Project Report

On

How Internet Marketing can help rural India?- A select study.

Subject: Internet Marketing.

Prepared By:

Kaushik Dutta Roy.

B-Tech(IT), PGDM(Marketing)
Preface:

Internet marketing is one of the important subject in the specialization of Information

System in PGDM course.The importance of internet marketing could be very well
realized by the fact that it covers a lot of spheres. Internet marketing would be the mantra
of all web savvy entrepreneurs. The importance of internet marketing lies in the fact of its
mass appeal. The internet marketing serves as a wonderful tool to those net savvy
businessmen who exploit the tool to maximize the profit. A small business would assume
incredible levels if an internet marketer apply a carefully planned technique to promote
the product or a service. The importance of internet marketing lies in the fact that it is not
restricted to one particular aspect and covers a large area. Larger area does not mean only
the urban area it also includes significantly the rural area also. The present research
enquires the Indian rural market in internet marketing perspective. Indian rural market
has high potential as compare to urban area because it consists almost 70% population of
India. Now a days per capita income is increasing in rural area also and introduction of
internet has been stimulating the Indian rural market for past few years. Because the
study is selective so ITC’s e-choupal initiative best describes it in every aspect of internet
marketing. ITC is the first player who has introduced internet marketing concept in rural
market to get direct touch with the producer of goods and make them to get best price for
their goods in the market as pert of their CSR activity as well as their business model.
Internet is the tool to implement their business plan effectively in rural market. The
whole research work is focused on different aspects of internet marketing and its
application in rural India.
Introduction:

The present research project is focused on how internet marketing is helping the Indian
rural market to explore its resources efficiently. If we make cluster of the title of this
research project then we can find two very contemporary relevant marketing topics; that
are “Indian Rural Market” and “Internet Marketing”. As a result of green revolution,
there is a socio-economic revolution taking place in Indian villages since last three
decades. The rural market is not passive. It is vibrant and growing at a faster pace. It will
soon outstrip the urban market if this pace of development continues. With the change in
scenario, the marketing focus is also changing towards villages: ‘Go rural’ is the slogan
of marketing gurus. Technology is facilitating this shift from urban India to rural India.
With the advent of technology internet is now become the major driver for the marketing
perspective as it reduces distance and time barriers. Apart from it Web is the driving
force of internet commercialization and where most consumer electronic commerce
occurs.
The main objectives of this study are:

 What is internet marketing and its implementation in India.

 Study of Indian Rural Market.
 How internet marketing can help rural India.

Research Methodology:

This research is based on secondary data obtained from different research articles and
published statistical reports. The work focuses on select study of ITC’s E-choupal
initiatives which is best describing the rural internet marketing scenario. ITC Limited has
now established computers and Internet access in rural areas across several agricultural
regions of the country, where the farmers can directly negotiate the sale of their produce
with ITC Limited. As a whole the research is case study based secondary research work.
Internet Marketing and India:

Internet marketing, or e marketing, is marketing in electronic environments primarily on

the Internet, on one or more of its services (WWW, email), or offline by enterprises that
produce and sell Internet-related products. Like traditional marketing, the goal is still to
facilitate exchange, build long term customer relationships, and create utility, which is
the benefit or value received from marketing exchange. The focus is on the synergy
created when traditional marketing is performed in electronics environments that reduce
or greatly eliminate time and space constraints, facilitate personalization and
customization, and allow the interoperability of computers and other devices.
Internet marketing delivers time, place, possession and form utility. The potential for
time utility is far greater online than off line because web-storefronts never close,
information is available nonstop, and searches can be conducted anytime the visitor is
connected. The Internet is a 24/7/365 environment. People with connectivity and the
ability to search for the products or information they need or want online benefit fron
place utility. Place utility is provided by entertainment, news, weather, software, and
other virtual products that can be delivered directly from the Internet to the visitor’s
computer or wireless device. Online visitors have worldwide access to stores and content.
They also have seamless access to delivery services for tangible products purchased
online. Buyers can take possession of purchased products with their credit card or online
payment alternatives, which creates possession utility. They benefit from utility when
products are customized or made available in the desired assortments or quantities. The
Internet facilitates customization on a scale that can not be approached online.
Internet marketing is performed by enterprises that operate exclusively on the
Internet(clicks only) and by others that have both an online and offline presence (bricks
and clicks). Marketing is taking place in the infrastructure segment where intermediaries
sell products provided by other businesses and manufacturers sell their own products. Its
occurs on intranets, proprietary(private) computer networks walled off from outsiders,
and extranets, networks that allow selected external enterprises intranet access. Internet
marketing can be targeted to local domestic home-country, regional, national, or global
markets.
The Seven Stage Cycle of Internet Marketing:

Step1: Step2: Step3:

Step 5
Corporate
Design the Marketing and Business
Analyze the Market Marketing Strategy
Program Unit Strategy. Opportunity
Step 6

Step7: Step4:

Evaluate the Marketing Design the Customer

Program Experience

Step6: Step5:

Design the Customer Design the Marketing

Interface Program

Designing the
S

(Source: “Internet Marketing: building advantage in a networked economy” by Rafi A. Mohammed, 2002
edition.)

Stage 1: Setting Corporate and Business-Unit Strategy

Corporate strategy addresses the interrelationship between the various business units in a
firm, including decisions about which units should be kept, sold or augmented. Business
unit strategy focuses on how a particular unit in the company attacks a market to gain
competitive advantage.

Stage 2: Framing the Market Opportunity

Stage two entails the analysis of market opportunities and an initial “first pass” of the
business concept—that is, collecting sufficient online and offline data to establish the
burden of proof of opportunity assessment.

Stage 3: Formulating the Marketing Strategy

Internet marketing strategy is based upon corporate, business-unit, and overall marketing
strategies of the firm. The marketing strategy goals, resources, and sequencing of actions
must be tightly aligned with the business-unit strategy. Finally, the overall marketing
strategy is comprised of both offline and online marketing activities.

Stage 4: Designing the Customer Experience

Firms must understand the type of customer experience that needs to be delivered to meet
the market opportunity. The experience should correlate to the firm’s positioning and
marketing strategy. Thus, the design of the customer experience constitutes a bridge
between the high-level marketing strategy (step three) and the marketing-program tactics
(step five).

Stage 5: Designing the Marketing Program

The completion of stages one through four results in clear strategic direction for the firm.
The firm has made a go/no-go decision on a particular option. Moreover, it has decided
upon the target segment and the specific position that it wishes to own in the minds of the
target customer.

Stage 6: Crafting the Customer Interface

The Internet has shifted the locus of the exchange from the marketplace (i.e., face-to-face
interaction) to the market space (i.e., screen-to-face interaction). The key difference is
that the nature of the exchange relationship is now mediated by a technology interface.
This interface can be a desktop PC, sub-notebook, personal digital assistant, cell phone,
WAP (wireless applications protocol) device, or other Internet-enabled appliance.
Stage Seven: Evaluating the Marketing Program

This last stage involves the evaluation of the overall Internet marketing program. This
includes a balanced focus on both customer and financial metrics. This model emphasizes
the importance of capturing the cross-platform behaviors that are observed by customers.

Indian Scenario:

India is the fastest growing internet market in the world with over 23 million active
Internet users, holding out prospect of a larger growth in the number of citizen. The top
eight metros were driving the growth of internet in India with fast growing adoption in
smaller cities, said Manish Agarwal, Vice-President (Marketing) of rediff.Com, one of
the leading online community portals.

E-commerce is the most recent trend in India for B2B and B2C marketing perspective.
As quoted in the report on eCommerce in India, from www.india-reports,
(http://www.india-reports.com/summary/ecommerce_in_india.aspx), India’s eCommerce
industry is on the growth curve and experiencing a spurt in growth. The Online Travel
Industry is very well developed and is booming largely due to the Internet-savvy urban
population. The rest of the segments, categorized under online non-travel industry,
include e-Tailing (online retail), online classifieds and Digital Downloads (still in a
nascent stage).

Though eCommerce took a beating in the dotcom bust, it seems set to grow globally. The
global revival of eCommerce is having a ripple effect in India too where the B2B
(Business to Business), B2C (Business to Consumer), C2C (Consumer to Consumer),
G2B (Government to Business) and G2C (Government to Citizens) segments are
showing rapidly increasing activity over the past few years. India has its share of success
stories in the B2C segment in the form of Indiatimes.com, Rediff.com, Shaadi.com,
Indiamatrimony.com, ebay.com, MagicBricks.com, Monster.com and Makemytrip.com
etc. These and such other portals are generating a lot of interest and increasing
transaction traffic. Smaller businesses have jumped onto the bandwagon by offering
products and services online and have successfully carved out niches for themselves. The
online community is growing by leaps and bounds as an increasing number of consumers
have started transacting online because the initial fears and apprehensions are being laid
to rest.

Research studies have indicated several factors responsible for the sudden spurt in growth
of eCommerce in India such as:

 Rapidly increasing Internet user base

 Technology advancements such as VOIP (Voice-over-IP) have bridged the gap
between buyers and sellers online

 The emergence of blogs as an avenue for information dissemination and two-way

communication for online retailers and eCommerce vendors
 Improved fraud prevention technologies that offer a safe and secure business
environment and help prevent credit card frauds, identity thefts and phishing
 Bigger web presence of SME’s and Corporates because of lower marketing and
infrastructure costs.
 Longer reach - Consumers in the Tier II & Tier III cities are fast realizing the
potential of the Internet as a transacting medium
 The young population find online transactions much easier

Internet Usage and Population Statistics:

YEAR Users Population % Pen. Usage Source

1998 1,400,000 1,094,870,677 0.1 % ITU
1999 2,800,000 1,094,870,677 0.3 % ITU
2000 5,500,000 1,094,870,677 0.5 % ITU
2001 7,000,000 1,094,870,677 0.7 % ITU
2002 16,500,000 1,094,870,677 1.6 % ITU
2003 22,500,000 1,094,870,677 2.1 % ITU
2004 39,200,000 1,094,870,677 3.6 % C.I. Almanac
2005 50,600,000 1,112,225,812 4.5 % C.I. Almanac
2006 40,000,000 1,112,225,812 3.6 % IAMAI
2007 42,000,000 1,129,667,528 3.7 % IWS

(Source: http://www.internetworldstats.com/asia/in.htm)

Overview of Indian Rural Market:

RURAL INDIA with its traditional perceptions has grown up over the years, not only in
terms of income, but also in terms of thinking. The rural markets are growing at about
two time faster pace than urban markets, not surprisingly, rural India accounts for 60 per
cent of the total national demand.

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

630 million (approximately) would become bigger than total consumer market in
countries such as South Korea or Canada in another 20 years and it will grow at least four
times from its existing size.
Gone are the days when rural consumer went to nearby city to buy ’branded products and
services’. The rural consumer is growing and this is an opportunity to grab the market
share for all the global players in the market -- whether it is into Fast Moving Consumer
Goods (FMCG) sector or retail sector (either insurance or banking or for that sake any
other sector).
The FMCG sector includes companies like Indian Tobacco Corporation (ITC), Godrej,
Hindustan Lever Limited (HLL), Gujarat Cooperative Milk Marketing Federation
(GCMMF-Amul) and Dabur India Limited. All these have shown a strong global
presence in the rural sector and it can be said that all the FMCG companies should target
the rural sector.

Some FMCGs products like toothpaste, hair oil and other like shampoos have done much
better in the rural areas than the urban and the semi urban areas. It has been a
phenomenon that the sales of many companies have gone up; Coca-Cola, Nestle and
Godrej too have also reported better sales in rural areas.
The retail sector has a huge potential for growth as a study shows that opportunities in
rural retail sector were estimated to be over $34 billion in the year 2007, which is
expected to touch $43 billion by the year 2010. It can be seen from the market that
companies like Reliance, Subhiksha are expanding in the rural market. ITC has launched
its first rural mall ’Chaupal Sagar’, which offers products ranging from FMCG to
electronic appliance to automobiles. Indian Oil was planning to invest $ 189.10 in the
rural areas during the financial year 2009.

Insurance sector has one of the biggest potential in the upcoming scenario and the fact
lies in the statement that only eight to 10 per cent of the rural households are covered by
life insurance. Rural investments are limited to their available option -- post offices and a
few limited commercial banks rural extension counters. The remaining 90 per cent offer a
huge potential as such for the insurance companies. The rural market is vibrant and holds
tremendous potential for growth of insurance business, particularly because of the strong
saving habits. LIC has a target of selling four million policies in the current financial
year.

Telecom sector is one of the booming sectors of the economy. There are a large number
of mobile subscribers in India and with the next 100 million to come from non-urban
areas, many Indian mobile service providers are targetting the rural market with
aggressive tariffs and low cost hand sets. In this regard Reliance Communication has
targeted the rural segment by its ‘Grameen programme’ for rural subscribers. Spice
Telecom is into the process of launching local market rates for the commodities across
Karnataka to connect with rural customers. BSNL plans a $ 125.38 million to be spent on
its rural infrastructure.

Consumer durable industry is also on the verge of making a foray into the rural India as it
was all set to witness 12 per cent growth in the year 2008. Many companies like LG,
Samsung are all set to put themselves into rural sector.
With India entering the globalisation mode and the rural revolution being governed by
rising purchasing power, increased savings, changing consumer habits, there are sure and
positive signs that a new dawn of rural India is going to come.

Internet Marketing in Rural India:

The roads are dusty and unpaved; electricity is erratic and its quality inferior; the
residents seldom finish school and to most the use of hi-technology starts with a
television and ends with a mobile phone – just for talking. Yet ask the heads of dozens of
technology companies in India and they will tell you that foremost on their list of
strategic moves is to head into rural India.

From multinational high-tech consumer durable companies to Chinese mobile-phone

makers; from global information technology giants such as Microsoft to back-office
service providers; global telecom and biotechnology companies, and even India’s IT-
sector lobbyist, the National Association of Software Services Companies (NASSCOM),
are stepping out of the cities and moving into the villages and towns of rural India.

If we take Yahoo for example, the latest firm to announce that it is moving into rural
India. This Internet company has finally decided to take the plunge after watching the
markets for several months, primarily because competition from rival portals is getting
tougher. According to Pranesh Anthapur, chief operations officer of Yahoo India, “The
importance of rural India can’t be underestimated any more.” The company plans – for
the time being – to just promote brand awareness by providing basic e-commerce support
against the backdrop of growing personal computer ownership and Internet penetration in
rural India.

Yahoo’s obvious competition in the rural markets is Google, which announced its foray
about some weeks back and does not have profits in mind either – at least not just yet.
This search-engine technology innovator’s “challenge” is to make the search engine less
complicated, as well as to develop content for rural users – such as weather updates, crop
patterns, ebb and tide schedules, etc.

Similarly, DataWind Net Access Corp, a Canada-based provider of wireless web access
products and services, has tied up with the Indian IT lobbyist NASSCOM to run Internet
training programs in the villages and small towns in the Indian states of Orissa, Andhra
Pradesh, West Bengal and Maharashtra. The objective looks more social than commercial
in the sense that the aim is to improve the reach and user base of the Internet in villages
and small towns so that state and district administration services can be enhanced and
made more transparent.

But if the rural markets are not revenue generators yet for Yahoo!, Google or even
Microsoft – which is implementing the “IT Saksham” project primarily to evangelize the
benefits of using IT in rural communities – most telecom companies (and even mobile
handset makers) are moving out of larger cities and plugging into the rural sector, purely
to ramp up volumes.

Although urban markets are still lucrative and will continue to be the focus for the
telecom sector, the untapped potential of the rural markets is now seen as the next volume
driver. “India has the target of reaching 500 phone subscribers – from the present 200
million (fixed plus mobile) – by 2010, and that kind of growth can only come from the
rural segment,” said TV Ramachandran, director general, Cellular Operators Association
of India (COAI).

In fact, a strange thing happened in India two weeks ago. To create and run networks in
remote areas, the government announced the auction of 81 rural regions, the laying-out
cost of which was supposed to have been subsidized by the Universal Service Obligation
Fund (USOF) created by the Department of Telecom (DoT) in 2003. The resources for
implementation of this objective are raised through a 5% universal service levy on gross
revenue of all telecom companies (except the pure value-added service providers like the
Internet, voicemail, e-mail service providers) and grants and loans from the federal
government.
However, in 38 of the 81 regions, telecom companies did not bid – meaning that
subsidies was not sought at all – and in about 15 regions, Bharti Airtel, Reliance
Communications and Aircel (three of India’s large telecom companies) submitted
negative bids – which means that they preferred to pay into the USOF instead of
accepting its support.

“Most of the rural pockets, which were unviable even a few years back, have now
become viable and profitable. Therefore, operators preferred to pay to the USOF rather
than to take its support and be bound by a few restrictive DoT conditions,” said a COAI
spokesperson.

Small wonder then that with the DoT stranded with unutilized USOF funds of about $2
billion as of March, many telecom experts have started questioning the utility of creating
such a fund in the country.

Indeed, to some extent, thanks to an abysmally low teledensity (number of telephone

connections per 100 people) of 4% (versus 15% in urban areas) in rural India, that
segment of the market is scorching. According to the vision plan drawn up by the DoT,
200 million rural telephone connections are envisaged by the end of 2012, taking the
rural teledensity figure to 25%.

India’s 700 million-plus rural population is a cheap talent pool as well. That’s what the
flourishing IT-enabled services or the business process outsourcing (BPO) sector has
realized lately. Stymied in their growth by an acute shortage of human resources in the
cities (where the attrition rate can go up to 60%) local BPO companies have now started
moving into to the rural sector for launching their services. The other reason why the
rural sector has emerged as attractive is cost. The industry says that the infrastructure cost
is 20% cheaper compared to urban set-ups.

Pioneers that have set up such centers include Lason Inc (a US-based outsourcing firm),
GramIT (a rural venture associated with local IT giant the Satyam Group), and
Datamation (a Delhi-based group). These are now the key players in the Indian rural BPO
scene, who say that besides reducing costs for their customers, their rural strategy has
also been a key contributor toward bridging the digital divide and creating jobs.

(Source:http://ahssan.wordpress.com/2009/06/17/high-tech-sector-eyes-indias-rural-market/)

The Opportunities

Bruno Goveas, Head - Marketing and Product Management, Akamai India, said, “We
also observed that Internet connectivity in India in terms of observed unique IP addresses
grew by 23 per cent quarter-over-quarter in Q3. A good percentage of the growth is
coming from places out of the top metros. Now that we have the technologies like mobile
and WiMax, which have the potential of reducing the urban versus rural divide in Internet
connectivity, I cannot think about a better time for Internet players to take rural
penetration more seriously.”

The Hurdles

Amardeep Singh, Co-Founder and Vice President - Business Development, Interactive

Avenues, noted, “Internet in India is still considered a niche medium and brand
advertising will happen in large numbers only when it becomes mass. If this medium gets
about 100 million users, only then can it be called a mass medium. Currently, it is only
half this number and it is important for the medium to touch the 100-million mark, only
then will more brands get more involved.”

Amar Goel, CEO, Komli Media, observed, “For Internet to go deeper in rural India, it is
important that the cost of computing comes down, thus making access to PC cheaper. The
infrastructure should be in place. One big drawback is that the penetration of broadband
is too low in India for widespread Internet access.”
Neeraj Kumar, ITS, BSNL, felt that the time was ripe for Internet to make a deeper
penetration in rural India. According to him, what was required was e-governance
service. “Government services should be available more on the Internet,” he added.

Harminder Kaur, Chief Strategy Officer, Ignitee, observed, “Digital penetration in the
rural market is abysmally low at this point, 3.3 million active users (I-Cube 2008) for a
population of 578 million – that is 0.57 per cent penetration. The key reasons that are
responsible for this are lack of infrastructure, unaffordable prices and lack of customised
content.”

He further said, “To counter the above, the Government will need to provide better
infrastructure in terms of more telephone lines, etc., make mobile, PC and Internet
accessible at more affordable prices, offer price incentives or easy finance schemes for
the buyers and so on. The digital industry at its end will need to focus on customised
content development to ensure practical usage and benefit to the rural program. This
would include vernacular search engines and websites at one end and software like
education programs, employment training, etc., at the other.”

The Road Ahead

Goveas pointed out, “I believe the key is educating the rural market on the power of the
Internet. Mobile has taken off well because rural Indians understood the power of
communication and how it can change relationships and business. People understood the
need clearly with mobiles.”

“We need to educate people by emphasizing that Internet fulfills their entertainment,
information, communication needs, while ensuring a better life for the community
around. Also, we believe there is a significant need for developing simple interfaces and
content in regional languages to create a strong need for people in rural India to access
content,” he added.

Kaur observed, “The Government and the digital industry should also partner with
private players to raise funds and develop new initiatives (for instance e-choupal or the
student learning program by Intel) to further the usage and penetration of the digital
medium in the rural areas. Higher penetration of the digital medium in these areas would
not only mean a much more empowered India, but also a lesser level, a great tool to
broaden the communication and interaction touch points of this audience.”

Kumar of BSNL said, “A deeper penetration of Internet in rural India would mean more
business, it will bring more efficiency in the country and above all it will further
strengthen the Indian economy.” (Source: http://www.ignitee.com/newsroom/rural_internet.html)

So, is mobile Internet the answer to taking Internet to the rural India? One needs to wait
and watch the infrastructure development brought in by the new Government that comes
into power after the Lok Sabha elections slated for April-May 2009.

Because the project is based on secondary research so we can now consider one case
study which is best describing the internet marketing scenario in Indian rural market.
ITC’s e-choupal initiatives best suites for it.

E-CHOUPAL: ITC’S RURAL NETWORKING INITIATIVES

In Hindi (an Indian language spoken in most parts of Northern and Central India), a
choupal is a village gathering place. The e-choupal initiative—whereby a choupal is
equipped with a computer and Internet connectivity—is the brainchild of a large
agricultural processing company in India, the Indian Tobacco Company (ITC). The
initiative was conceived to tackle the challenges posed by certain features of Indian
agriculture, such as fragmented farms, a weak infrastructure, and the involvement of
numerous intermediaries. Although the primary objective of the project was to bring
efficiency to ITC’s procurement process, an important byproduct is the increased
empowerment of rural farmers where e-choupals have been established.
The e-choupal initiative directly links the rural farmers with the company for the
procurement of agriculture and aquaculture products, such as soybeans, coffee, and
prawns. Traditionally, these commodities were procured by such companies as ITC from
mandis (major agricultural marketing centers in rural areas of India), and a long chain of
intermediaries was involved in buying the produce from farmers and moving it to the
mandis. Through e-choupals, these farmers can directly negotiate the sale of their
produce with ITC. The PCs and Internet access at these centers enable the farmers to
obtain information on mandi prices and good farming practices, and to place orders for
agricultural inputs, such as seeds and fertilizers. This access to information helps farmers
in improving the quality of produce and obtaining better prices. Elected from the village
itself, a literate farmer acts as the interface between the illiterate farmers and the
computer.
The e-choupal model has been effective in the short term. However, because of multiple
variables that affect productivity, a long-term assessment of the system’s productivity and
efficiency levels needs to be undertaken.

Background
The ITC group of companies has a yearly turnover of Rs 7.5 billion (US$162 million),
and its activities span tobacco and cigarettes, paper and packaging, paperboard, hotels
and tourism, information technology, and agricultural exports. For its agri-export
division, ITC procures various agricultural commodities such as soybeans, coffee, and oil
seeds. Typically, a farmer sells his produce to a small trader called a kaccha adat, who
sells the produce to a larger trader called the pakka adat, who in turn takes the produce to
a local mandi, where a larger trader buys the produce. The mandi traders then operate
through brokers to negotiate sales to companies such as ITC. This long supply chain
results in high procurement costs for ITC and in lost profit opportunities for the farmers.
Because this long supply chain is a very time-consuming system, it also results in
deterioration in the quality of the products.
The e-choupal system was introduced by ITC in June 2000. A choupal was converted
into an e-choupal by setting up a computer and Internet connectivity. An investment of
Rs 40,000 is needed to establish an e-choupal with dial-up connectivity. If a VSAT (Very
Small Aperture Terminal) has to be mounted, the investment moves up to Rs 100,000.1
E-choupals are operated by a sanchalak (operator), a literate person who is elected from
among the farmers of the village. He acts as an interface between the computer and the
illiterate farmers, and retrieves information on their behalf.
While ITC covers the cost of equipment, the sanchalak pays for day-to-day operational
costs, such as electricity and Internet charges. These costs vary from Rs 3,000 to Rs
8,000 (US$60 to US$160) per year. Training is given to the sanchalak, who also doubles
as an ITC salesman. He is paid a commission of 0.5 percent per ton of processed product.
ITC spends an average of Rs 5,000 (US$100) annually on the support and maintenance of
each e-choupal—training, maintaining a help desk, addressing equipment and software
complaints, and repairing and replacing broken equipment.
Information that can be accessed from an e-choupal includes crop prices, weather,
scientific farming practices, farmer peer groups, and soil-testing services. This online
information is made available in Hindi. For the farmer, the selling process works as
follows: The farmer carries a sample of his produce to a local kiosk and receives a spot
quote from the sanchalak. If the farmer accepts the quote, he can then transport the
produce directly to an ITC collection center and get payment within two hours.
The material handling systems at the ITC collection center ensure that tractors, trolleys,
or trucks can directly unload their produce without spilling any grain, and a modern
weighbridge ensures precise weighing. The transportation cost is reimbursed to the
farmer. If the farmer is located in a remote area, he has the option of selling his produce
to the sanchalak or to a nearby collection center. The farmers prefer this system to the
mandi system, where they had to wait for hours, or even days, before the produce was
sold. In addition, transaction costs such as bagging, transportation, loading, and
unloading had to be incurred by the farmers. Commission agents at the mandi used a
small weighing scale that was inaccurate and resulted in less revenue in proportion to the
produce. Moreover, the wastage level was higher, because the agents tended to throw
away some grain while evaluating its quality.
The intermediaries are not removed from the value chain. Their roles are redefined to
samayojaks (coordinators), who assist ITC in setting up new e-choupals by conducting
village surveys and by identifying the best sanchalaks. They manage the physical
transportation of sales made at the e-choupal, collect price data from local auctions, and
maintain records. These coordinators earn a 1 percent commission on product processed.
Initial resistance to joining, because of commissions as low as 1 percent, was overcome
once the increased volume of transactions became apparent.
ITC coordinates its activities with institutions such as the national meteorological
department and several universities to build useful Internet content, and also with
companies supplying agricultural inputs (fertilizers and seeds) to enable e-commerce.
Such companies take orders and market their products on the e-choupal Website. ITC has
also collaborated with an insurance company on a pilot basis, to provide insurance
services specially designed for the landless, marginal farmers in more than 100 villages in
the state of Madhya Pradesh.

Impact/Results
The project has come a long way since its inception, and is today recognized as India’s
largest Internet-based initiative, covering 1,300 choupals, linking 7,500 villages, and
serving almost 1 million farmers. Madhya Pradesh is host to 1,045 e-choupals, spread
over 6,000 villages covering 600,000 farmers. E-choupal has also established its presence
in other states, such as Uttar Pradesh, Andhra Pradesh, and Karnataka. ITC, which
exports US$140 million worth of agricultural commodities, sourced US$15 million worth
of commodities from e-choupals in 2001. The substantial quantity (120,000 metric tons
of various commodities) already procured through this channel has resulted in overall
savings of more than US$1 million. These savings are shared between ITC and the
farmers. (source: http://www.itcportal.com)
Web-enabled, real-time data on crop prices gives farmers an accurate picture of the prices
they can expect from ITC and from different mandis. This information enables them to
become informed decisionmakers and thereby sell their produce at a price that gives them
a higher profit margin. With the participation of agricultural supplies companies in
ecommerce, the farmers now can also conveniently order agricultural inputs.
Although the prices offered by ITC are not higher than those at the mandi, the farmer
chooses ITC because the transactions are done closer to home and the practices of
weighing and quality assessment are more efficient and transparent. Farmers save on
travel time and costs and incur less wastage. Their savings have been estimated at Rs 400
to Rs 500 (US$8 to US$10) per ton of soybeans. It is important to note that the final
decision to sell their crops to the mandi or to ITC rests with the farmers themselves.
The farmers can transact with the company directly and deal orders on the Internet. In the
process, the farmers save about Rs 250–500 per ton, depending on their location relative
to the collection center. ITC gains in terms of assured supply and savings of more than Rs
200 per ton by avoiding the transportation of the crop from the mandi to the collection
center and other intermediary costs in the supply chain.
Altogether, more than Rs 1 billion (US$21 million) in transactions have occurred so far,
and the company plans to extend the initiative to 15 other states across the country over
the next few years.

Key Elements of Empowerment

Information
Access to information through e-choupal has reduced the dependence of the farmers on
the traditional agricultural intermediaries. It has also enabled them to align their
agricultural output with market demand. E-choupals enable transparent listing of various
“mandi” prices, giving the farmers a fair chance to choose where to sell their produce to
gain a better price, thereby increasing their bargaining power. Historical data and figures
on supply, expert opinion on future price movements, information on farming practices
and techniques, soil testing, virus testing, and weather information also contribute to the
empowerment of the farmer.

Inclusion/Participation
The e-choupal model involved farmers in the design phase of the project. In some cases,
farmers have also contributed to the content on the Web to ensure user-friendliness. The
sanchalak who operates the computer is also a farmer selected from the village itself.
Farmers actively access information for crop prices in mandis, and get inputs on soil
testing, best farming practices, and expert advice from the system.

Accountability
The e-choupal system considerably reduced transaction costs for the farmers. The
weighing techniques under the system are accurate and transparent, and farmers are paid
in proportion to the quantity of their produce, unlike the mandi system. In addition,
quality measurement is more open as results are immediately available to farmers.
Local Organizational Capacity
This initiative has created an organization at the local level that is transparent and
accountable in its operations.

Issues and Lessons

Challenges
Familiarizing first-time users in remote areas of rural India with the Internet presented a
challenge. When the e-choupal concept was first proposed, there was initial hesitation by
the farmers, but no direct resistance. Farmers learned quickly; the basic training planned
for two days was accomplished in just four hours by the very first batch of sanchalaks. A
video showing farmers using the kiosks has helped speed acceptance and adoption of the
technology among other farmers. ITC also had to surmount regulatory barriers. The
Agricultural Produce Marketing Committee Act (APMC Act) prohibits the purchase of
specified commodities (including several that ITC deals in) from any source other than
government-designated mandis. ITC has overcome this challenge by convincing the
political and bureaucratic leadership of various state governments that the “spirit” of the
act (to benefit the farmers) is better served through e-choupals. As a result, some states
have amended the act (such as Uttar Pradesh), while others have allowed specific
exemptions for such new business models. Rural India faces the problems of
infrastructure bottlenecks such as outdated telephone exchanges, frequent electricity
outage, and unreliable Internet connectivity. ITC had to overcome these challenges. It
managed to get some telephone exchanges upgraded. VSAT links were established in
other areas. Several e-choupals use backup batteries recharged with solar panels. Another
challenge is to build personalized content, catering to individuals with a wide range of
income levels and information needs.

Key Factors for Success

Unlike many other experiments in which Internet kiosks have been established to provide
information to rural communities, this experiment is completely funded by a private
sector company. ITC’s e-choupals face no significant competition from a business
perspective. While other industry players have attempted to replicate the e-choupal
business model, ITC retains a strong competitive advantage as a result of its first-mover
status, broad multisector experience, extensive partnerships, and large financial
resources.
In implementing this project, the interests of a chain of small and medium traders were
hurt because of the process of disintermediation. However, ITC recognized the resistance
that would be built up if the role of intermediaries were completely eliminated. In
introducing e-choupals, ITC has redefined the role of the local intermediaries from that of
procurement to that of facilitation and information gathering. In the process, ITC has
ensured that at least a part of the income derived by intermediaries through trading
commissions is replaced by commissions or service charges paid by ITC to these traders.
This has helped ITC in overcoming any resistance from these traders.
Instead of creating an entirely new mechanism of direct procurement, ITC has chosen to
strengthen an existing institution in rural areas, the choupal, which serves as the focal
point for the exchange of ideas and information by word of mouth in rural communities.
By locating a PC and Internet access at such meeting points, ITC has enlarged the scope
and quality of information exchange.
Factors contributing to the success of e-choupal are the partnerships built with academia
and NGOs to create and document relevant knowledge about agricultural practices that
are useful for farming communities. Another success factor was the participatory method
in which ITC tried to understand the information needs of rural communities.

Outlook
ITC plans to scale up the model to cover 15 states in the next 7 years, reaching 100,000
villages. It plans to diversify into products such as horticulture, rice, and cotton. A plan to
market and distribute other firm’s services related to microcredit, insurance, health, and
education through the same e-choupal “channel” infrastructure is also underway. Such a
scale-up would require very large investments, of the order of US$200 million.

Conclusion:
The result is showing that India has great potential for leveraging its internet marketing
infrastructure across its rural area. Integration of Indian economy with world economy
also has fueled the growth of internet marketing rapidly. Because of rich rural
environment more corporate giants are now entering into it along with their modern
technology to exploit the resources and competition is now becoming steeper. Internet
not only the advantageous way to companies but also to rural people who are getting
more option to sell their products to the right one in most profitable price. Another
important side of internet marketing is its transparent transaction and elimination of third
party involvement where producer gets direct touch to the purchaser. It not only
eliminates the place and time constraints it also facilitate rural people to procure their raw
materials and the daily needs in low cost from the vendor company. As a whole we can
say internet marketing is boosting the Indian rural market in every aspect from
procurement of raw materials to selling of end product in most profitable way for both
the parties involve in the business.

Bibliography:

1. “ internet marketing: building advantage in a networked economy” by Rafi

A.Mohammed. 2002 edition.
2. “ Internet Marketing: Foundations and Applications” by Carolyn Siegel. 2004
edition.
3. “ Principles of INTERNET MARKETING” by Ward Hanson. 2000 edition.
4. “Rural Marketing” by R.V. Badi; N.V.Badi. 2009 edition.