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RURAL MARKETING A Project on T. Y. BMS COMPILED BY: RAJIV. B (09) NAVIN. C (11) ANKIT. G (15) ROHAN. M (31) RINKI. W (59) Introduction Gone are the days when a rural consumer went to a nearby city to buy ‘branded products and services’. Trends indicate that the rural markets are coming up in a big way and growing twice as fast as the urban, witnessing a rise in sales of hitherto typical urban kitchen gadgets such as refrigerators, mixer-grinders and pressure cookers. According to a National Council for Applied Economic Research (NCAER) study, there are as many ‘middle income and above’ households in the ural areas as there are in the urban areas. There are almost twice as many ‘lower middle income’ households in rural areas as in the urban areas. The absolute size of rural India is expected to be double that of urban India. The study on ownership of goods indicates the same trend. It segments durables under three groups – (1) necessary products – Transistors, wristwatch and bicycle, (2) Emerging products ??? Black & White TV and cassette recorder, (3) Lifestyle products ??? Color TV and refrigerators. Marketers have to depend on rural India for the first two categories for growth and size.
Even in lifestyle products, rural India will be significant over next five years. Apart from increasing the geographical width of their product distribution, the focus of corporates should be on the introduction of brands and develop strategies specific to rural consumers. Britannia Industries launched Tiger Biscuits especially for the rural market. It clearly paid dividend. Its share of the glucose biscuit market has increased from 7 per cent to 15 per cent. About the company Hindustan Unilever Limited (abbreviated to HUL), formerly Hindustan Lever
Limited, is India’s largest consumer products company and was formed in 1933 as Lever Brothers India Limited. It is currently headquartered in Mumbai, India and its 41,000 employees are headed by Harish Manwani, the non-executive chairman of the board. HUL is the market leader in Indian products such as tea, soaps, detergents, as its products have become daily household name in India. The Anglo-Dutch company Unilever owns a majority stake in Hindustan Unilever Limited. The company was renamed in late June 2007 to “Hindustan Unilever Limited” to rovide the optimum balance between maintaining the heritage of the Company and the future benefits and synergies of global alignment with the corporate name of “Unilever”. This decision will be put to the Shareholders for approval in next “Annual General Meeting”. HUL is one among those companies in the country that derives huge revenues (over 50 per cent) from the rural areas. Evolution of HUL”””””s distribution model To meet the ever-changing needs of the consumer, HUL has set up a distribution network that ensures availability of all their products, in all outlets, at all items.
This includes, maintaining favorable trade relations, providing, innovative incentives to retailers and organizing demand generation activities among host of other things. HUL has followed a strategy of building its distribution channels in a transitional manner; and in different successive phases of the evolution of its distribution system, has penetrated well into the rural market. Phase I The first phase of the HUL distribution network had wholesalers placing bulk orders directly with the company. Large retailers also place direct orders, which omprised almost 30 percent of the total orders collected. The company salesman grouped all these orders and placed an indent with the Head Office. Goods were sent to these markets, with the company salesman as the consignee. The salesman then collected and distributed the products to the respective wholesalers, against cash payment, and the money was remitted to the company. Phase II The focus of the second phase, which spanned the decades of the 40s, was to provide desired products and quality service to the company’s customers. In order o achieve this, one wholesaler in each market was appointed as a “Registered Wholesaler,” a stock point for the company’s products in that market. The company salesman still covered the market, canvassing for orders from the rest of the trade. He would then distribute stocks from the Registered Wholesaler through distribution units maintained by the company. The Registered Wholesaler was given a margin of 1 per cent to cover the cost of warehousing and financing the stocks held by him. The Registered Wholesaler system, therefore, increased the istribution reach of the company to a larger number of customers. Phase III The highlight of the third phase was the concept of “Redistribution Stockiest” (RS) who replaced the REGISTERED WHOLESALERSs. The REDISTRIBUTION STOCKIST was required to provide the distribution units to the company salesman. The REDISTRIBUTION STOCKIST financed his stocks and provided warehousing facilities to store them. The REDISTRIBUTION STOCKIST also undertook demand stimulation activities on behalf of the company. The second characteristic of this period was the changes brought in as the company ealised that the REDISTRIBUTION STOCKIST would be able to provide customer service only if he was serviced well. This knowledge led to the establishment of the “Company Depots” system. This system helped in transshipment, bulk breaking, and acted as a stock point to minimise stock-outs at the REDISTRIBUTION STOCKIST level. In the recent past, . significant change has been the replacement of the Company Depot by a system of third party; the Carrying and Forwarding Agents (C). The C act as buffer stock-points to ensure that stock-outs did not take place.
The C system has also resulted in cost savings in terms of direct transportation and reduced time lag in delivery. The most important benefit has been improved customer service to the REDISTRIBUTION STOCKIST. Operation Bharat ??? HUL’s Rural Distribution Effort HLL implemented a major direct consumer programme called Project Bharat, which covered 2. 2 crore homes. Each home was given a box, at a special price of Rs. 15, comprising a low unit-price pack of hair-care (Clinic shampoo), dental Pepsodent toothpaste), skin-care (Fair & Lovely) and body-care (Pond’s Dream flower talc) products along with educational leaflets , audio-visual demonstrations, film songs and mythological serials interspersed with ads of Lever product. Close to 160 vans and over thousand promoters (sales staff of the distributors or some other private operators) were pressed into Operation. The cost came upto roughly Rs. 13 crore. Each van, equipped with a TV arid VCR, had six ‘promoters’. The project helped eliminate barriers to trial, and strengthened salience of both articular categories and brands. Operation Streamline In 1998, HUL launched Operation Streamline to extend their distribution. Operation Streamline is one of the major initiatives undertaken by HUL in recent times to penetrate the rural markets. In the case of Operation Streamline, the goods are distributed from the C Agents to the Re-distributors, who in turn pass it on to the Star Sellers. Being a cross-functional initiative, the Star Seller sells everything from detergents to personal products, etc. Operation Streamline opened p a new distribution channel beyond the territories that were covered by HUL’s 7,500 odd distributors. In less than two years, it has doubled’ the company’s reach in rural India. Lever’s distribution network now covers 60 per cent of the villages with population greater than 2,000, and having motor able roads. Example:- Penetration levels for its Fair & Lovely cream shot up nearly three times in just three months of launch of project. Interestingly, there appears to be a convergence around the prescription that HUL has created to crack opens the rural markets.
For the additional 30,000 villages that HUL wanted to reach, it created a super stockiest; sub-stockiest structure. The super-stockiest in the bigger towns service these sub-stockiest, who are paid 1-2 per cent more margins that the retailers. This is to cover the sub-stockest’s costs in servicing retailers in his area. Since the distributor cannot cover these retailers regularly, these sub-stockiest are essentially stock points. Then, once dealers do the necessary demand creation exercises and as such off takes increases. Operation Harvest
The reach of conventional media and, therefore, awareness of different products in rural markets in weak. It was also not always feasible for the distribution Stockiest to cover all these markets due to high costs involved. Yet, these markets are important since growth opportunities are high. The company decided to initiate mobile van operations in a focused manner to create both awareness and point of purchase access. Operation harvest endeavored to supplement the role of conventional media in rural India and, in the process, forge relationships and oyalty with rural consumers. Operation Harvest also involved conducting product awareness programmes on vans. There are 1. 2 million urban retail outlets, and another 3. 6 million shops in rural areas. Depending on their business objectives, marketer’s use varying definitions for what is rural. Whatever be the case, to extend their reach, marketers begin by ‘seeding’ the new territory, mostly through a brand awareness exercise. As HUL demonstrated with Operation Harvest, this exercise is best done through van operations. During this exercise, vans from HUL nd its distributors did the rounds of 30,000 villages giving promotional packs, showing products ads and identifying key retail and distribution points. Cinema Van Operations The Redistribution Stockiest typically funds these. Cinema Van Operations have films and audio cassettes with song and dance sequences from popular films, also comprising advertisements of HUL products. But over a period of time, van operations (usually run by the distributor or a third party) have also been used to regularly service retailers in these smaller markets rather than only making contract ith the end consumer. These successive ‘Operations’ have enabled the company far deeper penetration levels than other companies. HUL recognised early in its rural distribution initiative that market share would be created only when demand is built up through awareness, trial and consistent availability. The company literally had to build up’ the market village by village in its rural initiative. Cost-effective distribution solutions were as first attempted by HUL, and many other companies are veering around to that option today. It has been working well or HUL, so others are beginning to experiment with it. HUL’s project Shakti A woman from a SHG selected as a Shakti entrepreneur receives stocks at her doorstep from the HUL rural distributor and sells direct to consumers as well as to retailers in the village. Each Shakti entrepreneur services 6-10 villages in the population strata of 1,000-2,000 people. A Shakti entrepreneur sets off with 4-5 chief brands from the HUL portfolio – Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. These are the core brands that they layer it with whatever else is in demand like talcum powder or
Vaseline during winters. The Shakti model trains women from SHGs to distribute HUL products of daily consumption such as detergents, toilet soaps and shampoos – the latter’s penetration being only 30 per cent in rural areas. The women avail of micro-credit through banks. The established Shakti dealers are now selling Rs 10,000-Rs15,000 worth of products a month and making a gross profit of Rs 700-Rs1,000 a month. Each Shakti dealer covers 6-10 villages which have a population of less 2,000. The company is creating demand for its products by having its Shakti dealers educating onsumers on aspects like health and hygiene. The Shakti brand endorsers are under-privileged rural women trained to manage businesses. Shakti is a win-win initiative that creates livelihoods and a social initiative that improves the standard of life and catalyses affluence in rural India. What makes Shakti uniquely scalable and sustainable is that it contributes not only to HUL but also to the larger interests of the community. I-Shakti I-Shakti kiosks have been set up in 8 villages in Andhra Pradesh, and have been functional since August 2003. The kiosks have received an overwhelming response rom the local populace. During the launch of these kiosks, important village members like the sarpanch, schoolteacher and doctor are invited to help reinforce relationships with the villagers. The kiosks remain open from 9 a. m. to 7 p. m. , six days of the week. To enable access to the services, users have to register themselves first and obtain the unique registration number. An id card with the registration number is provided for use every time they visit the kiosk. The kiosks offer information chiefly in the form of audio-visuals in the following reas health and hygiene, E-Governance, education, agriculture, employment, legal services and veterinary services. The information provided in the above areas is called from the best available resources, taking additional care to ensure that information, especially in areas like agriculture, is locally relevant and includes inputs from home-grown experts. These experts are also available on request, to help provide solutions to problems raised by users through a query mailing system. A farmer from the village can btain a quick solution to a pest problem with his crops. People can also send queries on health and hygiene to a local doctor for a speedy response. Villagers can avail of discount coupons from the kiosk for medical treatment from doctors operating in local areas. ‘I-shakti’ has also tied up with Azim Premji Foundation to deliver innovative educational modules to students of classes VIII-XII through the kiosk. Local school teachers have also been involved in the process. A similar partnership is in place with Tata Adult Literacy for adult education.