THIS PROJECT IS DIRECTED BY HASSAN RAZA

FROM T.Y.B.M.S 117

CONTENTS

S.No. Chapter Name Page no.

1. Executive Summery 5
2. Introduction 7
3. Objective 9
4. Research Methodology 10
5. Rural Market Environment 15
6. Changing Face of FMCG marketing in rural sector 36
7. Advertising in rural sector 38
8. Strategies adopting by different FMCG companies 40
9. Problem in rural marketing 61
10. Rural marketing challenges and opportunities 65
11. Opportunities for different FMCG companies 67
12. Conclusion 71
13. Recommendations 75
14. Limitations of the study 76
15. Bibliography 77

1
 EXECUTIVE SUMMERY

A variety of factors have rendered the rural market quite attractive to corporate in recent
years. The growing opportunity in the rural market is no doubt the prime factor. The rural
demand has been growing rapidly and its composition has been changing for the better in the
recent years. The increased income/ purchasing power of the rural consumer and the
improved income distribution has enhanced rural demand for several products. Better access
to many modern products/brands has added to this growth.

The heat of competition in the urban market actually serves as the stronger driver behind the
growing interest of cooperates in the rural market. The fact that the rural market is still
largely an untapped as well as the early entrants can tap it without having to face intense
competition as in the case of the urban market, makes the rural market all the more
attractive to them.
Corporate have been finding the going increasingly tough in the urban market, especially for
the products in respect of which penetration levels are already high. For example penetration
level for the toothpaste in the urban market has now reached close to 80 per cent. In contrast,
it is below 30 per cent in the rural market. Moreover in the urban market many consumers
have been using toothpaste for quite some time and have settle
Down to the brand, its flavor, and other characteristics .They cannot be expected to switch
their brand very easily. In contrast, in rural markets, there a lot of first time users of
toothpaste whom the company can tap from the scratch.
Corporate find that the highly penetrated urban markets allow little room for volume growths
for most of what are called,’ necessity products’ (toothpaste, bath soap, washing products,
tea etc). Growth opportunity for many of the ‘emerging products’ (coffee, shampoo, talcum
powder etc) too is rather low in the urban market. The rural market thus becomes essential
for companies with strong aspirations. Not comprising in the rural market keep them out of

2
about half of the country’s market for the ‘necessity products’ and the onethird for the
‘emerging products’ by value .It is but natural that in these circumstances, corporate set their
sights on the rural market.’

3
 INTRODUCTION

The rural market of India is fascinating and challenging at the same time. It offers large
scope on account of its sheer size. And, it is growing steadily. Even a modest growth pushes
up the sales of a product substantially, in view of the huge base.
It is attractive from yet another angle. Whereas the urban market is highly competitive, the
rural market is relatively quiet. In fact, for certain products, it is totally virgin market.
Simultaneously, the market also poses several problems and hurdles. The firms have to
encounter them squarely and put in a great deal of effort, if they have to get a sizeable share
of the market.
Efforts to capture the market with due thought and focus on the constraints with streamlined
strategies to overcome the same will tend to define the path ahead for rural marketing in
India.
A Hindi poet has rightly said, “Bharat mate gram vasini” which means Mother India lives in
her villages.
According to the 2001 census, India’s population was 100 million, of which 73 percent
lived in villages. This is average statistics. There are states like UP, MP, Rajasthan, Kerala,
Bihar and Orissa where the rural population varies from 80 to 90 percent. The spread of
population in 4,200 cities and towns is to the extent of 25 percent, and of the
Remaining 75 percent is in 5, 76,000 villages. This sheer base defines the volume and scope
of rural marketing.
Marketing in India has for a long time meant urban marketing. But now rural marketing is
being widely researched and discussed. If market potential is considered, the rural market is
big with approximately 70 percent of the population still residing in rural areas and with 40
percent the Gross National Product emanating from agriculture.
The following transactions, (which broadly outline the landscape of rural marketing) , can
be categorized as follows:
• Marketing of agricultural inputs like fertilizers, pesticides, farm machinery etc;
• Marketing of products made in urban centers and sold to rural areas like soap,
toothpaste, television sets, etc;

4
Marketing of products made in rural areas sold to urban centers like khadi cloth, hand
crafted products etc; and
• Marketing of products made and sold in rural areas like milk and milk products, locally
manufactured toothpowder, cloth etc.

5
 OBJECTIVE

The overall objective of the thesis is to throw light on Scope of Rural Marketing for FMCG

Company in India.

SUB OBJECTIVE:

 Rural marketing of FMCG Companies – Present and future.

 Future growth potential of rural marketing of FMCG Companies in India.

 Different Strategies adopted by different FMCG companies to increase our rural market

share.

 Challenges faced by different FMCG Companies.

 Various opportunities for FMCG Companies in the future.

RESEARCH METHODOLOGY

Type of Research : Descriptive and conclusive

Data type : Secondary
Data collection source : Magazines, journals, Books
And Internet.

6
 INTRODUCTION

This chapter aims to understand the research methodology establishing a framework of

evaluation and revaluation of primary and secondary research. The techniques and concepts
used during primary research in order to arrive at findings; which are also dealt with and
lead to a logical deduction towards the analysis and results.

7
 RESEARCH DESIGN

I propose to first conduct a intensive secondary research to understand the full impact and
implication of the industry, to review and critique the industry norms and reports, on which
certain issues shall be selected, which I feel remain unanswered or liable to change, this shall
be further taken up in the next stage of exploratory research. This stage shall help me to
restrict and select only the important question and issue, which inhabit growth and
segmentation in the industry.

The various tasks that I have undertaken in the research design process are:
 Defining the information need
 Descriptive and casual research.
SECONDARY DATA

Information that already exists somewhere, having been collected for another purpose.
Sources include census reports, trade publications, and subscription services. Data that have
already been collected and published for another research project (other than the one at
hand). There are two types of secondary data: internal and external secondary data.
Information compiled inside or outside the organization for some purpose other than the
current investigation. Data that have already been collected for some purpose other than the
current study. Researching information, which has already been published? Market
information compiled for purposes other than the current research effort; it can be internal
data, such as existing sales-tracking information, or it can be research conducted by someone
else, such as a market research company or the U.S. government. Published, already
available data that comes from pre-existing sets of information, like medical records, vital
statistics, prior research studies and archival data.

Secondary source of data used consists of books and websites:

8
My proposal is to first conduct a intensive secondary research to understand the full impact
and implication of the industry, to review and critique the industry norms and reports, on
which certain issues shall be selected, which I feel remain unanswered or liable to change,
this shall be further taken up in the next stage of descriptive research.
DESCRIPTIVE RESEARCH

STEPS in the descriptive research:

 Statement of the problem

 Identification of information needed to solve the problem

 Selection or development of instruments for gathering the information

 Identification of target population and determination of sampling Plan.

 Design of procedure for information collection

 Collection of information
 Analysis of information  Generalizations and/or predictions

.
THE RURAL MARKET ENVIRONMENT

The rural market environment need a separate examination as it varies significantly from that
of the urban market. We shall deal with the subject under the three headings:-

1. The rural consumer.

2. The rural demand.
3. Other aspects of the rural market environment.

(A)-THE RURAL CONSUMER: A Detailed Profile:-

Size of Rural Consumer Group:

9
In numerical terms, India’s rural market is indeed a large one; it consists of more than 740
million consumers. 73% of India’s total population is rural. The rural market consists of
more than 12 crorer households, forming over 70%of the total households in the country.

Characteristics of Rural Consumer Group:-

LOCATION PATTERN:-

Rural Market of India is a geographically scattered market. The rural population is scattered
across 5, 70,000 villages. And, of them, only 6300 villages have a population of more than
5,000 each. More than 3 lakh villages are in the category of 500 people or less.

SOCIO-ECONOMIC POSITION:-

Rural Consumers continue to be marked by low per capita income/ low purchasing power.
Similarly, they continue to be a traditional -bound community, with religion, culture and
tradition strongly influencing their consumption habits. Nearly 65% of rural income comes

from agriculture.

Rural Prosperity and discretionary income with rural consumers are thus linked to a sizeable
extent with agricultural prosperity.

LITERACY LEVEL:-

Rural India has a literacy rate of 28% compared with 55% for the whole country. The adult
literacy programs launched in the rural areas are bound to enhance the rural literacy rates in
the years to come. The rate is certainly on the low side.

LIFE STYLE:-

The rural consumers are marked by conservative and tradition-bound lifestyles. But the
lifestyle of a sizeable segment of rural consumers has already changed significantly in recent
years .The changes can be attributed to several factors such as:

10
  Growth in income and change in income distribution.
 Growth in education.
 Enlarged media reach (particularly television).
 Growing interaction with urban communities.
 Marketer’s effort to reach out the rural market.

BUYING BEHAVIOUR:-

Buying behavior of rural consumers have been effected by the following factors:-

INFLUENCE OF CULTURE:-

Rural consumer’s perception of products is strongly influence by cultural Factors. For

example-the preference in respect of color, size and shape is the result of cultural factors.

GEOGRAPHIC LOCATION:-

Rural consumer behavior is also influenced by the geographical location of the consumers.
For example, nearness to feeder towns and industrial projects influenced the buying behavior
of the consumers in respective cluster of villages.

EXPOSURE TO URBAN LIFESTYLES:-

Extent of exposures of rural consumers to urban lifestyles also influences their buying
behavior.

THE WAY THE CONSUMER USES THE PRODUCT:-

The situation in which the consumers utilize their the product also their buying
behaviour.For example – Lack of electricity automatically increase the purchase of batteries

11
by rural consumers.: since the rural consumers cannot use washing powders /detergents
powders that much, as they wash their clothes in streams or ponds , they go is more for
washing bars and detergents cakes.

PLACE OF PURCHASE:-

Different segments of rural buyers buy their requirements from different places \ outlets.
Some buy from the village, shopkeepers; some from village markets/ meals; other buy from
the town that serves as the feeder to the rural area.

MARKETERS’EFFORT TO REACH OUT THE RURAL MARKET:-

Many corporate have been trying hard to develop a market their products in rural areas,
investing substainlly in these areas. Developmental marketing has created discriminating
buyers demand in the rural market. This has brought about some change in the way buyers

purchase different product.

(B)- THE RURAL DEMAND: A Detailed Profile:-

Steady growth:

Rural demand has grown steadily over the years. Not only has the market grown in
quantitative terms, but qualitative terms too it has undergone a significant change.

Change in the composition of Rural Demand:

The composition of rural demand has also been changing significantly in recent years many
new products have entered the consumption basket of the rural consumers. and the relative
shares of the different categories of products in the consumption basket .The upper
segments, in particular , have started buying and using a variety of modern consumer
products, which were till recently unknown in the rural market.

12
Several products already well established in the rural market:

Marketers cannot now assume that rural India consumes only certain traditional/ essential
products and that its share in other product category is meager. It is perhaps well known that
products like packaged tea , bath soaps and washing products, including
detergents/detergents cakes , are popular items of consumption in rural market .Products like
shampoo ,toothpaste and talcum powder , and durables like electric irons , bicycles ,
mopeds, scooters and motorcycles have joined this category in recent years. The rural
demand for electric irons, mopeds and motorcycles have note between 30 and 50 percent of
the all-India demand.
In many products, rural consumption accounts for a larger share than
urban:-

In many products, rural consumption now accounts for a larger share than urban. In washing
soaps (cakes/bars), the rural share is over 60 per cent.
In popular bath soaps, it is more than 50 per cent and in batterie4s, it is more than 56 per
cent .similar is the case with packed tea and hair oils.
Among durable, the rural market now accounts for a larger share of the total sales in
• Sewing machines. • Radio/ transistors.
• Tape Recorders.
• Wrist watches.
• Black and White Television sets.
• Cassette recorders.
• Bicycles.
• Table Fans.
• Pressure Cookers.

In Many Products, the rural markets have overtaken the urban in growth
rate:-

A survey by NCAER shows that the rural market is growing faster than the urban market
several products. These include packaged tea, detergent powder, washing shop, and

13
detergent cake. Growth of motorcycle too has been more in the rural market than the urban
market.

Position of durables

According to NCAER survey, Rural India’s market for consumer durables is estimated at
Rs .4500 crore , with an annual growth rate 8 per cent .

OWNERSHIP OF DURABLES BY RURAL CONSUMERS:

Product No. of owner per 100 households

Bicycles 53
Fan (ceiling) 18
Fan (table) 13
TV(B&W) 16
Pressure cooker 13
Wristwatch(mechanical) 76
Radio/Transistors 42

It can be seen from above table that now every other other rural household has a bicycle,
every third households has a fan, every sixth has a black and white televisions set, and every
seventh a pressure cooker. Also , nearly 80 per cent of rural holds own a mechanical wrist
watch and 42 per cent a radio/transistor .Rural India now purchase a third of the color
television sets, a fourth of the mixers/ grinders and fifth of the refrigerators sold in the

country.

14
Factors Behind the growth and Diversification in Rural Demand:-

Variety of factors , acting in concert , have brought about the big growth and welcome
changes in the rural demand, a few of them such as growth in income , changes in income
distribution , changes in lifestyles, and the expectation.

New income due to agricultural /rural development:-

The technological breakthrough, popularly known as the GREEN REVOLUTION, which

took place in Indian agriculture from the mid 1970 onwards, has added to the prosperity of
rural India considerably. Moreover, in recent years, as part of the new farm policy, high
support prices are offered for farm products. As a result, there is now more money in the
hands of the owner-farmers in the rural areas.

The expectation revolution:-

The ‘rising expectations’ of the rural people have greatly influenced the rural market
environment. It has enlarged the desire as well as awareness of the rural people ; it has
strengthen their motivation to work, earn and consume. The rise income provides substance
to the aspiration.

Rural Demand is More Seasonal:-

Rural demand is more seasonal compared to urban demand .The pre-dominance of

agriculture in the income pattern is one main reason for this. The relatively greater influence
of marriages and festival on the purchase pattern is another. After all, agriculture in many
parts of India is still depends on the vagaries of the monsoon.

15
 TAPPING THE RURAL MARKETS:-

While rural India does constitute an attractive and sizeable market, firm have to strive hard
for securing a share of it. Practically in every task of marketing, rural marketing poses some
unique problems.
The major tasks that need unique handling in rural marketing are:
 Segmentation and targeting.
 Product management.
 Physical distribution.
 Channel management.
 Marketing communications.

A.SEGMENTATION AND TARGETING:-

The rural consumers are not a homogeneous lot in economic conditions, or literacy, or
lifestyles, or buying behavior. It would, therefore, firm to assume that the rural market as a
whole can be served by a single offer or a single product -price-promotion combination.
Firms have to analyses the consumers in –depth, carry out thorough market segmentation
and select relevant segments as target markets. And they have to develop a distinctive
positioning and a distinctive marketing mix for each target segment.

Geographical Segmentation:-

The rural market can be segmented geographically, using different geographical bases.

Climate and level of irrigation:-

Climate can be one of them; regions endowed with favorable climate are usually more
prosperous compared with climatically handicapped region. Level of irrigation can be

16
another base; irrigated areas and dry land areas pose different economic and marketing
environments.

Nearness to a feeder town:-

Firms can also segment the rural market using ‘nearness to a feeder town’ as the base.
Consumers located close to a feeder town visit it at least once a month to sell their product
and/or to buy their requirements, and in buying habits, they differ from those living in the
interior areas. It will thus be meaningful to segment the rural market in to consumers located
closer to a feeder town and consumers located away from them.

Demographic segmentation:-

The rural market can be segmented demographically too. In fact, there are many possibilities
of segmenting the rural market demographically.

Population concentration:-

It can be one base. About 40 percent of the rural population lives in 7 percent
of the villages in the country and remaining 60 percent in the other 93 per cent
of the villages. Thus, the market can be segmented on the basis of different size
classes with regard to population.

 Age:-

In particular, the youth in the rural areas can be picked up as a separate market. There is a
population of more than 20 crore in the age group of 16-30 years in the rural market.
Surveys have revealed that the younger generation dominates the purchase in the rural
market. The rural youth differ from their elders in their buying behaviors .It will thus be
meaningful to segment the rural youth as a separate market.

17
 Literacy level:-

It can be another demographic base for segmenting the rural market. Though rural India is
characterized by low literacy, there are wide variations in the matter of literacy within rural
India. For example- The rural literacy rate in Kerala is 80 Per cent that in Bihar is only 15
per cent.

 Income:-

The rural consumers can be segmented in to different income classes. The rural consumers
can also be segmented into regular income and demand .All rural consumers are not
characterized by sesonalty of income .There is a sizeable salaried class in the rural areas.
There is also a sizeable self-employed group, consisting of shopkeepers and service
providers. There is nothing seasonal about the income of such people .Obliviously; those
with regular income will differ in buying habits compared with those whose income is
seasonal.

Buying behavior segmentation:-

Rural consumer differs in their buying behavior from their urban counterparts as well as
among themselves. This fact too could be factored in to segmentation exercise. Firms
should, however, generate relevant data on the rural consumers and their buying behavior,
perception and attitudes, and then segment them using their buying behavior as the base.

Thompson rural index:-

Hindustan Thompson Associates have developed the ‘Thompson rural market index’ based
on 26 variables, including area of the concerned district, demographic pattern occupational
pattern, agriculture –related data, rural electrification data and commercial bank data. The
index can be used in segmentation.

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B. PRODUCT STRATEGY:-

The first decision to be made in product strategy in the rural context is whether the product
that is sold in the rural context is whether the Product is sold in the urban market can be
supplied to the rural market as it is , or whether it must be Adapted . It depends on the
situation and the nature of the product .Basically, the firm must find out what kind of
product is actually required by the rural consumer and then decide if it should make an
altogether distinct product or adapt the existing product.
Economic and income realities of the market should certainly be considered while
developing the product strategy for the rural market. When products are designed reflecting
both these influences, the chance of success is greater.
Lower priced product versions do help in many cases in the rural market, but no
generalization can be made in this regard. Many companies try to reduce the prices of their
products for the rural market by creating smaller size by decreasing the quality. The
approach works sometimes and with some products, but not all times, with all products.

Specifically – Designed Products:-

Specifically –designed product to help in many cases

TRACTOR /TRAILEIER: -

The tractor /trailer are an apt example. It is a product specifically designed for the rural
market. It is designed as a replacement for the plough as well as a vehicle for transporting
both men and material in rural areas.

EVEREADY’S JEEVAN SATHI TORCH:-

Eveready‘s Jeevan Sathi brass torch is another example of successful rural specific product
strategy. Initially Eveready’s brass torch was not picking up well in the rural areas. Union
carbide launched a market research study for locating the reasons. The study by the ad

19
agency OBM found that the rural folks rejected the torch since all of its parts are not made
of brass .the design, developed abroad, and had given the product certain plastic parts, like
the reflector. The Indian rural consumer felt that the plastic parts would not durable. OBM
also found that the rural people were prepared to pay high prices for the same torch if it were
made ’all brass’. Eveready then introduced for the rural market the all brass torch designed
to last lifelong and positioned it ‘Jeevan Sathi’ as a ‘life long ‘companion.

MODEL VARIANT:-

Models developed specifically for the rural market have found more takers in the market.
For instance, Motorcycles that are designed to take on the rig ours of rural roads have
succeeded more in the rural market
COLOUR VARIANT:-

The rural consumer differs from their urban cousins in color preference. In case
of some products, color may matter very much. Firms can exploit this fact to
their advantage. For example, ASIAN PAINTS understood the substantial
difference between the rural buyers in the color preference. Asian Paints
introduced paints with bright colors for the rural markets. Asian Paints also
communicated the feature well through its communication campaigns.

Different products/ models, Different brands, packing, pricing and different positioning:-

By and large, the rural market can be tapped better through different products / models,
different brands, different packaging and different positioning.

PACKAGE DESIGN AND PACK SIZE:-

In some case, the product can be the same, but the package and pack size may have to be
different for the rural target group. Package design and color help identification of brands by
rural buyers. Many rural consumers are not quite conversant with various brands .All the
same, they manage to pick the brand that they want. They recognize the brands by its

20
packaging. This reason why a number of local brands in rural areas imitate the packaging of
big national brands.
As regard pack size, as a general, it can be stated that smaller packs are more suited to the
rural areas. Low purchasing power and limited availability of cash for shopping force the
rural consumer to go in for smaller packs with low unit price. In some cases, they also prefer
small packs so that they can make a beginning on small scale and after trial and satisfaction
go in for regular purchases.
In recent years, sale of shampoo brands were priced at Re 1 or below per sachet helped the
trail and adoption. The 5-gram Vicks Vapourb tin and the small –size Lifebuoy soap are
other such examples.
HUL has deepened coverage of many of its products in the rural market through such
combination. It has come up with a series of small pack sizes/saches that specially cater to
low –end consumers.

Logo, Symbols and Mnemonics:-

Image is far more potent the rural market, which in many cases is an uninitiated market.
Symbols, therefore, add value to brand recall and brand personality in the rural market.

Asian Paints’ Gattu:-

Asian Paints Gattu though equally well known in urban and rural market, has greater
effectiveness as an identity tool in the rural market .Actually in many rural parts of India;
Asian Paints is referred to as the bahahawala or chokrawala company.

The Nirma Girl:-

The Nirma Girl in Frock on the packs of Nirma washing powder has become the mnemonic
for effective and good value in washing powders.

The Dettol Sword and the Mortein Genie:

For the same reason, Reckitt& Colman has been focusing on the Dettol Sword and the
Mortein genie in its rural communication.

21
Brand Decisions:-

Branding too needs skillful handling in the rural market. The rural consumers have already
graduated from generic products to branded products. Today, the brand name is the surest
means of conveying quality to rural consumers. In other words, brand is the key to
confidence building among the rural consumers. Besides quality, it conveys that the
manufacturer is going to show sustained interest in those products ands markets. Whether
the same brand is used in both urban and rural market, and appropriate variants of the brand
must be adopted for the rural market, is a matter for conscious decisions by the individual
firms depending on the context. In quite afew cases, the ‘same brand’ is providing right and
cost effective. In some cases, however, the brand name that is suited to the urban market
may not be quite suitable to the rural market. Low priced variants seem to work better in
majority of cases in the rural market. It will, however, be incorrect to assume that rural
consumers prefer local brands to national brands.

Sell Value Brands, Not Cheap Brands;-

While brands specifically developed for the rural market and low – priced variants may work
better in many cases, the strategy should be one of selling value brands. HLL’s Lifebuoy, for
example, is a low –priced carbolic soap that is often the first choice of bath soap by a rural
consumer .HLL, however, does not sell it as a cheap soap. Instead, sell it as a hygiene brand.
It communicates the value of the brand to the target market. It also tries to enhances the
value of the offer by giving suitable ‘add-ons’ .for example, while targeting rural students
for the soap , it distributed height charts along with the soap and conveyed its concern for
their health and well being . Rural marketers would do well to add some value to their
products in this fashion if they are keen to secure the loyalty of the consumers.

C. PHYSICAL DISTRIBUTION:-

The problems faced by the marketer in the Physical distribution in rural context are as
follows:-

22
The Problems in Transportation and Warehousing:-

It is well known that transportation infrastructure s quite poor in rural India. Though the
country has the fourth largest railway system in the world, many parts of rural India remain
outside the rail network. As regards Road transport, nearly 50 per cent of the 570,000 – odd
villages in the country are still not connected by proper roads. While some improvement is
taking place on account of the various rural development programmes, many areas still have
only KACHA roads and most of the interiors have hardly any roads worth mentioning .As
regards transport carriers, the most common ones are delivery vans and the animal drawn
carts. Because of the difficulty in accessibility, delivery of products and services continues
to be difficult in rural areas. In warehousing too, there are special problems n rural context.
Business firms find it quite difficult to get suitable godowns in many part of rural India.

Cost –service Dilemma Becomes more Acute :-

The firms cannot simply rely on ‘trickle down of stocks ‘to the rural buyers. They need a
network of clearing and forwarding (c&f) agents and distributors at strategic locations for
facilitating proper distribution of the products in the rural market. They have to commit
themselves to servicing the villages will help not only the availability of the product, but
product promotion as well.
In the matter of transportation, combining different modes can be cost –effective.
Trucks for medium distance movement and delivery vans and bullock carts for local haulage
may serve the purpose better. Water transport too has a role in specific areas Bullock carts
have a special role on rural distribution, especially in tertiary transport. They are cheaper;
they are available in plenty and are ideal for the rural roads.

The Delivery Van;-

The delivery van has a key role in rural distribution the companies concerned and their C &
F agents /stockiest / distributors operate these vans. Companies like Hindustan lever and
ITC, who are pioneers in rural marketing in India, have a fleet of company delivery vans for
rural distribution. The van takes the products to the retail shops in every nook and corner of
the rural market. It enables the firms to establish direct contact with rural dealers and

23
consumers. It also helps the firm in promotion. But the cost of operating such vans is quite
high. Firms like HLL and ITC had the resources as wells the wisdom to consider van as
initial investment in the market. Through the van, they were not only solving their
transportation problem of the rural market, but were also developing the market for their
products.

D. Channel Management:-

Organizing marketing channels is the second part of the distribution task.

Multiple tier add to the cost:-

The distribution chain in rural context usually requires more tiers, compared with the urban
distribution chain. The distance between the production points and the rural market, and the
scattered location of the consumer make it necessary. At the minimum, the distribution chain
in the rural context need three tiers i.e. The village shopkeeper, the distributor , and the
Whole seller/ stockiest/ C&F agent in the town .in addition it involves the manufactures’
branch office operations in the territory.
Producers who can reach the customers through the shortest distribution chain can
do better in this market.

Non-Availability of Dealers:-

Firms find that availability of dealers is limited and the scope for appointment fresh /
exclusive dealers of the company is equally limited in view of the low demand and
nonavailability of suitable candidates.

Poor viability of the outlets:-

A good number of retail outlets in the rural market suffer from poor sviability. A familiar
paradox in rural distribution is that on the one hand the manufacturer incurs additional
expanses on distribution and on the other hand, the retail outlets find that the business is un

24
– remunerative to them. The additional funds the manufacturer’s pumps into the system are
used by the scattered nature of the market and the multiplicity tiers in the distribution chain.

Inadequate banking and credit facilities:-

Distribution in rural markets is also capped due to the lack of adequate banking and credit
facilities. It is estimated that there is only one bank branch for every 50 villages. Rural
outlets need banking support for two important purposes:
(1)- For remittances to principals and to get fast replenishment of stocks.
(2)- For securing credit.
Firms have been in search of a low- cost system of distribution with the
wholesaler serving all the retailers , including the ones at the tail –end , and the latter
servicing the consumer . This is the strategy followed by Nirma to compete with HLL.

Nirma relies on the wholesaler network. HLL is trying to get around the problem by giving
credit to the distributors.

E. Marketing Communication:-

In marketing communication and promotion too, rural markets pose many problems.
The literacy rate among the rural consumers being low, the scope for using the printed
word is rather limited. The traditional bound nature of the people and heir cultural barriers
add to difficulty of the communication task. Marketing communication in the rural areas has
to be necessarily in the local language and idiom.
Rural communication is quite expansive. Rural communication has to go through the
time consuming stages of creating awareness, altering attitudes and changing behavior. In
addition, it has to break the deep- rooted behavior pattern.

25
Managing the communication task:-

The rural communicator will do well to choose a combination of formal and non formal
media. The possibilities are indicated in below table:-

POSSIBLE MEDIA MIX IN THE RURAL CONTEXT Non-

formal /Rural -Specific Formal / organized media Media
TV Audio-Visual/Publicity Vans
Cinema Rural specific art forms like puppet
show and HARIKHATHA.
Radio Demonstrations

Print Media-PressMeeting ,Announcements, Processions Other Print Media

Caparisoned elephants and decorated bullock carts carrying advertisement
panels
Outdoor Music records.
POPs

Selecting The Media Mix:-

TV:-

With the increase in coverage and increase in TV ownership in rural areas , TV is gradually
becoming the prime media for rural communication .

Cinema:-

The cinema is a useful medium in rural context. Most large and medium villages have one or
more cinema house. Also, more than one-third of all rural people do see cinema as a matter
of regular lifestyle. Advertisement films, short feature films, with disguised advertisement
message, and documentaries that combine knowledge and advertisements, can be employed
for rural communication.
It has been estimated that 33 per cent of the total cinema earnings in the country
come from rural India.

26
Radio:-

The radio is well -established medium in rural areas. A big expansion in broadcasting
facilities has taken place in the country over the years. The availability of radio sets has also
expanded. While radio as a medium cannot match TV in potency and effectiveness, in the
existing context, it can certainly play a significant role in rural communication.

Print media too has some scope:-

The role of print media is certainly limited in the rural context. Even the remotest rural parts
have a small group, which is literate. Moreover, while the group may be numerically small ,
its member usually happen to be the opinion leaders , influencing the purchasing behaviour
of the large segment of the rural consumers. so, it would be unwise to assume that the print
media has no scope at all in the rural areas . Moreover, the younger generation in the rural
areas is comparatively more literate. With the new trend of increasing rural literacy , the
scope for using print media in rural communication will increase further.

Outdoor:-

The outdoors, which includes hoardings, wall paintings, illumination and other displays, also
lend well for rural communication. In fact, many companies are using the outdoors in the
rural communication mix.

POPs (print of purchase) :-

The POPs – Point of purchase promotional tools- are also quite useful in the rural markets.
The POPs meant for the rural market should be specially designed to suit the rural
requirements. Symbols, Pictures, and colors must be liberally in POPs meant for the rural
market. Color is of particular significance. As a general rule, the rural people love bright
colours. The effective Communicator utilizes such cues.

27
Audio-visual / publicity vans:-

The AV unit or the publicity van is very useful for the rural communication .The van is a
comprehensive mobile promotion station at the exclusive command of the concerned firm.
The firm can exhibit its films and other audio-visual presentations, such as slide shows,
sound and sight presentations; puppet shows etc. from the instant promotion station. A
potable shamiana or Platform often forms a part of the van. Even public meeting can be
organised using the potable shamiana . The van can also be used for the sale campaign. It
can also be used for Product demonstration.
Naturally, the AV vans are quite popular with rural marketing firms’ .Practically
all firms in the agri – inputs business have their own AV vans followed by those marketing
consumer durables.
Colgate-Palmolive has supply vans that offer the free samples and screen video
films on oral hygiene. It has an on – going rural van programmed, which cover on an
average 80 million rural consumers per year. Vans are supplemented with bicycle vendors,
who go to villages not accessible by the vans.
Godrej has vans that play music and announce free gifts in the village square. The
van than goes to few shops in the villages to sell the product.

Syndicated AV vans:-

In recent years, rural AV vans have become a sharable service. Firms which cannot afford to
operate vans of their own, utilize syndicated AV van service offered by independent
agencies.

Multi-purpose vans: Jain TV’s Video -on-wheels:-

Recent years have witnessed the emergence of tools that are more innovative than the AV
van. Jan TV‘s Video – on- wheels is one of them.

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Puppet shows, Harikhatha:-

Popular entertainment programmed like puppet show, dance, dramas, and Harikathas ,
specially developed for the product- promotion purpose , are now being used in rural
markets. The traditional art forms readily render for communication with rural society.

Village fairs, festivals and meals are ideal venues for projecting these programmes. In
certain cases, public meeting too many be used for rural promotion.

Music Cassettes:-

Music cassettes are another effective medium for rural communication. It can be reached is
an appealing and a comparatively inexpensive medium. Different language groups can be
reached with low budget. They can be played in cinema houses or in other places where
rural people assemble.

HUL rural specific communication for Surf:-

For propagating ‘Surf’, Hindustan Lever brought out separate advertisement films for the
urban and rural audience. In the film meant for the rural audience, the company took
particular care to demonstrate step-by-step the method to be adopted in washing with surf
for getting the best whitening effect. The company knew that an elaborate demonstration
was essential for the rural audience.

The Changing Face Of FMCG marketing in rural sector

Customers coupled with changing competition and saturated market is giving a tough time to
the FMCG (Fast Moving Consumer Goods) marketing is no more going to be the same
again! The changing consumer mindset thanks to more knowledgeable and discerning

29
FMCG marketers. The changed scenario not only demands a new game plan with a sharp
and decisive strategy but also a lot of creativity and insight. Some of the players in Indian
FMCG industry have already taken a lead and are smartly moving to chart a success story
for their brands. Some brands that reaped magnificent dividend from adopting a new
strategy are Fairever, Ujala, Ghadi detergent, Chik, and Dandi namak.

The greatest challenge for managers is to visualize an active market when what exists is
abject poverty. These successful brands are just doing that- focusing on untapped markets.
Take the example of Dandi namak. Who would have advised them to enter the branded salt
market when Tata and HLL virtually share the whole market among them? But they entered
this category when conventional wisdom said no. And they became a success story
overnight. .They entered the market not to compete with Tata and HLL, but with the focus to
take branded salt to rural and semi-urban areas. With this narrow focus, they not only
captured a large rural and semi-urban market but also got some share of the urban market
due to rub off effect.

Moreover, these small players fully realize that in today’s world, marketing needs money.
So they don’t shy away from investing in marketing. Again take the example of Dandi
namak. They splashed out money on their lengthy TV commercials to ensure that the
message gets ingrained in the mind of the prospect. Forever and Ujala adopted the same
strategy. Of course they don’t spend as much as the MNCs do but they do spend enough to
get attraction.

One of the important aspects of the strategy being adopted is effective communication about
product. . Take the case of Dandi namak. The TV advertisement was bland and
uninteresting. However, without any glitz, it was able to connect to its target customers
because it talked in the language of its target customers. These brands send a powerful
message to their target customers that they are made for each other.
Advertising in Rural Sector: -
A dramatic change is in progress. Villagers who used to crack open peanut M & M candies,
eat the nut and throw away the shell are now demanding chocolate candies that will melt in
their mouths, not in their hands. Charcoal-cleaned teeth are a rare sight; so is the case with
twigs of niim (neem) and babul (babool) tree. Today, the ultra bright shine of Colgate or

30
some other international brand of toothpaste holds more appeal than the traditional methods
of cleaning teeth. Even the native expressions of cleaning teeth, such as daatun karnaa and
musaag lagaanaa, are endangered to being replaced by new expressions such as paste
karnaa, 'to brush teeth with paste'.

Villages and small towns, which were once inconsequential dots on maps, are now
getting the attention of global marketing giants and media planners. Thanks to globalization,
economic liberalization, IT revolution, Indian female power, and improving infrastructure,
middle class rural India today has more disposable income than urban India. Rural
marketing is gaining new heights in addition to rural advertising because of the following
reason:-

• Various rural media (conventional and non-conventional) and integrated marketing

communication. In addition to rural market discourse, media forms such as wall
paintings, calendar advertising, outdoor advertising, print, radio and television
advertising
• In particular, uniquely Indian media forms such as video van technology, which has
changed the face of not only marketing but also political campaigning. Rural markets
(hat) which are the mobile McDonald's or Wal-Mart of India.
• Targeting women and religious groups in addition to rural population.
• Marketing taboo products such as 'bidi', cigarettes, sanitary supplies, and other such
products
• Globalization and its effects on product naming, product monitoring, rural discourse
and media forms.
• Creativity and deception, together with guidelines for advertisers and marketers.
• Information structures and logic of rural ads.

• Ads as a social barometer of changing relationships and value systems.

Strategies adopted for rural marketing by different FMCG Companies :-

31
ITC's e-choupal :-

ITC's e-choupal initiative is changing the lives of farmers on a scale no other venture has
ever done. The company is entering more than 30 new villages a day, every single day of the
week, 365 days a year.
. Take a remote village. Go to the smallest farmer there. Educate him in the best farming
techniques. Inform him of daily weather conditions and price movements in the market.
Make available to him at his doorsteps the best possible seeds, pesticides and fertilizers at
the most competitive prices. And when his crop is ready, help him find the best buyer.

Imagine doing all of this in 30,000 villages across six states season after
season, year after year. Doing it at no cost to the farmer and yet making money for yourself.
Impossible, would be the most obvious verdict to such a proposal.

Yogesh Chander Deveshwar, chairman of Rs 12,000 crore ITC, said when S. Sivakumar,
chief executive of its agri-business, approached him with an equally ambitious idea in 2000.
Knowing that he was asking for the moon, Sivakumar initially requested Rs 50 lakh to test
the idea among soya farmers in Madhya Pradesh. Deveshwar granted him Rs 10 crore. The
rest, as they say, is history. ITC's e-choupal network has already reached 3.1 million farmers,
and is expanding into 30 new villages a day-making it corporate India's most ambitious rural
initiative ever. Partnering ITC in the network are 37 companies, NGOs and state
governments, together creating a new ecosystem for villages and establishing a direct link
bet
THE POWER OF 'e
The e-choupal redefines choupal, the Hindi word for village square where elders meet to
discuss matters of importance. The all-important letter in the word is "e". It stands for a
computer with an Internet connection for farmers to gather around and interact not just
among themselves but with people anywhere in the country and even beyond. It begins with
ITC installing a computer with solar-charged batteries for power and a VSAT Internet
connection in selected villages. The computer's functioning is freed from the notorious
power and telecom facilities at the village level. A local farmer called sanchalak (conductor)
operates the computer on behalf of ITC, but exclusively for farmers. The e-choupal offers
farmers and the village community five distinct services.

32
Farming methods specific to each crop and region, soil testing, expert advice-mostly sourced
from agriculture universities-all for free.
Purchase: Farmers can buy seeds, fertilizers, pesticides and a host of other products and
services ranging from cycles and tractors to insurance policies. Over 35 companies have
become partners in the e-choupal to sell their products through the network.
Sales: Farmers can sell their crops to the ITC centres or the local market, after checking the
prices on the Net.
Development work: NGOs working for cattle breed improvement and water harvesting, and
women self-help groups are also reaching villages through e-choupal. In some states farmers
can even access their land records online, sitting in their village. Access to health and
education services through e-choupal begins next month.
In many villages e-choupals have become the axis around which the local community
revolves. Be it for accessing newspapers online in the mornings (many villagers have
discontinued their newspaper subscriptions) or checking the supply of products they ordered
on the Net, or watching movies on farming techniques in the evenings, farmers frequent
echoupal at all times of the day. Each e-choupal covers between five and six villages.

EMPOWERING THE SMALLEST

Indian farmers typically buy at retail prices and sell their produce at wholesale prices, losing
out on both ends of the deal. By virtually aggregating them, e-choupal brings the power of
scale to the smallest of farmers. ITC ensures that there are at least two suppliers of all
products sold through the e-choupal. Farmers can pool their demand, compare prices and
place orders on the Net. Bargain and choice-two key virtues of competition-are delivered to
the farmers right on their doorstep.
When it is time to sell the produce, e-choupal helps the farmers by breaking
the monopoly of local markets that are controlled by trade cartels. In most mandis, farmers
are cheated at several stages-arbitrary pricing, under weighing, delayed payments. In Uttar
Pradesh, farmers lose between 10 and 30 per cent of their income to such malpractices. ITC
is setting up its own purchase centres in the six states covered by e-choupals. The farmers'
response has been overwhelming. In 2001-2, the company purchased 60,000 metric tonnes
of crop through e-choupal. By 2003-4 the purchase increased to 2,10,000 tonnes and in four
months of 2004-5, the company picked up 1,80,000 tonnes of farm produce.

33
For farmers it is a win-win situation. Sitting in their village, they can check the prevailing
purchase price at the mandi and the ITC centre through e-choupal and sell wherever they
wish to. ITC's entry into crop purchase invariably means a rise in mandi rates too, benefiting
even those farmers who can't sell to ITC. In places where ITC rates aren't higher than the
mandi rates, farmers are drawn to ITC a centre because the company uses electronic
weighing, better quality testing and ensures spot payment

ITC'S E- choupal achievement

Its achievement:-
(1)- 5,050 choupals, 29,500 villages, 3.1 million farmers.

(2)- Using e-choupal to source a range of farm produce (foodgrains, oilseeds, coffee,
shrimps).

(3)- Marketing a variety of goods and services though e-choupal (agri-inputs, consumer
goods, insurance, and market research).

(4)-Transactions:$100in(2003).

STRATEGY ADOPTED BY HUL:-

Hindustan Unilever to expand Project Shakti reach the rural market:-

FMCG major Hindustan Lever will take its Project Shakti, the rural direct-to-home
distributor model, national and reach out to 100 million people in four years' time. The
project is at present on in Andhra Pradesh but will be soon be rolled out to other remote
villages across the nation. The target is to establish access with 100 million people in 3-4
years' time.The importance of the project is rural economy had immense potential and they
were the consumers of tomorrow.
Supported by micro-credit, the women from self-help groups were HLL's rural direct-
tohome distributors.
The idea behind Project Shakti was to help the company reach, penetrate and communicate
with rural consumers. The initiative benefited women in more than 4,750 villages.

34
VISION OF THE PROJECT:-

The vision was to change the lives of women in 100,000 villages by making them Shakti
dealers. This would provide economic opportunities for the underprivileged while creating a
distribution and communication channel for brands to access untapped rural markets with a
consumer base of 100 million rural Indians.
STRATEGY ADOPTED BY COCO-COLA:-

Coca-Cola India doubled the number of outlets in rural areas from 80,000 in 2001 to
160,00in 2003, which increased market penetration from 13 per cent to 25 per cent.
It brought down the average price of its products from Rs 10 to Rs 5, thereby bridging the
gap between soft drinks and other local options like tea, butter milk or lemon water.

It doubled the spend on Doordarshan, increased price compliance from 30 per cent to 50 per
cent in rural markets and reduced overall costs by 40 per cent.

It also tapped local forms of entertainment like annual haats and fairs and made huge
investments in infrastructure for distribution and marketing.

Result: the rural market accounts for 80 per cent of new Coke drinkers and 30 per cent of its
volumes.

The rural market for Coca-Cola grew at 37 per cent over the last year, against a 24 per cent
growth in urban areas. Per capita consumption in rural areas has doubled in the last two
years.

The launch of the Rs 5 pack has reaped rich dividends in terms of sales and the bottles are
expected to account for 50 per cent of the company's sales in 2003.

Coca-Cola is just one example. A lot of fast-moving consumer goods and consumer
electronics companies are aggressively targeting rural consumers. The necessity arose
because the growth rates of consumer products were slowing down not because the markets
were getting saturated in terms of penetration.

35
While overall volumes continue to grow reasonably well, there are too many players eating
into each other's market share.

The companies, therefore, reduce prices in urban areas and invest heavily in sales promotion,
intensifying the battle for market share.

The companies, therefore, reduce prices in urban areas and invest heavily in sales promotion,
intensifying the battle for market share.

Operating margins come under pressure and new growth markets have to be explored. This
is where the rural markets play an important role.

The rural market was tempting since it comprised 74 per cent of the country's population, 41
per cent of its middle class, 58 per cent of its disposable income and a large consuming
class, Coca-Cola India CEO Sanjiv Gupta said.

Today, real growth is taking place in the rural-urban markets, or in the 13,113 villages with a
population of more than 5,000.

Of these, 9,988 villages are in seven states -- Uttar Pradesh, Bihar, West Bengal,
Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu.

For manufacturers of consumer goods, these are the markets to look out for. While the 1980s
saw a boom in Class I towns with the spread of television, the Class II towns showed strong
growth in the 90s propelled by reforms.

According to the National Council for Applied Economic Research, the millennium belongs
to the Class III and IV rural-urban towns.

It estimates that an average rural Indian household will have five major consumer appliances
by 2006, almost double of what it had five years ago.

In order to efficiently and cost-effectively target the rural markets, the companies will have
to cover many independent retailers since in these areas, the retailer influences purchase
decisions and stock a single brand in a product category.

36
In such an environment, being first on the shelf and developing a privileged relationship with
the retailer is a source of competitive advantage to consumer good companies.
Most of the companies have started tinkering with pack sizes and creating new price points
in order to reach out to rural consumers since a significant portion of the rural population are
daily wage workers.

Thus, sachets and miniature packs, as in the case of shampoo sachets priced at Re 1 and Rs 2
or toothpaste at Rs 10, have become the order of the day in hinterland India and help
improve market penetration.

Yet, driving consumption of goods in rural areas is not just about lowering prices and
increasing volumes but also about product innovation and developing indigenous products to
cater to their demands.

For example, soap makers use advanced technology to coat one side of the soap bar with
plastic to prevent it from wearing out quickly.

Also, the companies need to turn to innovative methods of advertising like fairs or haats to
reach their potential customer base.

Two years ago, many companies congregated at the Ganges river for the Kumbh Mela
festival, where about 30 million people, mostly from rural areas, were expected to come over
the span of a month.

The companies provided 'touch and feel' demonstrations and distributed free samples. This
proved to be extremely effective in advertising to the rural market.

Strategic Issues:

37
The rural India offers a tremendous market potential. A mere one percent increase in India’s
rural income translates to a mind-boggling Rs 10,000 crore of buying power. Nearly
twothirds of all middle-income households in the country are in rural India. And close to
half of India’s buying potential lies in its villages. Thus for the country’s marketers, small
and big, rural reach is on the rise and is fast becoming their most important route to growth.
Realizing this Corporate India is now investing a sizeable chunk of its marketing budget to
target the rural consumers.

Increasing brand awareness

In the rural families, studies indicate a slow but determined shift in the use of categories.
There is a remarkable improvement in the form of products used. For instance, households
are upgrading from indigenous teeth-cleaning ingredients to tooth powder and tooth-pastes,
from traditional mosquito repellant to coils and mats. There is also a visible shift from local
and unbranded products to national brands. From low-priced brands to premium brands.

38
Price promotion
In an occasional effort to capture volume sale, multinational brands use price promotions
that often yield dramatic, if temporary, sales increases in the rural areas. Their large volume
increases reveal a potentially large market in the villages that remains untapped, just below
the actual price points. To penetrate this market and generate sustainable volume sales, a
permanent product entry at the lower price point is required. Failure to recognize the
potentially huge market of the villages that lies below the surface of international price
points can even place the premium branded business at risk

FMCG consumption

Organizations like Hindustan Lever Ltd., Nirma Chemical Works, Colgate Palmolive, Parle
foods and Malhotra Marketing have carved inroads into the heart of rural markets. Various
categories of products have been able to spread their tentacles deep into the rural market and
achieved significant recognition in the country households. And, in the process, the regional
brands, local brands and the other unbranded offerings got displaced by the leading brands

Company House hold penetration

HUL 86%

Nirma chemical works 56%

Colgate Pamolive 33%

Parle Foods 31%

HLL
31%
Nirma chemical works
86%
33%
Colgate Pamolive
56%
Parle Foods

39
 Category %volume of local
brands/unbranded
Washing cakes/bars 86%

Tea 55%
Salt 33%

% volume of local brands/unbranded

33% Washing
86% cakes/bars

55% Tea

Salt

Of the expenditure on consumer goods in rurahousehold, approximately,

44% is on food articles such as biscuits, tea, coffee and salt, 20% on toiletries, 13% on
washing material, 10% on cosmetics, 4% on OTC products and 9% on other consumables. A
number of category products have established themselves firmly in the rural households. It is
evident that in the villages low-priced brands are well accepted and one might feel that a
larger proportion of the purchases made in rural market can be attributed to local/ unbranded
players. Surprisingly, however, the unbranded/local component contributes to a substantial
portion of the volume of only a few of the highly penetrated categories.

40
Category Category Brand with highest penetration
Penetration
Toilet Soap 91% Lifebuoy
Washing cakes/Bars 88% Wheel
Edlble oil 84% Double Iran Mustard
Tea 77% Lipton Tazza
Washin powder / liquid 70% Nirma
Salt 64% Tata Salt

Biscuits 61% Parle G

Focus on urban categories

Though the commodity products have greater penetration, traditionally urban categories such
as skin creams and talcum powder have also made a mark. While the urban talcum powder
market suffered a de-growth, the rural talcum powder market darted ahead. Similarly,
growth of rural skin cream market was at par with that of urban skin cream market. This
clearly indicated that after being considered urban for a long time, some categories are now
wearing a rural face. And, in many a case, it is the rural market that is actually driving the
growth of category.

Premium brands

Pond’s is the leader in the talcum powder category with a penetration of 65% and volume
contribution of 56%. Its rivals viz. Nycil and Liril are trailing far behind. Moreover, 60% of
the Pond’s users have purchased no other brand i.e. they are 100% brand loyal. This reflects
the strength of the brand in rural bazaar

Category Household Penetration

Skin Cream 18%

Talcom Powder 15%

41
In the skin care category, Fair & Lovely fairness cream, with a penetration of 75%, accounts
for 60% of the skin care market in rural India. It also enjoys the undistinguished patronage
of 58% of its user households. Both Pond’s and Fair & Lovely are enjoying a monopoly
in the rural markets In their respective categories.

Rural India is not averse to trying out the premium brands at

Brand Penetration of Category users

Surf 6.20%

Ariel 4.50%

Pantene 1.80%

Denim 1.80%

high prices. A study indicated that a majority of the premium brand users are using the
brand for the first time. Similarly 0.9% of the talcum powder-using families have started
using Denim talc and 0.7% of the shampoo using households started using Pantene. Surveys
also reveal that trials are not restricted to the more affluent echelon of the villages. The
experimenting households are more-or-less evenly spread across the various socio-economic
clusters of the rural market. This should further encourage the marketers to focus their
attention on rural buyers.

Penetration of Category users

42
 1.80%
1.80% Surf
6.20%
Ariel
4.50% Pantene
Denim
The rural youths are more open to fresh concepts as against their elderly family members.
Their difference in choice of products/brands with the seniors of the households often leads
to a “dual-usage” of product categories. As an instance, 20% of the households using tooth
powder also use tooth paste. Similarly, many of the households using premium brands also
use mass market brands. For example, while 15% of Surf and 12% of Ariel using families
also use Nirma detergent, 3% of Denim users use Pond’s Dreamflower talc and 18% of
Pantene using households use Clinic shampoo as well.

Income growth goes into consumption

In urban households there are a number of competing demands for ones money. In rural
households, they hardly change their house or go out on a vacation. They save only a small
fraction of his money and spend the rest. And when there is a growth in their income, the
money goes straight into consumption.
Rural media

Urban consumers shop daily and have 365 opportunities a year to switch brands while the
rural purchasers who buy their goods in weekly haats have only 54. Attempts to reach rural
consumers, even once during the purchase cycle to ensure repeat purchase, make point of
purchase advertising and trade push indispensable. This requires a significant reorientation
in the allocation of funds across media. For example, outdoor advertising accounts for over
7% of all media expenditures in India.

43
Rural buyers living in small isolated groups distributed across vast distances have limited
access to the broadcast media. The existence of a multiplicity of languages and varying level
of illiteracy complicates the task of communication further. To overcome some of these
challenges, Unilever pioneered the concept of video vans that travel from village to village
screening films in the local language, interspersed with advertisements for Unilever’s
products. The company also provides product usage demonstrations to the captive audience
because written instructions on the pack may

44
 Quality consciousness

It will be unjustified to think that rural consumers are less bothered about product quality.
Even the village buyers desire to buy a quality product and upgrade their quality of life.
Marico, an Indian edible oil company, has found the rural consumers in the interior of India
willingly pay a reasonable price premium for branded cooking oil, over community oil,
because they are certain of its consistent quality. Unbranded products are often considered
by some of them to be adulterated.

Travails in distribution

In spite of recognizing the potential of this vast market of 700 million, marketers are often
unable to cater to it because of lack of adequate infrastructure. The distances between
villages, the terrain and the lack of pucca roads connecting the places act as impediments for
them to reach their customers. But once if they overcome these hassles and reach those
remote bazaars to be first on the shelf in the product category, they develop a privileged
relationship with the retailer that offers them a tremendous competitive advantage. Rural
retailers are far less specialized than their urban counterparts and carry a wider range of
products. Since frequent delivery is not possible in their part of the world, they tend to carry
only a single brand in each product category. And, usually, the brands that are first on the
rural shelves become synonymous with product category and are difficult to dislodge. For
instance, Maggi noodles, the brand that created the category of instant noodles, reached the
rural shelves before anyone else and remained the market leader ever since. Thus, a drive
down the rugged countryside, sans electricity and other modern facilities, is, surely,
torturous. But the pain is worth bearing.
Preference for Low Unit Packs (LUP)

Trial is often encouraged by Low Unit Packs (LUP) or sachets. The sachet packaging
strategy caught the popular FMCG imagination in the early 1990s and it was considered as a
breakthrough in the psyche of the rural consumers. Today, the sachets are increasingly
dominant on shelves. Shampoo, for instance, has invaded the rural households with sachets

45
at low affordable prices. Sachets of tea, blues and washing powder are being launched in a
big way in the village haats by leading manufacturers. Companies like HLL and Marico are
making concrete efforts to create and then meet the demand of rural consumers by launching
products in small affordable packs.

Channel power
The rural consumers interact directly with their retail salespersons who has a strong
conviction power and whose recommendations carry weight. The owners’ relationship
with customers is based on an understanding of their needs and buying habits and is
cemented by the retailer extending credit. Some of the successful manufacturers
creatively develop new revenue activities for the rural retailer. United Phosphorous
Limited (UPL), an Indian crop protection company, realized that in its rural markets
small farmers were not applying pesticide at all, or applying it inappropriately due to the
lack of application equipment. The capital cost of the equipment (mounted pumps and
dispensers that cost up to $3000) was placed out of reach of small farmers and most
rural retailers. UPL designed a program in which it arranged for bank loans for its rural
retailers to purchase application equipment and demonstrated to their retailers the
additional revenue possibilities from renting this equipment to small farmers. The result
was an added revenue stream for rural retailers.
Wider competition for a product

Many of the rural buyers tend to have little stock of money, only a flow. Consequently, they
tend to make purchases only to meet their daily needs and have little capacity to build
inventory. The marketing implications of this are far-reaching. Not only are pack sizes and
price points affected, but in turns out that consumers have to make a selection from a much
wider array of product categories. Thus the nature of competition for any given product is
much broader. For instance, in a village haat, Coca Cola competes not just with Pepsi, but
with a broad set of purchases that the rural consumers consider as “treats”.

46
 Problems in rural marketing
Where the rural market does offer a vast untapped potential , it should also be recognized
that it is not that easy to operate in the rural market because of several attendant problems .
Rural marketing is thus time consuming affair and requires considerable investment in terms
of evolving appropriate strategies with a view to tackle the problems .
The major problems faced by manufacturing and marketing men in rural areas are described
below:-

1. Underdeveloped people and underdeveloped market:-

The agriculture technology has tried to develop the people and market in rural areas .
unfortunately ,the impact of the technology is not felt uniformly throughout the country
.while there are pockets- some districts in Punjab , Haryana or western Uttar Pradesh –
where a rural consumer is somewhat comparable to his urban counterpart , there are lager
areas and groups of people who have remained beyond the technological break thorough .

Even today about 75 districts in county are drought prone and none technology
worth the name has percolated to increase in the standard of living of these people in
addition; the small agricultural land holdings have unable to take advantage of new
technological breakthrough. The number of people below below poverty line has not
decreased in any appreciable manner. Thus the rural markets, by large number, by and large
are characterized by underdeveloped market.. a vast of the rural people image old customs
tradition habits , taboos and practices

2. Lack of proper physical communication facilities :-

Nearly 50% of the villages is the country do not have villages in the country don’t have all
weather roads. Physical communication to these villages is highly expensive . even today
,most villages is in eastern part today inaccessible during monsoon season .hence,
distribution put in by manufacturer prove expensive and some times of no consequences .to

47
be effective the products have to be physically moved to places of consumption or places to
purchase.

3. Media for rural communication:-

Among the mass media, at some point of time, say in late 50s or early 60s, radio was
considered to be a potential ,medium for communication to the rural families . now the
advent and expansion of telecast network appears for easy communication with rural masses.
The question is how many people access viewing television? There is a need to examine the
ownership pattern of television sets in rural areas to judge the potential reach of this
medium. Another e mass media is cinema. it has been observed that cinema viewing is fairly
satisfactory ,where available . Mobile theaters are also good medium but very expansive
companies like HLL using these vans found 10 to12 times higher in rural areas than urban
areas due to bad roads in areas.

4. Hierarchy of markets:-

Rural consumer has identified market places for different items of their requirements. So
there cannot be uniform distribution pattern for all products. It has been seen that 90% of
farmers visited the nearest town , where an agricultural produces assembling market is
situated at least once a quarter for either selling the produce or for purchase of their
requirements. so town/ mandi centers with large hinterland villages become the focal point
thus depending upon the purchase habit of rural people. The distribution network for
different commodities has to be different.
5. Low level of literacy:-

The literacy rate is low in rural areas as compare to urban areas. This again lead to the
problem of communication for promotion purposes. Print medium becomes in effective and

48
to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy. The
dependent should be more on electronic media cinema, radio and television. While the
excess to cinema and radio appears to be fairly easy and common. in not so in case of
television. Television advertising is very expensive. Probable it will be prudent to take
advantage of such professional rural advertising agencies. The promotion of product along
with distribution is also being resorted to by many.

6. Seasonal demand:

The distribution of any product in rural areas either agricultural inputs , consumables or
durable should necessarily follow a seasonal pattern. Since 75% of the rural income is
generated through agricultural operation which is seasonal so the demand pattern is also
seasonal. A typical example is that of fertilizers. The demand of fertilizers is always high
during the start of kharif and rabi system the fertilizers manufacturers have evolved a
distribution pattern so that the seasonal demand can be met. Likewise the demand for
consumables and durable will be high during the peak crop harvesting and marketing season.
. This is the time at which the rural people have substantial cash inflows. Hence the
distribution should be fairly intensive. During harvesting season this arrangement would
result in adequate sales realization vice versa in summer months the demand will be very
low festivals seasons like sankranti, poangal, vaisakhi or deepawali are also demand seasons.
So the distribution of rural areas should be more and frequent during the harvest and festival
seasons as opposed to a fairly uniform demand pattern in urban areas.

7. Many languages and dialects: -

Even assuming that media are available for communication or the companies commit its own
media vans the large number of languages and dialects vary wildly from state to state and
reason to reason. The messages have to be delivered in local; languages and dialects. Even
though the numbers of recognized languages are only 16, the numbers of dialects are
estimated to be around 850.

8. Low per capita income:

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Even though about 33 to 35 percent of gross domestic product is generated by rural areas. It
is shared 75% of population hence the per capita income is low compared to urban areas.
This apart the distribution of income is highly is skewed. Since the land holding patterned
itself is skewed thus the rural population present a highly heterogeneous seen. .Given the
low per capita incomes and population spread in the villages, what will be the off take of any
product by rural consumer, say from a village shop? What should be the inventory levels to
be maintained by a rural shopkeeper and how long will it take for the rural areas shopkeeper
to liquidate his stock? If a company opts to distribute the products up to village these aspects
require very careful consideration while evolving distribution strategies for rural markets.

RURAL MARKETING-CHALLENGES AND OPPORTUNITIES

The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two-thirds of countries consumers live in rural areas and almost half of the
national income is generated here. It is only natural that rural markets form an important part
of the total market of India. Our nation is classified in around 450 districts, and
approximately 630000 villages which can be sorted in different parameters such as literacy
levels, accessibility, income levels, penetration, distances from nearest towns, etc.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always
been difficult to gauge the rural market. Many brands, which should have been successful,
have failed miserably. More often than not, people attribute rural market success to luck.
Therefore, marketers need to understand the social dynamics and attitude variations within
each village though nationally it follows a consistent pattern.

50
While the rural market certainly offers a big attraction to marketers, it would be naive to
think that any company can easily enter the market and walk away with sizable share.
Actually the market bristles with variety of problems. The main problems in rural marketing
are:

• Physical Distribution

• Channel Management

• Promotion and Marketing Communication

The problems of physical distribution and channel management adversely affect the service
as well as the cost aspect. The existent market structure consists of primary rural market and
retail sales outlet.
One of the way could be using company delivery vans which can serve two purposes- it can
take the products to the customers in every nook and corner of the market and it also enables
the firm to establish direct contact with them and thereby facilitate sales promotion.
However, only the bigwigs can adopt this channel. The companies with relatively fewer
resources can go in for syndicated distribution where a tie-up between non-competitive
marketers can be established to facilitate distribution.
As a general rule, rural marketing involves more intensive personal selling efforts compared
to urban marketing. Marketers need to understand the psyche of the rural consumers and
then act accordingly. To effectively tap the rural market a brand must associate itself with
the same things the rural folks do. This can be done by utilizing the various rural folk media
to reach them in their own language and in large numbers so that the brand can be associated
with the myriad rituals, celebrations, festivals, meals and other activities where they
assemble.
One very fine example can be quoted of Escorts where they focused on deeper penetration
.In September-98 they established rural marketing sales. They did not rely on T.V or press
advertisements rather concentrated on focused approach depending on geographical and
market parameters like fares, melas etc. Looking at the ‘kuchha’ roads of village they
positioned their mobike as tough vehicle. Their advertisements showed Dharmendra riding
Escort with the punch line ‘Jandar Sawari, Shandar Sawari’. Thus, they achieved whopping
sales of 95000 vehicles annually.

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One more example, which can be quoted in this regard, is of HLL. A year back HLL started
‘Operation Bharat’ to tap the rural markets. Under this operation it passed out low–priced
sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to
twenty million households.
Thus looking at the challenges and the opportunities which rural markets offer to the
marketers it can be said that the future is very promising for those who can understand the
dynamics of rural markets and exploit them to their best advantage

OPPORTUNITIES FOR DIFFERENT FMCG MNC’s The Indian

rural market with its vast size and demand base offers a huge opportunity
that MNCs cannot afford to ignore:-

TO expand the market by tapping the countryside, more and more MNCs are foraying into
India's rural markets. Among those that have made some headway are Hindustan Lever,
Coca-Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate Palmolive and the
foreign-invested telecom companies.

Opportunity:-
The Indian rural market with its vast size and demand base offers a huge opportunity that
MNCs cannot afford to ignore. With 128 million households, the rural population is nearly
three times the urban.

As a result of the growing affluence, fuelled by good monsoons and the increase in
agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a
large consuming class with 41 per cent of India's middle-class and 58 per cent of the total
disposable income.

The importance of the rural market for some FMCG and durable marketers is underlined by
the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per
cent of all two-wheeler purchased.

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The rural market accounts for half the total market for TV sets, fans, pressure cookers,
bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for
FMCG products is growing much faster than the urban counterpart.

The 4A approach
The rural market may be alluring but it is not without its problems: Low per capita
disposable incomes that is half the urban disposable income; large number of daily wage
earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to
harvests and festivals and special occasions; poor roads; power problems; and inaccessibility
to conventional advertising media. However, the rural consumer is not unlike his urban
counterpart in many ways. The more daring MNCs are meeting the consequent challenges of
availability, affordability, acceptability and awareness (the so-called 4 As)

Availability
The first challenge is to ensure availability of the product or service. India's 627,000 villages
are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them
is not easy. However, given the poor state of roads, it is an even greater challenge to
regularly reach products to the far-flung villages. Any serious marketer must strive to reach
at least 13,113 villages with a population of more than 5,000. Marketers must trade off the
distribution cost with incremental market penetration. Over the years, India's largest MNC,
Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system which helps
its brands reach the interiors of the rural market. To service remote village, stockiest use
auto rickshaws, bullock-carts and even boats in the backwaters of Kerala. Coca-Cola, which
considers rural India as a future growth driver, has evolved a hub and spoke distribution
model to reach the villages. To ensure full loads, the company depot supplies, twice a week,
large distributors which who act as hubs. These distributors appoint and supply, once a
week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns

53
other than the seven metros cities as rural and semi-urban market. To tap these unexplored
country markets, LG has set up 45 area offices and 59 rural/remote area offices.

Affordability
The second challenge is to ensure affordability of the product or service. With low
disposable incomes, products need to be affordable to the rural consumer, most of whom are
on daily wages. Some companies have addressed the affordability problem by introducing
small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej
in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar
Pradesh — the so-called `Bimaru' States.

Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has
launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is
mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by
introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off:
Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has also
introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sun fill
is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm
priced at Rs 15.

Acceptability
The third challenge is to gain acceptability for the product or service. Therefore, there is a
need to offer products that suit the rural market. One company which has reaped rich
dividends by doing so is LG Electronics. In 1998, it developed a customized TV for the rural
market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first
year. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola
provides low-cost ice boxes — a tin box for new outlets and thermocol box for seasonal
outlets.

The insurance companies that have tailor-made products for the rural market have performed
well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in

54
total premia. The company tied up with non-governmental organizations and offered
reasonably-priced policies in the nature of group insurance covers.

Awareness:-
With large parts of rural India inaccessible to conventional advertising media — only 41 per
cent rural households have access to TV — building awareness is another challenge.
Fortunately, however, the rural consumer has the same likes as the urban consumer —
movies and music — and for both the urban and rural consumer, the family is the key unit of
identity. However, the rural consumer expressions differ from his urban counterpart. Outing
for the former is confined to local fairs and festivals and TV viewing is confined to the
stateowned Doordarshan. Consumption of branded products is treated as a special treat or
indulgence.
Hindustan Unilever relies heavily on its own company-organised media. These are
promotional events organised by stockists. Godrej Consumer Products, which is trying to
push its soap brands into the interior areas, uses radio to reach the local people in their
language.

Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural
households. It doubled its spend on advertising on Doordarshan, which alone reached 41 per
cent of rural households. It has also used banners, posters and tapped all the local forms of
entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its
`magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows
to reach rural customers. The company uses local language advertising. Philips India uses
wall writing and radio advertising to drive its growth in rural areas.

The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether
they can do so without hurting the company's profit margins. Mr Carlo Donati, Chairman
and Managing-Director, Nestle, while admitting that his company's product portfolio is
essentially designed for urban consumers, cautions companies from plunging headlong into
the rural market as capturing rural consumers can be expensive. "Any generalisation" says
Mr Donati, "about rural India could be wrong and one should focus on high GDP growth
areas, be it urban, semi-urban or rural.

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 Conclusion

Rural Marketing Becomes Attractive To Corporate:-

A variety of factors have rendered the rural market quite attractive to corporate in recent
years.
The growing opportunity in the rural market is no doubt the prime factor. The rural demand
has been growing rapidly and its composition has been changing for the better in the recent
years. The increased income/ purchasing power of the rural consumer and the improved
income distribution has enhanced rural demand for several products. Better access to many
modern products/brands has added to this growth.

The heat of competition in the urban market actually serves as the stronger driver behind the
growing interest of cooperates in the rural market. The fact that the rural market is still
largely an untapped as well as the early entrants can tap it without having to face intense
competition as in the case of the urban market, makes the rural market all the more
attractive to them.
Corporate have been finding the going increasingly tough in the urban market , especially for
the products in respect of which penetration levels are already high . For example
penetration level for the toothpaste in the urban market has now reached close to 80 per cent.
In contrast, it is below 30 per cent in the rural market. Moreover in the urban market many
consumers have been using a toothpaste for quite some time and have settle down to the
brand, its flavour , and other characteristics .They can not be expected to switch their brand
very easily . In contrast, in rural markets, there a lot of first time users of toothpaste whom
the company can tap from the scratch.

Corporate find that the highly penetrated urban markets allow little room for volume
growths for most of what are called,’ necessity products’ (toothpaste, bath soap, washing
products, tea etc). Growth opportunity for many of the ‘emerging products’ (coffee,
shampoo, talcum powder etc) too is rather low in the urban market . The rural market thus
becomes essential for companies with strong aspirations. Not comprising in the rural market
keep them out of about half of the country’s market for the ‘necessity products’ and the

56
onethird for the ‘emerging products’ by value .It is but natural that in these circumstances,
corporate set their sights on the rural market
Many companies have already taken to the market in a Big Way:-

EXTENT OF RURAL SALES BY SELECTED COMPANIES

Company Rural Sales(% share)
HLL 50
COLGATE 50
GODREJ 33
CADBURY 25
SMITHKLINE BEECHAN 25
HEINZ 20
GLAXO 25
CIPLA 18
RANBAXY 17
HERO HONDA 40
KINETIC 30

Company Rural Sales

AUDIO 40%
REFRIGATORS 24%
CTVs 22%
PHARMA 20%
CEMENT 10-20%
PAINTS 10-12%
WASHNG MACHINES 9%

Above tables shows that the extent of rural sales by select companies/Industries. Many
companies/ Industries have already taken to the rural market in a big way.

It can be shown from above table that in the FMCG Category, half of the revenue of
HINDUSTAN LEVER and Colgate’s Come from the rural market . In the case of another
companies too, the countryside accounts for a substantial part (25-30) per cent of the total

57
sales. It can also be seen that about One-Fifth of Pharma sales occur in rural India . Kinetic
sells about 30 per cent of its scooters. Hero Honda 40 percent of its bikes.

Recommendations

1. Advertisements on rural media like radio, press media has been increased .
2. Physical Distribution channel must be made strong.

58
3. Awareness about the product must be increased among the peoples.
4. Profit –margin percentage of the product for the retailers should be increased.
5. The rural customers are usually daily wage earners and they don’t have monthlyincomes
like the ones in the urban areas have. So the packaging is in smaller units and lesser-
priced packs that they can afford given their kind of income streams.
Then thing like the colour that attracts him is also important.

6. A difference in the kind of media mix that is used to convey the messages to the rural
customers. We need to use different models and means to reach them as what appeals to
the urban customer may not appeal to him due to varying lifestyles. The communication
and the design of it are also different as what attracts one need not attract the other as
well. So again, even if the media reaches him, there might not be an impact as it may fail
to attract him as fails to connect to it due to the lifestyles being different.

7. Infrastructure like- road, electricity facility must be improved because most of the MNC’s
tap the rural market due to such difficulties.

8. In advertising local languages can be used to attract more and more viewers.

LIMITATIONS OF THE STUDY

The study is based totally on secondary data and such data relates to something of the past
and not the exact present scenario. Hence totally depending on such given data could at
timesbe misleading, that is no matter how good the report is one has to do certain amount of
homework before jumping to conclusions on the basis of such study.

59
 Marketing activity is something that is never stable and is constantly changing with the
changing circumstances, ever changing rules and regulations that control these activities.
Hence something which is very up-to-date as of now might become obsolete in a very short
span of time. One has to be very cautious before taking any decision based on such data and
has to think beyond what is given. No amount of data can be accurate enough to give the
desired results.

Another major drawback with respect to the study of Scope Of Rural Marketing For
FMCG Company In India is that it is something that has been here for the past few years
only and hence trying to get much information regarding it is also difficult, and whatever
little that is available has to be taken note of and believed into. Only a few studies on the
topic are available and hence very few facets of it can be seen.
A lot more can be known about it but at a later stage when it has grown in proportions
and is more frequently used by the various MNC’s for increasing their market share and lot
of competition increases among the MNC’s and the urban market is saturated.

BIBLIOGRAPHY

Study books:

• David H Maister, "Marketing Professional Services”,”Forward-Thinking Strategies

for Boosting Your Business, Your Image, and Your Profits," 2nd Edition. Sep 2002.
Edition. 13, Is. 3; p. 57.delhi.

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 • Ali Abdulla, “The Marketing of Nations”, “A Strategic Approach to Building
National Wealth”, Aug 1997, Edition 122, pg. 104, Delhi.
• T P Gopalaswamy, “Rural marketing environment, problems and strategies” third
edition published by Vikash publishing house pvt. Ltd. Noida.
• Nargundkar, “Market research” second edition Tata Mc Graw Hill.
• Bucklin and Lattin, “A Study of the demographic and psychographic factors”:
Journal of Marketing Vol.65, (January 2007).

Internet:

www.udel.edu/alex/chapt18.html
ideas.repec.org/p/ebg/heccah/0698.htm
l www.rural
marketing.com www.HUL .com www.
Censusindia.com www.P&G.com

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