Executive Summary

This study on rural consumer behaviour is aimed to get a better understanding of the Indian
market place thus enabling companies to embark on selected strategies to effectively reach the
India rural consumers.

India is a huge country with 28 states, over one billion people and 120 dialects or languages.
From the market perspective people of India comprise different segments of consumers based on
class, status and income.

An important and recent development is India’s consumerism is the emergence of the rural
market for several basic consumer goods. Three fourth of India’s population live in rural area
and contributes to one third of the national income.

India is a lucrative market even though the per capita income in India is low and it remains a
huge market even for costly products.

This project report focuses on understanding the rural consumer behaviour and psyche without
which it will be virtually impossible for companies to satisfy this segment. It is very essential for
them to invest time and resources for the same resulting in appropriate marketing strategies to
increase the market share and for avoiding any surprises in the market place.

Illustrations have been given to explain the difference in the behaviour of the rural consumer and
his urban counterpart.

When we talk about rural markets and rural marketing, names of a few global players come to
our mind. The top rank will definitely be taken by the pioneer in rural marketing – Hindustan
Unilever Limited. An effort has been made to understand the successful marketing strategies
adopted by HUL to become a household name in rural India.

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CONSUMER BEHAVIOUR – WHAT IS IT?

The success or failure in any business depends upon the behaviour of the end-user or consumer
who finally uses the product or any service. It enables the manufacturer to know which products
have been positively accepted in the market and which ones need changes so as to suit the
consumers better. Not only is it critical to the manufacturer but also to all the intermediaries
involved in transferring the product to the ultimate user. Thus understanding the consumer
behaviour helps in identifying the weak points and also reflects the positive aspects of any
business.

So how can we define consumer behaviour? It refers to the acts of individuals directly involved
in obtaining goods and services and includes decision process that involves a purchase.

Sciffman and Karuk state that consumer behaviour is the behaviour that consumers display in
searching for purchase, using and evaluating products, services and ideas which they expect will
satisfy their needs.

It is the behaviour of the consumer which impacts their decision to purchase or not purchase the
product. Depending on their decision and their usage, an organization decides which products to
manufacture and to continue. The positioning of the product depends on the consumption of the
product and this behaviour of consumers may be related to any kind of products or services.

THEORIES ON CONSUMER BEHAVIOUR

As consumer behaviour is complex and dynamic to analyze many social scientists of different
disciplines have attempted to formulate various theories.

A) Decision making approach in understanding consumer behaviour provides that purchase

is an ultimate activity in a course of action taken by a consumer. One of the theories
suggests four different views related to consumer decision making process and behaviour.

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  First is the ‘economic view’ which states that consumers are primarily facing imperfect
competition and they are always expected to make rational decisions on the basis of
assumptions that they are aware of all product alternatives, they rank benefits and
limitations of all alternatives and select one best alternative.

 Second ‘passive view’ is absolutely opposite to the above one and states that consumers
are irrational, impulsive and submissive to self centered interests of marketers. These
consumers are easily influenced by marketing tools.

 Similarly third ‘emotional view’ is related to perceive consumer’s decision making

process based on their emotional association or feelings about some products or services.
For an instance, a person who has lost his red pen will neither make a rational decision by
evaluating the alternatives (economic view) nor will he act in an impulsive manner and
get influenced by the marketers (passive view). Rather the person would choose any pen
that closely resembles his favourite possession.

 Fourth and arguably the most acknowledged view is ‘cognitive view’ which considers
consumers to be ‘thinking problem solvers’ and who are receptive as well as actively
searching for products that can fulfill their needs. Consumer’s behaviour under this goal
is based on information seeking and processing attributes usually directed by a goal.

An example would be that of a person buying a tooth paste from a certain shop with a
goal of choosing a product that tastes good.

Despite of critics for each viewpoint, it can be considered a valid argument that all four types of
decision making behaviour exist and provide the marketer guidelines to analyze the consumer
accordingly. Based on general perception about acknowledged and common ‘cognitive view’

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asserts broader stages of a consumer’s decision making process that includes problem
identification, evaluation of alternatives, outlet selection, purchase and post purchase selection.

B) We can also consider the study conducted by Engel which revealed certain basic facts on
which he designed four models to ascertain consumer behaviour.

 It was found out in the study that the purchases made by consumers are mainly to satiate
their demands and to solve the underlying problem.

 If a consumer purchases a product in order to fulfill his basic need, it can be said the
purchase was necessity-driven and it can be analyzed from this aspect as to what
motivates or drives a consumer to purchase a product.

 If a consumer does an impulse purchase, he does it without any preconceived notion or

well-thought over buying of a product. The product in this case seems to be so attractive
or beneficial to a consumer that he immediately buys the product.

So, this makes us understand that a product should have certain unique attributes to lure the
customer. In some of the product categories, there are a number of options to choose from and it
becomes difficult for the customer to reach a certain decision. Also it is difficult for the seller to
sell his product as he needs to convince a lot by paying thrust on his product as against his
competitors.

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IMPORTANCE OF CONSUMER BEHAVIOUR

Let us understand how the behaviour of the consumer affects a marketer.

 It helps the marketer to take vital decisions with respect to designing of future marketing
strategies and help him to find out what kind of promotional offers or marketing
campaigns need to be undertaken.

 Whether the marketer should stick to the same product, extend the product portfolio, or
probably launch a new product. If consumers prefer a particular brand and make the
purchase and the consumption of the same their regular habit, it is time that the marketer
should think of improving upon a brand or come out with a different product. Many times,
the need calls for a niche marketing

 It also helps an organization to reinstate the corporate policies or take action to reframe the
corporate mission statement.

 The consumer behaviour also has effects on the entire social network which again helps
an organization to target a specific audience or set of customers.

 The behaviour of consumers gives the nation a different face, either good or bad.

 Also helps in scheduling of events, for example, any product launch or any advertising
campaign.

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  The consumer behaviour also is related to cultural attributes. If a product suits a
particular cross-section of culture, the marketer can think of extending his products to
international arena and across different cultures.

INDIAN CONSUMER – DIFFERENT SEGMENTS

Socialites

Socialites belong to the upper class. This affluent group forms a small part of the Indian
population with about 150 million people. They prefer to shop in specialty stores, go to clubs on
weekends and spend a lot on luxury goods. They are always looking for something different and
prefer high value, exclusive products.

Socialites are very brand conscious and would go for only for best known in the market.
However this group does not form a demand base large enough for manufacturing marketing
firms to depend upon exclusively on them, except perhaps that those deal with real luxury items.

Conservatives

Conservatives belong to the middle class. The conservative segment is the reflection of the true
Indian culture. They are traditional in their outlook, cautious in their approach towards purchases
and spend more time with family than in partying and focus more on savings rather than
spending. Slow in decision making, seeking a lot of information before making any purchase.
They look for durability and functionality but at the same time is also image conscious.

They prefer high value consumer products but often have to settle for the more affordable one.
These habits in turn affect their purchasing patterns.

Rural consumer

About 70% of India’s population lives in rural India which is scattered in the 6,00,000 villages in
the country. For several product categories, rural markets account for well over 60 per cent of the

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national demand. While the rural consumer is generally seen as less affluent than his urban
cousin, things are changing in rural India over the last ten years.

While in 1998-99 over 83% of rural households fell in the lower and lower middle classes, the
number has fallen to 70% in 2006-07; the comparative fall for urban India is from 53% to 27%
[NCAER data]. And if experts are to be believed, the number is set to fall at a rapid rate over the
next 20 years.

Over the years, as a result of the increasing literacy in the country, exposure to the west, satellite
communication, foreign magazines and newspapers there is a significant increase in awareness
of rural consumers. Today more and more consumers are selective on the quality of products and
services.

This awareness has made the Indian rural consumers seek more and more reliable sources for
purchases such as organized retail stores which have a corporate background and where the
accountability is more pronounced. The consumer also seeks to purchase from a place where his
or her feedback is valued.
Indian rural consumers are now more aware and discerning, knowledgeable about technology,
products and the market and are beginning to demand benefits beyond just availability of a range
of products that came from a trusted manufacturer. They prefer to buy value for money
products.

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FORTUNE AT THE ‘BOTTOM OF THE PYRAMID’

Man at the Bottom of the Pyramid is a consumer too

University of Michigan Business School professor C.K. Prahalad challenges business's common
beliefs about the world's impoverished and introduces readers to the Bottom of the Pyramid
(BOP), an untapped market of more than four billion people, many of whom are seen as “poor”
in the public eye.

This is the market, companies should be paying attention to, he says, even more so than the few
rarified consumers at the high-profit pinnacle, or even the growing middle markets. In short,
Pralahad’s vision “is not about philanthropy and corporate social responsibility”; but is centered
around the idea that "If we stop thinking of the poor as victims or as a burden and start
recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole
Snew world of opportunity will open up."

Constant innovation is the need of the hour

According to the author, we need to find new and innovative approaches to rise to the challenge
of this fast growing population. One of the assumptions that he makes is that the poor need to
seen as a market, but one different from the conventional perception of a market.

This assumption has some immediate consequences - all of the traditional business concepts are
applicable but each and every one of those concepts needs to be applied from a distinct
perspective.

What results is a practical example of the application of innovative thinking and innovation to an
intractable problem – How to cater to the more than 4-billion humans who do not form part of

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the target market of the organizations that are driven by conventional assumptions about
products, services, value and needs.

FORTUNE AT THE ‘BOTTOM OF THE INDIAN PYRAMID’

The Indian pyramid has to large a bottom

A research conducted classifies BOP consumers on the basis of household incomes. The bottom
two classes (less than Rs 75,000 p.a and Rs 75,000 to Rs 1,50,000 p.a) are defined as the
consumers. The research is conducted with the secondary data (income, expenditure and savings
profile for six income classifications).

The study estimates for 2008 -09, that of the total 70 million urban households, 39.5% or 27.7
million are BOP. In the rural segment BOPs are more prevalent, as many as 81.2% of the 159.3
million rural households are BOP.

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This is a very high proportion and indicates that we have a long way to go in spite of the
moderate economic successes over the last 15 years. But at least there is a satisfaction that we are
moving in the positive direction as compared to 2006 07 when urban BOPs were 45.3% of the
households and rural BOP households constituted 84.3% of the households.

And that the same time this provides various companies, a huge untapped potential in terms of
the rural BOP.

Annual Household Income, estimates for 2008 - 09

The rural urban divided in income is quite stark. 39.5% of the urban BOP households on
aggregate earn only 155 of what the upper segment earns and one can hope that this segment will
move upwards very fast.

This again provides an opportunity for marketers to target this segment of rural India.

In rural India though, the BOP are so large in proportion (81% of the households) that they
account for almost half of the total income of rural India. Urban India is of course better off,
having a marginally higher aggregate income than rural India, though it is less than half the rural
India.

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 Annual Household Expenditures, estimates for 2008 - 09

Annual Household Savings, estimates for 2008 – 09

The precarious position of the BOP households is reflected in their low savings. The total
household savings of the BOP segment is only about 80% of the others in value; their aggregate
incomes are at similar levels. This is not surprising, since they have to spend a higher proportion
of their incomes on basic necessities leaving them with very little surplus.

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A CLOSER LOOK AT THE BOTTOM OF THE PYRAMID

Many were convinced and C.K.Prahlad’s Fortune at the Bottom of the Pyramid created a sort of
skeptical scramble within large global companies to make in a dispassionate manner and find the
Holy Grail: A business model that can give the consumers all that they want, at the price they
want and still be profitable.

As a result, several leading- edge global companies started experimental projects in India to try
and figure out what they should do or could do for and with the bottom of the pyramid consumer,
a significant chunk of which lives in India.

Rama Bijapurkar, one of India’s most respected thought leaders on market strategy and
consumer behaviour states that however there is not enough conviction amongst managers, no
matter how senior, about why such a big effort has to be made to construct such a big and
challenging and risky business model.

She further states that serving the BOP consumer has been viewed as corporate social
responsibility and hence essential and noble but not as part of the mainstream business. It is seen
to be as part of sustainable development and hence important but not urgent.

Companies have a general feeling about serving the BOP consumer as buying some kind of an
option for some not clearly recognized eventuality – a bit like prayer, essential but not mission
critical to everyday living.

Due to such approaches, the author believes these companies do invest a great deal of time and
effort in understanding consumers and using it as the starting point to develop appropriate
business models.

They usually pass to the BOP segment products that cannot or will not be accepted by their
counterparts so blindly strip features of a product.

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These exercises will be fatal to the company in the long run. Hence a good understanding of the
BOP consumer psyche and behaviour is essential for success. This forms the basis for the next
chapter.

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UNDERSTANDING RURAL CONSUMER – NEED OF THE HOUR

If there is any one part of consumer India that epitomizes the line ‘every truism about India can
be contradicted by another truism’, it is the rural consumer India.

Often marketers do not invest a great deal of effort in understanding rural consumers and hence
fail to develop suitable marketing strategies. Most of the time efforts are in the form of blinkered
‘inside out’ approaches. At worst, it comes in the form of tinkering to strip features and creating
‘no frills’ models of a feature rich expensive product without a concern for what the rural
consumers would consider to be frills and essentials. At best, it has been seen in the form of
letting R&D loose in their spare time to invent things that the poor can use – based on the
stereotypical image of the poor as illiterate, uninformed and primitive. The result has been
specially created new products which are low priced but are light years behind in sophistication.
In either case they usually fail to connect with the market.

Thus unless marketers are able to understand rural consumers it is almost impossible to develop
effective marketing strategies to cater to this huge untapped market.

SIMPLE MODEL OF RURAL CONSUMER BEHAVIOUR

Need recognition

It is the difference between the desired state and the actual state. A rural consumer first
recognizes his needs and accordingly thinks of purchasing the product. This is the first step in the
simple decision making model. For instance a farmer in a rural area wants to purchase a colour
television

Pre purchase search

After the need has been identified, the next step is to do a pre purchase search. Pre purchase
search is of two types namely internal search using one’s memory and external search which
involves getting more information from friends or relatives (word of mouth). Marketer
dominated sources, comparison shopping, public malls etc. A successful information search

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leaves a buyer with possible alternatives, the evoked set. Here the farmer may go to a nearby city
and visit a showroom that has multiple products.

Evaluation of alternatives

This third step is to basically pick the best alternative from the available. In this step the buyer
needs to establish criteria for evaluation. He makes a decision about what features he wants or
does not want in the product. Accordingly ranks are given to the alternatives. The farmer may
look for products of Videocon, Onida, and LG that are available with the dealers and finally
select one of them. If he is not satisfied with the choice made the buyer can return to the search
phase.

Also marketers try to influence the buyer by ‘framing’ alternatives.

Purchase decision

This is action that results in the purchase of the product from among available alternatives. The
customer may plan to purchase a specific product that suits his needs and is within his budget,
etc. This includes product, package, store, method of purchase among other things. For example
the farmer may plan to go for LG’s Sampoorna Colour Television as it has a vernacular on
screen display, better sound and superior picture quality. Besides it is priced at only Rs 8,500.

Purchase

This involves the actual purchase of the product. However it may differ from the decision due to
time lapse between the purchase decision and the actual purchase or may also depend upon the
availability of the product.

Post purchase behaviour

This is the final step in the simple model of consumer behaviour. The buyer’s relationship with
the seller does not come to an end with the purchase especially in the case of consumer durables.
This is not an important factor for FMCG. The farmer may see whether LG has a service centre
nearby in case the product needs servicing.

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It is found that the main elements studied for analyzing rural consumer decision making process
are media exposure, purchase aspects, behaviour of the consumer towards price, quality
relations, credit and influence of the retailer.

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RURAL CONSUMER BUYING BEHAVIOUR

Rural buyer behaviour refers to the buying behaviour of final consumers – individuals and
households who buy goods and services for personal consumption. All these final consumers
make up the consumer market.

The rural consumer is likely to exhibit different purchase behaviour as compared to his urban
counterpart. This is basically due to the unique characteristics of rural markets. The composition
of Indian rural market is probably the much more complex than the whole market in Europe in
terms of cultural, linguistic and other diversities.

The social and religious customs, climatic considerations, dual ownership due to prevalence of
joint family system, mould the buying habits of rural consumers. The Chairman of Hindustan
Unilever Ltd also corroborates ‘our survey shows that rural consumers tend to be more subject to
local religious, cultural and social pressures and there are regional variations in tastes and
habits”.

Thus it is important to study the thought process of the rural consumer purchase decision so that
marketers can successfully reach this huge untapped segment.

Factors influencing buying behaviour

To understand rural buying behaviour a marketer must first understand

a) The factors that influence the buying behaviour and

b) The variations in that behaviour

These help to generate information upon which a marketer can create bases for segment
the rural market taking the following factors into consideration:

 Environment of the consumer – The surroundings within which consumer lives has a
very strong influence on the buying behaviour.A villager’s needs are different from those

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 of his urban cousin. The environment has a critical influence in shaping the needs of the
rural consumer. Products made to urban specifications may be impractical in rural
settings.

An excellent example would be of electrical and electronic goods. Virtually all radios,
cassette players and television sets are made to urban supply specifications. In many
villages, especially in power strapped villages, voltages fluctuate wildly making electrical
goods susceptible to frequent breakdowns. In fact villagers don’t mind paying more for
these goods if they can sustain the frequent power cuts. Also water supply affects demand
for durables in many villages.

 Geographic variations in market behaviour – The geographic location in which the

consumer is located also speaks about the thought process of the consumer.

Rural markets are not homogeneous. Variations in economic development and degree of
acceptance of innovation are evident in such markets. Geographic variation to urban
centres and variations in development have resulted in tremendous heterogeneity even
within a state for example western and eastern UP where there are major differences. For
instance in western UP bullock carts are smaller vehicles with one buffalo while in
eastern UP bullocks carts are larger pulled by two buffaloes. Also locals speak
Hindustani in western UP while they speak Bhojpuri in eastern UP.

For instance villages in south accept technology quicker than in other parts of India.
Thus HMT sells more winding watches in the north while they sell more quartz watches
down south.

These have implications to product design and marketing strategies.

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 Influence of occupation and consumption patterns – The perception that the rural
consumer is either a farmer or an agricultural labourer restricts marketing effectiveness.
In fact there are other groups of consumers with different needs and behaviour having
significant purchase volumes.

The Indian Readership Survey of 1998 has chosen the occupation of chief wage earner as
a basis to define the rural consumer. It tells us that the occupation profiles of owners of
consumer durables of three popular consumer durables indicate that non agricultural
occupation group is one that constitutes the high consumption segment.

Here the non agricultural occupation group includes shopkeepers, traders or those in
employment service like government administration jobs, banks, teachers and other
professionals.

Television owners in the service clan constitute 43 percent which means one in two
persons own a television set. In the case of other non agricultural group, the shopkeepers
and traders, one in three persons owns a television.

Influence of consumer behaviour and its implications

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 Place of purchase – Not all the rural consumers buy from the same location. Also the
same consumer buys from different location depending upon the product and need. A
study on haats showed that about 58% of villagers visiting these haats preferred them
over village shops due to better quality, prices and variety.

Companies need to assess the influence on consumers of both village shops and haats.

Rural consumer do not depend on the haats and village shops alone as some purchases
are made from the urban areas also. For example, there are few product categories in
which the rural distribution is still low and therefore consumer buys from towns. It was
observed that for certain categories of products of FMCG, the rural consumers made as
high as 50% of their purchases from urban markets.

In case where rural dealer penetration is low, the purchase from urban centres is high. For
example, shaving creams have low dealer penetration and hence 37% of purchases are
made from urban area while there is a high dealer penetration for tea and hence 60%
purchases are from rural markets and 25% from urban centres.

% of products bought from the nearby town rather than within the village itself
 Creative use of product – Marketers will find it useful to keep an eye on the different
ways in which the rural consumers can use the given product. This is because product use
can differ and not be envisaged by the marketer. Even for the experienced marketers
there could be surprises. Market development is achieved by being alert to the new and
creative uses of products.

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 Godrej hair dye being used to colour the horns of oxen,washing machine being used for
churning lassi. The study of product end provides indicators on the need for education
and also new product ideas.

Developing a framework for understanding rural buyer behaviour

Framework developed by Mr. Mithileshwar Jha, Professor in Marketing, IIM Lucknow

Consumers in India can be divided into three broad categories Urban, Rural and Rurban in terms
of geography and sociological characteristics. This supports the notion of a continuum from rural
to urban, rurban being the overlap between the two, with pretensions to being closer to urban in
physical features and proximity to large urban centres but with deep sociological moorings.

It is desirable to consider behaviours in specific interaction contexts of these three markets that
is participants from each market buying from or selling to or facilitating participants from the
same or other markets for a better understanding of specific behaviour patterns.

When the above two (grouping in terms of geography, sociological characteristics and as
participants of three markets) are put together we establish a domain for exploring and

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understanding rural buyer behaviour. It includes eight of the nine blocks (except the crossed
one).

Any marketing interaction normally involves six broad categories of participants from the
marketer’s perspective. These are the end customers, suppliers and distributors, facilitators who
are both direct and indirect like bankers, transporters, warehousing agents, advertisers, research
utilities and regulators.

It makes more intuitive and practical sense to map out both individual behaviour and interaction
behaviour (influence on each other) to develop a better insight on their past behaviour and future
possibilities.

Apart from traditional buying phases and buying roles the factors that need to be studied are as
below

 Modalities (activities providing time, space, form, ownership, assortment etc., utilities
and their perceived importance by the participants)

 Norms (formal and informal rules guiding the interactions among participants)

 Satisfaction/ Dissatisfaction of the participants with the interaction process and their
outcomes and results thereof.

A set of systematic activities using the above framework can provide comprehensive insight into
rural buyer behaviour. However there is no need to re invent the wheel. Disciplines like
sociology/ rural sociology, anthropology, agricultural economies, psychology, social work,
literature etc have developed considerable insight in the individual and group behaviour in the
rural and rurban context over a period of time.

These disciplines may be tapped into, with the material carefully selected, interpreted and
validated wherever required given the differences in the context. In fact one of the tragedies of

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the growth of marketing as a discipline has been its increasing isolation from the parent or sister
disciplines mentioned above without developing sufficient rigour of its own.

Note – The word ‘participants’ is deliberate here.

It is possible and meaningful to segment the above categories in the exhibit but it is not
attempted here.

TYPES OF RURAL CONSUMER BUYING BEHAVIOUR

Types of consumer buying behavior are determined by:

 Level of Involvement in purchase decision. Importance and intensity of interest in a

product in a particular situation.

 Buyer’s level of involvement determines why he/she is motivated to seek information

about a certain products and brands but virtually ignores others.
High involvement purchases--Honda Motorbike, high priced goods, products visible to
others, and the higher the risk the higher the involvement.

Types of risk:
 Personal risk
 Social risk
 Economic risk

The four type of consumer buying behavior are:

 Routine Response/Programmed Behavior--buying low involvement frequently

purchased low cost items; need very little search and decision effort; purchased almost
automatically. Examples include soft drinks, snack foods, milk etc.
 Limited Decision Making--buying product occasionally. When you need to obtain
information about unfamiliar brand in a familiar product category, perhaps. It requires a

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 moderate amount of time for information gathering. Examples include Clothes--know
product class but not the brand.
 Extensive Decision Making/Complex high involvement - unfamiliar, expensive and/or
infrequently bought products. High degree of economic/performance/psychological risk.

Examples include cars, homes, computers, education. Spend a lot of time seeking
information and deciding.
Information from the companies MM; friends and relatives, store personnel etc. Go
through all six stages of the buying process.

 Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same buying behavior. Product can
shift from one category to the next.

For example
Going out for dinner for one person may be extensive decision making (for someone that does
not go out often at all), but limited decision making for someone else. The reason for the dinner,
whether it is an anniversary celebration, or a meal with a couple of friends will also determine
the extent of the decision making.

Role of people in buying decision

Initiator – The person who first suggests the idea of buying the product or service. For example,
a in a family the youngest child who goes to school suggests the buying of a cell phone.

Influencer – The people whose views or advise influence the decision. For instance the father of
the child talks to his relative who lives in a nearby city. This relative suggests the farmer that a
Nokia or Dolphin cell phone would be good since he is well versed with the various models.
Thus he has influenced his father.

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Decider – The person who decides on any component of the buying decision, whether to buy,
what to buy, how to buy or where to buy. The elder son of the farmer when asked, tells him that
Nokia cell phone suggest that buying it would be a better option as it is more trusted. He has
decided what cell phone to buy for the father.

Buyer – He is the person who makes the actual purchase. Here the father has made a decision
and buys a Nokia cell phone from a dealer known to him. The father has paid the money and he
is the buyer.

User – The person who consumes or uses the product or service. For example this new Nokia
cell phone is actually used buy their sister who teaches in the school.

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CONSUMER SPENDING BEHAVIOUR

The Indian consumer spending has increased from US$ 133.60 in 1992-93 to US$ 350.74 in
2002-03, a compound annual growth of 10.13 per cent at current prices. The way Indian
consumers are spending their money on various items has changed in recent years. The share
being spent on the basis (food and beverages) has fallen from 54.07 per cent in 1992-93 to 44.8
per cent in 2002-03. Other items have increased in importance, for example, medical and
healthcare spending has increased from 3.5 per cent to 8.5 per cent of total expenditure over the
same period, a compound growth rate of 19.71 per cent. Similarly spending on transport and
communication has grown at 13.2 per cent.

While the Compound Annual Growth Rate (CAGR) in total consumer spending has been around
12 per cent a year over the past decade, there have been sharp ups and downs. Consumer
expenditure has been in tandem with the annual GDP growth.

For rural India, per capita 30 days' consumer expenditure of US$ 12.34 was split up into US$
6.78, on an average, for food, and US$ 5.56 for non-food. Food expenditure included US$ 2.25
for cereals and cereal substitutes, and US$ 2.37 for milk, milk products, vegetables, edible oil
and US$ 2.16 on others. Non-food expenditure included US$ 1.11 for fuel and light, and another
US$1.00 for clothing, footwear and US$3.45 on other non-food expenditure.

For the urban sector, average Monthly Per Capita Consumer Expenditure (MPCE) of US$ 23.53
was split up into US$ 10.00 for food and US$ 13.53 for non-food. Of food expenditure, US$
2.37 went towards cereals and cereal substitutes while US$ 3.67 was spent on milk, milk
products, vegetables and edible oil and US$3.96 on other food items. US$ 2.11 was spent per
person per month on fuel and light, and US$ 1.65 on clothing and footwear and US$9.77 on
other non-food items.

Urban expenditure levels per capita exceeded rural levels for all the product groups, except on
cereals and cereal substitutes. The average monthly per capita expenditures on cereals and cereal
substitutes for rural and urban areas are very close to each other.

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The gap between rural and urban averages of MPCE was of the order of US$ 11.16. The item-
groups viz. milk and milk products, beverages etc, fuel and light, education, miscellaneous
consumer goods & services, conveyance and rent contributed to the gap significantly.
Non-food expenditure per person in the urban sector was more than double of that for the rural
sector, where it was about US$ 5.55.

In India, the higher income group (>US$2,465) spends more amount of their income on luxury
goods and trendy products than fact moving consumer products.
The middle income group (US$1,162 – US$1,190) spends more on consumer expendables than
the rich.

Combined the middle and the lower income group provide 60 per cent of the value of the Indian
market.

UNDERSTANDING SPENDING POWER AND PATTERNS BEYOND

‘ANNUAL INCOME’

Since the bulk of low income Consumer India is rural and does not have a steady source of
income, total annual income is not the best measure to use to understand their affluence. More
variables like per capita income, number of earning members and rules of household spending,
especially in joint families, etc. need to be factored in.

Secondly, there are often swings in the income of a given family unit, which cause frequent
changes in spending patterns. Agricultural income is one such example. New household unit
configurations (for example the earning son who leaves to set up his own home, or an earning
daughter getting married) change the spending the changing pattern of the old unit as well as the
new unit, neither remaining the same as it was before.

The practice of borrowing also stretches income – while formal credit is often not available to
this group, they are informally borrowing against future income, not in a deliberate and planned

27
way but in a very immediate kind of way. It is either the retailer who captures the value or the
pawn shop. Further given the interdependent nature of our society, there is a lot of borrowing
from friends and relatives.

UNDERSTANDING VALUE PROCESSING AND BUDGET BALANCING

Durables are obviously far more attractive items for low income consumers than FMCG. The
Indian low income consumer is struggling to ‘up-grade’ on durables and is down trading on
FMCG. While they carefully look at ways to stretch budgets with ‘no frills’ FMCG products,
they are occasional gratification purchases – for children, around festival time, or occasional
treats for the family.

Sylvester Research says, ‘It isn’t practicable for them to buy cars and houses, so how do you
flaunt your new disposable income? Their answer is ‘labels’. Perhaps the low end branding game
has latent potential – may be store brands?

IMPROVING BUYING POWER

It is a well known and well documented fact that existing retail environments extract more from
the poor customers. Low income consumers are dependent on the retailer for credit, they end up
paying more as they buy in small quantities and getting poorer service.

There is a case for opening a set of thrift stores, offering credit as well as relevant merchandise to
lower income consumers, who will reward this empowerment will loyalty. Another interesting
suggestion is the creation of ‘buying groups’ modeled after the buying circles set up by
Mohammad Yunus of the Grameen Bank in Bangladesh.

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FACTORS INFLUENCING RURAL CONSUMER BEHAVIOUR

STIMULI

Stimuli are inputs to any of the senses. Stimuli (i.e sensory inputs) include products, packages,
brand names, commercials etc. Marketing stimuli include an enormous number of variables that
affect consume perceptions such as the nature of the products, their physical and commercial
attributes (including the positioning of the print ad or the timimg of a commercial and editorial
environment)

According to the Howard and Sheth model of buying behaviour, the most significant stimuli
affecting buyer behaviour are the information cues about the characteristics of the product. The
cue may be significative if it comes from the product itself when the consumer is involved in a
shopping activity.

SOCIAL CLASS

Social class is the classification involving stratifying people into groups with various amounts of
power, prestige and privilege. We cannot associate social class with income because someone in
a traditionally low status job like plumber may today earn as much as an individual in a more
prestigious job like a school teacher. In certain other cultures the stratification is more clear- cut.

Although the caste system in India is no longer as powerful as it was a few years ago, it still has
a tremendous influence on rural society

CULTURE

Cultural factors exert the broadest and deepest influence on consumer behaviour. The marketer
needs to understand the role played by the buyer’s culture. Culture is the most basic element that
shapes a person’s wants and behaviour. In India, there are so many different cultures which only
29
go to make the marketer’s job even tougher. Some of the few cultural factors that influence the
buyer’s behaviour are as below:

Product: colour, size, shape, design

For example, the Tata Sumo which was launched in rural India in white colour was not accepted.
But however, when the same sumo was re – launched as spacio in a different name and in a
bright yellow colour, with a larger seating capacity and ability to transport goods, the acceptance
was higher.

Another good example would be Philips Audio systems. Urban India looks at technology with
the viewpoint ‘the smaller the better’. However in rural India the viewpoint is totally opposite.
This is the reason for the large acceptance of big audio systems in rural India. Thus Philips
makes audio systems that get easily accepted by the sheer size.

Social practices

There are so many different cultures in India and each culture exhibits different social practices.
For example, there are common bath areas in a few villages. The villagers used to buy one
lifebuoy cake and cut it into smaller bars. This helped lifebuoy to introduce smaller 75 gm bars
which could be used individually.

Decision making by male head

The male in Indian culture has always been given the designation of the key decision maker. For
instance, the Mukhiya’s opinion who is the head of the village is usually shared with the rest of
the village. Even in a house the male is the final decision maker. It is the men who do the
purchasing women are not allowed to step out of the house.

In rural areas this trend is very prominent while in urban households the wife is the key decision
maker. The trend is also changing in rural households due to more media exposure.

30
Changes in savings and investment patterns

The savings and investment patterns of the rural rich is shifting from gold, land to tractors,
VCR’s, LCR’s etc.

Thus cultural factors have a strong influence on the rural consumer behaviour. Times are
changing and increased reach of information through media and influence of the urban areas is
surely reducing the influence of traditions. But until that happens, marketers need to

 Develop products that suit the cultural practices of the rural consumer.

 Identify a suitable target audience and design media and message that reflect the social
behaviour.

 Design the distribution to reach the places or outlets from where the consumer has been
traditionally making his purchase.

PERCEPTION

Perception can be defined as “the process of selecting, organizing and interpreting or attaching
meaning to events happening in the environment.” It is an integral part of consumer behaviour,
whereby an individual selects data or information from his environment, organizes it and then
draws conclusions or meaning from it.

The marketer who seeks to modify the behaviour of the rural consumer needs to influence the
consumer’s perception and attitude. It is here that the marketer has to carefully design the
products and developing message for the rural markets. The decision variables of product and
message are critical to marketing effectiveness in rural markets as the colour, shape and actions
that hold meaning for rural consumers are different from those of urban consumers.

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The factors that affect perception are exposure and interpretation.

Exposure involves the extent to which we encounter a stimulus. In rural areas where marketers
fall short of exposing the products, alternative uses for the same product crop up.

Interpretation involves making sense of the stimulus. Perception is a different process and
different people may interpret an event differently. Consumer’s perception of the product and
promotion contribute to creating the position for the product. The interpretations of the rural
consumer are different from those of urban consumers. Colours are interpreted differently, so are
sizes and shapes. The lower literacy levels in the rural markets increase the importance of
perpetual influences. In interior markets, brand identification is through visual patterns – a red
soap cake identifies Lifebuoy soap.

The strong influence of perceptions on rural consumers provides a good reason for the marketer
to develop separate marketing strategies for the rural market.

ATTITUDE

Attitudes are generally the inner expressions or feelings that reflect whether a person is
favourably or unfavourably predisposed towards the subject. Consumer attitudes are a composite
of a consumer’s beliefs, feelings and behavioural intentions towards some object.

The beliefs that a consumer may hold towards a product may be positive (that sturdy and tough
fans last long) or negative (that sleek and designer fans perish fast). It could also be neutral. For
example fans should be preferably black or white. Also beliefs need not be accurate e.g
chemicals like fluoride in toothpaste corrode teeth.

The feelings that consumer’s have for some brands or objects are sometimes based on beliefs.
For example in a village in Rajasthan the village elders banned television sets as they felt
everyone was getting addicted and were neglecting their farming duties.

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The behavioural intentions of rural consumers are typical of their overt habits. A typical rural
Indian applies toothpowder on his index finger and rubs it on his teeth. This is because
toothpowder is more in line with mouth washing habits. So when an urban consumer uses
toothpaste his rural counterpart uses neem sticks, charcoal products etc.

Changing attitudes of rural consumers

Changing the attitudes of rural consumers is very difficult particularly if they feel marketers have
a vested interest in either increasing sales or making them switch to other brands. But there are a
few ways in which changes can be brought about

Attitude to quality and price

Conventional wisdom on rural marketing believes that villagers craves, but can’t afford the
products the products his city cousin consumes. As a result companies usually try to reduce the
prices of their products either by creating smaller pack sizes or by compromising on quality. This
works sometimes and with some products only.

Small size packs get acceptance in markets that can only pay a smaller price because of the
nature of income receipts. A land less labourer may get a small sum of money every day, so he
buys his provisions daily and does not have a big sum to spend. He will therefore buy something
that has a small unit price.

The rural consumer is a very careful buyer. He is very conscious for getting value for money and
does not like to pay extra for the frills he cannot use. However it is not true that only cheap
brands sell in the market. An example to support this would be that of the Usha Company. Usha
found that the sales of its economy brands was falling in rural areas in contrast to its premier
‘Century’ brand even though it was priced 20 percent higher.

33
NEEDS AND MOTIVES

Need is a state of deprivation of some basic satisfaction e.g food, clothing and shelter. To sell in
rural markets, marketers have to adapt to suit rural needs, like the hugely successful sachet
shampoo that was a boon to rural workers earning daily wages. The rural priority in outlays can
also be non - traditional as shown by the fishermen of Kerala who prefer to buy cell phones
rather than scooters or refrigerators so that they can obtain market information.

INFLUENCE GROUPS

These are the groups an individual uses as a reference against which he compares himself. The
influence group involves reference groups, opinion leadership, family and innovation.

Reference groups – Reference groups come with degrees of influence. Primary reference groups
are the members of the family, school teachers, mukhiya of the village. These people have a

34
great deal of influence. The secondary reference groups are the choupals where rural folk get
together.

Opinion leaders – One big influence on a rural consumer is that of an opinion leader. An
opinion leader is a person who influences the actions or attitudes of others. Individuals may be
opinion leaders, opinion seekers or opinion recipients.

The influencers vary with the type of products purchased. According Anugrah Madison (rural
advertising arm of ad agency Madison) discovered that women, youth and children were demand
generators but it is the man who decided on the brand. He did that after consultations with other
male members in the society.

Youth in the age group of 15 to 25 years influence purchase in rural areas. Children in the age
group between 8 and 15 years also onfluence most purchases. This is largely because children
tend to retain messages and often play- back these messages to others. Aso, children are usually
sent by their mothers to purchase something without specifying a brand and hence they ask for
products they have seen or hearrd on radio or television.

The influence of children on choice is mostly for personal care products. For other products, the
rural consumer gets information from multiple sources including children, but opinion leaders
have a substantial influence on the decision making process of a rural consumer. The influencing
memebers in the community include the village elders as also the educated youth of the village.

Retailers also influence consumers in rural markets. An important reason for this is the credit that
the retailer extends to many of his customers. This is true for FMCG purchases where the
sarpanch and other senior leaders have little or no influence.

The rural market is two – tiered, the higher end comprises opinion leaders. The old order was
made up of successful farmers, village legislature members and elders. However the traditional
roles are changing. The old myths of extension workers, teachers, village heads and the above
need verification.

35
In many areas younger, more educated aggressive persons from dominant castes have become
role models and opinion leaders; retired persons from the armed forces and government services
have taken these roles elsewhere. Courtesy self – help groups and migration of able bodied
males, women have taken the dominant deciion making role in many poorer families.

In any case, most poor rural women have much greater decision making power, particularly on
issues related to household goods, daily consumption item, marriage related issues and so on
compared to many of their urdan counterparts. Nobody demonstrates the understanding of this
‘women power’ better tha the itinerant merchants, ‘pheriwallas’, and so on. This is so evident in
the ‘melas’, ‘haats’, places of pilgrimage, etc.

INNOVATION

Usually when new products or ideas come about, they are only adopted by a small group of
people initially later innovations spread to other people.

Let us take a look at some companies who have tried to use innovation techniques to influence
the rural consumers.

Britannia has an innovative way of influencing the rural consumers through a magic show in a
village. Amidst the laughter of children, the magician breaks into the virtues of Tiger biscuits,
sometimes even drawing out of nowhere or making the packet disappear.

Everyready has also tried to make its mark on the villagers. In between a nautanki performance,
the lights go out. An artiste carrying a torch appears. The ray of light is so strong that it disturbs
the actors on stage one says, “Who is there? What is it that is shining so brightly?”
The wheel of fortune game at the Nauchandi Mela in Meerut sports a different brand of tractor at
every number. This is Escort’s effort at brand differentiation.

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HETEROGENEITY OF RURAL CONSUMERS

It is a well known fact that the consumers in rural areas are different from those in the urban
areas. The rural market itself is diverse with vastly different behaviour across different
geographical locations or across buyer groups. The rural consumers also have their share of the
rich and poor. Their purchases reflect their incomes, physical environment, cultural and social
practices, attitudes, perceptions, beliefs and values. The place of purchase of a product and
product usage vary according to consumers, products and situations and add to the complexity in
the behaviour of the rural consumer. Thus sophistication in approach to the rural markets is
clearly a necessity and starts with the recognition of the non – existence of the average rural
consumer.

Segmentation opportunity

The heterogeneity among rural consumers is an opportunity for the marketers to identify possible
ways of segmenting this market. Variations in behaviour and the benefits sought are important
variables to segment this market. A simple and very relevant variable for segmenting the market
is the economic well being of households. The five categories identified by NCAER survey 02
uses economic well being as the basis for categorization. The five categories are:

The Affluent/ very rich: Households owning personal car/ jeep and other products.

The Well off: Households owning any/ all of these – air conditioners, motor cycle, scooter,
washing machine, refrigerator, colour television with other durables but not car or jeep.

The Climbers: Households owning any/ all of these – VCR or VCP, mixer grinder, sewing
machine, audio equipment (two in ones etc.), black and white television, geyser with other
durable products but not those mentioned in the first two categories.

The Aspirants: Households owning any/ all of these – electric fan, electric iron, bicycle with
other durables but not the ones mentioned in the first three categories

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The Destitute: Households other than those classified under Categories one to four above
(owning any/all/none of these – wristwatches, mono cassette recorder, pressure cooker and
transistor/radio).

The size of each of the segments from the application of the above categories is given in the table
below.

The rural markets have almost the same of households in the ‘well off’ category in the urban
markets even though it is a smaller segment in the rural markets. The number of households in
the category of ‘well off’ in the urban market is 29.45 million and the number of households in
this category in the rural market is 26.36 million.

The above categorization of the market has the advantage that it captures the variations in the
consumption pattern and that it is a basis of segmenting both the urban and rural markets. This
helps the marketer in developing and comparing the marketing strategy in both these markets.

The very advantage of ability to compare can be seen as a disadvantage by marketers who see
this common classification as resulting in inadequate appreciation of the peculiarities of the rural
markets.

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Hence some rural marketers have applied a segmentation method developed specially for rural
markets. A popular approach to segmenting the rural markets is the ‘Socio economic’
classification.

This approach is similar to the earlier categorization except that the category definitions are
specific to the rural market. This approach has been widely used by ICICI Bank in segmenting
the rural market.

Socio economic classification (SEC) approach to segmentation used by certain marketers also
indicates that a large percentage of consumers are in the lower segments of SEC. All the same,
about 9 million belong to the affluent class.

The type of segmentation to be used also differs within the rural markets depending on the
product, competition, characteristics of the company and consumer behaviour variations. This
makes it essential for the marketer to invest time and effort to understand the rural consumer.

Research on specific markets of interest is required for meaningful marketing decisions. In

addition to segmenting decisions, the understanding of the consumers and the regular monitoring
of consumer purchase and use behaviour is critical to avoid surprises.

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BRAND POSITIONING IN RURAL MARKETS

Branding correlates with Image Building in an organization vis-à-vis its products

produced/services rendered. In the vicinity of today's Marketing scenario along with
advancement in technology, Brand Management is the order of the day. In the process of
branding, the aspect of brand activation at ATL (above the level) and BTL (below the level)
makes a vital contribution for the marketing journey.

To attain a safe platform in Brand activation, the Marketing Managers pay attention and focus in
a diligent manner on the value based credentials of the users in the Marketing arena. A full-
fledged dedicated team with multi focused thoughts only can do the needful for the successful
brand management.

Good branding strikes a chord with viewers help them relate with the product and reflect their
aspirations.

The research approaches to get at brand objective.

1. Word Associations:

While using the logo, hoardings and exhibits, suitable jargons have to be deployed in the word
association. People can be asked what strikes in their mind when they hear the brand's name. 

40
2. Personifying the Brand:

Visual control mechanism plays a vital role in identifying the brands in terms of personification.
People can be identified the brands when seeing the visual pictures described.

3. Laddering up to find the brand essence:

Brand essence relates to the deeper, more abstract goals consumer and trying to satisfy with the
brand. The attribute, a functional benefit and an emotional benefit brand essence constitute a
technique known as laddering up.

Brands are increasingly getting more entwined with our lives. The debate today is not as much
about 'why branding' as above defining a meaningful role for a brand in the consumer's life.

FLOW CHART ON BRANDING PROCESS

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BRAND

Views of the Expertise:

The theme addresses of the Confederation of Indian Industry (CII) Brands submit 2005.
Pointed out, this increasing clutter in the market place and the changing consumer dynamics
have thrown up a new set of challenges for marketers-of accruing, retaining and sustaining the
relationship with the consumer.

A leitmotif of this is that the consumer is at the center of all brands do, or at least need to do.

Dr. Erich Joachimsthaler, CEO, Vivaldi Partners and co – author with David Aaker of the
seminal book brand leadership, says that this no longer means mere lip service on the part of
the marketers. As he points out, perhaps to many a brand marketer's chagrin, brands don't occupy
much mind space. In consumers, but revolves around other interest in their lives. Now as he says
it's up to companies to develop products that fit in to consumers' lives rather than develop
products, which they think consumers will prefer.

Prof. Ramaswamy says consumers are no longer passive beings that who will accept what is
doled out to them as a product and service. Consumers today are seeking to "co-create" their
experience of a product or service with a company. This puts traditional business models in a
bind and also has implications for company’s brands.

The next decade is expected to be quite cataclysmic for brands and an article by D.Shivakumar,
ED of Philips India, captures the essence of the changes that are being wrought. But the refrain is
the same. To manage and succeed in tomorrow's Brand world, marketing teams would need to be
far more right brained than left brained they need to be more consumer connected and responsive
than ever before. Speed, smart thinking and sensitivity will be the skill set of the marketer. An
office desk will be a bad place from which to manage the future brand, says a clairvoyant
Shivakumar.

Why Branding:

42
Separate your brand from your competitors in a unique way

 Relevant and motivating to your customer

 Prospects and channels-it gives you value and make you special.

 Enhance your perceived value, there by supporting premium pricing, sheltering you from
low price competition.

 Contributing to share holder value. (Companies like Morgan Stanley look to evidence of
brand strength in setting buy ratings.)

 Provide resilience in times of negative press.

 Enable you to launch new products more quickly and cost effectively

Successful Branding:

As branding can make or break a product, marketer should handle it with the same concern as the
artisans show in their work. All the activities that are taken under the umbrella of a brand add to
or subtract from the value. The customer's evaluation of a brand is a result of all the consumer
experiences he has had with the brand. Consumer experience includes product, services, personal
contacts, advertising, promotions, word of mouth, etc.

This mix of memories, which are built up over a long time, makes the brand potentially the most
powerful liver of the intangible perceived values. After all the first thought that comes to the
mind of the customer prior to the purchase of the product is 'who has made it', if that brand has
good reputation, it raises the level of confidence on the part of the customer to buy the product.

India's USP

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India is shining then. India is Unique in many ways. It has a population that is large,
heterogeneous, largely English speaking and a cultural heritage that runs back to thousands of
years. India is young. India is vibrant. The major segmentation of mass population is located in
rural area. So, the market potential is large in number. So we can expect the market strength in
rural area. Now, the educational Institutions are also concentrating on rural marketing and doing
market research in rural places. Rural markets are rapidly growing in India but have often been
ignored by marketers. Most of them are remote-fully ignorant due to the reason of diversification
of products produced thereby slitting into disposable income.

Branding strategy in rural areas

a) Rural Product Development:

The rural market is a fast growing one and has a huge population with a great level of disposable
income. To encash this, products have to be specifically developed to meet the needs of rural
markets. Sometimes, existing products might have to be modified to suit these markets too
accordingly.

Rural product development has the strong edifice on a great deal of research like feasibility
studies, rural aspiration, rural profiling and so on. This paves way for a great deal of
infrastructure and expertise in this area.

b) Rural Branding

Rural branding bears quite different stand from urban branding. The first step towards rural
branding is to research and gain insight into the working of rural markets. Based on this
communication campaigns have to be developed with a lot of rural sensitivity.

Rural branding is attained by way of opting to a greater percentage of local media and a smaller
percentage of the mass media. Rural gatherings like temple festivals, melas, cinema halls and so
on can be used as venues to promote brands. Direct Marketing and events like road shows; film
shows, melas, street theatre can also be used to promote brands.

44
A well-planned rural branding campaign cannot just create brand awareness but help your target
relevant to your brand and promote sales. A long-term campaign will keep your brand at the top-
of-the-mind and build brand loyalty. So the brands are in safe hands.

c) Rural Market Research

Rural markets behave most differently from urban markets. While many marketers have tried to
market their products in rural areas, just a handful of the same only has succeeded. A strong
insight into rural consumer behavior and sensitivity to their values and beliefs is essential; to
upgrade the rural market rural market research encompasses not just gathering data but analyzing
them and linking the findings to promoting your products.

d) Rural Communication Campaigns:

Communication for rural markets calls for a different kind of outlook. There must be a strong
accent on helping the target relate to the message.

The entire communication and media strategy has to devise a system based on research findings.
These have to be developed in the regional vernacular languages and set in the local culture for
easier acceptance and reach. Unlike communication campaigns in urban areas that rely greatly on
the mass media, the strategy will be of crying in the wielderness in rural areas. Besides mass and
outdoor media, rural extravaganza like temple festivals, melas and other events where the
villagers come together can be used for promotions.

e) Rural Events:

In the rural context, one of the best ways to capture the attention of the audience is through
Event-management. Since rural areas have limited venues for entertainment, conducting an event
in rural areas can bring a good response.

A well-planned event can get the product the mileage that we want. Some of the interesting
events that can be conducted are Road Shows, Melas, Street-Theatre, Film Shows and so on.

45
These make a visually strong impact and build long term brand recall. Rural public are the target
audience and hence the portfolio of event management has to be handled professionally with
diligent care and broad perspective.

f) Rural DM Campaigns:

Direct Marketing (DM) is one of the most powerful way to meet the target on their turf and build
product awareness as well as promotion. The success of any DM campaign depends on the field
workers and their sensitivity and emotional connectivity to rural markets.

In the area of Direct Marketing, rural team has to be trained, to be sensitive to rural culture and
beliefs. They can handle activities like Door-to-Door sampling, marketing and product
promotion. These activities can also be carried out innovatively at places like local cinema halls,
melas and festivals, in the midst of cross-cultural gatherings and conglomerations.

g) Database Creation & Management:

Marketing, branding and promotional activities in the rural context can be highly effective and
thereafter have to create a database of prospects. The question is how will you source this critical
data? The data will contain details of your target segments at the village level / town-level. This
data is essential for us to reach our target accurately and helps our marketing plan and
communication strategies.

Management Information System along with Database management paves ways for a congenial
rural marketing through the information and data available for effective interpretations and use. 

TIPS FOR RURAL BRANDING

Rural Branding is the process of creating and disseminating the brand name so that it is instantly
understood by the consumer. It is different from branding in rural areas as the rural consumers do

46
not understand English names of brands. They rather associate the product with the picture on
the package. For example ‘laal Sabun or red soap for Lifebouy’.

Creating an Identity: In the minds of the consumer. For example,‘Tata Namak – Desh Ka
Namak’. Here Tata has given the salt a national image. They have associated it with the country
and as a result rural consumers tend to connect with it, trust it and also remember it well.

Enhance recognition: The brand should be recognizable to the consumer and create top of the
mind (TOP) consumer recall. For example Fevicol ‘majboot jod’.

Building a brand image: The brand should have a personality of its own. Mahindra & Mahindra
has built its image in the tractor. Bhumiputra series of tractors, sarpanch series have done very
well in the rural areas. The brand name has connected well with villagers.

BRAND PREFERENCE AND LOYALTY

A marketer does not perceive an opportunity in rural market when he or she thinks that the rural
consumer buys only unbranded items. It is useful to have a good understanding of the purchase
behaviour of the consumer in order to guide decisions in the rural markets. In as many as 10
product categories, national brands account for more than 90 percent of the sales.

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The attitude of the rural consumers favours quality products and brands, but brand pricing has
taken into account both the income level and income flow of the consumers. Rural consumers, as
seen earlier are not a homogenous group. There are consumers who can afford high priced
brands. A group of rural consumers who cannot only afford but are also wiiling to buy high
priced brands.

BRAND LOYALTY

Slow to adopt brands. Slow to give them up.

Being relatively closed societies, rural consumers are slower to adopt new brands and categories
than their urban counterparts. Generating trial becomes more difficult than gaining loyalty -
whereas in the more mature urban markets retention is a bigger issue.

Marketers therefore have to front-load their investment, and probably plan for longer lead times
before their investment yields returns. However, the higher level of loyalty that can be expected
(as rural consumers are slower in giving up brands once they have adopted them) helps justify
the initial brand investment.

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Many MNC brands that have long since vanished from shop shelves across the world can still be
found in rural India, indicating the longevity of brands once they are adopted. Newer brands will
need a lot more on-the-ground effort to convince rural consumers to try them as mass media
input alone is seldom enough to get consumers to try.

BRAND PROTECTION IN RURAL INDIA

This is the latest initiative of the consumer goods industry in India in association with the
Federation of Indian Chambers of Commerce to fight a long standing menace that of counterfeits
and pass offs.

Name a product be it a soap, shampoo, hair oil, toothpaste, biscuits, soft drinks, confectionery or
batteries or balm and you will find between 2 and 200 copies of it that compete for customer
attention. There is a plethora of these products in lookalike packages under slightly twisted
names. For instance Fair & Lovely as Pure & Lovely or Parachute as Parashudh.

The packaging, design and colour of the pass off product is so much similar to the original that it
is actually impossible for consumers to distinguish between the two especially if you are not the
sort who reads product names before purchasing it. Leave alone the vast uneducated masses that
live in the country even the educated and informed ones would not be in the habit of verifying
the brand or manufacturer’s name before making a purchase.

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A study conducted by AC Neilson reveals that about 80% of the consumers realize that they have
purchased a counterfeit or a fake product after consuming it. Surprisingly there are many people
who do not even realize this after consumption.

While the problem of fakes is witnesses all over the country it is more severe in the North.
Counterfeiting is rampant in the states of Delhi, Punjab, Haryana and UP. Procter & Gamble
which has embarked on a major drive against counterfeits of its popular Vicks Action 500 found
out through a recent study that 54 out 100 strips of Action 500 sold in the market are pass offs.
This menace has affected its sales in this sector by about 10% These counterfeits and pass offs
are affecting the sales of several brands up to 20 – 30%

The FMCG industry in India loses Rs.8000 Crore, which is about 15% of total market size, per
year to fake goods manufacturers. Pharma Industry in India loses around Rs.4000 Crore ie; 40%
to counterfeiters. The government loses Rs.15000 crore in revenues that would have been
otherwise generated through excise, octroi, sales and income taxes paid on these sales and the
industry all in all loses Rs.30,000 crore to the counterfeits.

A brand represents image and the consistent assurance of quality that a customer has the right to
expect. However, duplicate products that enter millions of homes today bleed brands of their
revenue and reputation, adversely impacting consumers and manufacturers alike. Or worse, these
could cause the consumers bodily harm or even danger to life.

In rural India, where the incidence of piracy is four times that of urban India, the impact of
counterfeits is even more pronounced. A rural consumer is not very well educated and is often
prey to such counterfeits since he usually recognizes products through their packaging, design or
symbols. The consumer is either unaware of or apathetic to the menace.

50
Since spurious goods sold under fake brands physically impact the consumer, a consumer push is
needed to act as a necessary catalyst to address the problem. The rural consumer must be
educated by the companies to look for certain packaging identification marks before purchase.

The problem of counterfeits and fakes is not confined to India alone. It is estimated that
counterfeits account for Rs 200 bn i.e 5 – 7% of total world trade.

The consumer goods industry in India has come together to fight this menace. A Brand
Protection Committee has been formed under the aegis of the Federation of Indian Chambers and
Industry (FCCI).

The mission of the committee is to stem the sale of counterfeits and fakes in India. Directors of
leading consumer non durable companies such as HUL, P& G, Marico, Smithkline Consumer,
Britannia, Indian Shaving and research agencies like AC Neilson and CERC as members of the
brand protection committee.

This is a concerted effort on part of the FMCG industry to stem the loss that accrues to the
companies, the Government and the Consumers.

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DEVELOPING MARKETING MIX FOR THE RURAL CONSUMER

The study of consumer behaviour helps a marketer to identify or define the basic P’s of
marketing and the marketing mix.

What motivates me to buy? Is it the fear of the dire consequences that I might face if I don’t have
the product? Is it the emotional connect with the brand that makes me buy the brand? Is it the
guilt that if I don’t buy the product, I might not do justice to the people I love? Or is it the greed
for the feeling of pride that will overwhelm me after I possess the product? But, do all these
emotional triggers take a back seat and only play a passive role when we talk of rural
consumers?  But again, all rural consumers are not misers. They all are not looking for the
cheapest product; they are probably looking for the most value for money. It is not about a cheap
buy, but a smart buy.

The rural urban divide does exist. Though times are changing the rural consumers are different
from their urban counterparts in some ways. Divisions based on caste, community and

52
hierarchical factors continue to exist. Perceptions, traditions and values vary from state to state
and in some cases from region to region within a state.

Let us take the example of a well known brand of shampoo. When it entered the Rajasthan some
decades ago, with a theater commercial showing a beautiful model featuring bouncy hair, the
product bombed. Post research it showed that it was considered indecent for a girl to show off
her hair and the audience refused to connect with the brand.

We can also consider the case of MRF bullock cart tyres which had to consider the glaring
differences between western and eastern UP in developing their communication package.

Thus there is more to rural marketing than just offering LUPs (Low Unit Packaging), reducing a
product’s price or making an inferior product and dubbing the national ads in vernacular. It
might rather do more harm than good. It is very important to understand the psyche of the rural
consumer and modify the marketing mix so as to be fit to cater to the rural demographics. Let us
have a look at some of the companies, which, made the efforts to understand a rural consumer,
customized the offerings and revolutionized the rural marketing mix.

PRODUCT

Catering to 70 crore residents in 6 lakh villages, where the habits, customs and culture change
every 100 kms is commensurate to catering to 2 demographically rich countries thousands of
miles apart. Customization of products to suit the requirements of such diverse demographics
hence becomes logical. Many consumer durables companies have just removed the value added
features from their products and re- launched them in the rural markets. (e.g. Refrigerators
without frost free technology, LG’s Sampoorna TV). Though, changing your product seems to be
a time consuming and tedious exercise, it has brought some mentionable and fabulous results for
the companies who have used consumer insights to bring in these changes.

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HUL - Let us see 2 examples of the forerunner in interpreting and gaining from insights bringing
in changes in its product range to cater to the profit storehouse.

1. India’s 16% contribution to the world population and 28% to world’s hair shows the
latter’s role in accentuating the physical appearance of an individual. Indigence forced
the rural community to use the same soap for hair and skin, since a Rs. 2 shampoo sachet
categorized itself as a luxury item for them. HUL, having taken a cue from this
insight, introduced Breeze 2 in 1, a multipurpose soap for hair and skin.

2. The premium positioning of Taj Mahal tea did not prevent them from launching Taj
Mahal Janata for the rural markets by using chicory and tapioca flour to decrease costs.

Arvind Mills - Being used to get their clothes stitched, the Rs. 300 price tag on readymade entry
level jeans was a major deterrent for the rural youth. None other than Arvind mills executed the
innovative idea of distributing ready to use stitch kits to the rural tailors, priced at Rs. 195.
Arvind mills sold 5 million kits in 2 years!

Britannia - They launched “Probisk” biscuits which used soya proteins instead of milk proteins
as its ingredient, hence making a biscuit cheaper without altering its nutrition content.

Hawkins - Unlike in urban areas, the use of coal and wood made the control on the flame of the
burner difficult. To help the rural women avoid hand-burns and facilitate the handing of the
pressure cooker, it came up with a new product with 2 long handles on both sides of the cooker.

Philips - The rural mindset of “Sturdier the product, more powerful it is” led to their
“Mahasangram” campaign where they introduced larger and louder radios for rural
demographics.

PACKAGING

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Packaging of the product largely depends upon these factors:

Affordability – Companies should consider the fact that rural consumers largely depend upon
daily wages. A product should be packaged by keeping this in mind. Taking the example of
Videocon which came out with a washer priced Rs. 3,000.

Perceptions – Cultural and social perceptions should be taken care of while packaging the
product.

Ability to read – The product should be packaged so that the rural consumer can identify it.
Since literacy levels are low symbols, logos and visuals are important. For instance, lightning
picture of Rin.

There are two reasons why a rural consumer prefers LUPs.

a. Since they don’t have a big dwelling place, they might not have place for storage.

b. Many of them earn their wages daily so they can’t spend in bulk.

Let us look at some instances where some of the companies have taken up a strategic move to
introduce LUPs in the market.

HUL - Under “operation Bharat”, they introduced sachets of clinic plus, ponds,close up and
fairness cream to make sachet buying a habit for these consumers. Seeing that the rural retailers
sell the cut lifebuoy cakes to the consumers, it came up with 75 gm soap cake and later launched
18 gm lifebuoy soap, priced at Rs. 2.

Asian paints - It introduced oil paints in 250 ml packaging, to cater to the rural consumers’ need
to paint the horns of their livestock and to paint their buffaloes for selling.

Colgate - Understanding the paucity of space for rural consumers, it came up with caps for their
toothpaste sachets to facilitate extended storage while usage of its product.

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Rural consumers identify a brand by its logo and package color rather than the letters (attributed
to the low literacy levels).Hence, the loud and bright colors on the packaging. This has, though,
not proved a deterrent for the imitation product industry, which hitch-hikes on the years of brand
building exercises of the veterans.

This study aims to establish whether the residential background of consumers has a varying
influence on their buying decisions. A survey of 1090 urban and rural respondents was carried
out of which 523 were rural and 567 were urban. The gathered data were analyzed by applying
counts, percentages, means, and analysis of variance.

Rural residents found that packaging is more helpful in buying, that better packaging contains a
better product and that they are more influenced by the ease of storing a package than their urban
counterparts.

Ease of carriage, package weight, simplicity, transparency and similarity of packaging have
comparatively less impact on purchase decisions of rural consumers than urban ones. However,
rural consumers are more critical about packaging as they strongly consider that it contributes to
misleading buyers and is also an environmental hazard.

PLACE

Complexities galore in these distinctive yet blended markets of rural consumerism. A rural
consumer who takes 2 years to make a watch-buying decision definitely does not believe in
impulse buying of consumer durables, but timely availability becomes an important factor in
their buying decisions for consumer goods. The following distribution structure enumerates
various touch-points with respect to the rural consumers.

Research shows that on an average the daily sales figure of a shandy with average 314 outlets are
close to a whopping Rs. 2 lakhs per day and that of an individual outlet is Rs. 874. These rural
supermarkets have the potential to challenge all the world’s K-marts and Wal-marts put together
in their size and sales!

56
HUL - Initiated “Project Harvest”, “Project Bharat” and “Project Shakti” (which utilized the
concept of self help groups) to extend their distribution to the villages with a population of 2000,
1000 and less than 1000 respectively. Each state has one or two Carrying and Forwarding Agents
(C&FAs) who are assisted by Redistribution Stockists (RS), who are allotted a specific area and
are responsible for the physical distribution of the products. RS, in the vans provided to them
cover the areas allocated to them called Indirect Coverage (IDC). The frequency of the RSs’ visit
to these IDC depends upon the kind of business these IDCs generate.

LG - This is a perfect example of a brand which has maintained a premium positioning in the
urban market and still has managed to cater to the rural markets. When LG launched its
“Sampoorna” TV range, it understood that shops in all the villages won’t be profit centers since a
rural consumer usually buys such high-priced items from assembly markets or from the markets
of nearby towns and cities.

There are a plethora of examples of co-operative societies (Amul), SHGs (Shakti), e-Choupal,
distribution in rural financial services, but I will restrict myself to just touching the periphery of
the topic and not dig deeper into these models.

PROMOTION

When in Rome, be a Roman and When in Rome, speak Roman. To make the
Promotions/Advertisements in rural markets successful, you have to connect instantly with the
consumers. You not just have to use the local dialect, but the psycho-graphic inclinations that a
rural consumer has so long been trained to develop should be built upon. The strategy of shock-
and-awe might not be as successful as a fighting teaser campaign that sinks in easily. Also, a
promotion that establishes an emotional connect will lead to returns, sooner than later.

CavinKare - Appreciating the cost-concern of consumers, it did a pre-launch campaign where it

went to the village schools and gave a free head-wash to children and then launched its “chic”
brand at a meager 50 paise per sachet. Consumers, having seen the live results, liked the value
proposition and hoarded the shops!

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HUL – Thecompany has continuously designed innovative promotions to reach the rural
markets.

1.  Lifebuoy in its rural contact program called “Lifebuoy Swasthya Chetna”, where it spread
information on how washing hands can keep diseases away, targeted a population of 5 crores in
15000 villages. It applied a 2 prong approach.

HUL employed Health Development Officers and Health Development Assistants who
went to all the villages and educated the community through lectures and community meetings.

They returned to the villages after 2 months, offered toys, badges and medals to children
who had made it a habit to wash hands regularly (read saved “Lifebuoy” soap wrappers )  and a
certificate to the children who had won these badges most often.

2. HUL capitalized on the huge gathering of 70 million odd pilgrims (read prospective
customers) in kumbh mela - They showed people using an ultra violet wand where germs and
dirt resided on their hands and how regular usage of soap can keep their hands clean.

ITC - The promotion done by ITC during its Hero cigarettes brand launch in 1993 is
unforgettable. In a campaign extended to 3 days, on the first day a person just went on cycle or a
rickshaw saying on a P.A. system “Hero aa raha hai”. On the 2nd day, an elephant draped in a
large “Hero” logo embossed  sheet and carrying a huge cut-out of the hero cigarette packet went
through the villages distributing free samples of the product. And finally on the third day, a video
van came to the villages playing popular movie songs to attract crowd. The campaign was so
successful that the villagers actually started waiting for an event to happen in those 3 days. It was
done in UP and Bihar in October 1993, and the sales figure reached 175 million sticks in just a
matter of months.

There can be many such promotional exercises cited that companies have undertaken to capture
the mind share of a rural consumer. For instance, M&M organized nukkad nataks and used

58
paintings on the well walls, since people gathered there. LIC has used vans and puppet shows to
sell its policies.

Asian paints painted the house of the Sarpanch and the post office to show that the paint can
stand against time and weather. Castrol tried to gain its consumers’ heart-share with its “jaago
jaago jug jug jiyo campaign” aimed at motivating the villagers to get together the issues that
bother them when their new brand CRB-plus was not doing well in the rural markets.

PRICE

Pricing should be kept in accordance with the financial strength of the villagers or the people one
aims to target. One should remember that a major part of the rural consumer base earns a daily
wage, so their savings are minimal. A company should not emphasize on price but on value. It
should provide value to the customer at the least possible price.

The Consumption Basket of the villagers is allocated among different needs among the villagers
and they prioritize and spend their meager earnings.

Examples of good pricing strategies are Philips 14’’ TV for Rs. 8,000 which provides good value
for the price and Videocon washer for Rs. 3,000.

CONCLUSION

Competence of a corporation makes it stay in the market, its competitiveness makes it reach the
rural markets and its Customer orientation helps it be successful there. Also, though the aim

59
seems difficult to accomplish taking the initiative and opening the gates of innovation can make
a corporation reap the benefits of the large and untapped demographics of India.

SOME FINDINGS ABOUT RURAL CONSUMER BEHAVIOUR

 A majority of rural consumers draw information from friends and neighbours.

 More rural consumers gather information from retailers, compared to those in urban
areas.

 About 70% of the rural consumers are advised by the retailer to buy a specific brand.

 Friends and relatives are the most reliable sources of information, compared to other
sources in both rural and urban areas, and retailers play a pivotal role in rural markets,
particularly for convenience products.

 Very few consumers feel that advertisements through mass media have made any impact

 In a little more than 50% of the cases, family members would select the brand in both
rural and urban areas.

 Higher income consumers in rural areas are fairly conscious of brand use and social
prestige.

 About 70% of the rural consumers use the same brand that is used by neighbours and
friends. Among these, a majority are from the lower income group.

 Price is relatively important in case of durable products and less important in case of non
durables for both rural and urban consumers.

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  Consumers in both rural and urban areas generally perceive a product to be of inferior
quality when it is priced low and vice versa.

 Higher income consumers are less- price sensitive and fairly brand loyal for all the
products.

 A majority of the consumers buy the convenience products from the same shop,
indicating high shop loyalty; rural higher income consumers buy from outside the village.

 Rural consumers buy durables mostly during the post harvest season, outside the village
(nearly towns).

FAST MOVING CONSUMER GOODS

The India rural Fast Moving Consumer Goods (FMCG) began to shape during the last fifty odd
years. The FMCG is a cornerstone of the Indian economy. This sector touches the every aspect
human life.

Indian FMCG market has been divided for a long time between the organized and unorganized
sector. Unlike the US market for FMCG which is dominated by a handful of global players,
India’s 460 billion FMCG market remains highly fragmented with roughly half the market going
for unbranded, unpackaged home made products.

This presents a tremendous opportunity for makers of branded products who can convert
consumers to buy branded products. Globally, the FMCG sector has been successful in selling

61
products to lower and middle income groups and the same is true in India. Over 70% of sales are
made to the middle class households today and over 50% is in rural India.

The sector is excited about a burgeon going rural population whose incomes are rising and
willing to spend on goods designed to improve lifestyle. Also with a near saturation and cut
throat competition in urban India, many FMCG’s are driven to chalk out bold new strategies for
targeting the rural consumers in a big way.

MART the specialist rural marketing and rural development consultancy, has found out that 53%
of FMCG sales and 59% consumer durable sales lie in the rural areas. Of two million BSNL
mobile connections, 50% went to small towns and villages; of twenty million Rediff mail 60%
came from small towns so did half the transactions on Rediff’s shopping site.

According to a Chennai based Francis Kanoi Marketing Planning Services Pvt Ltd, the rural
market for FMCG is Rs 65,000 crore, for durables Rs 5,000 crore, for tractors and agri- inputs Rs
45,000 crore and for two and four wheelers Rs 8,000crore. In total, it is a whopping Rs 123,000
crore. This could be doubled if the corporate understood the rural buying behaviour and got their
distribution and pricing right.

A study done by Nielsen (April-Sept ‘08), has indicated that FMCG sectors including skin
creams and lotions, hair oils, toothpaste and candies have seen significantly higher value and
volume growth in rural India as compared to urban India. The rural consumer is very discerning
and in many cases, is far more discerning and demanding than his urban counterparts.

Compared to last year, rural FMCG sales have grown at 6-8% over the last couple of months,
while urban sales have grown at 4%,” says Debashish Mukherjee, a principal at AT Kearney

62
in New Delhi. “For many of these FMCG companies, rural markets contribute 40-50% of
revenues, which is very impressive.”

IMPULSE TO GO RURAL

There are many reasons that have urged FMCG’s to enter the uncharted territory of rural India.
Some of the attractions are discussed below:

Large population

The rural Indian population is large and its growth rate is also high. Over 70% of India’s one
plus billion population lives in villages in rural areas. This simply shows the great potential rural
India has, to bring the much needed volumes and help the FMCG companies to bank upon the
volume driven growth.

Rising rural prosperity

India is now seeing a dramatic shift towards prosperity in rural households. To drive home the
potential of rural India just consider some of these impressive facts about the rural sector. As per
the National Council for Applied Research (NCAER), there are as many as ‘middle income and
above’ households in the rural areas as are there in the urban. There are almost twice as many as
‘lower middle income’ households in rural areas as in the urban.

Growth in market

The purchasing power in rural India is on a steady rise and it has resulted in the growth of the
rural market. The market has been growing at 3 – 4% per annum adding more than one million

63
new consumers every year and now accounts for close to 50% of volume consumption of
FMCG. The growth rates of a lot of FMCG companies are higher in rural markets than in urban
markets. In product categories like toilet soaps, talcum powders, cooking oil, vanaspati ghee, tea,
cigarettes and hair oil, the share of rural markets is more than 50%.

The estimated annual business from rural markets was Rs 123,000 crore, comprising Rs 65,000
crore of FMCG, Rs 5,000 for durables, Rs 43,000 of agricultural inputs including tractors and Rs
8,000 of two and four wheelers.

29% of the rural population owns cars, 27% owns colour television, 24% owns refrigerator and
10% owns washing machines which indicates the untapped potential in rural areas. Companies
therefore have to look at the rural market very seriously for future expansion.

Effectiveness of communication

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 makes it easy to pass off lookalike
products. Slowly the rural audience is maturing to understand the communication developed for
urban markets especially with reference to FMCG products. Television has been a major
effective communication system for rural masses and as a result companies should identify
themselves with their advertisements.

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

IT penetration in rural India

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Today there are over 15 million villagers in India who are aware of the internet and over 300,000
villagers have used it. Ten years back history was created with Public Call Office phone booths
(essentially manually operated payphone facilities) which had opened in every corner of the
country. This experiment was an instant success and contributed to hundreds of thousands of
jobs. Over the next two years, World Tel is expected to product 1000 centres in Tamil Nadu with
2 to 20 terminals in each centre.

If successful this experiment can be easily replicated in the remaining states leading to over a
half million internet users through this experiment alone. The existing 600,000 Public Call
Offices in India will soon be transformed into public ‘tele info centres’ offering a variety of
multimedia information services. The rural consumers spend time and money to access higher
level information. Studies have indicated that if the content direct relevance and commercial
gains, rural consumers are willing to pay for information services.

Consumerism has altered buying behavior in recent years. Spending pattern of consumers is now
adapting the technology bug. Today’s rural children and youth will grow up in an environment
where they have ‘information access’to education opportunities, exam results, career
opportunities, government schemes and services, health and legal advice and services,
worldwide news and information, land records, mandi prices, weather forecasts, bank loans,
livelihood options.

If television could change the language of brand communication in rural areas, affordable web
connectivity through various types of communication hubs will surely impact the currency of
information exchange. As the electronic ethos and IT culture moves into rural India, the
possibilities of change are becoming visible.

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HINDUSTAN UNILEVER LIMITED – A PIONEER IN RURAL
MARKETING

Hindustan Unilever Limited has left no stone unturned to reach the last rural consumers in
India’s hinterland. From project Streamline to project Shakti HUL has achieved huge success
and its efforts have paid off. We definitely cannot undermine the contribution of HUL in rural
development.

PRODUCT SEGMENTATION OF HUL

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HUL’s ENTRY INTO RURAL MARKETS

 Until about twenty years ago the rural market was considered to be a homogenous
market. The decade of 1980s was a significant one for Hindustan Unilever Limited then
Hindustan Lever Limited an India subsidiary of Unilever, when the giant and undisputed
market leader in detergents, Surf in India suffered significant losses at the hands of a new
and small firm, Nirma chemicals.

 Nirma through its product formulation, pricing and distribution immediately caught the
fancy of the middle and low income consumers who were finding it difficult to make
both ends meet with their limited monthly income

 Nirma was low- priced branded washing powder available in grocery and co – operative
stores. The middle class house wife was happy as she could choose a powder against
Surf, which was beyond her budget.

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 Nirma challenged HUL’s detergent business. Its attack from below made HUL realize its
vulnerability as well as identify a new opportunity.

 In 1984, HUL decided to take a fresh look at the market. Research conducted across the
country revealed that different income groups of consumers had varying expectations
from detergent and washing powder.

 Thus, to counter the attack from Nirma, HUL launched Sunlight (Yellow), Wheel
(Green) and Rin (Blue) detergent powders for rural and low income urban consumers.
This strategy of segmenting the market helped HUL win back part of its lost market.

 Later, in 1976 sachets were introduced by Cavinkare, a local South India based company
with its ‘Velvet’ brand.

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 In 1999, Cavinkare came up with another pricing innovation: it launched a 4ml sachet of
Chik shampoo priced at 50 paise. The launch was a great success and Chik’s market
share jumped from 5.61 percent in 1999 to over 23 percent in 2003. It became the largest
selling brand in rural markets.

 As Chik’s market share grew rapidly, HUL saw the potentiality of the market it had
ignored. It responded by launching 50 paise and one – rupee sachets of its Lux, Clinic
Plus and Sunsilk brands.

 Since then, HLL has launched various initiatives to reach out to the rural consumer. It has
changed its product formulations and deliveries. It has begun a number of initiatives in
terms of widening distribution reach through traditional as well as unconventional
channels.

 Servicing rural markets involved ensuring availability of products through a sound

distribution network, overcoming prevalent attitudes and habits of rural customers and
creating brand awareness. Price-sensitivity was another key issue.

 In 2004, HUL was India's largest FMCG company, with 30 power brands turnover of
over Rs. 10,000 crores and 40,000 employees. HUL derived around 50% of its sales from
rural areas. HUL's rural marketing initiatives began way back in 1988, when the company
had launched 'Wheel' for the rural and lower income urban consumer.

 These efforts had intensified since the late 1990s when HLL like many other companies
faced flat growth in the urban markets. In early 2004, as it reviewed its past performance,

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 HLL realized that bulk of its future growth was likely to come from rural areas. The
challenge for HLL was to exploit this opportunity in a profitable manner.

BRANDS OFFERED BUY HUL

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HINDUSTAN UNILEVER’S RURAL MARKETING INITIATIVE

Project Shakti: How it all started?

Hindustan Unilever Limited (HUL) and its constituent companies have been in India since 1931.
Over these decades, while HUL has benefited from the developments in the country, it has
contributed equally to these developments.

HUL has consciously woven India's imperatives with the company's strategies and operations.
The company’s main contributions include developing and using relevant technologies,
stimulating industrialization, boosting exports, adding value to agriculture and generating
productive employment and income opportunities.

HUL has been proactively engaged in rural development since 1976 with the initiation of the
Integrated Rural Development Program in the Etah district of Uttar Pradesh, in tandem
with the company’s dairy operations. This Program now covers 500 villages in the district.

71
Subsequently, the factories that HUL continued establishing in less-developed regions of the
country have been engaged in similar program in adjacent villages.

KEY LEARNINGS ON RURAL DEVELOPMENT:

The principal issue in rural development is to create income-generating opportunities for the
rural population. Such initiatives are successful and sustainable when linked with the company’s
core business and is mutually beneficial to both the population for whom the program is intended
as well as for the company. Based on these insights, HUL launched Project Shakti in the year
2001, for keeping with the purpose of integrating business interests with national interests.

  Total no. Of districts   32

  Total no. Of villages   43,722

  Rural population   55,732,513

  Average population   1,275

per 

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 village

  Literacy rates (rural)   M: 82   F: 59

  Per capital annual

  
 income (rural)

WHY SHAKTI?

Empowering women in rural India

The objective of Project Shakti is to create income-generating capabilities for underprivileged

rural women, by providing a sustainable micro enterprise opportunity, and to improve rural
living standards through health and hygiene awareness. Following the pioneering work carried
out by Grameen Bank of Bangladesh, several institutions, NGOs and government bodies have
been working closely, for nearly five years, to establish Self Help Groups (SHGs) of rural
women in villages across India. Their experiments clearly indicate that micro-credit, when
carefully targeted and well administered can alleviate poverty significantly.

CATALYSING PROSPERITY IN INDIAN VILLAGES

Under the project, HUL offers a range of mass-market products to the SHGs, which are
relevant to rural customers. HUL is investing significantly in resources and manpower that
work with the women on the field and provide them with on-the-job training and support. This
is a key factor in ensuring the stabilization of their fledgling businesses.

HUL imparts the necessary training to these groups on the basics of enterprise management,
which the women need to manage their enterprises. For the SHG women, this translates into a

73
much-needed, sustainable income contributing towards better living and prosperity. Armed with
micro-credit, women from SHGs become direct-to-home distributors in rural markets.

A Shakti Entrepreneur

RISK-FREE MICRO ENTERPRISE THAT YIELDS HIGH RETURNS

A typical Shakti entrepreneur conducts a steady business, which gives her an income in excess of
Rs.1, 000 per month on a sustainable basis. As most of these women live below the poverty line,
and hail from extremely small villages (with populations of less than 2000), this earning is very
significant, and almost twice the amount of their previous household income.

The most powerful aspect about this model is that it creates a win-win partnership between HUL
and the consumers, some of whom will depend on the organization for their livelihood, and
builds a self-sustaining cycle of growth for all.

SHAKTI TODAY

The model was piloted in Nalgonda district of Andhra Pradesh in 50 villages in the year 2000.
The Government of Andhra Pradesh took the pioneering step of supporting the initiative by
enabling linkages with the network of DWACRA Groups of rural women set up for their
development and self-employment. Most SHG women view Project Shakti as a powerful

74
business proposition and are keen participants in it. It has since been extended to Bihar,
Chattisgarh, Gujarat, Haryana, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa,
Punjab, Rajas than, Tamil Nadu, Uttar Pradesh and West Bengal with the total strength of
over 40,000 Shakti Entrepreneurs.

Project Shakti: key players.

SHAKTI : MOTHER OF ALL MARKETING SCHEMES

Thus every morning at a time when, most women in Indian villages perform household chores,
women in villages across Andhra Pradesh, Madhya Pradesh, Gujarat and Karnataka are busy
making money, selling products manufactured by Hindustan Unilever Limited. This is shakti’s
success.

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LIFEBUOY SWASTH CHETNA : A SOCIAL MARKETING CAMPAIGN

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HUL has embarked on a massive first of its kind rural campaign using the concept of hygiene as
a platform to reposition its leading brand lifebuoy. This activity aims to build awareness in the
target audience about hygiene and health through product demonstrations.

Through this campaign HUL aims to reach a figure of one billion users spread over 15000
villages (5% of India’s population) annually by next year.

HUL has identified 8-9 key states for commencing its rural contact program wherein the concept
of hygiene will be highlighted.

The brief:
 Create a sustainable, scalable and cost effective model to reach villages.

 Create a communication package for rural India, which enables behaviour change in
favour of soap usage.

The mission:
 Make the nation a safe place to live in.

The goal:
 Spread awareness about invisible germs amongst children, the carriers of change through
a nationwide program.
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The target audience:
Primary audience:
 School going children aged 5 to 13 years studying in primary and middle schools

Secondary audience:
 Parents who are infrequent users of soap
Key influencers: RMP, teachers &retailers.

Marketing to rural India: making the ends meet HUl Launches i-Shakti Rural
Information Service

Hindustan Lever Limited (HUL) has launched an Internet-based rural information service, called
i-Shakti, in Andhra Pradesh, in association with the Andhra Pradesh Government’s Rajiv Internet
Village Program.

The service is available in Nalgonda, Vishakapatnam, West Godavari and East Godavari
districts.

The i-Shakti service is an extension of HLL’s Project Shakti, which creates income-generating
capabilities for underprivileged rural women by providing a sustainable micro enterprise
opportunity, and to improve rural living standards through health and hygiene awareness.

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It started in Andhra Pradesh in the year 2001; it now covers all districts of the state.

A key factor that has inhibited the socio-economic development of rural India has been lack of
access to critical information and services. Given India’s large geography and weak
infrastructure, it is often difficult to reach out to the rural areas. i-Shakti’s strength’s lies in the
unparalleled reach it offers in reaching out to the rural populace.

The need for such services across most of India’s villages is beyond doubt and the benefits
immense.

i-Shakti is an IT-based rural information service network that has been developed to provide
information and services to meet rural needs in medical health and hygiene, agriculture, animal
husbandry, education, vocational training and employment and women's empowerment. The
premise of the i-Shakti model is to catalyze overall rural development by providing need based,
demand driven information and services across a large variety of sectors that impact the daily
livelihood opportunities and living standards of the village community.

HUL expects that the information services provided would improve the productivity of the rural
community and unlock economic and social progress.

The kiosks offers information in a voice based interactive system, covering a wide range of
topics including, Medical, General Health and Hygiene, Agriculture, Horticulture, Vetenary,
Animal Husbandry, Fisheries, Children and Adult Education, Employment, Legal, General
Entertainment, Computer Games and other Women's related topics. The information provided is
specially developed based on extensive research to understand the needs of the rural community.

In addition HUL has also appointed a panel of experts who are available to the villagers through
a specially developed online query mailing system. This allows villagers to post questions to the

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experts in their local language. The experts answer all questions, taking additional care to ensure
that information is locally relevant and making it available to the user on the kiosk when they
return the next day. Information is updated on a regular basis and new sections are added from
time to time. The kiosks remain open from 9 a.m. to 7 p.m., six days of the week.

In developing the content for i -Shakti, HUL has collaborated with a number of mainstream
institutions, both corporate and not-for-profit organizations that are experts in agriculture, health,
insurance, financial services and education. Some of the partnerships include tie-ups with the
Azim Premji Foundation for children education, Tata Adult Literacy for adult education, and
with CARE India’s CASHE micro finance program.

Other strategic partnerships with Dabur, ICICI Bank, Times of India and Mahindra and
Mahindra will work to provide a new delivery channel for rural India through the i-Shakti kiosks
to offer a multitude of products and services to the rural customer. HLL is deploying i – Shakti
through its partnership with Yonearth Interactive, a Mumbai based Interactive Technology and
Online Marketing Company

Operation Bharat-Hindustan Unilever product strategy

Hindustan unilever operation bharat in the year 1997 to create brand awareness for hul’s
rural brands

This strategy was also to promote the sales of its “special packs” for rural areas.
HUL provided hampers at a discounted price of Rs 5, Rs 10, Rs 15 and Rs 20, each of which has
a clinic shampoo bottle, a tube each of Pepsodent and fair and lovely, and pond’s dream flower
talc, in different sizes and combinations.

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The idea? To have a product for hair care, dental care, skin care, and body care. Consumers were
also made aware of the superior benefits of using HUL products compared to their current habits,
and the affordability of the pack sizes on offer.

The project, thus successfully addressed issues of awareness, attitudes and habits. Hopefully as
consumers in rural areas get exposed to such value-added, value for money alternatives, they will
continue to buy in the categories. Operation Bharat is now targeting 65000 villages and the
strategy has proved to be successful for HUL.

Its long-term strategy is to target 1-lakh villages by the year 2007.

Operation streamline- Hindustan Unilever distribution strategy

HUL launched its operation streamline in the year 1997 with an effort to extend its
distribution in the rural market.

Started as a pilot project in UP, HUL is now using this distribution strategy to cover many new
villages. In this approach, HUL will appoint a redistribution stockist (RS) who will approach a
district stockist who is often termed a wholesaler (in the feeder town).

Each of the 450 districts in India has as many as a hundred villages connected to them, at times
even a thousand. HUL appoints some people in the remote villages as “star sellers”.

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These star sellers do not carry any title to the goods. They take stocks on has got exhausted, they
again approach the RS in the district.

In this manner, HUL is able to penetrate deeper pockets of rural India with its products. This
concept has increased the sales of HUL’s product in two big ways in the villages of UP, BIHAR,
and MP. Now, HUL plans to replicate this model in the villages of Maharashtra, Gujarat etc

HUL increased its sales turnover by over 20% using this innovative strategy. It’s a big. Big
market out there.

HUL creates win- win initiative model:

Why the model was created:
 To make people aware
 To increase the consumption
 To increase the income
 To increase awareness & living standard lifestyle
 self-consciousness

Problem definition of rural India

 Rural poor are skilled on traditional activities & produce excellent products.

 Some of the efforts from government, NGO’s have also trained them on new skills/
technologies.

 These rich products are produced at individual or community level in rural areas.

 These efforts of rural poor do not yield adequate return due to poor marketing facilities.

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Domain analysis- current scenario of rural market

An analysis of the current scenario brings to light the following points:

 Most of the products are sold in the local rural haats.

 Some state government bodies extent preferential treatment to these products at the time
of procurement.

 Attempts are made to publicize & promote the sale of these products through periodic
exhibitions & melas.

 By and large, marketing issues such as demand assessment, brand identification, product
promotions etc have at best been extended cursory consideration.

Challenges faced in rural market.

Sale of products mostly confined to rural haats, therefore:

 May not fetch a very good price for the products.

 Limited demand, low turnover, low income.

 Chance for product improvement is quite limited.

 There is limited awareness in global market.

 Products are not available all the time in most of the places.

 Full financial benefits are not realized by the rural producer.

 It is nearly impossible to analyze the market.

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Possible solution:

Provide a marketing infrastructure that ensures a ready market for these products.

Solution characteristics:

The marketing infrastructure should be such that it:

 It should be durable in terms of time.

 Publicizes & promotes the widest range of products to the widest possible customer base.

 Provides an anytime- anywhere access to the customer.

 Facilitates unhindered flow of financial benefits generated from sale of products, to

producers.

 Reveals customer preferences thereby assisting the rural entrepreneurs in the potential
demand.

Pricing strategy of Hindustan Unilever limited

FMCG major Hindustan Unilever is trying to boost top line growth through low unit packs and
VFM (VALUE FOR MONEY) in order to push growth. Consumers are increasingly opting for
more VFM launches in segments like toilet soaps, washing soap and detergents, toothpastes and
biscuits. VFM BRAND OF HINDUSTAN UNILEVER LIMITED, BREEZE, according to ORG
estimates, breeze recorded a 12 % growth in 2001 over the previous year while Lux a premium
brand a negative 12.3 percent growth.

Pricing in rural markets: “ VFM- VALUE FOR MONEY”.

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A rural customer shops for value. The marketer has to understand that rural markets are far more
utilitarian and price conscious.

A rural customer is price sensitive mainly because of his/ her relatively lower income levels than
urban consumers.

The marketer has to examine methods by which he can make the product more affordable to the
rural customer. Many consumer durables work through banks and offer hire purchase terms to
the customer.

A company has to offer smaller unit sizes, at lower prices. Lux soap of HUL available in 25-
gram packs in urban centers is available in 5 or 10 gram packs in rural markets for half the price.

Low price: a rural customer is price sensitive mainly because of his / her relatively low level of
income and unit price of a product will have an impact on sales. Pricing the product at a lower
price really attracts rural population for using the products.

For e.g. Hindustan Unilever sells lifebuoy soap in 60 gms @ Rs 4.50 sells primarily in rural
areas. Urban sales to rural sales ratio are 40:60.

Product strategy of Hindustan Unilever limited:

Branding: A brand is a name, word, symbol, design or a picture or a combination of them used
to identify the product & distinguish it from the competitors. The marketers have to come out
with appropriate brand names that can be easily remembered by rural consumers.

For e.g. HUL’s brand lifebuoy (lal saboon) has created a lasting impact on rural consumer.

Refining the product-mix

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HLL is aggressively investing in a variety of high-end products in the key personal care segment
and in expanding its processed foods business rapidly. They see this as the key to HUL’s core
focus on growing organically. Additionally, with its exit from the marine business, the company
has tied up all of its loose ends, and will no longer seek to operates in businesses that are
strategically separate from its core operations

Promotion strategy:

Formal media to reach the people:

It includes press and print, TV, cinema, radio, and point of purchase and outdoor advertisement.
Reach of formal media is low in rural households (print: 10% TV: 31%, cinema: 36%, and radio:
32%) and therefore the marketer has to consider the following:

Newspapers and magazines:

English newspapers and magazines have negligible circulation in rural areas. However local
language newspapers and magazines are becoming popular among educated family in rural
areas.

Television:

It has made a great impact and large audience has been exposed to this medium. Hindustan
Unilever has been using TV to communicate with the rural masses. Lifebuoy, Lux, etc are some
of the products advertised via television. Regional TV channels have become very popular
especially in rural areas. HUL marketers are using Sun TV (Tamil Nadu), Asianet (Kerala).
Alpha Punjabi (North), alpha Marathi (Maharashtra) to reach the consumers.

Radio:

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Radio reaches large population at a relatively low cost. There are specific programmes for
farmers like farm and home/krishi darshan in regional languages. Another advantage is that the
radio commercial can be prepared at short notice to meet the changing needs of the consumers.
Second advantage is that a ten second spot in regional news would cost only about rs 1500/.

Cinema:

The monthly charge for showing an ad film is within rs 500/-. Local distributor or dealer who has
good contacts with cinema houses can easily monitor this activity.
Films on lifebuoy are shown in cinema halls. Apart from films, ad slides can also be screened in
village theatres.

Point of purchase:

Display of hangings, festoons and product packs in the shops will catch the attention of
prospective buyers. However a clutter of such pop materials of competing companies will not
have the desired effect and is to be avoided. Hindustan Unilever has been promoting lifebuoy
soap at the point of consumption by putting stickers, posters, tin boards on the walls of wells,
tanks and trees near rivers.

Indirect Coverage

Under the Indirect Coverage (IDC) method, company vans were replaced by vans belonging to
Redistribution Stockists, which serviced a select group of neighboring markets.

Operation Harvest:

HLL`S strategy “operation harvest” uses a fleet of vans, which regularly visits remote villages
with a population of less than 5000 at regular intervals to restock small shops with its primary

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products- lifebuoy and wheel soaps. They only use this for primary products because of higher
returns coupled with low cost benefit.

Cinema van operations:

These are typically funded by the Redistribution Stockists. Cinema Van Operations have films
and audiocassettes with song and dance sequences from popular films, also comprising
advertisements of HLL products.

BIBLIOGRAPHY

‘We are like that only’. Understanding the logic of Consumer India – Rama Bijapurkar

Fortune at the Bottom at the Pyramid – C K Prahlad

http://www.icmrindia.org/casestudies/catalogue/Marketing1/MKTA008.htm

www.hul.com
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http://www.financialexpress.com/news/hll-project-shakti-to-cover-all-rural-india/100565/

http://www.scribd.com/doc/7349157/understanding-rural-buyer-behaviour

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