. SimilarlyITCaimstohelpimprovefarmers'incomesandthenhelpitsownbusiness.

Case:E-Choupals ITChasstartedup toover2,000e-choupalsacrossIndiaatacostofaboutRs1.5 lakh(USD3,400)each invillages.It isnowadding5aday,withplans tocover 100,000 Indian villages in 5 years (India has a total of 600,000 villages). Itis improvingIncomesoffarmersby:

--Wiringruralcommunitieswithcomputeraccesstoitse-tradingplatform--Offeringbetteron-linepricesthanauctionsforproduce--Providingqualityseedsandon-lineagriculturaladvice.

Next,itaimstohelpitsownbusinessby:

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--Growingitscommoditiesbusinessoverseas--Gainingaccesstoruralconsumers--Sellinggoodsandservicesbacktothefarmers

LowProduction LowIncome

LowInvestmentinFarm LowConsumption

Thus, it is able tobreak the vicious circle of Lowproduction, income investmentand subsequentlylowproduction intohigh-highscenarioas thus increasingconsumptionfor itsproducts.

HighProduction High

Income

HighInvestmentinFarm HighConsumption

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Conclusion

Thus,accordingtousitistheapplicationofthemarketingconceptsandnottheconceptsthemselves thatneedtobe lookedat.Often,in theruralmarketplaceit is theapplicationof these concepts which differs the winningcompanies from the rest of thepack. Theyare inaposition to view theirmarketingmix in the form of 4+1Pand1R,and therebycustomize theirofferings to theruralmarket.Further, toensureawiderparticipation themarketingmixat itsbaseshouldhaveEducationandEmpowermentas itscore.Inordertobridge the gapbetween Philip Kotler and countryside Indian what is needed theappreciationof unique features of rural Indiaand thus, responding to thembyadequateimprovementsintheapplicationofthemarketingconceptslearntintheclass.

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APPENDIX

1.SomeFactsabouttheruralmarket

70 % of Indias population lives in 627000 villages in rural areas. 90 % of therural population is concentrated in villages with a population of less than 2000.According to theNCAERprojections,thenumberofmiddleandhigh-incomehouseholdsin rural India is expected to grow from 80 million to 111 millionby 2007. In urbanIndia,thesameis expectedtogrowfrom46millionto59million.

Packagedconsumerproducts: MorethanRs.2000crores

MarketforNon-fooditems: Rs.20000croresgrowingat2.5%p.a.Consumptionofpesticides: 68,000tonnes,growingat12%p.a.ShareofRuralmarketinoverallconsumptionToiletries

SafetyRazorBlades 48%PremiumSoaps 24%ToothPaste 20%HairOil 20%OTCproductsMedicateddress 25%ColdAnalgesic 42%AntisepticCreams 28%

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Miscellaneous

Batteries 52%

Torches 30%

2.) Product Adoption: Hairproducts were introduced to rural India in an attemptto capitalize on a culture where hair grooming is taken extremely seriously bywomen. Whileruralwomenmaywearfadedsarisandlittlejewelry,fewstepoutwithoutensuring thattheirhair isinplace.Consumergoodscompanies introducedatransplanted

product from developed markets, the 2-in-1 shampoo/conditioner. Companiesthought that women wouldbe attracted to thisproductbecause it was cost-effective;however, initial salesweredismal.Whatcompaniesfailed torecognize is thatmostruralconsumershad previously never used shampoo and did not value or understand thefullbenefits of conditioner. However, several years back, Hindustan Leverfocused on product development strategies for rural consumers who still did notuseshampooinIndia.Their researchindicatedthataprevailingconsumerhabitinruralIndiawas to use soap for hair andbody care. Rather than try to change instilled consumer

behavior,product developers focused on creating an opportunity. Consumers wanted aproductthatwasconvenientand low-cost.Theresultwasanew2-in-1soap,aproductthatcleansthehairandbody,andis targetedtowardsconsumersinruralareas.

SOMESTRANGEFACTSAmazinginnovatorWithaqueerpsychologyofpurchase andusage, Indian ruralmarket is stillapuzzle tomarketers. Inmanyacase, it stretches its imagination to findsurprisinglydifferentusesof

some

of

the

products.

And

the

red-faced

marketers

admit

that

they

actually

sell

theirproductsinareastheywouldotherwisefinddifficult,simplybecausethereareotheruses

forthem.Forinstance,

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Buffaloes displayed at the haats for sale are dyed an immaculateblack withGodrejhairdye.

HorlicksisusedasahealthbeveragetofattenupcattleinBihar. In villagesofPunjab, washingmachines arebeingused tomake frothy lassi

in bulk.

Iodex is rubbed into the skins of animals after a hard day's work to relievemuscularpain.

3.)CommunicationAdaptation:Both,washingandfortakingbath-onerequireswater.Nowforruralmarketstherearethreesourcesofwater-wells,handpumpsandponds.Forthe first in thehistoryof advertising - thesewerebranded.Special stickerswereput onthehandpumps,thewallsofthewellswerelinedwithadvertisingtilesandtinplateswere

putonallthetreessurroundingtheponds.Theideawastoadvertisenotonlyatthepointof purchase but also at the time of consumption. This case shows that the brandwas somehow relating to the consumer. It was right there when the consumer wantsit and respondstohisneedswhenwanted.Sothecustomercouldalsoseetheadvertisingwhen he wasbathing or washing.Now, the customers whobought thesebrands got asense of satisfactionby seeing their choicebeing advertised in theseplaces while aquestionwas putinthemindsofthecustomerswhohadboughtotherbrands.

4.)DistributionCaseStudy:HLL

HLL Stock KeepingUnit

RuralDistributor

Sub-Stockist

Retailer Consumer

AdditiontoexistingsupplychainunderProjectStreamlinetoservicetheruralconsumer

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Theneedforinnovativeandeffectivedistributionnetworkforruralareasisevidentfromthe fact thatHLLhascomeupwithnewdistributionchannels tocater to ruralmarkets.For eg Project Streamline was conceptualized to significantlyenhance the control onthe rural supplychain through a network of rural sub-stockists, who arebased in theseveryvillages.Aspartoftheproject,higherqualityservicing,intermsoffrequency,creditand full-line availability, wasbeprovided to rural trade. Thepivot of Streamline is theRuralDistributor(RD),whohas15-20ruralsub-stockistsattachedtohim.Eachofthesesub-stockists is located in a rural market. The sub-stockists thenperforms the roleof driving distribution in neighboring villages using unconventional means of transportsuch as tractor,bullock cart, et al. The Streamline system has extended direct HLLreach in thesemarketstoabout37%ofIndia'sruralpopulationfrom25%in1995andthenumber ofHLLbrandsandSKUsstockedbyvillageretailershasgoneupsignificantly.

5.)PackagingCaseStudy:AsianPaints:AsianPaintsfamousmascotGattuisoneofthemostfamousmascotsintheIndianMarketinghistory.Itssuccessstemsfromthefactthat illiterate people in rural India were able to identify the brand as theLadkewala Paint and thebrand had a highbrand recallbecause of the mascot on its

packaging.

6.)Smallpricedpacks:InIndiatherehasbeenaproliferationofsmallpricedpackslikeshampoos,chocolatesticks,creams,cold-drinks,etc,atpricepoints forRs.5andbelow.This helps in synchronizing the expenditure of the Indian consumers with his dailystreamofincome.

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