28289259 rural marketing

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Chapter.1 Profile of Rural Marketing

1.1 Introduction to Rural Marketing

1.2 Definition of Rural Marketing

1.3 Statistical Approach to Rural Marketing

1.4 Evolution of Rural Marketing

1.5 The Reasons to Prefer the Rural Areas

1.6 Characteristics of Rural Marketing

1.7 Classification of Rural Marketing


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Profile Rural Marketing

1.1 Introduction to Rural Marketing:

The rise in rural marketing provided volume growth to all leading companies in

the beginning of 90s. Rural markets are facing many challenges to target rural markets.Higher rural incomes driven by agricultural growth have increased the purchasing power

to consume branded and value-added products in rural areas. Marketers and

manufacturers are increasingly aware of the purchasing power, size and demand base ofthe Indian hinterland. Efforts are been made by them to understand the attitude of rural

consumers.

Marketers want to follow the principle of WALK THEIR WALK and TALKTHEIR TALK. Marketing mix is framed according to rural tastes and lifestyles.

For example: MIRC ELECTRONICS, which owns the Onida television brand, launched

IGO, which was positioned as a value-for-money brand targeted at rural markets,especially customers who were upgrading their black-and-white TVs, which constitutes

65%of the total colour television buyers. The ad campaign screamed loudly in rurallexicon: kasam se, kya TV hai!

1.2 Definition of Rural Marketing:

According to Prof. Ramkishen Y, Rural marketing is the process ofdeveloping, pricing, promoting, distributing rural-specific goods and services, leading to

exchanges between urban and rural markets, which satisfies consumer demand and also

achieves organizational objectives.

Let us understand this definition and its implications: -

Rural marketing involves a two way marketing process.

Every want is backed by an ability and willingness to buy. These are known

as demands. Marketers are now trying to satisfy the rural demands by

customizing the products and manufacturing the products as per the demand.

1.3 Statistical Approach to Rural Marketing:

Government agencies like IRDA (Insurance Regulatory and Development Authority)

and NCAER (National Council for Applied Economic Research) define rural as

villages with a population of less than 5,000, with 75% of the male population

engaged in agriculture, etc. Two-thirds of the countrys consumers live in rural areas, which are around 700

million people, and almost 26% of the National income is generated there.

10 consecutive monsoons have led to 26% of GDP as returns from agriculture. This

has increased their purchasing power.

India is divided into 597 districts, and has 6,38,667 villages, of which 32% can be

reached as they are connected by pucca roads.


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However, 68% of the rural market lies untapped due to various reasons ranging from

inaccessibility to lack of awareness.

In all there are more than 3.8 million retail outlets in rural India, averaging 5.8 shopsper village.

The rural market has been growing at 3-4% per annum, adding more than 1 million

new consumers every year. It now accounts for close to 50% of the volume of consumption of fast-moving

consumer goods (FMCG) in India.

As a result Rural India is becoming an important part of the market

development strategies of all FMCG and consumer durables companies as well as service

companies.

1.4 Evolution of Rural Marketing:

The Glorious Past (1940-1990):

In 1949, Asian Paints was the first company to enter rural markets. In 1960HLL saw rural markets as an opportunity and entered with lifebuoy soap. Today HLL

dominates rural markets and have its presence in more than 1 lakh villages. Major playerslike Colgate and Dabur followed in. in 80s companies like Nirma, Cavinkare, and

Marico enteredrural markets. MNCs like P&G (Proctor & Gamble) also found potential

in rural markets.

The Pulse of the Present (1990-2000):

Around 70% of the population lives in rural India, which is almost700 million in number. A 1% increase in their purchasing power can lead to an increase

of Rs.10,000 crores in the government revenues. Cos. Are launching a range of products

to cater to the changing lifestyles in rural India. MNCs like LG, Samsung, Revlon andinsurance biggies like Birla Sun life, Max New York Life and Prulife are entering ruralmarkets in a big way. But till today these have altogether tapped only 1-lakh villages out

of the 6-lakh odd villages.

1.5 The Reasons to Prefer Rural Areas:

Presently, companies operating in India are left with only two options,i.e. either to go Global or to go Rural. The cost of going global is very high and also its

tough to penetrate markets in other countries. Rural India is emerging as a large market

for a number of goods and services. So, its better to target the rural market. Marketers

find a similarity between the criticality of rural as well as urban markets. Some reasonsfor the same are listed below: -

a) Saturation of urban markets: There is cutthroat competition in urban markets. Due

to the wide variety of choices of products, it becomes difficult for existingcompanies to maintain their market share. Compared to urban markets, the rural

markets provide better opportunities.


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b) A huge untapped market: With a rural population of more than 700 million, it has

a huge potential and market areas as only around 1-lakh villages are tapped out of

the 6-lakh odd villages.c) Rising disposable incomes: Good monsoons during the past 10 years have raised

farmers incomes. Non-farm sectors now account for almost 50% of the total rural

incomes. It is a market that corporatists cannot afford to ignore. Another reasonfor the rising disposable incomes of the villages is that Agricultural income is

non-taxable.

d) Remittances from abroad: Many households in rural India have one of theirfamily members abroad, mostly in Gulf countries. People working there send their

savings to their families in India, which is an additional source of income.

e) Impact of the media: The growing reach of the electronic media has created a

huge change in the lifestyles of rural consumers because of TV programmes likesoaps and other serials. Rural people are spending more on lifestyle products

these days. Modi, Revlon, for instance sells more lipsticks in the rural market than

in urban areas. Last year rural sales were Rs.25 crores; only Rs.12 crores came

from the urbanmarket.

1.6 Characteristics of Rural Marketing:

India is a big country and its rural markets have variedcharacteristics that change from people to people, region to region. Some of the mainfeatures of Indias rural markets are: -

1) Diverse Nature: There are 6,38,667 Indian villages in all.

Out of these 50% share a very small population of less than 500 and a

limited purchasing power. Many of these villages dont even have a

single shop. In the second category there are 2,50,000 villages with a population

between 500-2000. There are at least 5 shops per village.

Lastly there are 60,000 villages with a population of more than 2000.

Companies should try and focus on the last two categories more asthey have high potential. Regional disparities heavily influence

economic development, social interaction patterns, mobility patterns

and awareness levels.

This in turn influences purchasing power.

2) Urban Market Saturation:

There is a cutthroat competition in urban markets, which have reacheda stage of saturation.

As a result, marketers are shifting focus to greener pastures in ruralmarkets, as there is equal number of households in rural areas as in

urban areas.


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3) Rising Disposable Income of Rural Customers:

New tax structures, good monsoons, the green revolution and theAdministered Pricing Mechanism (APM) have raised disposable

incomes in rural areas.

It is ironic that rural people spend so lavishly on weddings, ceremonies

and festivals amidst deficiency. Today the rural consumer shop for value.

It is this income that the companies are going to tap in the near

future.

4) Rising Literacy Levels:

Nearly 45% of rural Indians are literate out of which 59% are men and31% are women.

Around 12 crore people in villages are literate as compared to 12.5

crore in urban India.

Every year produces 60 lakh literate people.

Farmers are remarkably well informed about the changing worldaround them.

The increased enrolment in schools has also generated a wave of rural

demand for lifestyles and aspiration products. Hence, one cannot make

generalizations about Indian Rural Markets.

5) Spread of Cable Television:

The growth of satellite TV channels has had a major impact on

villagers.

It has led to a change in lifestyle and consumption patterns.

Television has high capacity to raise interest levels as it has greater

accessibility compared to other media.

Rural consumers now aspire to buy brands rather than to just purchase

commodities.

1.7 Classification of Rural Marketing:

URBAN RURAL

RURAL URBAN

RURAL RURAL

Urban to Rural (U2R): A major part of rural marketing falls in this category. It

is the transaction where urban products are sold in the rural areas. The urban products,

which are generally sold in rural areas, are pesticides, fertilizers, seeds, FMCG, tractors,bicycles, consumer durables, etc.


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Rural to Urban (R2U): It is basically where agricultural products are marketed

in urban areas. Usually a farmer seeks to sell his produce in an urban market. An agent ormiddlemen plays a crucial role in this marketing process. These are basically

cooperatives like AMUL, MAPRO, etc. Products sold under R2U category include seeds,

fruits, vegetables, milk and milk products, forest produce like beeswax, honey, spices,cotton for textile mills etc.

Rural-to-Rural (R2R): This includes activities that take place between twovillages in close proximity to each other. The transactions involve areas of expertise a

particular village has. Items in this category include agricultural tools, handicrafts,

bullock carts, dress materials etc.


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Chapter.2 Consumer Behavior in Rural Areas

2.1 Characteristics of Rural Consumer

2.2 Rural Consumer Class

2.3 Factors Influencing Rural Consumer Behavior

2.4 Model of Rural Consumer Behavior

2.5 Rural Marketing Strategy


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Consumer Behavior in Rural Areas

2.1 Characteristics of Rural Consumer: Literacy level:

Consumers Literacy level in %

Urban India 52%

Rural India 45%

The literacy rates are much lower in the villages of underdeveloped

states like Bihar, Andhra Pradesh, etc.

Income level:

Consumers Income levelUrban India High

Rural India Low

Low purchasing power, standard of living, per capita income, economicand social positions are the traits of rural consumers.

Location Pattern of Rural Consumer:

India

Urban Rural

3,200 cities & Towns 6,38,667 villages

6,300 villages 3,00,00 1.5 lakh

Villages villages

5,000 persons 500 people 200 people

Or less or less


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Reference Groups: Typically, in a rural area the reference groups are primary health

workers, doctors, teachers and panchayat members, the village trader or the grocer,commonly called Baniya or Mahajan are an important influencer in the decision

making of rural customer. A marketer needs to be aware of these influences that can

effect changes in the rural customers consumption patterns.

Occupation: Consumption patterns differ according to income levels. Typically, in arural area the principal occupation is farming, trading, crafts, plumbing, electric

works, primary health workers and teachers.

Media Habits: Rural people are fond of music and folklore. In rural areas a popularform of entertainment is the Tamasha and Nautanki. And then there are television,

radio and video films.

Other Variables: Culture, language, religion, caste and social customs are some otherimportant variables for profiling a rural customer. Rural consumers have a lot of

inhibitions and tend to be rigid in their behavior. A company has to take intense care

while targeting them.

2.2 Rural Consumer Class:

Groups Population Examples

1. Affluent Group 150 million people Cash rich wheat farmersin Punjab, Chilli

merchants in Andhra

Pradesh (Guntur).

2. The Middle

Class

300 million people Sugarcane farmers in

Uttar Pradesh, Jutefarmers in West Bengal.

3. The Poor Size is very large The poorest farmers

growing Jowar, Bajra,etc. of Bihar, Orissa.

2.3 Factors Influencing Rural Consumer Behavior:

Stimuli

Perceptiona. Exposure

b. Interpretation Attitudes

a. Changing Effect

b. Changing Beliefs

c. Changing Behavior

Needs and Motives

Demographics

Culture


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Believes and Value

Social Class

Influence Groups

a. Reference Groups

b. Opinion Leaders

c. Innovations

2.4 Model of Rural Consumer Behavior:

Need recognition: A rural customer first recognizes his needs and accordingly thinks of

purchasing the products. This is the first step in the Simple Decision Making Model.

EX: Ramlal, Sarpanch of Sonawani District, wants to purchase a color TV.

Pre-purchase Search: Once there is need recognition, the next step is to do a pre-purchase

search. EX: consider the earlier example, Ramlal may go to a nearby city and visit a

showroom that has multiple products.

Evolution of alternatives: the third step is to basically to pick up the best alternative from

the available options. EX: Ramlal may look for the products of Videocon, Onida, and LGthat are available with the dealer and may finally select one of them.

Purchase decision: This is the action that result in the purchase of the product fromamong available alternatives. The customer may plan to purchase a specific product that

suits his needs and is within his budget. EX: Ramlal may plan to go for LGs Sampoorna

colour TV, as it has a vernacular on-screen display, better sound and superior picture

quality. Besides, it is priced at only Rs. 8,500.

Post-purchase behavior: This is the final step in the Simple Model of Consumer

Behavior. The buyers relationship with the seller does not come to an end with thepurchase, especially in the case of commodities like consumer durables. This is not an

important factor for FMCG. EX: Ramlal may see whether LG has a service centre

nearby, in the event of the product needing servicing.

Need

Recognition

Pre-Purchase

Research

Post-Purchase

Behavior

Evaluation of

Alternatives

Purchase

Decision


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2.5 Rural Marketing Strategy:

Introduction:The stagnation in the urban markets, cutthroat competition and shrinking product

life cycles are forcing marketers to go rural. Pioneer marketers used an insensitive

approach to their advantage. They took the urban brand, tweaked the product a wee-bit,extended the brand to low-unit packs, modified the packaging marginally, took the urban

advertisement and dubbed it in the vernacular. That was the way rural marketing was

done.A more sensitive approach has to be adopted to succeed in the rural markets. The

conservative approach resulted in huge losses and erasing of brands completely from the

rural landscape e.g. LUX shampoo and POLAR fans. New rules have to be framed tosucceed in the rural markets. Its a bit like handling a honeycomb; you want to take out

the honey, but you dont want to be stung by the bees!

Let us see how a company can adopt a rural marketing strategy that achieves the

desired results. A company entering the rural markets will do it as:

A new entrant:A company starts its life in markets and then venturesin the urban areas. For example, CavinCare and Asian Paints

A mid-entrant: An organization will enter the rural markets aftertasting success in urban markets. These companies seek to earn

around fifty percent of their revenue from the rural markets. For

example, HLL and LG.

The late entrant: Companies in this category will enter the rural

markets with a lot of skepticism. After being successful in the urban

markets for a long tine, they finally decide to enter rural markets. Forexample Cadbury and Nestle.

A company has to decide when it wants to enter the rural market.

Basically a company will enter the rural market for the following reasons:

To look for new markets. To expand existing markets.

To increase potential customers.

To sustain profitability and increase market share.

The rural marketing strategy involves three stages:

I. The Planning Stage

II. The Execution and Implementation Stage

III. The Feed Back Stage


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Rural Marketing Strategy:

Planning Stage

Execution and Implementation Stage

Feedback Stage

Profile of Rural

Market

Segmentation,

Targeting &

Positioning

Study Consumer

Behavior

Profile of Rural

Consumer

Rural Product

Rural Pricing

Rural

Distribution

Rural Sales

Force

Management

Rural

Communication

Monitor the Rural

Strategy

Feedback

&Control


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Chapter.3 Rural Distribution Network

3.1 Introduction

3.2 Functions of Rural distribution

3.3 Strategies of Rural Distribution

3.4 Statement of the Problem of Rural Marketing

Rural Distribution Network


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3.1 Introduction:

Rural distribution is considered as a nightmare because of the 6-lakh odd villages

spread across the country.

To make it easier, one needs to ask from where rural consumers buy. In the case of

durables, 90% is purchased from towns with a population of 20,000 plus. The situation with FMCG is more complex but not insurmountable.

Direct supply to the 20,000 plus population feeder towns should be quite sufficient, as

each distributor would, in turn, have supply networks of 100-plus outlets in 50-oddlocations, which can cover all villages up to the 2000-plus population category.

3.2 Function of Rural Distribution:

Rural Distribution Network can be divided into two categories:

RURAL DISTRIBUTION

Multiple tiers

Non-availability of dealers

Poor viability of retailOutlets

Inadequate Bank Facilities

Inadequate Credit Facilities

1) Physical distribution: Physical distribution is the process of delivering products tothe marketing channels and consumers. It encompasses the various activitiesinvolved in the physical flow of the product, from the manufacturer to the

consumer. The following diagram illustrates the various processes of physical

distribution:

Transportation

Communication

PHYSICAL

DISTRIBUTION

CHANNELS OF

DISTRIBUTION


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Transportation: The transportation infrastructure remains underdeveloped in

rural India. Although India has the fourth largest railway network in the world,

many parts of rural India remain outside its reach. As regards road transport,nearly50% ofthe 6 lakh-odd villages do not have all-weather roads. Waterways are an

easy transport option in state like Kerala, Jammu and Kashmir. Many cos. use

animal carts to carry their goods. There are around 2 lakh mobile cycles traders in

rural India that are penetrating rural markets and thee mobile traders are of immensehelp.

Communication: Communication plays a pivotal role in distribution for ruralmarkets. Lack of proper facilities like telephones, postal devices, Internet etc. in

rural areas poses lots of problems to marketers in servicing their retailers.

Companies are using Internet as a communication tool and are harnessing the power

of Internet in rural areas. It provides e-mail services in vernacular languages.Warehousing: Companies find it difficult to suitable godowns in many parts of

rural India. There are no public warehousing facilities in the interiors of rural India.

CWS/ SWCs Three-tier rural

Warehousing

Set-up

CO-OPERATIVES

RURAL GODOWNS

At the apex level, Central warehousing corporation (CWC) and State

warehousing corporations (SWCs) do not provide their services beyond the district level.

They reach only up to the nodal points or major markets centers. In the middle tiers arethe co-operatives at the mandi level. Then there are rural godowns, which are owned by

panchayat heads. All these provide warehousing facilities only to their own members. As

Warehousing


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a result it is a big problem for a company to store its goods in rural areas. Companies like

HLL and ITC have feet of delivery vans for rural distribution. It is better for companies

to have their own mobile warehouses rather than to depend on central godowns. Therebythey can save the cost of constructing warehouses of their own.

2) Channels of distribution: Channels play a pivotal role in marketing by performing anumber of vital distribution functions. Firms rely on marketing channels to

generate customer satisfaction and to achieve differentiation over the competition.

Channels are thus a vital source of competitive advantage for the firm. Thefollowing are some problems of rural channels of distribution:

(a) Multiple Tiers, Higher Costs and Administrative problems: In the first

place, the rural distribution chain requires a larger number of tiers, compared to

the urban one. The long distances to be covered from the product points and thescattered locations of the consuming households cause this situation. At the

minimum, the rural distribution chain needs the village-level shopkeeper, the

mandi-level distributor and the wholesaler/ stockist in the town. And on top of

them are the manufacturers own warehouses/branch office operations at selectedcenters in the marketing territory. Such multiple tiers and scattered outfits push up

costs and make channel management a major problem. It becomes expensive aswell as unmanageable.

(b) Non-Availability of Dealers: Another problem is the availability of

dealers. Many firms find that there are a limited number of suitable dealers. Even

if the firm is willing to start from scratch and try out rank new comers, the choiceof candidates is really limited.

(c) Poor Viability of retail outlets: Retail sales outlets in the rural markets

suffer from poor viability. A familiar paradox in rural distribution is that themanufacturer incurs additional expenses on distribution; still the retail outlets find

that the business is unremunerative. The scattered nature of the market and the

multiplicity of the tiers in the chain use up the additional funds. Moreover, thebusiness volume is not enough to sustain the profitability of all the groups and the

retail outlet suffers the most.

(d) Inadequate Bank Facilities: Distribution in rural markets is alsohandicapped due to lack of adequate banking and credit facilities. Rural outlets

need banking support for three important purposes:

To facilitate remittances to principals and to get fast replenishment ofstocks.

To receive supplies through bank (retiring documents with the bank)

To facilitate credit from banks.

As banking facilities are inadequate in rural areas, rural dealers arehandicapped in all these aspects. It is estimated that there is only one bank branch

for every fifth village.

(e) Inadequate credit facilities: Inadequacy of institutional/ Bank credit is anotherconstraint. Rural outlets are unable to carry adequate stocks due to lack of credit

facilities. Thus there is a vicious circle of lack of credit facilities leading to

adequate stocking and loss of business, finally resulting in poor viability of


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outlets. In order to tackle the problem of channels of distribution effectively, a

marketer needs to implement the following strategies: -

Relying on private village shops- For a large variety of consumer

products, private shops are the main channels in the rural markets. They are also the

cheapest and the most convenient channel to align with. Considering the many

constraints that the village shopkeeper in India has to operate under. He is forced to dealin a large number of products in order to make his operations viable.

Satellite distribution- The concept of satellite distribution is strongly

recommended to penetrate the rural market. Stockists are appointed in major towns andfeeder towns. They, by and large, discharge the following functions: financing,

warehousing, sub- distribution. Depending on the size of the stockists and the product

line, these functions are performed withvarying degrees of competence. They function as

authorized retailers or franchised dealers ofthe company and are recognized officially asforming part of the companys marketing network, operating through the stockists. The

manufacturer supplies goods to the stockists either on a consignment or on cash or a

credit purchase basis. The stockists take care of distribution on the terms and conditions

determined by the manufacturer or agreed upon by the parties. The volume of businessdone by the retailers vary, partly because of their location and partly because of their own

capacity for doing business.

Hubs and Spokes Model:

Please turn over

HUBS AND SPOKES MODEL:


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A1-A4 semi-wholesale S1-S4 satellite markets

This process continues as long as the market and consumption level keepexpending and the supply also catches up. At any point of time, a certain number of

retail points always hover round particular stockists. Hence the system is known as

the satellite distribution system. The advantage of this system is that market

penetration takes place in the interiors of rural markets without the manufacturer

having to expand his direct stock point network. Syndicated distribution- channels of distribution are a major problem for

anew company targeting the rural market for the first time. The biggest problem a new

company faces is that there to many levels in the channels (multiple-tier), and setting up a

distribution channel for rural markets is a costly proposition. Coca-cola India purchased

by the Parle brands (thumbs up, Limca,etc.) for Rs.550 crores in 1993 mainly to useParles existing distribution network. But small companies cannot afford to buy another

company for distribution. The solution for small companies is to tie up with a leading

Whol

esalertown

A2

A3

S

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S

4

S

3

S

2

A4

S

4

S

3

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2

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A1 S

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S1

S3

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company the already has a presence in the rural market to distribute products through its

distribution network. The golden rule is the small companies should not deal in the same

product that the leading company sells. A successful model of syndicated distribution isP&G using the rural distribution network of Marico to sell Ariel, Tide, etc. in the initial

stages, Cavincare uses distribution network of Amrutanjan Pain Balm for its Chik

Shampoo.

3.3 Strategies of Rural Distribution:

3.4 Statement of the Problem of Rural Marketing:

Although the rural market offer a vast potential but we cannot forget to

recognize the fact that it is not easy to operate there. Rural marketing is a time consuming

affair and requires considerable investments in terms of evolving appropriate strategies.The major problems faced by companies targeting rural markets are:

1) Deprived People and Deprived Markets:

Rural people are tradition-bound and fatalistic.

They strongly believe in old customs, traditions, habits, taboos and practices.

They also face significant deprivation of basic human needs.

2) Lack of Proper Physical Communication Facilities:

Communication with these villages is difficult and highly expensive.

Moreover 300,000 villages in the country have no access to telephones. Even today, most villages are inaccessible during the monsoons.

3) Transport:

Many rural areas are not connected by rail transport.

At least 50% of the roads are poorly surfaced, some are totally destroyed and manyare severely damaged due to monsoons and lack of servicing duringyears.

Strategies of Rural

Distribution

Integrated

Marketing

Outlets

Combining

IN & OUT

operations

Rural

Supermarkets

National &

Regional Chain

Stores


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This lead to isolation of the interior villages. And the use of bullock carts looks

inevitable for many years into the future.

4) Many Languages and Dialects:

The number of languages and dialects vary widely from state to state, region to

region, and probably from district todistrict. It is difficult for marketers to design promotional strategies in different languages and

local dialects.

These rural areas also lack telecommunication facilities adding to the problems facedby the marketers in the distribution of goods and services.

5) Dispersed Markets:

Rural populations are scattered over a large land area and it is almost impossible to

ensure the availability of a brand all over the country.

Rural buyers arent concentrated unlike urban buyers.

Advertising in such a highly heterogeneous market, which is widely spread, is very

expensive.

6) Low Per Capita Income:

Even though 26% of GDP is generated in rural areas, it is shared by 76% of the

population.

So, per capita incomes are low. Moreover demand for goods in rural markets depends

upon the agricultural situation, which depends upon the monsoon to a large extent.

Therefore demand is not stable or regular.

7) Low Levels of Literacy:

Literacy rates are low in rural areas compared to urban areas.

This lead to the problem of communication.

The print medium is ineffective in rural areas since its reach is poor.

8) Prevalence of Spurious Brands and Seasonal Demand:

For any branded product there are a multitude of local variants, which are cheaper

and therefore more desirable for villagers.

Rural people are cautious about there buying decisions.

They like to give a product a trial, and buy it again only after getting personal

satisfaction.

9) Different Way of Thinking: There is a vast difference in the lifestyles of rural and urban people.

An urban customer is given many more choices than his rural counterpart.

A rural customer has two to three brands to choose from, whereas an urban

counterpart has more choices. Its only a difference in the way of thinking.

The rural customer lives fairly simply as compared to his urban counterpart.

Life in rural areas is still governed by customs and traditions and people do not easily

adopt new practices.


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10) Distribution Problem:

Effective distribution requires a village-level shopkeeper, mandi/ taluka-level

wholesaler or preferred dealer, a distributor or stockist at the district level and a

company owned depot or consignment distribution at the state level.

So many tiers increase the cost of distribution. There are more macro-level concerns about purchasing power parity, per capita

household expenditure and regional and cultural variances.

These all problems taken together make up the great hurdle that one can ill-afford toeither ignore or take for granted.

Infrastructure also poses a major problem when a marketer thinks of targeting rural

markets.

11) Narrow Consumption Basket:

According to NCAERs India Market Demographics Report, 1998, almost 55% of the

FMCG produced in the country were consumed by the villagers between 1992-1993

and 1997-1998, with annual average growth rate of 14%. These figures are estimated on a narrow consumption basket of about 20 most

expendable goods and do not signify either the potential size of the market nor the

dynamics of the product preferences and life cycles.


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Chapter.4 A Brief Profile of Hindustan Lever Limited

4.1 Introduction

4.2 Present Scenario4.3 HLLs Initiative in Corporate Social Responsibility

4.4 Introduction to SHAKTI

4.5 Expectations of Shakti in Future

A Brief Profile of Hindustan Lever Limited (HLL)


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4.1 Introduction:

Hindustan Lever Limited (HLL) is India's largest fast moving consumer

goods company, with leadership in Home & Personal Care Products and Foods &Beverages. HLL's brands spread across 20 distinct consumer categories, touch the lives

of two out of three Indians. They endow the company with a scale of combined volumesof about 4 million tonnes and sales of Rs.10,000 crores.

The mission that inspires HLL's 36,000 employees, including about 1,350managers, is to "add vitality to life".

With 35 Power Brands, HLL meets everyday needs for nutrition, hygiene, and

personal care with brands that help people feel good, look good and get more out of life.

HLLs parent company, Unilever, holds 51.55% of the equity. A Fortune 500transnational, Unilever sells Foods and Home and Personal Care brands in about 100

countries worldwide. The rest of the share holding is distributed among 3,80,000

individual shareholders and financial institutions.

HLL is India's largest marketer of Soaps, Detergents and Home Careproducts. It has the countrys largest Personal Products business, leading in Shampoos,

Skin Care Products, Colour Cosmetics and Deodorants. HLL is also the market leader in

Tea, Processed Coffee, branded Wheat Flour, Tomato Products, and Ice cream, Soups,Jams and Squashes. HLL is also one of the country's biggest exporters and has been

recognized as a Golden Super Star Trading House by the Government of India; it is a net

foreign exchange earner.HLL is India's largest exporter of branded fast movingconsumer goods. HLL is also driving exports in chosen areas where India has a

competitive advantage Marine Products, Basmati Rice, Castor Oil and its Derivatives.

It is India's largest exporter of Marine products, and one of the largest global players incastor.

4.2 Present Scenario:

Largest FMCG Company: Hindustan Lever Limited (HLL) is India's largest Fast

Moving Consumer Goods Company, touching the lives of two out of three Indianswith over 20 distinct categories in Home & Personal Care Products and Foods &

Beverages. They endow the company with a scale of combined volumes of about 4

million tonnes and sales of Rs.10,000 crores. HLL is also one of the country's largest

exporters. The Government of India has recognized it as a Golden Super Star Trading

House. HLL's brands: HLLs major brands like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair

& Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond,Kissan, Knorr-Annapurna, and Kwality Wall's are household names across the

country. They span many categories - soaps, detergents, personal products, tea,

coffee, branded staples, ice cream and culinary products.

Factories: They are manufactured in close to 80 factories. The operations involve

over 2,000 suppliers and associates.


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HLL's distribution network: It comprises of about 7,000 redistribution stockists, and it

directly covers the entire urban population, and about 250 million rural consumers.HLLs distribution network is recognized as one of its key strengths which helps

reach out its products across the length and breadth of this vast country. The need for

a strong distribution network is imperative, since HLLs corporate purpose is to

meet the everyday needs of people everywhere. Technologies: HLL has traditionally been a company, which incorporates latest

technology in all its operations. The Hindustan Lever Research Center (HLRC) was

set up in 1958, and now has facilities in Mumbai and Bangalore. HLRC and theGlobal Technology Centers in India have over 200 highly qualified scientists and

technologists, many with post-doctoral experience acquired in the US and Europe.

Social Services: HLL believes that an organizations worth is also in the service itrenders to the community. HLL is focusing on health & hygiene education, women

empowerment, and water management. It is also involved in education and

rehabilitation of special or underprivileged children, care for the destitute and HIV-positive, and rural development. HLL has also responded in case of national

calamities /adversities and contributes through various welfare measures, most recentbeing the village built by HLL in earthquake affected Gujarat, and relief &

rehabilitation after the Tsunami caused devastation in South India.

Over the last three years the company has embarked on an ambitious programme,

Shakti.

Through Shakti, HLL is creating micro-enterprise opportunities for rural women,thereby improving their livelihood and the standard of living in rural communities.

Shakti also includes health and hygiene education through the Shakti Vani

Programme, and creating access to relevant information through the I-Shakticommunity portal.

The programme now covers about 50,000 villages in 12 states. HLL's vision is to take

this programme to 100,000 villages impacting the lives of over a 100 million ruralIndians.

HLL is also running a rural health programme Lifebuoy Swasthya Chetana. The

programme endeavors to induce adoption of hygienic practices among rural Indians.

It has already touched 70 million people in approximately 15000 villages of 8 states.

The vision is to make a billion Indians feel safe and secure.

If Hindustan Lever straddles the Indian corporate world, it is because of being single-

minded in identifying itself with Indian aspirations and needs in every walk of life.

And they prove it by the latest redesign done for the HLL brands LUX and Wheel:

HLLs brands redesign:

Indias two most popular FMCG brands got a makeover recently. HLL roped in

ELEPHANT DESIGN, a Pune based design house for the redesign strategy.

One of them is Rs. 7500 crores-toilet soap LUX, which was redesigned for market

abroad.


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And the second one being Rs. 1000 crores detergent brand WHEEL for which all

aspects of redesign its logo, new packaging and promotional material was done byElephant Design for the Indian market.

The brief for both the brands was to make them look fresh and contemporary while

maintaining their emotional connect with the user.

The design revamp is expected to provide a fresh impact of the FMCG giant in theface of rigid competition in foreign and domestic markets.

The challenge for WHEEL was to make the brand look fresher, slicker and yet reflect

its image as a value for money soap.

The objective of redesign was to convey that an improved product was available at

the old price.

In Wheels white powder now added was the Lemon-fresh power boosters.

Redesigning of logo was done to make it look more meaningful and with the use of

more colours in the logo, Elephant tried to make it look more dynamic, fresh and

premium.

The smarter green wheel on the pack creates play of dimensions; illustration on the

backside of the pack has been made in a fresh style.

The images and expressions on the pack communicate the feeling of a good wash,enhanced fragrance and a premium look. This all adds to the overall effect of the

revamped WHEEL.

Product Mix:


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HLL

Home & Personal car Food & Beverages

Personal wash: oral care: Foods:

Lux Pepsodent Kwality walls

Lifebuoy Close-up

Liril

Hamam

Breeze Beverages:

Dove Tea: Coffee:

Peers Brook bond Bru

Rexona Lipton

3 Roses tea

Hair care: Colour cosmetics: A1 tea

Sunsilk naturals Lakme

Clinic plus

Nihar

Skin care: Ayurvedic personal &

Fair & lovely health care:

Ponds Ayush

Laundry:

Surf excel

Rin

Wheel

4.3 HLLs initiative in Corporate Social Responsibility:

Corporate Social Responsibility (CSR) in Hindustan Lever Limited (HLL) is rooted

in its Corporate Purpose - the belief that "to succeed requires the highest standards ofcorporate behavior towards our employees, consumers and the societies and world in

which we live". HLL's CSR philosophy is embedded in its commitment to all stakeholders -

consumers, employees, the environment and the society that the organization operates

in.

HLL believes that it is this commitment, which will deliver sustainable, profitablegrowth.

HLL's key CSR initiatives are undertaken with a long-term view. Initiatives that are

sustainable have long-term benefits and an ongoing business purpose.


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As early as in the 1950s, HLL focused on import substitution when balance of

payments was an issue.

Since the 1980s, most of HLL's investments have been in designated backward areasand zero-industry districts, spreading industrialization.

HLL has revived sick industries and has developed local entrepreneurship.

HLL is also involved in a number of community support activities, like education andrehabilitation of special or underprivileged children, care for the destitute and HIV-

positive, and rural development.

In recognition of these initiatives, HLL received the prestigious TERI-CSR SpecialAward for the year 2002-03 from The Energy and Resources Institute (TERI),

which was established in 1974.

TERI is world famous for its commitment to and initiatives in every aspect ofsustainable development.

HLL is also a socially responsible company in running programmes for the sake of the

society, namely:

Greening barrens

Shakti

Lifebuoy swasthya chetana

Fair & lovely foundation

Happy homes

Yashodadham

4.4 Introduction to Shakti:

Hindustan Lever Limiteds (HLLs) rural self-help group initiative to push the

penetration of its products deeper has paid off.

In terms of contribution to HLLs rural sales, 10% -- 15% comes from this initiative,

which was launched two years back. The rural market constitutes over 40% of HLLstotal sales of about Rs.10,000 crores.

In terms of incremental gains, the company now reaches out to around 10,000

villages. In general, rural women in India were underprivileged and required asustainable source of income.

NGOs (Non-Government Organization), governmental bodies and other institutions

have been working to improve the status of rural women.

SHAKTI is a pioneering effort in creating livelihoods for rural women, organizedin Self-Help Groups (SHGs), and improving living standards in rural India.

Shakti provides critically needed additional income to these women and theirfamilies, by equipping and training them to become an extended arm of the

company's operation.

Started in 2001, Shakti has already been extended to about 50,000 villages in 12states - Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Tamil Nadu,

Chattisgarh, Uttar Pradesh, Orissa, Punjab, Rajasthan, Maharashtra and West Bengal.


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The respective state governments and several NGOs are actively involved in

supporting the rural initiative of HLL.

Shakti already has about 13,000 women entrepreneurs in its fold.

A typical Shakti entrepreneur earns a sustainable income of about Rs.700 -Rs.1,000

per month, which is double their average household income.

Shakti is thus creating opportunities for rural women to live in improved conditionsand with dignity.

In addition, it involves health and hygiene programmes, which help to improve the

standard of living of the rural community.

Shakti's ambit already covers about 15 million rural population. Plans are also being

drawn up to bring in partners involved in agriculture, health, insurance and education

to catalyze overall rural development.

Shakti Vani is a social communication programme where women are trained in health

and hygiene issues; village communities are addressed through meetings at schools,

village baithaks, SHG meetings and other social fora.

In 2004, Shakti Vani has covered 10,000 villages in Madhya Pradesh, Chattisgarh and

Karnataka.

HLL has formulated a strategy for rural markets known as Operation Bharat.

OPERATION BHARAT HLLs Rural Product strategy:

HLL launched Operation Bharat in the year 1997to create brand awareness for its

rural brands.

The strategy also involved promoting the sales of its special packs for rural areas.

HLL provided hampers at discounted prices of Rs. 5, Rs. 10, Rs. 15 and Rs. 20, each

of which had a clinic shampoo bottle, a tube each of Pepsodent and Fair & Lovely,

and Ponds Dream flower Talc, in different sizes and combinations.

The idea behind this is to have a product each for hair care, dental care, skin care and

body care.

Consumers were also made aware of the benefits of using HLL products, and theaffordability of the pack sizes on offer.

The project thus successfully addressed issues of awareness, attitudes and habits.

Hopefully, as consumers in rural areas get exposed to such value-added, value-for-money, alternatives, they will continue to buy the different categories of products.

Operation Bharat is now targeting 65,000 villages and the strategy has proved to be

successful for HLL.

Its long-term strategy is to target 1.5 lakhs villages by the year 2005.

4.5 Expectation of Shakti in Future:


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An organization, which successfully stands the test of time, is one that transformsitself in line with changes in the environment.

Hindustan Levers continued success in India over the past 75 years is marked by

conscious transformations, building on the past and reshaping for the future.

In Foods, they see enormous growth potentially in leading the evolution of consumersto branded and processed foods.

Over the last few years they have focused on putting in place the building blocks of a

strong Foods business.

They recognized that changing food habits would require considerable investment,

which the current business simply could not afford. Therefore they divested the non-

value added parts like Vanaspati.

They have consolidated their portfolio and improved the gross margins by over 13%

through product mix and cost reduction.

They have also cleared the supply chain of all old stock and geared up for freshavailability on shelf. The foods business will now invest for growth through relevant

innovation.

Over the next 10 years, per capita income in India is likely to touch Chinas currentlevels. At those levels, the FMCG market will be over Rs. 1,00,000 crores from a

current value of Rs. 40,000 crores. This is an opportunity that they well poised to

seize.

They choose to focus on 35 power brands covering all consumer appeal and price

segments. They are already seeing the benefits; six brands Brooke bond, Lifebuoy,

Lux, Fair & Lovely, Rin and Wheel have emerged as mega brands in the last five

years, each with sales of more than Rs. 500 crores.

Perhaps the most significant change has been to move their brands beyond merely

making functional claims to playing a bigger and deeper role in the lives of

consumers.

Today lifebuoy, their oldest brand, has grown at over 15% for the last three years.

They have strengthened this and reinvented the way they manage their distribution

channels and customers.

The sales structure has been transformed to leverage scale and build expertise in

servicing Modern Trade and Rural Markets.

They have also delayered their sales force to improve their response times and servicelevels.

It has been extended to 60,000 villages in 12 states, already touching 75 million

people. By the end of the year, Shakti will cover 100 million people.

To ensure that HLL remains competitive in the long-term, they have made significantinvestments in product quality, pricing and marketing.

As mentioned earlier, the investment in product quality alone has been in excess ofRs. 4000 crores, or 5% of their sales.

In addition there is a cost of defending their market position.

They have made this trade-off necessary that market share is the best means ofsustaining future profits.

Over time their stronger market positions will surely lead to greater long-term profit.


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Despite these significant investments to strength the long-term competitiveness and

the costs of defending there strong market position, they still remain one of the mostprofitable companies in the country.

HLL's vision for Shakti is to scale it up across the country, covering 100,000 villages

and touching the lives of 100 million rural consumers.

Given the success of the initiative, the company is now planning to expand ProjectShakti in 400 districts by 2006.

HLL will cover 100 districts through Project Shakti by the end of this calendar year.

I-Shakti, the Internet-based rural information service, has been launched in AndhraPradesh, in association with the Andhra Pradesh Government's Rajiv Internet Village

Programme.

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

I-Shakti has been developed to provide information and services to meet rural needs

in medical health and hygiene, agriculture, animal husbandry, education, vocationaltraining and employment and women's empowerment.

The vision is to have 3,500 kiosks across the state. HLL want to spread the use ofInternet through I-Shakti not only in Andhra Pradesh but also throughout India.


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Chapter.5 A Case Study on HLLs Project Shakti

5.1 Introduction to Shakti

5.2 The Objectives of Shakti5.3 The Idea of Shakti to Achieve

5.4 The Motto of the Shakti Sandesh

5.5 Business Activity of Shakti

5.6 Achievement Model of Project Shakti

5.7 The Reasons for Shakti to Start

5.8 Shakti The Present Scenario

5.9 The Ways of Development: I-Shakti

5.10 The Expectations of Market towards Project Shakti

5.11 Channel of distribution used by HLL


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A Case Study on HLLs Project Shakti

5.1 Introduction to Shakti:

Hindustan Lever Limited (HLL) and its constituent companies have been in India

since 1931.

Over these decades, while HLL has benefited from the developments in the country,it has contributed equally to these developments.

HLL has consciously woven India's imperatives with the company's strategies and

operations.

The companys main contributions include developing and using relevanttechnologies, stimulating industrialization, boosting exports, adding value to

agriculture and generating productive employment and income opportunities.

HLL has been proactively engaged in rural development since 1976 with the initiation

of the Integrated Rural Development Programme in the Etah district of Uttar Pradesh,in tandem with the companys dairy operations.

This Programme now covers 500 villages in the district. Subsequently, the factoriesthat HLL continued establishing in less-developed regions of the country have been

engaged in similar programmes in adjacent villages.

These factory- centered activities mainly focus on training farmers, animalhusbandry, generating alternative income, health, hygiene and infrastructure

development.

The company has acquired a wealth of experience and learning from these activities.

The principal issue in rural development is to create income-generating opportunities

for the rural population.

Such initiatives are successful and sustainable when linked with the companys corebusiness and is mutually beneficial to both the population for whom the programme is

intended and for the company.

Based on these insights, HLL launched Project Shakti in the Year 2001, in keeping with

the purpose of integrating business interests with National interests.


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5.2 The Objectives of Shakti:

To create income- generating capabilities among underprivileged rural women by

providing a sustainable microenterprise opportunity for them. To improve rural living standards through health and hygiene education.

5.3 The Idea of Shakti to Achieve:

Avail micro- credit from government/ banks/ loans for self help groups, and a

stable income- generating activity offered by HLL will stimulate wealthcreation in the village.

Women from self- help groups to operate like rural direct-to-home sales

distributors for HLL products.

GOALS: 50,000 villages25,000 Entrepreneurs by 2005


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5.4 The Motto of Shakti Sandesh:

THINK BIG. START SMALL. MOVE

FAST.

5.5 Business Activity of Shakti:

Year 2000 found Peddakaparthy village, in the Nalgonda district of Andhra Pradesh,in the throes of a new revolution.

A revolution propelled by a vision to better the lives of rural women and support

them in their move towards economic independence. It was the inception of ProjectShakti.

Today, with over 5000 entrepreneurs, Project Shakti has traversed 130 districts in

eight states.

A journey only made possible by our spirited entrepreneurs and the steadfast support

received from numerous individuals and organizations including NGOs and SHGs.

Project Shakti remains indebted to them and is hopeful of their continued patronageand support.

They aspire to have 25,000 Shakti Entrepreneurs in their midst, covering 100,000

villages and reaching 100 million rural people, by year 2005.

As they set forth, they earnestly hope that they have made several poignant struggleseasier towards a life of dignity.


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Typically, women from a SHG selected as a Shakti entrepreneur receives stocks at

her doorstep from the HLL rural distributor and sells direct to consumers as well as toretailers in the village.

To get started the Shakti women borrows from her SHG and the company itself

chooses only one person from SHG.

Each Shakti entrepreneur services 6-10 villages in the population strata of 1000-2000people.

Some Shakti entrepreneur selling upwards of Rs.15000 a month worth of products

can make a gross profit of over Rs.1000 a month.

Their attempt has been to educate rural consumers on the value they can derive from

an HLL product.

5.6 Achievement Model of Project Shakti:A Win-Win Model:

Faster turnaround of moneyBetter repayment rates

Social Responsibility

Income/Investment

Opportunity

Education/

Awareness

Access to urban

Markets and

Information

Corporate Social Responsibility

Better product reach

Income

Generating

Activities

Efficiency and

Productivity

Bank

SE*

Govt.

HLL


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*Shakti Entrepreneur

5.7 The Reasons for Shakti to Start:

The objective of Project Shakti is to create income-generating capabilities forunderprivileged rural women, by providing a sustainable micro enterprise

opportunity.

It also aims to improve rural living standards through health and hygiene awareness.

Following the pioneering work carried out by Grameen Bank of Bangladesh, and

several other institutions, NGOs and government bodies have been working closely,

for nearly five years, to establish Self Help Groups (SHGs) of rural women in villagesacross India.

Their experiments clearly indicate that micro-credit, when carefully targeted and well

administered can alleviate poverty significantly.

A crucial lesson learnt was that rural upliftment depended not on successful infusion

of credit, but on its guided usage for better investment opportunities.

This is where HLL's Project Shakti is playing a role in creating such profitable microenterprise opportunities for rural women.

Catalyzing prosperity in Indian villages:

Under the project, HLL offers a range of mass-market productsto the SHGs, which

are relevant to rural customers.

HLL is investing significantly in resourcesthat work with the women on the field andprovide them with on-the-job training and support.This is a key factor in ensuring the

stabilization of their fledgling businesses.

HLL imparts the necessary training to these groups on the basics of enterprisemanagement, which the women need to manage their enterprises.

For the SHG women, this translates into a much-needed, sustainable income

contributing towards better living and prosperity.

Armed with micro-credit, women from SHGs become direct-to-home distributors in

rural markets.

Risk-free micro enterprise that yields high returns:

A typical Shakti entrepreneur conducts a steady business, which gives her an income

in excess of Rs.1,000 per month on a sustainable basis. As most of these women live below the poverty line, and hail from extremely small

villages (with populations of less than 2000), this earning is very significant, and

almost twice the amount of their previous household income.

For most of these families, Project Shakti is enabling families to live with dignity,

with real freedom from want.

In addition to money, there is a marked change in the woman's statuswithin thehousehold, with a much greater say in decision-making.


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This results in better health and hygiene, educationof the children, especially the girl

child, and an overall betterment in living standards.

The most powerful aspect about this model is that it creates a win-win partnershipbetween HLL and the consumers, some of whom will depend on the organization for

their livelihood, and builds a self-sustaining cycle of growth for all.

5.8 Shakti The Present Scenario:

The model was piloted in Nalgonda district ofAndhra Pradeshin 50 villages in the

year 2000.

The Government of Andhra Pradesh took the pioneering step of supporting theinitiative by enabling linkages with the network ofDWACRA Groupsof rural women

set up for their development and self-employment.

Most SHG women view Project Shakti as a powerful business proposition and are

keen participants in it.

It has since been extended to in Andhra Pradesh, Karnataka, Gujarat, Madhya

Pradesh, Uttar Pradesh, Tamil Nadu, Chattisgarh and Orissa.

As part of their training programme, all HLL Management Trainees spend about 4

weeksonProject Shakti in rural areas with NGOs or SHGs.

Assignments include business process consulting for nascent enterprises engaged inthe manufacture of products such as spices and hosiery items.

HLL envisions the creation of 25,000 Shakti Entrepreneurs covering 100,000villages, and touching the lives of 100 million rural people by the year 2005.

In order to achieve this goal, Project Shakti plans to extend to the states of West

Bengal, Punjab and Rajasthan in addition to expanding operations in the eight

existing states.


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Product Mix:HLL

Home & Personal care Food & Beverages

Personal wash: oral care: Foods:

Lux Pepsodent Kwality wallsLifebuoy (Rs.1 candy)

HamamBreeze Beverages:

Tea:

3 RosesA1 tea

Hair care: Colour cosmetics: Green label

Sunsilk naturals Elle 18

Clinic plus

Nihar

Skin care: Ayurvedic personal &Fair & lovely health care:

Ayush

(New entry)

Laundry:

Surf excel

Rin

Green Wheel


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5.9 The Ways of Development: I-Shakti:

Hindustan Lever Ltd, which had launched an Internet-based rural information service

I-Shakti in Andhra Pradesh, expects to set up over 1,000 such kiosks by the end of theyear in the state.

The company opened its 250th kiosk at Puttapaka village of Nalgonda district,

extending its services to Nalgonda, Visakhapatnam, West Godavari and EastGodavari districts.

I-Shakti is an IT-based rural information service network that has been developed to

provide information and services to meet villagers' needs in medical, health andhygiene, animal husbandry, agriculture, education and women's empowerment among

others. The programme is being rolled out in association with Andhra Pradesh's Rajiv

Internet Village Programme and it is an extension of HLL's Project Shakti.

Meanwhile, the company was also planning to extend its reach of Project Shakti to

over 1,00,000 villages by 2005 from the present 20,000 villages in 196 districts ofAndhra Pradesh, Karnataka, Madhya Pradesh and Tamil Nadu among others.

The scaling up will result in creating over 25,000 entrepreneurs and helping over 10

crores rural consumers.

Project Shakti is aimed at creating incomes for under-privileged rural women byproviding a sustainable micro enterprise opportunity.

A key factor that has inhibited the development of rural India has been lack of access

to critical information and services.

Given Indias large geography and weak infrastructure, it is often difficult to reachout to the rural areas.

In order to impact both livelihood opportunities and living standards of rural

communities.


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I-Shakti- an IT-based rural information service has been developed to provide

information and services to meet rural needs in agriculture, education, vocationaltraining, health and hygiene.

The premise of the I-Shakti model is to provide need based demand driven

information and services across a large variety of sectors that impact the daily

livelihood opportunities and living standards of the village community. The I-Shakti kiosk will be operated by the Shakti Entrepreneur, which further

strengthens the relationship we have already cultivated and builds new capacity.

HLL expects that the information provided would improve the productivity of therural community and unlock economic and social progress.

To catalyze overall rural development, HLL hopes to collaborate with mainstream

institutions (both corporate and not-for-profit organizations) that are experts inagriculture, health, insurance, financial services and education.

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 from 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 registrationnumber is provided for use everytime they visit the kiosk.

The information provided in the above areas is culled 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 System running on Interactive dialogue:

HLL uses a system running on interactive dialogue. Every area expert provides

content online to every satellite village. This is how Shakti entrepreneurs operate an I-

shakti kiosk.

A farmer from the village can obtain 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.

This can be explained diagrammatically as:


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Please turnover:

'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

schoolteachers have also been involved in the process.

A similar partnership is in place with Tata Adult Literacy for adult education.

Involving the locals, augments institutional knowledge with local expertise, that

greatly benefits the village community and provides them with a customized webspace on subjects of immediate relevance.

Information is updated on a regular basis and new sections are added.

Feedback is sought from the users on the quality of content based on which,improvisations have been made to satisfy user requirements.

The system is based on an interactive dialogue technology developed & patented by

the Unilever Corporate Research Team, U.K.

The system enables a deeper understanding of individual user needs and thereby

improves the quality of services rendered to them.

Ogilvy Outreach and Interactive worked with HLL to develop the content for thesystem, while Tessellaprovided key software development and support services.
http://www.tessella.com/http://www.tessella.com/


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APonline, a joint venture between TCS and the Government of Andhra Pradesh,

which has the mandate to enable e-governance, services to both urban and ruralcommunity, has tied up with I-Shakti to launch these services in rural Andhra

Pradesh.

This is one of the first rural service delivery projects of APonline.

The services include application forms for caste, nativity, income certificates,agricultural grievances, and utility bill collection to name a few. Over fifty new

services will be added in the next six months.

Through I-Shakti kiosks, ICICI Bank and HLL will work together to provide a newdelivery channel for rural India, which offers a multitude of products and services to

the rural customer.

In the first phase, Life and General Insurance will be offered through this channel.

Other financial services including Investment products (Equity, Mutual Funds,

Bonds) ICICI Bank Pure Gold (gold coins), Personal Credit, Rural Savings Accounts

and Remittances will be introduced subsequently.

5.10 The Expectations of Market towards Project Shakti:

There are other plans brewing, one is to allow companies, which do not compete with

HLL to get onto the Shakti network to sell their products.

Talks are on with a variety of companies selling batteries, mopeds and insurancecompanies for LIC policies.

They wanted to first stabilize the project before they can look at other companies.

It requires somebody with scale and size to build a platform and then invite othercompanies onto this platform.

The most powerful aspect about this model is that it emphasizes in creating a win-

win partnership between HLL and its consumers, some of whom will also draw on


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the organizational for their livelihood, and it builds a self sustaining virtuous cycle of

growth for all.

The next stage of project Shakti is even more ambitious. HLL is now in the process of piloting I- SHAKTI, an IT- based rural information service that will providesolutions to key rural needs in the areas of agriculture, education, vocational training,

health and hygiene.

The project will be piloted in Nalgonda district again.

Based on a hand held digital device, HLL is looking at sourcing appropriate low cost

hardware from Hewlett-packer while Unilever corporate research out of London is

developing the consumer interactivity software.

Women in the rural areas are the catalyst of change and that is why its whole

programme keeps women in focus.

Its like popcorn in a machine; one burst at first and then everything begins popping.

Here too, one woman as an agent of change bursts into a movement and it isstrengthen.

5.11 Channel of Distribution used by HLL:

Generally most of the textbooks talk about the 4 level channel of distribution,

namely:

Zero level

One level

Two level

Three level

Zero level involves no middlemen, which can help companies to save upon cost.

The three level COD involves the following steps:


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Please turnover:

3 level COD:

Level 1

Level 2

Level 3

The urban market uses this distribution channel. But in case of rural

markets, companies use a different COD, which is upto 4 levels, 6 levels or maximum, an

8 level channel. For this, we first need to understand the distance in the rural market.

Manufacturer

Wholesaler

Stockist

Retailer

Consumer


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Project Harvest

Project Streamline

Project Shakti

Forest

Tribal Areas

City

Village

District

Satellite Village


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For example consider a city with a population of 20 million. To transport the goods

from city to the district, we have rail routes.

So, we can put a warehouse at the district level. Now consider a district with apopulation of around 10 lakhs EX: Ahmednagar.

Suppose in Ahmednagar there are around 110 villages, which are accessible through

road transport. So, a warehouse can be put at a village also. Now take into account any village (ex: Saphale with a population of around 10,000).

Villages are linked to satellite villages through kutcha roads. Ex: Nevasa with a

population of 2000.

So, companies should either use bullock carts orbicycles for transport.

Between satellite villages and tribal areas, there are only fields and the population of

tribal areas is around 200 only.

Since there are no proper transportation facilities here, companies cannot put a

warehouse.

Now, the only option left to reach satellite villages or tribal areas is on foot.

So, what companies like HLL do is that they hire SHGs to sell their products.

Women in the SHGs personally collect the products from the distributors in the

villages and sell it in their areas.

Self Help Groups (SHGs) is a group of 18-20 women coming together to market and

sell HLLs FMCG brands. These women are known as Shakti Entrepreneurs.

HLL have not created these SHGs model. They only use it. Actually, these SHGsare MICRO CREDIT INSTITUTIONS employed by SAHARA group of companies.

This is the core business of Sahara industries.

What HLL does is that from every SHG they select one woman as Shakti

Entrepreneur to be a representative of HLL in rural areas to sell HLLs brands in andaround villages.

MART (Marketing and Research Team) a private MR agency from Delhi providestraining to these SHGs in marketing and selling products in rural areas.

Channel of Distribution adopted by HLL in Rural Markets (Project Shakti):

HLLs clearing and

forwarding agent

RDS (Re-Distribution

Stockist)

MART (Marketing and

Research Team)

MACTS (Mutually Aided

Co-operative Thrift Society

Star sellers

RetailersSHGs (Self Help

Groups)

Consumers


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Now lets see the link between the distribution system applied by HLL

and the distance in the rural markets:It is actually the logistics management but it is known as Channels of

Distribution. The reason behind this can be explained diagrammatically: -

Communication

Flow

Inventory Management

Logistics is divided into 3 parts: - Transportation

Warehousing

Supply Chain

But in case of rural markets, due to improper means of transportation there are nowarehousing facilities available in the satellite villages. That is why distribution in rural

areas is known as channels of distribution.

Link between COD and the distance in the rural markets: The clearing and forwarding (C&F) agent is at the CITY level. There are around

3000 C&F agents in the city. Then comes the RDS, which is at District level. Further the

goods are either distributed through star sellers i.e. the distributors or the MACTS, whichis a co-operative society and both are at the village level. An MR agency MART assists

and trains the distributors in order to sell and market the goods. Lastly, is the distribution

in the satellite villages, which is either done by MACTS directly i.e. MACTS supply thegoods at satellite villages with the help of SHGs and retailers.

Logistics

Warehousing Supply Chain

Transportation


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