Session 8
 Rural
Marketing with a focus on distribution
Selling in rural India
An important phenomenon in India’s consumer
culture is the emergence of the rural market for
several basic consumer goods
 Three-fourths of India’s population lives in rural
areas, and generates one-third of the national
income
 The rural market has been growing steadily over
the years and is now bigger than the urban market
for FMCG’s (53% share of the total market) with
an annual size in value terms currently estimated at
around 50,000 crore

Contd.
 NCAER
projects that the number of middle and
high-income households in rural India are
expected to grow from 100 million to 130
million by 2010
 The
higher income group in Rural India is growing
at a phenomenal rate
Changing rural customer
 Different
SEC groups are being exposed to similar
media influences owing to Cable & TV penetration
 People prefer time & convenience besides better
bargains
 The concept of brand & quality are very much
prevalent
Rural market penetration levels
Durable
Rural share %
Product
Penetration
%
Refrigerator
24.30
Coffee
7
Black and white
television
62.65
Biscuits
60.1
Washing machine
14.64
Toilet soap
91.6
Pressure cooker
51.51
Toothpaste
35.6
Instant Water heater
2.04
Talcum
powder
16.4
Mixer/grinder
27.43
Hair oil
16.0
Colour television
28.77
Shampoo
39.8
Scooter
28.56
Razor blade
47.1
Motorcycle
47.87
Skin cream
15.5
Rural Distribution in India
Challenges for Marketing in Indian
Hinterland
 Lack of infrastructure, big geographical
areas and wide dispersion of the villages
makes regular redistribution
uneconomical for the companies.
Challenges of targeting the BOP
boggling logistics – 638,365 villages,
24.3% have a population of 200-499 and 25.5%
have a population 500 – 999.
 That means 50% of the villages have 2-3 small
shops as the market. – How will a distributor
generate enough business?
 Huge geography on which they are spread. –
How can small volumes of sales support high
transportation cost?
 Mind
Challenges – contd…
 Infrastructure?
Till date only 36% of these
villages are connected by a pucca road. – How
can you actually send the goods there?
 Low purchasing power – Apart from food &
clothing, other categories tend towards luxuries
rather than necssities.
 That means almost 16 crore of India’s
population is inaccessible or unprofitable to
reach. - Challenge? Opportunity?
Product and Branding
 Do
the rural customers only look at price?
 Can the same product be given in smaller
quantities at lesser price points?
 Can the core product be given with only the basic
offering and strip it of peripheral features?
 Adaptability, Availability, Affordability,
Awareness
Retailer – The key element in rural
business
Companies are realizing that rural retailer holds much
bigger control over the shopping behavior than urban
because of the following factors:
 Khaata – Monthly account held at the retailer for all
rural customers. Big influence on what they purchase.
 Vishwaas – Perception that dealer is more
knowledgeable as he interacts with the outside world
more. Becomes their advisor.
 Even for purchase of agri-machinery like tractors,
they buy from local dealer.
 How to engage or co-opt him into the distribution?

Rural Distribution adopted by most
of the companies






Rural buying behaviour is different from urban customers.
The major income comes only at the harvesting time.
Majority of the bulk buying happens when the farmers go to the
nearby towns for selling the produce while daily consumption
items are bought from local retailers / Haats.
Durables, clothing, 2-wheeler companies limit their coverage to
these hub towns.
FMCG companies have direct distribution in towns with a
minimum population size.
More use of the indirect coverage channel i.e. wholesalers in the
feeder towns from where rural retailers buy.
The existing rural distribution
channels
More levels in the channel required. Challenge to
ensure their profitability.
 Wholesalers – Mostly village retailers buy from some
feeder town close by.
 Traveling agents – Commission workers collecting
orders from village market and bringing the material
from the feeder town.
 Trade Melas – Once or twice a year event with big
crowds; generally tied to a festival. There are 47000
Haats, 6800 Mandis and 25000 Melas as per the
Government records. Cos. are asking the feeder town
distributors to put up stalls at weekly haats.

Some other strategies
Video Vans – Run by companies for adv & ready
selling. Combined promotion and selling activities.
Apportionate the expenses over selling & marketing
budget.
 Another solution – use of cycle based salespersons, but
their reach & suitability to all products is limited.
 Recognize other qualitative factors – shraddh months,
other inauspicious / auspicious occasions.
 Effective PR – Utilize the strong influence of Sarpanch
and the village elders (Opinion Leaders)

Growing trends
Using non-motorized transportation – Usually bullock
carts, rickshaws & push carts, camels in desert areas,
elephants in NE.
 Innovative ways like combining the buying and the
retailing activity - rural hypermarkets like Haryali
Kissan Bazaar, Choupal Sagar
 Going the e-way – e-choupal. ITC becomes a trusted
partner in their lives.
 Entrepreneurial empowerment – HUL Shakti.
 Engaging MFI, SHG & NGOs

Special products / packs by some
companies
 Britannia
Biscuits
 Annapurna Salt
 Cold drinks
 Sachet Packing of Detergents, Shampoos, Hair
Oils etc.
 Sampoorna TV from LG
Some Innovative Strategies
 LIC,
cement and fertilizer manufacturers push
their brand through tractor dealers.
 Titan has tied up with HLL van for distribution
of its Sonata range in small towns and villages.
 Chik shampoo’s demonstration program.
 Dabur Chayawanprash organizes bowling
games where nine pins represent nine diseases
which it fights.
Understanding ‘ rural’
 Government
classification on the basis of
population and the primary occupation is not
adequate.
 Within all metros, there are rural pockets.
 Migrated people living in slums in big cities will
be similar in psychographics to their rural
cousins.
Targeting the urban BOP
 Rural
population in urban areas is easier to
reach.
 Existing distribution but different products can
do the trick.
 The last-mile delivery to the retailers in such
pockets has to be usually by a manual mode.
 Promotion generally through nukkad nataks,
Ram Lilas and puppet shows etc.
Illustration
 Rural
distribution of LPG – Indane Gas
Research on Opportunities in Rural
Insurance
 Commissioned
by LIC in 2006
Macro Study
Key Findings of the Research – Opportunities in Rural
Insurance






Rural sector offers a huge business opportunity for insurance
companies
Savings ratio is a healthy 30% of income across all socio
economic segments
Awareness about Life Insurance is near universal
51% of all respondents have expressed intention to purchase
a life policy
There are a total of 124 million rural households
Nearly 20% of all farmers in rural India own a Kissan Credit
Cards. The 23 million credit cards issued till date offer a huge
data base and opportunity for insurance.
Macro Study
Key Findings of the Research (contd.)



Delivery infrastructure in the form of District
Cooperative Banks, Cooperative Societies, NGO’s and
Self Help Groups already exists in most villages.
Rural connectivity through IT.
E-choupal of ITC and other similar initiatives are
available as additional delivery channels of insurance

An extensive rural agent network for sale of Life
insurance products exists

The agent plays a major role in creating awareness,
motivating purchase and rendering other insurance
services
Macro Study
Key Findings of the Research (contd.)




78% of respondents prefer various combinations of life
insurance like life + accident, life + loan, life + health +
accident.
Flexibility in Premium payments is important.
Security of income and bulk returns, especially for
daughter’s marriage and children’s education are major
persuasions for taking life policy.
While individuals are undecided about purchasing
insurance from private players, members of different
groups are favorably disposed to purchasing group
insurance through a private player vetted by the group…
Herd mentality…Safety in numbers.
Macro Study
Complementary Delivery Systems
Name of the institution/
instrument
Accessibility/ coverage of each
branch
Rural presence/
penetration
Regional Rural Bank
15-20 villages
5000+ pop size village
Commercial bank (Rural
Branch)
5000 account holders spread
over (35-40 villages)
5000+ pop size village
Post office
5-6 villages
2000+ pop size village
Cooperative society
10,000 members spread over
20-25 villages
5000+ pop size village
*ITC E choupal
5 to 7 villages
Prosperous village
District cooperative bank
7500 accounts
Block head quarter
Kissan Credit Card
12% of total no. of farmers in
rural area
Farmer of any village
* E-choupals manned by a “Sanchalak” provided with computer and internet connectivity for
procurement of agri produce and giving information on variety of services to villagers.
Micro Study
Available Channels
Banks
Cooperatives
Panchayats
Agents
Post Offices
Cybermediaries
Industrial Fin
Inst.
Eco Exchange Pts
Brokers
NGO’s & SHG’s
Distribution Channels
Evaluation Criteria
Reach
Influence on target segment
Trust & reliability
Feasible Channels
Coop Banks
Cooperatives
Business acquisition capability
Support requirements
Panchayats
Financial transaction handling
Agents
Operational discipline
Customer servicing
E-Bima
New Channel
Micro Study
Suggested Strategy Model
DISTRICT COORDINATOR (1)
Insurer’s
Resources
BLOCK COORDINATOR (14)
E-Bima
1
Agents Cooperatives Panchayats Coop Bank
20
5
No of Channel Units per Block
Av. No. of Agents per LIC Dev Officer : 37
8
3
Micro Study
E-BIMA
 Infrastructure
• A Van
• A Computer with a Printer
• Video-Audio Facility
 Human Resources
• One Driver
• Two sales cum administrative staff / agent
 Site and Mode of Operation
• Moves Village to Village
• Parks at Panchayat, Local School , Village Chaupal
• Visits 2 Villages and one haat a day
• Works 8 Hours a day
Micro Study
Role
Role and Benefits of E-BIMA
•
Awareness Programmes
•
Relationship Building and Management
•
Business Acquisition
•
Policy Servicing and Business Retention through Premium
Collection facilities
Other Benefits
•
Support to other Channels for Policy Servicing, Premium
Collection, Policy Query Handling, Complaint Handling,
Assistance in Claim Processing
•
Overcome limitations of channels