1

Research Project Report

On

STRATEGIC IMPACT OF ELECTRONIC MEDIA FOR

FMCG PRODUCTS IN RURAL MARKET

In the partial fulfillment For the degree

Of

Master in Business Administration (MBA)

By G.B. Technical University
Submitted by

Submitted to

AJAY KUMAR SINGH

MRS. SWATI TIWARI

ROLL.NO- 1166670006

( ASSTT. PROFESSOR )

Specialization- Marketing & HR

SRM Business School Lucknow

NH-24, Sitapur Road, Bakshi Ka Talab, Lucknow

CERTIFICATE
This is to certify that Ajay Kumar SIngh of Master of Business Administration session 20122013 has completed his Research Report on the Topic STRATEGIC IMPACT OF
ELECTRONIC MEDIA FOR FMCG PRODUCTS IN RURAL MARKET for partial
fulfillment for award of Master of Business Administration. The Report submitted by his is a
genuine work done by his and the same is being submitted for evaluation.

Place: Lucknow
Date:

(Name &Signature of the Internal Guide)

( Mrs. Swati Tiwari )

Asst. Professor

PREFACE

Research on strategic impact of electronic media for FMCG product, who have been considered as
the relevant decision making unit in a family. However, the role of electronic media influences to
the FMCG products, such as children and rural areas, on decision making strategies and
negotiations is essential to taking a broader view of the relevant unit of analysis. Traditionally,
women were seen to be the purchasing agents for the family. Nevertheless, increasing participation
of women in the workforce has prompted a shift in this role as Family members are increasingly the
"buyers" for the entire family. Even in families where women do not work, members are observed
to share this role with their families. They enjoy greater discretion not only in making routine
consumption decisions for the family but also in pestering their parents to buy other products
desired by them. Contemporary researchers express that peoples constitute a major consumer
market, with direct purchasing power for snacks and sweets, and indirect purchase influence while
shopping for FMCG items. Indian consumers have recently attracted considerable attention from
marketers because the market for FMCG's products offers tremendous potential and is rapidly
growing. According to available industry data, the FMCG market is estimated.

Anybody can do a work but very few can excel it and they are said to be repository of
expertise skills of that work.

Ajay Kumar Singh

ACKNOWLEDGEMENT

"Sometimes our light goes out

But is blown into flame by another human being.
Each of us owes deepest thanks
To those who have rekindled this light"
Dedication and devotion of the researcher aided or backed by the guidance, support, and
encouragement of a guide is required to attain the specified objectives. My research project
report is not an exception to this. For this research project, I have been fortunate enough to have
assistance, co-operation, and blessings of a few but valuable persons. All they have played a
decisive role in helping me out to prepare this research project report a worthwhile one.
Research Report is the most vital part of an MBA course, I therefore, consider
myself fortunate to receive this Research report yet the opportunity could not
have been utilized without the guidance and support of many individuals who
although held varied positions, but were equally instrumental for successful
completion of my research report.
I would like to express gratitude to the respected Director Professor Dr. Vivek
Inder Kocchar and HOD Dr. Vivekanand Pandey for his valuable inputs and
direction that rendered success to the project.
I owe a deep intellectual debt to all of them who through their rich &varied
contribution have greatly improved my understanding of various concepts of my
report.

TABLE OF CONTENTS

CHAPTER-1
Introduction Of Rural Marketing
Objective Of Study
Scope Of Study
CHAPTER-2
Literature Review
CHAPTER-3
Research Methodology
CHAPTER-4
Data Analysis & Findings
SWOT Analysis
CHAPTER-5
Suggestion And Recommendations
CHAPTER-6
Conclusion
Limitation Of Study
Bibliography
ANNEXURE
Questionnaire

CHAPTER-1

INTRODUCTION OF RURAL MARKETING

FMCG products: fast moving consumer goods; relatively low-priced, frequently purchased
items, such as groceries and toiletries.
Consumer goods: goods that are sold to individuals for their own or their families' use.
The Indian Fast Moving Consumer Goods (FMCG) industry began to shape during the last
fiftyodd years. The FMCG sector is a cornerstone of the Indian economy. This sector touches
every aspect of human life. Indian FMCG market has been divided for a long time between the
organized sector and the unorganized sector. Unlike the US market for FMCG which is
dominated by a handful of global players, Indias Rs. 460 billion FMCG market remains highly
fragmented with roughly half the market going to unFMCG , unpackaged home made products.
This presents a tremendous opportunity for makers of FMCG products who can convert
consumers to buy FMCG products. Globally, the FMCG sector has been successful in selling
products to the lower and middle income groups, and the same is true in India. Over 70% of sales
are made to middle class households today and over 50% is in rural India. The sector is excited
about a burgeoning rural population whose incomes are rising and which is willing to spend on
goods designed to improve lifestyle. Also with a near saturation and cut throat competition in
urban India , many producers of FMCGs are driven to chalk out bold new strategies for targeting
the rural consumer in a big way. MART, the specialist rural marketing and rural development
consultancy, has found that 53 per cent of FMCG sales and 59 per cent of consumer durable sales
lie in the rural areas. Of two million BSNL mobile connections, 50 per cent went to small towns
and villages; of 20 million Rediffmail subscriptions, 60 per cent came from small towns; so did
half the transactions on Rediff's shopping site. According to a study by Chennai-based Francis
Kanoi Marketing Planning Services Pvt Ltd, the rural market for FMCG is worth Rs.65,000
crore, for durables Rs 5000 crore, for tractors and agri-inputs Rs.45,000 crore and two- and fourwheelers, Rs.8000 crore.
In total, a whopping Rs.123,000 crore. This could be doubled if corporates understood the rural
buying behavior and got their distribution and pricing right.

Rural Marketing in India

8
The future lies with those companies who see the poor as their customers. When C K Prahalad
addressed to the Indian CEOs in January 2000, he clearly pinpointed on the raw fact that there is
vast potential for profits in the rural markets. In his book The Fortune at the Bottom of the
Pyramid he cites numerous examples of companies that have generated wealth for the poor and
profits for themselves by focusing on underserved rural markets. As urban markets become more
saturated,businesses are retooling their marketing strategies, and in many case their products, to
target rural consumers with tiny incomes but rising aspirations fueled by the media and other
forces, giving birth to a new era of rural marketing. Rural marketing involves delivering
manufactured or processed inputs or services to rural producers or consumers so as to soak up
the huge size of the untapped rural market.
In today's congested and difficult markets, both local and global, all FMCG as well as other
companies

search

for

new

opportunities,

consumers

and

markets.

The 800 million potential consumers in rural India presented both an opportunity and a problem,
as this market has been characterized by unbalanced growth and infrastructural problems.Thus
looking at the opportunities which rural markets offer to the marketers it seems that the future is
very promising for those who can understand the dynamics of rural markets and exploit them to
their best advantage. A radical change in attitudes of marketers towards the vibrant and
burgeoning rural markets is expected in the coming years so that they vividly understand the
bottom of the pyramid model of CK Prahalad and start capitalizing on it.My paper discusses the
various strategies to be adopted in order to launch a product in the rural market of India.

Social Changes and the Growth of Indian Rural Market : An

Invitation To FMCG Sector

9
The Fast Moving Consumer Goods (FMCG) sector is a corner stone of the Indian economy. This
sector touches every aspect of human life. The FMCG producers now realize that there is a lot of
opportunity for them to enter into the rural market. The sector is excited about the rural
population whose incomes are rising and the lifestyles are changing. There are as many middle
income households in the rural areas as there are in the urban. Thus the rural marketing has been
growing steadily over the years and is now bigger than the urban market for FMCGs. Globally
,the FMCG sector has been successful in selling products to the lower and middle income groups
and the same is true in India. Over 70% of sales is made to middle class households today and
over 50% of the middle class is in rural India. The sector is excited about a burgeoning rural
population whose incomes are rising and which is willing to spend on goods designed to improve
lifestyle. Also with a near saturation and cut throat competition in urban India, many producers
of FMCGs are driven to chalk out bold new strategies for targeting the rural consumers in a big
way. But the rural penetration rates are low. This presents a tremendous opportunity for makers
of FMCG products who can convert consumers to buy FMCG products. Many companies
including MNCs and regional players started developing marketing strategies to lure the
untapped market. While developing the strategies, the marketers need to treat the rural consumer
differently from their counterparts in urban because they are economically, socially and psychographically different to each other. This paper covers the attractions for the FMCG marketers to
go to rural, the challenges, the difference between the rural and the urban market and the suitable
marketing strategy with the suitable example of companies and their experience in going rural.

Impulse to go Rural
There are many reasons that have urged the FMCG companies to enter the uncharted territory of
rural India. Some of the attractions are discussed below;

1. Large Population
The rural Indian population is large and its growth rate is also high. Over 70% Indias one billion
plus population lives in around 627,000 villages in rural areas. This simply shows the great

10
potentiality rural India has to bring the much needed volumes and help the FMCG companies to
bank upon the volume driven growth.

Table 1. Percentage distribution of households and income

Area Households Population
Rural 72.6 74.6
Urban 27.4 25.4
All-India 100 100
2. Rising Rural Prosperity
India is now seeing a dramatic shift towards prosperity in rural households. To drive home the
potential of rural India just consider some of these impressive facts about the rural sector. As per
the National Council for Applied Economic Research (NCAER) study, there are as many middle
income and above households in the rural 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.

Table 2. Distribution of people income-wise

Income groups Total R20u0r1a l- N 0o2. % Total R2u00ra6l - N 0o7. %
High 1.48 0.41 27.7 2.96 0.7 23.6
Middle 69.18 4.83 64.8 90.25 59.85 66.3
Low 32.29 29.52 91.42 20.41 95.8 95.7
Total 102.95 74.76 72.6 114.52 80.96 70.7
According to NCAER projections, by 2012-13, the lowest income class (i.e.Rs.2500 and below)
will shrink by more than 60%. The higher income classes are likely to double by 2012-13. This
apparently is the result of development work, which happened under the five years plans and
other special programmes such as land reforms, rural electrification rural communication, and
rural credit facilities, etc. The absolute size of the rural market is thus expected to double that of
urban India. But despite the high rural share in these categories, the rural penetration rates are
low, thus offering tremendous potential for growth. According to Mr. D. Shivakumar, Business
Head (Hair), Personal Products Division, Hindustan Lever Limited, the money available to spend

11
on FMCG (Fast Moving Consumer Goods) products by urban India is Rs. 49,500 crores as
against is Rs. 63,500 crores in rural India.
3. Growth in Market
The purchasing power in rural India is on steady rise and it has resulted in the growth of the rural
market. The market has been growing at 3-4% per annum adding more than one million new
consumers every year and now accounts for close to 50% of volume consumption of FMCG. The
growth rates of lot of FMCG are higher in rural markets than urban markets.
In product categories like toilet soaps, talcum powder, cooking iol, vanaspati ghee, tea, cigarettes
and hair oil, the share of rural market is more than 505. The table above indicates the projected
market size of FMCG products in 2012-13 based on the annual growth rates compounded
period.The estimated annual business from rural markets was Rs.1,23,000 crore, comprising
Rs.65,000 crore of FMCG, Rs.5,000 crore of durables, Rs.45,000 crore of agricultural inputs
including tractors and Rs 8,000 crore of two-wheelers and fourwheelers. Twenty nine per cent of
the rural people own cars, 27 per cent own colour televisions, 24 per cent own refrigerators and
10 per cent own washing machines, which points to the untapped potential in the rural areas. "We
therefore have to look at the rural market very seriously for future expansion," said Mr
Nandakumar while inaugurating the Business Line Club and delivering the keynote address on
the topic, `Brand Building Beyond the Urban' under the auspices of the Departments of Business
Management and Commerce of the Auxilium College here on Friday.

Table 4. Rural FMCG market Projections Category Growth 201213

Projected
Total Rural share Rural market share %
Toilet soaps 13.4 9645 6021 18086 11291 62.4

12
Body talcum
powder 23.65 1445 793 4237 2292 54.1
Toothpaste 23.5 3198 1441 9376 4140 45.1
Cooking oil 10.91 20946 15731 35295 25806 73.4
Vanaspati 7.63 4549 2846 6648 4108 62.6

4. Effectiveness of Communication
An important tool to reach out to the rural audience is through effective communication.``A rural
consumer is brand loyal and understands symbols better. This also makes it easy to sell look alike", says Mr. R.V Rajan, CMD, Anugrah Madison Advertising. The rural audience has
matured enough to understand the communication developed for the urban markets, especially
with reference to FMCG products. Television has been a major effective communication system
for rural mass and, as a result, companies should identify themselves with their advertisements.
Advertisements touching the emotions of the rural folks, it is argued, could drive a quantum
jump in sales.

5. IT Penetration in Rural India

Today there are over 15 million villagers in India who are aware of the Internet and over 300,000
villagers have used it! Ten years back, history was created with Public Call Office phone booths
(essentially manually operated payphone facilities), opening in every corner of the country.
This experiment was an instant success and contributed to hundreds of thousands of jobs. Over
the next two years, WorldTel is expected to provide 1000 centres in Tamil Nadu with 2 to 20
terminals in each centre. If successful, this experiment can be replicated easily to all 27 states
leading to over half a million Internet users through this experiment alone! The existing 600,000
public call offices in India will soon be transformed into public 'tele-info-centres' offering a
variety of multimedia information services. The rural consumers spend time and money to access
higher level information. Studies have indicated that if the content has direct relevance and will
result in commercial gains, people in rural areas are willing to pay for information services.
Consumerism has altered rural buying behavior in recent years. Spending patterns of those who
spend are now adapting to face the technology bug. Today's rural children and youth will grow
up in an environment where they have 'information access' to education opportunities, exam

13
results, career counseling, job opportunities, government schemes and services, health and legal
advice and services, worldwide news and information, land records, mandi prices, weather
forecasts, bank loans, livelihood options. If television could change the language of brand
communication in rural India, affordable Web connectivity through various types of
communication hubs will surely impact the currency of information exchange. As the electronic
ethos and IT culture moves into rural India, the possibilities of change are becoming visible.

6. Impact of Globalization
The impact of globalization will be felt in rural India as much as in urban. But it will be slow. It
will have its impact on target groups like farmers, youth and women. Farmers, today 'keep in
touch' with the latest information and maximize both ends. Animal feed producers no longer look
at Andhra Pradesh or Karnataka. They keep their cell phones constantly connected to global
markets. Surely, price movements and products' availability in the international market place
seem to drive their local business strategies. On youth its impact is on knowledge and
information and while on women it still depends on the socio-economic aspect. The marketers
who understand the rural consumer and fine tune their strategy are sure to reap benefits in the
coming years.
In fact, the leadership in any product or service is linked to leadership in the rural India except
for few lifestyle-based products, which depend on urban India mainly.

OBJECTIVE OF STUDY
1. To evaluate the customers perceptions toward purchase of FMCG products.
2. To know the role of the family members in information search about the brand they
possess.

14
3. To study the consumer satisfaction towards FMCG Products
4. To evaluate the socio-economic factors influencing the consumers to buy FMCG
Products.
5. To know the advertisement effectiveness of FMCG Products.
6. To know the brand loyalty of the respondents towards FMCG Products.
7. In this study more focus was to understand the Consumer Buying Behavior while
purchasing FMCG Product.
8. In the changing market scenario, and post globalization, Do Brand Loyalty really exists?
9. Determine the impact branding has on the consumer purchase decision-making
possessed.
10. To know the satisfaction of consumer on the basis of attributes.
11. To know the basic aim for buying the. FMCG Product set.
12. To know the role of the family members in information search about the brand they
posses.
13. To know the post purchase experience with your FMCG Product set.
14. To know the aware about different promotion of activities adopted by FMCG Product set.
15. To know the mode of payment for purchasing the FMCG Product set.

SCOPE OF STUDY
1. This study focuses on how and why customers make decisions to purchase FMCG
Products.
2. The dissatisfaction with choice FMCG Products of may have been caused due to a variety
of reasons.

15

16

CHAPTER-2

LITERATURE REVIEW

The Customer Perception Report includes questions in four key areas, Expectations,
Purchase Decisions, Customer Service, and Future Purchases. So the customer should be invited
to participate in the survey. Setting realistic expectations during the sales process is a vital
component of making happy customers. How a company sets and meets product and service
expectations plays a pivotal role in fashioning customer opinions. How a companies meets or
exceeds expectations is measured in three important areas: product/service, support, and price.

17
These three areas will be used to factor a score for the Expectations category. The results of the
three questions will be used to factor an overall expectations perception score.
The Purchase Decision category gives us a better understanding of how the customer perceives
the purchase process. Two key areas for questions include an open ended question on why they
purchased and a ratings question on their experience. The rating
Question data will be used for the analysis of Purchase Decision category. The open ended
responses from the Why questions will be used for product strengths analysis. The results of
the purchase experience question will be used for the overall Purchase perception analysis.
Customer service is one of the most important differentiations a company can have. For this
report, customers will rate a company in three key areas: customer service, timeliness for
problem resolution, and expertise. These three areas will be used to factor a score for the
Customer Service category.
Purpose o of Literature Review
Literature review is one of the prime parts of every project. The very basic purpose of the
literature review is to gain insight on the theoretical background of the research problem. It helps
the researcher to gain strong theoretical basis of the problem under study and also help to explore
whether any one has done research on the related issue.

Growth in production of FMCG

The sectors which have recorded double digit growth in terms of value are shaving cream (20 per
cent), deodorant (40 per cent), FMCG coconut oil (10 per cent),anti dandruff shampoos (15 %),
hair dyes (25 per cent), cleaners & repellents (20 per cent).The performance of the industry
during the periods April-March 2013-14 and the corresponding previous year, April-March 201213 in terms of absolute figures and the percentage growth rates sector wise are presented below:

18

Production (market size)

20122013

Unit

%
growth

Est 2013- EST %

2104
growth

FMCG (overall)

Rs billion

600

2%

609

1.5%

Soap & Toiletries (overall)

Rs billion

90

-5%

90.9

1%

Soap & Toiletries (overall)

Mn tonn

60

4%

60.09

1.50%

Fabric wash market

MN tonn

50

4%

50.25

0.50%

Laundry soaps/bars

Rs billion

53.3

-6.5%

50.64

-5%

Detergent cakes

MN tonn

15

10%

15.3

2%

Washing powder

MN tonn

25

10%

25.63

2.5%

Dish wash

Rs billion

4.4

25%

4.27

-3%

Personal wash market

Rs billion

45

5%

45.45

1%

Toilet soap

Rs billion

42

-3.2%

40.11

-4.5%

Personal health care

Rs billion

52

5%

50.44

-3%

Oral care

Rs billion

26

4%

24.7

-5%

Tooth paste

Rs billion

17.3

-13%

16.44

-5%

Tooth powder

Rs billion

4.6

-6%

4.23

-8%

Tooth brush

Rs billion

4.0

10%

4.2

5%

Skin care & cosmetics

Rs billion

12

5%

12.6

5%

Skin/fairness cream

Rs billion

12%

5.075

1.5%

Shaving cream

Rs billion

1.1

15%

1.32

20%

Deodorant

Rs billion

0.8

40%

1.12

40%

Coconut oil

Rs billion

15

2%

15.23

1.5%

Coconut oil

Tonn

3000

4%

3150

5%

FMCG coconut oil

Rs billion

6%

8.8

10%

Shampoos

Rs billion

10.2

-5%

10.51

3%

Shampoos

Tonn

29000

10%

33350

15%

Anti dandruff shampoos

Rs billion

15%

1.15

15%

Hair dyes

Rs billion

30%

2.5

25%

Feminine Hygiene

Rs billion

0%

2.04

2%

Cleaners/Repellents

Rs billion

20%

9.6

20%

Hair Care

Segment wise analysis:Fabric wash market: The demand for detergents has been growing at an annual growth rate of
10-11 per cent during the past five years, while the laundry bar market has witnessed a negative
growth. This year growth rate is low at 2 per cent for detergent cakes and 2.5 per cent for

19
washing powder. In the urban markets, people prefer to use washing powder and detergents,
instead of bars, on account of convenience of usage, increased purchasing power, aggressive
advertising and increased penetration of washing machines.
Personal wash market: While the growth rate for the overall personal wash market is only 1 per
cent compared to average growth rate of 5 per cent, premium and middle-end soaps are growing
at a rate of 10 per cent. The leading players in this market are HLL (Lux, Lifebuoy, Breeze,
Rexona), Nirma (Nima), Godrej Soaps (Cinthol, FairGlow, Shikakai, Nikhar), and Reckitt &
Colman (Dettol).
Oral care market: The oral care market valued at Rs. 26 bn has suffered a negative growth of 5
per cent in 2013-14. Toothpaste and toothpowder have suffered negative growth of 5 % and 8 %
respectively. The market for tooth brushes valued at Rs 4 bn has grown at 5 per cent in 2013-14
as compared to 10 % in 2012-13.
Skin care and cosmetics market: Skin care and cosmetics valued at Rs 12 bn and includes cold
creams, lotions, moisturizers, cleansers, talcum powders, deodorants, lipsticks, nail enamels, etc.
The shaving cream market valued at Rs 1.1 bn, has grown by 20% in 2013-14. The market is
dominated by C-P, Gillette India and Godrej Soaps. The skin care market has seen the entry of a
number of international brands, like Oriflame, Avon and Aviance. The herbal-based products are
also

quite

popular

in

this market.
Hair care market: Hair care includes a variety of FMCG and unFMCG products like hair oils,
shampoos, creams, conditioners hair dyes, etc. The Coconut Oil Market account for 72 per cent
of the hair oil market. In the FMCG coconut hair oil market, Marico (with Parachute) and Dabur
are the leading players. HLL is also extending its Sunsilk brand to hair oils. The market for
FMCG coconut oil valued at approximately Rs. 8 bn has grown by 10 %. The market has been
witnessing a shift in usage patterns in both urban and rural markets.
Feminine hygiene market: The feminine hygiene market is estimated to be worth Rs. 2 bn
market. The market has reversed from a negative growth in previous years and flat growth in the

20
last

year

has

recorded

growth

of

per

cent

in

2013-14.

This

has

got a boost from the withdrawal of excise duties.

Deodorants market: The deodorant market is estimated to be worth Rs 0.8 bn and has been
growing at 40 per cent annually. The organized segment is dominated by HLL with its Rexona,
Axe, Denim and Impulse brands in different categories targeting different segments of the
market.
Dish wash market: The total size of the dish wash market, estimated at Rs 4.4 bn has recorded a
negative growth of 3 per cent in 2013-14. Over 60 per cent of the market is dominated by bars,
while

dish

wash

powders

accounts

for

32

per

cent.

The

penetration levels are, however, still very low.

Cleaners / Repellents Market: The cleaner market covering products like floor cleaners, air,
phenyl and toilet cleaners, and is estimated to be growing at 20 per cent per annum. The key
players are HLL, Reckitt & Colman India (RCI), Henkel Spic, Bayer India and Balsara Hygiene.
The market for insecticides and repellents is estimated to be around Rs 8 bn has grown by 20 per
cent in 2013-14. Godrej Sara Lee is the world's largest manufacturer of mosquito mats, with an
all-India market share of about 66 per cent. The organized sector is trying to increase penetration
levels by higher brand visibility.
The survey outlines some measures for raising productivity, efficiency and making FMCG
competitive as follows:

Level of abatement for soaps and detergents should be revised to 45 per cent in
consideration of hike in the prices of various inputs.

Excise duty of about 50 per cent without CEN VAT credit facilities on alcohol based
toiletries is very high and should be on par with non-alcoholic toiletries.

Higher and different sales tax rates in different states.

VAT applicable for these products should fall in the proposed 4 per cent slab.

21

Companies need to have a distribution system of its own or rely on other companies and
for product awareness and demand creation try new products with already established
popular product lines.

The companies should introducing product variants that account for distinctive regional
tastes as well as a wide range of package sizes and prices to suit to purchasing
preferences of Indias varied consumer segments.

The survey confirms that the FMCG sector is poised for further growth because of the emerging
opportunities and strong fundamentals developing in the economy.
The

FICCI

survey

highlights

the

need

for

pro-active

government

action

for

helping the industry to achieve lower cost, improved quality and better performance in the
competitive environment.
The survey foresees that future growth will come from newer segments such as the youth and
through increased rural and small town penetration. The Internet and e-commerce will change
the dynamics of this industry helping companies improve their procurement, distribution and
selling efficiencies. This will, in turn, help them reduce prices and still remain profitable.
A package of fiscal incentives provided by various State governments like Himachal Pradesh,
Uttranchal, have encouraged companies to set up manufacturing facilities in these regions. Some
companies setting up units in backward areas are:
Britannia Industries
Colgate Industries
Dabur Industries
Godrej Consumer Products
Hindustan Lever
Marico Industries

FMCG market remains highly fragmented with almost half of the market representing unFMCG,

22
unpackaged home made products. This presents a tremendous opportunity for makers of FMCG
products who can convert consumers to FMCG products.
In the past decade, the personal care industry has witnessed a consumer boom. This has been
possible due to liberalization, growing urbanization and an increase in the disposable incomes
due to rise in Gross Domestic Product. The changing lifestyles, higher level of awareness among
the rural community as a result of the onslaught of satellite television has fuelled demand.
The boom has also been fuelled by the reduction of excise duties, de reservation from the smallscale sector and the concerted efforts of personal care companies to tap the potentials of the
segment of the middle class through product and packaging innovations.

FMCG Products and Categories

-

Personal

Care,

Oral

Care,

Hair

Care,

Skin

Care,

Personal

Wash

(soaps);

- Cosmetics and toiletries, deodorants, perfumes, feminine hygiene, paper products;

23
- Household care fabric wash including laundry soaps and synthetic detergents; household
cleaners, such as dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides
and

mosquito

repellents,

metal

polish

and

furniture

polish;

24

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

25
market. To tap these unexplored country markets, LG has set up 45 area offices and 59
rural/remote area offices.
AFFORDABILITY OF A PRODUCT
The second challenge is to ensure affordability of the product or service. With low disposable
incomes, products need to be affordable to the rural consumer, most of whom are on daily wages.
Some companies have addressed the affordability of Cinthol, Fair Glow and Godrej in 50-gm
packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh - the socalled `Bimaru' States.
Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has
launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is
mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by
introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty
per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced
Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a
single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15.
ACCEPTABILITY OF A PRODUCT
The third challenge is to gain acceptability for the product or service. Therefore, there is a need
to offer products that suit the rural market. One company which has reaped rich dividends by
doing so is LG Electronics. In 1998, it developed a customised TV for the rural market and
christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because
of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice
boxes a tin box for new outlets and thermocol box for seasonal outlets.
The insurance companies that have tailor-made products for the rural market have performed
well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total
premia. The company tied up with non-governmental organisations and offered reasonablypriced policies in the nature of group insurance covers. With large parts of rural India

26
inaccessible to conventional advertising media only 41 per cent rural households have access to
TV.
AWARENESS OF A PRODUCT
This is another challenge. Fortunately, however, the rural consumer has the same likes as the
urban consumer movies and music and for both the urban and rural consumer, the family is
the key unit of identity. However, the rural consumer expressions differ from his urban
counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is
confined to the state-owned Doordarshan. Consumption of FMCG products is treated as a special
treat or indulgence.
Hindustan Lever relies heavily on its own company-organised media. These are promotional
events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands
into the interior areas, uses radio to reach the local people in their language.
Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural
households. It doubled its spend on advertising on Doordarshan, which alone reached 41 per cent
of rural households. It has also used banners, posters and tapped all the local forms of
entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its
`magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows to
reach rural customers. The company uses local language advertising. Philips India uses wall
writing and radio advertising to drive its growth in rural areas.
problem by introducing small unit packs. Godrej recently introduced three brands To expand the
market by tapping the countryside, more and more MNCs are foraying into India's rural markets.
Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics,
Britannia, HDFC Standard Life, Philips, Colgate Palmolive and the telecom companies.

27
OPPORTUNITY IN RURAL MARKET
The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs
cannot afford to ignore. With 128 million households, the rural population is nearly three times
the urban.
As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural
output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming
class with 41 per cent of India's middle-class and 58 per cent of the total disposable income.
The importance of the rural market for some FMCG and durable marketers is underlined by the
fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of
all two-wheeler purchased.
The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles,
washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG
products is growing much faster than the urban counterpart.
APPROACHES TO RURAL MARKETING
The rural market may be alluring but it is not without its problems: Low per capita disposable
incomes that is half the urban disposable income; large number of daily wage earners, acute
dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and
festivals and special occasions; poor roads; power problems; and inaccessibility to conventional
advertising media. However, the rural consumer is not unlike his urban counterpart in many
ways. The more daring MNCs are meeting the consequent challenges of availability,
affordability, acceptability and awareness of products.
Projected Growth in Production of FMCG Sector
On the basis of the above positive developments conducive for further positive growth, the white
goods industry makes the following projection in respect of the commodities for the first two
quarters of 2014-15 as per the table below:

28
First two quarters First
SECTOR

UNIT

two

(Apr-Sept 2013-14) (Apr-Sept

Actual

Projected

FMCG (overall)

Rs billion

1.50%

2%

Soap & Toiletries (overall)

Rs billion

-4%

1.50%

Soap & Toiletries (overall)

MN ton

2%

4%

Laundry soaps/bars

Rs billion

-8%

0%

Laundry soaps/bars

MN Tonn

-5%

1%

Detergent cakes

MN Tonn

7%

3%

Washing powder

MN Tonn

7%

4%

Dish Wash

Rs billion

10%

5.5%

Personal wash market

Rs billion

7%

1.5%

Toilet Soap

Rs billion

-5%

1.5%

Personal health care

Rs billion

5%

2%

Oral care

Rs billion

4%

0.5%

Tooth paste

Rs billion

-4%

0.5%

Tooth powder

Rs billion

-6%

0.2%

Tooth brush

Rs billion

12%

6%

Skin care & cosmetics

Rs billion

5%

7%

Skin/fairness cream

Rs billion

12%

12%

Shaving cream

Rs billion

15%

20%

Deodorant

Rs billion

32%

25%

Coconut oil

Rs billion

1.5%

2%

Coconut oil

Tonn

3.5%

6%

FMCG coconut oil

Rs billion

6%

12%

Shampoos

Rs billion

2%

5%

Shampoos

Tonn

12%

15%

Anti dandruff shampoos

Rs billion

15%

17%

Hair dyes

Rs billion

25%

26%

Cleaners/repellants

Rs billion

20%

22%

Feminine hygiene

Rs billion

0%

2.5%

Fabric wash market

Hair Care

quarters
2014-15)

29

Company experiences in Going Rural

It becomes amply clear that rural India has to be the hot target in future for FMCG companies as
it presents a plethora of opportunities, all waiting to be harnessed. Many of the FMCG
companies are already busy formulating their rural marketing strategy to tap the potential before
competition catches up. With extensive competition not only from MNCs but also from the
numerous regional players and the lure of an untapped market has driven the marketers to chalk
out bold new strategies for targeting the rural consumer in a big way. All biggies in the industry
be it HLL, Marico, Colgate-Palmolive or Britannia, are showing deep interest in rural India.
However not everything is all rosy and there exist some gray areas in the rural strategies also. To
increase sales, growing the consumer pie rather than sharing it, has emerged as one of the key
strategies being used by FMCG majors. Offering more product variants, categories, price points,
sizes and different marketing and distribution channels, all form part of a FMCG corporates
strategy. To gauge the extent of shift in focus of the FMCG giants just sample this: recently
Godrej Consumer Products Ltd (GCPL) did something that it hadn't done before; it introduced
smaller pack sizes of some of its soaps and put them on the market for Rs 5. And FMCG giant
HLL has just launched a green variant of Lifebuoy soap, which, it hopes will be a winner in the
rural areas. Also, don't be too surprised if you village folk having their hair washed and dyed en
masse as they are only taking advantage of the live demonstrations conducted by Chennai-based
CavinKare Products. So it is clear that rural markets have caught the eyes of FMCG marketers
and it is being targeted through experiments in a big way. But is it a right marketing strategy? Or
will it prove to be an expensive mistake? Well thats the issue most FMCG companies face today
and the one we

discuss here. HLL has also established a single distribution channel by

consolidating categories. The channel seeks to build a network of sub-stockists. In 2003, about
6000 such sub stockists were appointed to service 50,000villages with a total population of 250
million. Likewise, at Coca Cola India, to reach out to rural villages, the company started out by
drawing up a hit list of high-potential villages from Indias various districts. To ensure full loads,
large distributors were appointed, and they were supplied from the companys depot in large
towns and cities. Full load supplies were offered twice weekly. On their part, the large
distributors appointed small distributors in adjoining areas. The small distributors in turn fixed
journey plan on a weekly basis.In addition to these innovative distribution techniques, a number
of FMCG companies have now started relying on savvy entrepreneurs who trawl the rural

30
hinterland, gathering mountains of village level data. One such entrepreneur, Pradeep Lokhande,
distributes used computers to schools in about 28,000 villages through his Pune-based rural
consumer organisation, Rural Relations. Lokhande supplies computers, collects data in
exchange, which is then sold to companies. The company now has a database of 35, 000 schools.
Besides tapping schools, Lokhande also strikes direct contacts with opinion leaders in villages
and recording obscure details of the local economy. This data is now being lapped up. In 1996,
Lokhande got his first customers for the data: Tata Tea and Parle. Today, he has clients like HLL,
P&G, Marico, Asian Paints, Telco and DSP Merrill Lynch. The focus on rural markets doesnt
really come as a surprise. Indias rural market has been growing steadily over the years and is
now bigger than the urban market for fast moving consumer goods (53% share of the total
market). The annual size in value terms currently estimated at around US $ 11 billion. According
to a study by the National Council for Applied Economic Research (NCAER), there are as many
'middle income and above' households in the rural areas as there are in the urban areas.
Moreover, there are almost twice as many 'lower middle income' households in rural areas as in
the urban areas. At the highest income level there are 2.3 million urban households as against 1.6
million households in rural areas. As per the NCAER projections, the number of middle and
high-income households in rural India is expected to grow from 80 million to 111 million by
2007. In urban India, the middle and high-income market is expected to grow from 46 million to
59 million. Thus, the absolute size of rural India is expected to be double that of urban India. But
despite the high rural share in these categories, the rural penetration levels are low, thus offering
tremendous potential for growth. This is why Coke and HLL are looking to increase their reach.
And others are following suit. Chennai-based CavinKare Products which makes hair dyes,
organises live demonstrations in remote areas where villagers get a free tinge of jet black or
blonde or red free of cost. Brooke Bond Lipton India markets its rural brands through magic
shows and skits. Reckitt and Colemen uses NGOs in rural areas to educate customers about
product benefits.
But rural India isnt just being developed as a consumer market. It is also being developed as a
cost effective supply chain. Tobacco and foods major ITC is focusing on the rural segment to
bring down its transaction costs. With a judicious blend of click & mortar capabilities,
agricultural communities in villages use internet kiosks - known as echoupals - to access ready

31
information in their local language on the weather & market prices. They are also able to
disseminate knowledge on scientific farm practices & risk management. The aggregation of the
demand for farm inputs from individual farmers gives farmers access to high quality inputs from
established and reputed manufacturers at fair prices. As a direct marketing channel, virtually
linked to the mandi system for price discovery, e-Choupal eliminates wasteful intermediation
and multiple handling. Thereby it significantly reduces transaction costs. While the farmers
benefit through enhanced farm productivity and higher farm gate prices, ITC benefits from the
lower net cost of procurement (despite offering better prices to the farmer). Launched in June
2000, 'e-Choupal', has already become the largest initiative among all Internetbased interventions
in rural India. 'e-Choupal' services today reach out to more than two million farmers growing a
range of crops - soyabean, coffee, wheat, rice, pulses, shrimp - in over 21,000 villages through
4100 kiosks across six states. Whether the objective is to increase market share or to lower
transaction costs, the end objective is to improve the robustness of the rural supply chain.
Moreover, these are scalable and robust models, and, given the right policy environment, it
should be possible to seamlessly integrate them in the months and years to come. Cokes
spokesperson: We are launching a new version of our Sprite brand, Sprite Zero, for the metro
audience. Similarly, we have introduced variants of our Maaza brand in the market. We have also
introduced 200 ml versions of Diet Coke at Rs 10, compared to the 500 ml Rs 20 version. This,
Coke maintains, is its strategy to grow the consumer pie, rather than share it with players in
existing categories. It is creating more choices and price points for the carbonated and noncarbonated drink consumers, who at present stand at less than three per cent of the total market.
Agrees Mr Shahra. He says consumer base is different across categories.For instance, we offer
different products for different target audiences. We provide soya products at different price
points in different markets. Realising the importance of reaching the consumer, more and more
companies are experimenting with alternative channels like direct marketing, rural haats.
Mr Press says Godrej generally

keeps experimenting with alternate channels to pump up

volumes. Our strategy hinges on effective communication and distribution plans, he adds. ITC
is experimenting with its e-choupal as a procurement and marketing channel to expand its
presence in rural India, while HLL has a similar initiative in Project Shakti. Over the next ten
years Indias per capita income is likely to double. In FMCG, there is an opportunity to catalyse
penetration, increase usage and upgrade consumers. Volume growth at HLL is following value

32
growth as a result of building capabilities and strengthening brands. This, in turn, he says, will
bring profit growth. This seems to be the story of rest of the Indian FMCG sector as well. They
seem to have done everything right. They have consolidated brands, built capacities and have
increased reach. Buoyed by GDP growth at 8.5% and 6.9% for 03-04 and 04-05, respectively,
there have been two years of successive economic growth. Consumer sentiments and spends are
positive. Monsoons are on track and rural demand is also believed to be on track. So bring on the
tea, cold drinks, juices, and ready-to-eat snacks now. The FMCG party seems like a long one.

Rural Vs Urban Consumers - Challenges

The biggest mistake a FMCG company can make while entering the rural India is to treat it as an
extension to the existing urban market. But there is a vast difference in the lifestyles of the rural
and urban consumers. The rural Indian consumer is economically, socially, and
psychographically different from his urban counterpart. The kind of choices that an urban
customer takes for granted is different from the choices available to the rural counterparts.
The difference in consumer behavior in essence stems from the way of thinking with the fairly
simple thought process of the rural consumer in contrast to a much more complex urban
counterpart. On top of this there has hardly been any research into the consumer behavior of the
rural areas, whereas there is considerable amount of data on the urban consumers regarding
things like - who is the influencer, who is the buyer, how do they go and buy, how much money
do they spend on their purchases, etc.
On the rural front the efforts have started only recently and will take time to come out with
substantial results. So the primary challenge is to understand the buyer and his behavior.
One more gray area that needs to be probed into is the importance of retailer in rural trade. Rural
consumers brand choices are greatly restricted and this is where the retailer comes into the
picture. The rural customer generally goes to the same retailer to buy goods. Naturally theres a
very strong bonding in terms of trust between the two. Also with the low education levels of
ruralsector the rural buying behavior is such that the consumer doesn't ask for the things
explicitly by brand but like "laal wala sabun dena" or "paanch rupey waali chai dena". Now in

33
such a scenario the brand becomes subservient to the retailer and he pushes whatever brand
fetches him the greatest returns. Thus, as there is a need to understand the rural consumer,
similarly need is there to study the retailer as he is a chief influencer in the buying decision.

Developing effective rural marketing strategy

Till recently most FMCG companies used to treat rural markets as adjuncts to their urban
strongholds and rural consumers as a homogeneous mass without segmenting them into target
markets and positioning brands appropriately. However it is beyond doubt that the treat rural
markets are not dumping grounds for low-end products basically designed for an urban audience.
The winning strategy instead is to focus on their core competency such as technological expertise
to design specific products for the rural economy. The most remarkable example in this context
is the launch of sachets which has transformed the rural market considerably as packaging in
smaller units and lesser-priced packs increases the products affordability. Also companies like
HLL and Nestle who have adopted this strategy have benefited tremendously. Another case is of
Britannia with its Tiger brand of low priced and conveniently packaged biscuits becoming a great
success story in rural markets.
Companies also need to change the profile of their brand managers as they are usually urbanbred MBAs, fed on a staple diet of western marketing principles and are alien to the rural India.
A step in this direction like hiring managers from the Institute of Rural Management Anand
(IRMA) could probably go a long way in improving the situation. Along with the cultural
dynamics, the needs and latent feelings of the rural people have to be well understood before
launching products in rural segments. Marketers would do well to first understand this and then
designing products accordingly. For example, Cadburys has launched ChocoBix, a chocolate
flavored biscuit which is based on the consumer insight that rural mothers opt for biscuits rather
than chocolates for their children. Another very important factor that needs to be looked at is the
proliferation of spurious products.
Rural masses are illiterate people and they identify a product by its packaging (color, visuals,
size etc.). So it becomes very easy for counterfeit products to eat into the market share of

34
established reputed brands. The retailer also gets a larger profit on selling the counterfeits rather
than the genuine products and hence is biased towards the fakes. Brands such as "Jifeboy",
"Bonds Talcum", "Funny & Lovely" etc., which are doing the rounds of rural markets, pose
considerable challenge to rural marketers. Companies would also do well to have a proper sales
and distribution network. In terms of sheer reach the companies can gain significant competitive
advantages as the rural market is highly fragmented and a brand needs to be on the shop shelf
before it can be sold. Companies should also make sure that the prices of their products are not
pushed up because of a channel of middlemen who are neither required nor add any value to the
product. The rural market remains quite price-sensitive and thus squeezing costs at every stage is
of vital importance. Some FMCG giants like HLL are in process of enhancing their control on
the rural supply chain through a network of rural sub-stockists, who are based in the villages
only. Apart from this to acquire further edge in distribution HLL has started Project Shakti in
partnership with Self Help groups of rural women. However not all traditional strategies need to
work and the need is to generate creative ideas.
A very significant step for change could be an effort to directly tap the haats, mandis, melas and
local bazaars which provide an opportunity of promoting the brand in front of a large
congregation of rural consumers. Finally an effective rural strategy for FMCG companies must
include the use of traditional media for creating awareness about their products in the rural
markets. The need for unconventional media arises as the mass media is too glamorous,
interpersonal and unreliable for a rural consumer. The traditional media on the other hand with
its effective reach, powerful input and personalized communication system will help in realizing
the goal. Besides this when the advertisement is couched in entertainment it goes down easily
with the villager.

35

CONSUMER BEHAVIOUR
Consumer behaviour is the study of individuals, groups, or organizations and the processes they
use to select, secure, and dispose of products, services, experiences, or ideas to satisfy needs and
the impacts that these processes have on the consumer and society. It blends elements
from psychology, sociology, social anthropology and economics. It attempts to understand the
decision-making processes of buyers, both individually and in groups. It studies characteristics of
individual consumers such as demographics and behavioural variables in an attempt to
understand people's wants. It also tries to assess influences on the consumer from groups such as
family, friends, reference groups, and society in general.

36
Customer behaviour study is based on consumer buying behaviour, with the customer playing
the three distinct roles of user, payer and buyer. Research has shown that consumer behaviour is
difficult to predict, even for experts in the field. [2] Relationship marketing is an influential asset
for customer behaviour analysis as it has a keen interest in the re-discovery of the true meaning
of marketing through the re-affirmation of the importance of the customer or buyer. A greater
importance is also placed on consumer retention, customer relationship management,
personalisation, customisation and one-to-one marketing. Social functions can be categorized
intosocial choice and welfare functions.
Each method for vote counting is assumed as social function but if Arrows possibility
theorem is used for a social function, social welfare function is achieved. Some specifications of
the

social

functions

are

decisiveness, neutrality, anonymity, monotonicity, unanimity,

homogeneity and weak and strong Pareto optimality. No social choice function meets these
requirements in an ordinal scale simultaneously. The most important characteristic of a social
function is identification of the interactive effect of alternatives and creating a logical relation
with the ranks. Marketing provides services in order to satisfy customers. With that in mind, the
productive system is considered from its beginning at the production level, to the end of the
cycle, the consumer (Kioumarsi et al., 2009).

Black box model

ENVIRONMENTAL FACTORS

BUYER'S BLACK BOX

Marketing

Environmental

Buyer

Stimuli

Stimuli

Characteristics

Product

Economic

Attitudes

Problem

Product

choice

Price

Technological

Motivation

recognition

Brand

choice

Place

Political

Perceptions

Information search Dealer

choice

Promotion

Cultural

Personality

Alternative

Purchase

timing

Demographic

Lifestyle

evaluation

Purchase amount

Natural

Knowledge

Purchase decision

BUYER'S

Decision Process RESPONSE

37
Post-purchase
behaviour
The black box model shows the interaction of stimuli, consumer characteristics, decision process
and consumer responses.[3] It can be distinguished between interpersonal stimuli (between
people) or intrapersonal stimuli (within people). [4] The black box model is related to the black
box theory of behaviourism, where the focus is not set on the processes inside a consumer, but
the relationbetween the stimuli and the response of the consumer. The marketing stimuli are
planned and processed by the companies, whereas the environmental stimulus are given by social
factors, based on the economical, political and cultural circumstances of a society. The buyers
black box contains the buyer characteristics and the decision process, which determines the
buyers response.
The black box model considers the buyers response as a result of a conscious, rational decision
process, in which it is assumed that the buyer has recognized the problem. However, in reality
many decisions are not made in awareness of a determined problem by the consumer.

Information search
Once the consumer has recognised a problem, they search for information on products and
services that can solve that problem. Belch and Belch (2007) explain that consumers undertake
both an internal (memory) and an external search.
Sources of information include:

Personal sources

Commercial sources

Public sources

Personal experience

The relevant internal psychological process that is associated with information search is
perception. Perception is defined as "the process by which an individual receives, selects,
organises, and interprets information to create a meaningful picture of the world". Consumers'

38
tendency to search for information on goods and services makes it possible for researchers to
forecast the purchasing plans of consumers using brief descriptions of the products of interest.
The selective perception process
Stage Description
Selective exposure consumers select which promotional messages they will expose

themselves to.
Selective attention consumers select which promotional messages they will pay attention

to.

Selective comprehension consumer interpret messages in line with their beliefs, attitudes,
motives and experiences.

Selective retention consumers remember messages that are more meaningful or important
to them.

The implications of this process help develop an effective promotional strategy, and select which
sources of information are more effective for the brand.

Evaluation of alternatives
At this time the consumer compares the brands and products that are in their evoked set. The
evoked set refers to the number of alternatives that are considered by consumers during the
problem-solving process. Sometimes also known as consideration, this set tends to be small
relative to the total number of options available. How can the marketing organisation increase the
likelihood that their brand is part of the consumer's evoked set? Consumers evaluate alternatives
in terms of the functional and psychological benefits that they offer. The marketing organisation
needs to understand what benefits consumers are seeking and therefore which attributes are most
important in terms of making a decision. It also needs to check other brands of the customers
consideration set to prepare the right plan for its own brand.
Purchase decision

39
Once the alternatives have been evaluated, the consumer is ready to make a purchase decision.
Sometimes purchase intention does not result in an actual purchase. The marketing organisation
must facilitate the consumer to act on their purchase intention. The organisation can use a variety
of techniques to achieve this. The provision of credit or payment terms may encourage purchase,
or a sales promotion such as the opportunity to receive a premium or enter a competition may
provide an incentive to buy now. The relevant internal psychological process that is associated
with purchase decision is integration. Once the integration is achieved, the organisation can
influence the purchase decisions much more easily.
There are 5 stages of a consumer buying process they are: The problem recognition stage,
meaning the identification of something a consumer needs. The search for information, which
means you search your knowledge bases or external knowledge sources for information on the
product. The possibility of alternative options, meaning whether there is another better or
cheaper product available. The choice to purchase the product and then finally the actual
purchase of the product.[6] This shows the complete process that a consumer will most likely,
whether recognisably or not, go through when they go to buy a product.

Postpurchase evaluation
The EKB (Engel, Kollat, Blackwell) model was further developed by Rice (1993) which
suggested there should be a feedback loop, Foxall (2005) further suggests the importance of the
post purchase evaluation and that it is key because of its influences on future purchase patterns.
Other influences
Consumer

behaviour

is

influenced

by

internal

as demographics, psychographics (lifestyle), personality, motivation,

conditions
knowledge,

such
attitudes,

beliefs, and feelings. Psychological factors include an individuals motivation, perception, attitude
and belief, while personal factors include income level, personality, age, occupation and lifestyle.

40
Congruence between personality and the way a persuasive message is framed (i.e., aligning the
message framing with the recipients personality profile) may play an important role in ensuring
the success of that message. In a recent experiment, five advertisements (each designed to target
one of the five major trait domains of human personality) were constructed for a single product.
The results demonstrated that advertisements were evaluated more positively the more they
cohered with participants dispositional motives. [7]Tailoring persuasive messages to the
personality traits of the targeted audience can be an effective way of enhancing the messages
impact.
Behaviour can also be affected by external influences, such as culture, sub-culture, locality,
royalty, ethnicity, family, social class, past experience reference groups, lifestyle, market mix
factors.

CUSTOMER RETENTION
Customer retention is the activity that a selling organization undertakes in order to reduce
customer defections. Successful customer retention starts with the first contact an organization
has with a customer and continues throughout the entire lifetime of a relationship. A companys
ability to attract and retain new customers, is not only related to its product or services, but
strongly related to the way it services its existing customers and the reputation it creates within
and across the marketplace.
Customer retention is more than giving the customer what they expect, its about exceeding their
expectations so that they become loyal advocates for your brand. Creating customer loyalty puts
customer value rather than maximizing profits and shareholder value at the center of business

41
strategy.[1] The key differentiator in a competitive environment is more often than not the
delivery of a consistently high standard of customer service.
Customer retention has a direct impact on profitability. Research by John Fleming and Jim
Asplund indicates that engaged customers generate 1.7 times more revenue than normal
customers, while having engaged employees and engaged customers returns a revenue gain of
3.4 times the norm.
Customer lifetime value
Customer lifetime value enables an organization to calculate the net present value of the profit an
organization will realize on a customerover a given period of time. Retention Rate is the
percentage of the total number of customers retained in context to the customers that approached
for cancellation.
Standardization of customer service
Published standards exist to help organizations deliver process driven customer satisfaction in
order to increase the lifespan of a customer. The International Customer Service Institute (TICSI)
has released The International Standard for Service Excellence (TISSE 2012). TISSE 2012
enables organizations to focus their attention on delivering excellence in the management of
customer service, whilst at the same time providing recognition of success through a 3rd Party
certification scheme. TISSE 2012 focuses an organizations attention on delivering increased
customer satisfaction by helping the organization through a Service Quality Model. TISSE
Service Quality Model uses the 5 P's - Policy, Processes, People, Premises, Product/Service, as
well as performancemeasurement. The implementation of a customer service standard leads to
improved customer service practices, underlying operating procedures and eventually, higher
levels of customer satisfaction, which in turn increases customer loyalty and customer retention.
Brand preference

42
One of the indicators of the strength of a brand in the hearts and minds of customers, brand
preference represents which brands are preferred under assumptions of equality in price and
availability.
Purpose
Measures of brand preference attempt to quantify the impact of marketing activities in the hearts
and minds of customers and potential customers. Higher brand preference usually indicates more
revenues (sales) and profit, also making it an indicator of company financial performance.
Construction
There are at least three classes of methodologies to measure brand preference directly:

Survey questions (self-report, unaided preference)

Brand choice measures (choice of preferred brand from a competitive set of brands)

Constant sum measures (planned purchases amongst a competitive set of brands)

Methodologies

ARS Persuasion [1][2][3][4][5][6][7][8][9][10][11][12][13] is a brand choice methodology applied at

various stages of the marketing process. It is derived by comparing the percent choosing a
particular brand versus competing brands before and after marketing activity .

Firstep applies the methodology to a selling proposition before moving on to creative

execution.[3]

APM Facts are the results of the methodology applied to TV ads. It has been audited
and profiled by the Marketing Accountability Standards Board (MASB) according
to MMAP (Marketing Metric Audit Protocol) . A MMAP audit examines the 10
characteristics of an "ideal metric," including reliability, calibration, predictive
validity, etc.[12][14][15]

Brand Preference Monitor (BPM) tracks the impact of all marketing activity over
time.

43

Brand
Marque" redirects here. For other uses, see Marque (disambiguation).

Coca-Cola logo

44

Apple logo
Brand is the "name, term, design, symbol, or any other feature that identifies one seller's good or
service as distinct from those of other sellers." Initially, Branding was adopted to differentiate
one person's cattle from another's by means of a distinctive symbol burned into the animal's skin
with a hot iron stamp, and was subsequently used in business, marketing andadvertising. A
modern example of a brand is Coca Cola which belongs to the Coca-Cola Company.
A brand is often the most valuable asset of a Corporation. Brand owners manage their brands
carefully to create shareholder value, and brand valuation is an important management technique
that ascribes a money value to a brand, and allows marketing investment to be managed (e.g.:
prioritized across a portfolio of brands) to maximize shareholder value. Although only acquired
brands appear on a company's balance sheet, the notion of putting a value on a brand forces
marketing leaders to be focused on long term stewardship of the brand and managing for value.
The word "brand" is often used as a metonym, referring to the company that is strongly
identified with a brand.
Marque[ or make are often used to denote a brand of motor vehicle, which may be distinguished
from a car model. A concept brand is a brand that is associated with an abstract concept,
like breast cancer awareness orenvironmentalism, rather than a specific product, service, or
business. A commodity brand is a brand associated with a commodity.Got milk? is an example
of a commodity brand. The word "brand" is derived from the Old Norse brandr meaning "to
burn." It refers to the practice of producers burning their mark (or brand) onto their products.[4]
The oldest generic brand, which is in continuous use in India since the Vedic period (ca. 1100
B.C.E to 500 B.C.E), is known as 'Chyawanprash', an herbal paste consumed for its purported

45
health benefits and attributed to a revered rishi (or seer) named Chyawan. This brand was
developed at Dhosi Hill, an extinct volcano in northern India.
The Italians were among the first to use brands, in the form of watermarks on paper in the
1200s. Blind Stamps, hallmarks and silver maker's marks are all types of brand.
Although connected with the history of trademarks and including earlier examples which could
be deemed "protobrands" (such as the marketing puns of the "Vesuvinum" wine jars found
at Pompeii), brands in the field of mass-marketing originated in the 19th century with the advent
of packaged goods. Industrialization moved the production of many household items, such
as soap, from local communities to centralized factories. When shipping their items, the factories
would literally brand their logo or insignia on the barrels used, extending the meaning of "brand"
to that of trademark.
Bass & Company, the British brewery, claims their red triangle brand was the world's first
trademark. Lyles Golden Syrup makes a similar claim, having been named as Britain's oldest
brand, with its green and gold packaging having remained almost unchanged since 1885.
Another example comes from Antiche Fornaci Giorgi in Italy, whose bricks are stamped or
carved with the same proto-logo since 1731, as found in Saint Peter's Basilica inVatican City.
Cattle were branded long before this. The term "maverick," originally meaning an unbranded
calf, comes from Texas rancher Samuel Augustus Maverick whose neglected cattle often got
loose and were rounded up by his neighbors. The word spread among cowboys and came to be
applied to unbranded calves found out wandering alone. Even the signatures on paintings of
famous artists like Leonardo da Vinci can be viewed as an early branding tool.
Factories established during the Industrial Revolution introduced mass-produced goods and
needed to sell their products to a wider market, to customers previously familiar only with
locally-produced goods. It quickly became apparent that a generic package of soap had difficulty
competing with familiar, local products. The packaged goods manufacturers needed to convince
the market that the public could place just as much trust in the non-local product. Pears
Soap, Campbell soup, Coca-Cola, Juicy Fruit gum, Aunt Jemima, andQuaker Oats were among

46
the first products to be 'branded', in an effort to increase the consumer's familiarity with their
products. Many brands of that era, such as Uncle Ben's rice and Kellogg's breakfast cereal
furnish illustrations of the problem.
Around 1900, James Walter Thompson published a house ad explaining trademark advertising.
This was an early commercial explanation of what we now know as branding. Companies soon
adopted slogans, mascots, and jingles that began to appear on radioand early television. By the
1940s, manufacturers began to recognize the way in which consumers were developing
relationships with their brands in a social/psychological/anthropological sense.
From there, manufacturers quickly learned to build their brand's identity and personality
(see brand identity and brand personality), such as youthfulness, fun or luxury. This began the
practice we now know as "branding" today, where the consumers buy "the brand" instead of the
product. This trend continued to the 1980s, and is now quantified in concepts such as brand
value and brand equity. Naomi Klein has described this development as "brand equity mania". In
1988, for example, Philip Morris purchased Kraft for six times what the company was worth on
paper; it was felt that what they really purchased was its brand name.
Marlboro Friday: April 2, 1993 - marked by some as the death of the brand - the day Philip
Morris declared that they were cutting the price of Marlboro cigarettes by 20% in order to
compete with bargain cigarettes. Marlboro cigarettes were noted at the time for their
heavy advertising campaigns
announcement Wall

and

street stocks

well-nuanced
nose-dived for

brand
a

image.
large

In

response

number

of

to

the

branded

companies: Heinz, Coca Cola, Quaker Oats, PepsiCo, Tide, Lysol. Many thought the event
signalled the beginning of a trend towards "brand blindness" (Klein 13), questioning the power
of "brand value."
Concepts
Proper branding can result in higher sales of not only one product, but on other products
associated with that brand. For example, if a customer loves Pillsbury biscuits and trusts the
brand, he or she is more likely to try other products offered by the company such as chocolate

47
chip cookies. Brand is the personality that identifies a product, service or company (name, term,
sign, symbol, or design, or combination of them) and how it relates to key constituencies:
customers, staff, partners, investors etc.
Some people distinguish the psychological aspect, brand associations like thoughts, feelings,
perceptions, images, experiences, beliefs, attitudes, and so on that become linked to the brand, of
a brand from the experiential aspect. The experiential aspect consists of the sum of all points of
contact with the brand and is known as the brand experience. The brand experience is a brand's
action perceived by a person. The psychological aspect, sometimes referred to as the brand
image, is a symbolic construct created within the minds of people, consisting of all the
information and expectations associated with a product, service or the company(ies) providing
them.
People engaged in branding seek to develop or align the expectations behind the brand
experience, creating the impression that a brand associated with a product or service has certain
qualities or characteristics that make it special or unique. A brand is therefore one of the most
valuable elements in an advertising theme, as it demonstrates what the brand owner is able to
offer in the marketplace. The art of creating and maintaining a brand is called brand
management. Orientation of the whole organization towards its brand is called brand orientation.
The brand orientation is developed in responsiveness to market intelligence.
Careful brand management seeks to make the product or services relevant to the target audience.
Brands should be seen as more than the difference between the actual cost of a product and its
selling price - they represent the sum of all valuable qualities of a product to the consumer.
A brand which is widely known in the marketplace acquires brand recognition. When brand
recognition builds up to a point where a brand enjoys a critical mass of positive sentiment in the
marketplace, it is said to have achieved brand franchise. Brand recognition is most successful
when people can state a brand without being explicitly exposed to the company's name, but
rather through visual signifiers like logos, slogans, and colors. For example, Disney has been
successful at branding with their particular script font (originally created for Walt Disney's
"signature" logo), which it used in the logo for go.com.

48

Consumers may look on branding as an aspect of products or services, as it often serves to

denote a certain attractive quality or characteristic (see also brand promise). From the perspective
of brand owners, branded products or services also command higher prices. Where two products
resemble each other, but one of the products has no associated branding (such as a generic, storebranded product), people may often select the more expensive branded product on the basis of
the quality of the brand or the reputation of the brand owner.
Brand awareness
Brand awareness refers to customers' ability to recall and recognize the brand under different
conditions and link to the brand name, logo, jingles and so on to certain associations in memory.
It consists of both brand recognition and brand recall. It helps the customers to understand to
which product or service category the particular brand belongs and what products and services
are sold under the brand name. It also ensures that customers know which of their needs are
satisfied by the brand through its products (Keller). Brand awareness is of critical importance
since customers will not consider your brand if they are not aware of it.
There are various levels of brand awareness that require different levels and combinations of
brand recognition and recall. Top-of-Mind is the goal of most companies. Top-of-mind
awareness occurs when your brand is what pops into a consumers mind when asked to name
brands in a product category. For example, when someone is asked to name a type of facial
tissue, the common answer is Kleenex, which is a top-of-mind brand. Aided Awareness occurs
when a consumer is shown or reads a list of brands, and expresses familiarity with your brand
only after they hear or see it as a type of memory aide. Strategic Awareness occurs when your
brand is not only top-of-mind to consumers, but also has distinctive qualities that stick out to
consumers as making it better than the other brands in your market. The distinctions that set your
product apart from the competition is also known as the Unique Selling Point or USP. Marketing
mix modeling can help marketing leaders optimize how they spend marketing monies to
maximize the impact on Brand Awareness or sales effects. Managing brands for value creation
will often involve applying marketing mix modeling techniques in conjunction withbrand
valuation.

49

Brand elements
Brands typically are made up of various elements, such as:
Name: The word or words used to identify a company, product, service, or concept.
Logo: The visual trademark that identifies the brand.
Tagline or Catchphrase: "The Quicker Picker Upper" is associated with Bounty paper towels.
"Can you hear me now" is an important part of the Verizon brand.
Graphics: The dynamic ribbon is a trademarked part of Coca-Cola's brand.
Shapes: The distinctive shapes of the Coca-Cola bottle and of the Volkswagen Beetle are
trademarked elements of those brands.
Colors: Owens-Corning is the only brand of fiberglass insulation that can be pink.
Sounds: A unique tune or set of notes can denote a brand. NBC's chimes are a famous example.
Scents: The rose-jasmine-musk scent of Chanel No. 5 is trademarked.
Tastes: Kentucky Fried Chicken has trademarked its special recipe of eleven herbs and spices for
fried chicken.
Movements: Lamborghini has trademarked the upward motion of its car doors.
Customer relationship management

Global brand variables

50

Relationship between trade marks and brand

The brand name is quite often used interchangeably with "brand", although it is more correctly
used to specifically denote written or spoken linguistic elements of any product. In this context a
"brand name" constitutes a type of trademark, if the brand name exclusively identifies the brand
owner as the commercial source of products or services. A brand owner may seek to
protect proprietary rights in relation to a brand name through trademark registration and such
trademarks are called "Registered Trademarks". Advertising spokespersons have also become
part of some brands, for example: Mr. Whipple of Charmintoilet tissue and Tony the
Tiger of Kellogg's Frosted Flakes. Putting a value on a brand bybrand valuation or
using marketing mix modeling techniques is distinct to valuing a trade mark.
Types of brand names
Brand
Initialism:

names
A

come
name

made

in

many
of

initials

styles.[15] A
such,

as

few
UPS

include:
or

IBM

Descriptive: Names that describe a product benefit or function, such as Whole Foods or Airbus
Alliteration and rhyme: Names that are fun to say and stick in the mind, such as Reese's Pieces or
Dunkin'
Evocative:

Donuts

51
Names

that

Neologisms:

evoke

Completely

relevant
made-up

vivid

image,

words,

such

such

as
as

Amazon
Wii

or
or

Crest
Kodak

Foreign word: Adoption of a word from another language, such as Volvo or Samsung
Founders' names: Using the names of real people, (especially a founder's name), such as
Hewlett-Packard,

Dell

or

Disney

Geography: Many brands are named for regions and landmarks, such as Cisco and Fuji Film
Personification: Many brands take their names from myths, such as Nike; or from the minds of
ad execs, such as Betty Crocker
The act of associating a product or service with a brand has become part of pop culture. Most
products have some kind of brand identity, from common table salt to designer jeans.
A brandnomer is a brand name that has colloquially become a generic term for a product or
service, such as Band-Aid, Nylon, or Kleenexwhich are often used to describe any brand of
adhesive bandage; any type of hosiery; or any brand of facial tissue respectively. Xerox, for
example, has become synonymous with the word "copy".
Brand identity
The outward expression of a brand including its name, trademark, communications, and visual
appearance is brand identity. Because the identity is assembled by the brand owner, it reflects
how the owner wants the consumer to perceive the brand and by extension the branded
company, organization, product or service. This is in contrast to the brand image, which is a
customer's mental picture of a brand. The brand owner will seek to bridge the gap between the
brand image and the brand identity.
Effective brand names build a connection between the brand personality as it is perceived by
the target audience and the actual product/service. The brand name should be conceptually on
target with the product/service (what the company stands for). Furthermore, the brand name
should be on target with the brand demographic. Typically, sustainable brand names are easy to
remember, transcend trends and have positive connotations. Brand identity is fundamental to
consumer recognition and symbolizes the brand's differentiation from competitors.

52
Brand identity is what the owner wants to communicate to its potential consumers. However,
over time, a product's brand identity may acquire (evolve), gaining new attributes from consumer
perspective but not necessarily from the marketing communications an owner percolates to
targeted consumers. Therefore, brand associations become handy to check the consumer's
perception of the brand.
Brand identity needs to focus on authentic qualities real characteristics of the value and brand
promise being provided and sustained by organizational and/or production characteristics.
Visual brand identity
The visual brand identity manual for Mobil Oil(developed by Chermayeff & Geismar), one of
the first visual identities to integrate logotype, icon, alphabet, color palette, and station
architecture.
The recognition and perception of a brand is highly influenced by its visual presentation. A
brands visual identity is the overall look of its communications. Effective visual brand identity is
achieved by the consistent use of particular visual elements to create distinction, such as specific
fonts, colors, and graphic elements. At the core of every brand identity is a brand mark, or logo.
In the United States, brand identity and logo design naturally grew out of the Modernist
movement in the 1950s and greatly drew on the principles of that movement simplicity (Mies
van der Rohes principle of "Less is more") and geometric abstraction. These principles can be
observed in the work of the pioneers of the practice of visual brand identity design, such as Paul
Rand, Chermayeff & Geismar and Saul Bass.
Color is a particularly important element of visual brand identity and color mapping provides an
effective way of ensuring color contributes to differentiation in a visually cluttered marketplace
(O'Connor, 2011).
Brand trust
Brand trust is the intrinsic 'believability' that any entity evokes. In the commercial world, the
intangible aspect of Brand trust impacts the behavior and performance of its business

53
stakeholders in many intriguing ways. It creates the foundation of a strong brand connect with all
stakeholders, converting simple awareness to strong commitment. This, in turn, metamorphoses
normal people who have an indirect or direct stake in the organization into devoted ambassadors,
leading to concomitant advantages like easier acceptability of brand extensions, perception of
premium, and acceptance of temporary quality deficiencies.
The Brand Trust Report is a syndicated primary research that has elaborated on this metric of
brand trust. It is a result of action, behavior, communication and attitude of an entity, with the
most Trust results emerging from its action component. Action of the entity is most important in
creating trust in all those audiences who directly engage with the brand, the primary experience
carrying primary audiences. However, the tools of communications play a vital role in the
transferring the trust experience to audiences which have never experienced the brand, the all
important secondary audience.
Brand parity
Brand parity is the perception of the customers that some brands are equivalent.[21] This means
that shoppers will purchase within a group of accepted brands rather than choosing one specific
brand. When brand parity is present, quality is often not a major concern because consumers
believe that only minor quality differences exist.
Expanding role of brand
It was meant to make identifying and differentiating a product easier, while also providing the
benefit of letting the name sell a second rate product. Over time, brands came to embrace a
performance or benefit promise, for the product, certainly, but eventually also for the company
behind the brand. Today, brand plays a much bigger role. Brands have been co-opted as powerful
symbols in larger debates about economics, social issues, and politics. The power of brands to
communicate a complex message quickly and with emotional impact and the ability of brands to
attract media attention, make them ideal tools in the hands of activists. Cultural conflict over a
brand's meaning have also been shown to influence the diffusion of an innovation.

54
Branding strategies
Company name
Often, especially in the industrial sector, it is just the company's name which is promoted
(leading to[citation needed] one of the most powerful statements of branding: saying just before
the company's downgrading, "No one ever got fired for buying IBM"). This approach has not
worked as well for General Motors, which recently overhauled how its corporate brand relates to
the product brands. Exactly how the company name relates to product and services names is
known as brand architecture. Decisions about company names and product names and their
relationship depends on more than a dozen strategic considerations.
In this case a strong brand name (or company name) is made the vehicle for a range of products
(for example, Mercedes-Benz or Black & Decker) or a range of subsidiary brands (such
as Cadbury Dairy Milk, Cadbury Flake or Cadbury Fingers in the United States).
Individual branding
Each brand has a separate name (such as Seven-Up, Kool-Aid or Nivea Sun (Beiersdorf)), which
may compete against other brands from the same company (for example, Persil, Omo, Surf
and Lynx are all owned by Unilever).
Attitude branding and iconic brands
Attitude branding is the choice to represent a larger feeling, which is not necessarily connected
with the product or consumption of the product at all. Marketing labeled as attitude branding
include that of Nike, Starbucks, The Body Shop, Safeway, and Apple Inc.. In the 2000 book No
Logo,[11] Naomi Klein describes attitude branding as a "fetish strategy".
"A great brand raises the bar -- it adds a greater sense of purpose to the experience, whether it's
the challenge to do your best in sports and fitness, or the affirmation that the cup of coffee you're
drinking really matters." - Howard Schultz(president, CEO, and chairman of Starbucks)

55
The color, letter font and style of the Coca-Colaand Diet Coca-Cola logos in English were copied
into matching Hebrew logos to maintain brand identity in Israel.
Iconic brands are defined as having aspects that contribute to consumer's self-expression and
personal identity. Brands whose value to consumers comes primarily from having identity value
are said to be "identity brands". Some of these brands have such a strong identity that they
become more or less cultural icons which makes them "iconic brands". Examples
are: Apple, Nike and Harley Davidson. Many iconic brands include almost ritual-like behaviour
in purchasing or consuming the products.
There are four key elements to creating iconic brands (Holt 2004):
"Necessary conditions" - The performance of the product must at least be acceptable, preferably
with a reputation of having good quality.
"Myth-making" - A meaningful storytelling fabricated by cultural insiders. These must be seen as
legitimate and respected by consumers for stories to be accepted.
"Cultural contradictions" - Some kind of mismatch between prevailing ideology and emergent
undercurrents in society. In other words a difference with the way consumers are and how they
wish they were.
"The cultural brand management process" - Actively engaging in the myth-making process in
making sure the brand maintains its position as an icon.
"No-brand" branding
Recently a number of companies have successfully pursued "no-brand" strategies by creating
packaging that imitates generic brandsimplicity. Examples include the Japanese company Muji,
which means "No label" in English (from "Mujirushi Ryohin" literally, "No brand
quality goods"), and the Florida company No-Ad Sunscreen. Although there is a distinct Muji
brand, Muji products are not branded. This no-brand strategy means that little is spent on
advertisement or classical marketing and Muji's success is attributed to the word-of-mouth, a
simple shopping experience and the anti-brand movement.[26][27][28] "No brand" branding
may be construed as a type of branding as the product is made conspicuous through the absence

56
of a brand name. "Tapa Amarilla" or "Yellow Cap" in Venezuela during the 1980s is another
good example of no-brand strategy. It was simply recognized by the color of the cap of this
cleaning products company.
Derived brands
In this case the supplier of a key component, used by a number of suppliers of the end-product,
may wish to guarantee its own position by promoting that component as a brand in its own right.
The most frequently quoted example is Intel, which positions itself in the PCmarket with the
slogan (and sticker) "Intel Inside".
Brand extension and brand dilution
The existing strong brand name can be used as a vehicle for new or modified products; for
example, many fashion and designer companies extended brands into fragrances, shoes
and accessories, home textile, home decor, luggage, (sun-) glasses, furniture, hotels, etc.
Mars extended its brand to ice cream, Caterpillar to shoes and watches, Michelin to a restaurant
guide, Adidas and Puma to personal hygiene. Dunlop extended its brand from tires to other
rubber products such as shoes, golf balls, tennis racquets and adhesives. Frequently, the product
is no different than what else is on the market, except a brand name marking.
There is a difference between brand extension and line extension. A line extension is when a
current brand name is used to enter a new market segment in the existing product class, with new
varieties or flavors or sizes. When Coca-Cola launched "Diet Coke" and "Cherry Coke" they
stayed within the originating product category: non-alcoholic carbonated beverages. Procter &
Gamble (P&G) did likewise extending its strong lines (such as Fairy Soap) into neighboring
products (Fairy Liquid and Fairy Automatic) within the same category, dish washing detergents.
The risk of over-extension is brand dilution where the brand loses its brand associations with a
market segment, product area, or quality, price or cachet.

57
Multi-brands
Alternatively, in a market that is fragmented amongst a number of brands a supplier can choose
deliberately to launch totally new brands in apparent competition with its own existing strong
brand (and often with identical product characteristics); simply to soak up some of the share of
the market which will in any case go to minor brands. The rationale is that having 3 out of 12
brands in such a market will give a greater overall share than having 1 out of 10 (even if much of
the share of these new brands is taken from the existing one). In its most extreme manifestation,
a supplier pioneering a new market which it believes will be particularly attractive may choose
immediately to launch a second brand in competition with its first, in order to pre-empt others
entering the market. This strategy is widely known as Multi Brand Strategy.
Individual brand names naturally allow greater flexibility by permitting a variety of different
products, of differing quality, to be sold without confusing the consumer's perception of what
business the company is in or diluting higher quality products.
Once again, Procter & Gamble is a leading exponent of this philosophy, running as many as ten
detergent brands in the US market. This also increases the total number of "facings" it receives
on supermarket shelves. Sara Lee, on the other hand, uses it to keep the very different parts of the
business separate from Sara Lee cakes through Kiwi polishes to L'Eggs pantyhose. In the
hotel

business,Marriott uses

the

name Fairfield

Inns for

its

budget

chain

(and Ramada uses Rodeway for its own cheaper hotels).

Cannibalization is a particular problem of a Multi Brand Strategy approach, in which the new
brand takes business away from an established one which the organization also owns. This may
be acceptable (indeed to be expected) if there is a net gain overall. Alternatively, it may be the
price the organization is willing to pay for shifting its position in the market; the new product
being one stage in this process.
Private labels
Private label brands, also called own brands, or store brands have become popular. Where the
retailer has a particularly strong identity (such as Marks & Spencer in the UK clothing sector)

58
this "own brand" may be able to compete against even the strongest brand leaders, and may
outperform those products that are not otherwise strongly branded.
Individual and organizational brands
There are kinds of branding that treat individuals and organizations as the products to be
branded. Personal branding treats persons and their careers as brands. The term is thought to
have been first used in a 1997 article by Tom Peters. Faith branding treats religious figures and
organizations as brands. Religious media expert Phil Cooke has written that faith branding
handles the question of how to express faith in a media-dominated culture. Nation
branding works with the perception and reputation of countries as brands.
Crowd sourcing branding
These are brands that are created by the people for the business, which is opposite to the
traditional method where the business create a brand. This type of method minimizes the risk of
brand failure, since the people that might reject the brand in the traditional method are the ones
who are participating in the branding process.
Nation branding (place branding and public diplomacy)
Nation branding is a field of theory and practice which aims to measure, build and manage the
reputation of countries (closely related toplace branding). Some approaches applied, such as an
increasing importance on the symbolic value of products, have led countries to emphasise their
distinctive characteristics. The branding and image of a nation-state "and the successful
transference of this image to its exports - is just as important as what they actually produce and
sell."

59

FMCG PRODUCTS

Hair oil
We deal in a variety of hair oil products. Our hair oil enhances the texture and quality of the
hair & is renowned for strengthening the structure of damaged, devitalized hair by lubricating the
hair and shaft. Our hair oil products are rich in minerals such as magnesium, potassium, calcium
& iron, which are essential for a healthy and steady hair growth. They are available in different
brands,

oil

qualities,

fragrances

&

attractive

packaging.

We supply and export a large variety of hair oil brands, the major ones are - Parachute, Dabur,
Amla, Tej Mustard and more.

Hair Shampoo
Hair shampoo is one of the integral parts of personal hygiene in the contemporary scenario. We
export a large variety of hair care products such as shampoo, hair dye etc. As healthy hair
signifies your health, our hair shampoo will enhance the growth, shine & texture quality of your
hair.

60
All our products are low on chemical formulation but high in natural / herbal ingredients, thus
making

them

apt

to

be

used

by

anyone

&

everyone.

Our hair care products are available at a cost effective price and the brands that we deal in and
export include Godrej Hair Dye, Head & Shoulder Shampoo and Pantene Shampoo.

Soap
Soap works as a cleansing agent & is usually made from the salts of vegetable or animal fats, the
soaps we deal in are specifically manufactured with lesser chemical composition and more of
natural raw material, which makes them smooth and ideal for the skin. Our soap products
enhance the quality of the skin while keeping your personal hygiene in check; they are available
in various sizes, shapes & fragrances.
We export various brands of soaps such as Lux, Pears, Margo, Medimix, Chandrika and more at
a cost effective price to our clients the world across.

Noodles
Noodles bring a large variety of Asian cuisines together and are a famous dish around the globe
now. It is easy to cook and works as an instant remedy to the appetite.

61

The noodles we deal in are manufactured basically from wheat flour and are available in various
flavors such as - masala, chicken, vegetable, hakka, egg hakka and many other flavors. These
noodles are good to eat, light on stomach & easy to digest. Our noodles are available in various
packings with the cooking procedure stated on them to help the client cook them in the best
possible way.
The major brand of Noodles we deal in are - Maggie & Ching's secret, we export them at a cost
effective price.

Cold Drinks
We export and supply various brand and varieties of wheat flour at a cost effective price, the
major ones are - Pillsbury, Aashirwad & Annapurna.
To beat the heat, one always thrives for something chilled, which can kill the thirst and give
some respite to the system. We offer a large variety of beverages or soft drinks as they are
popularly known.
We deal in both carbonated and non-carbonated soft drinks. Our beverages are available in
different flavors such as - cola, mango, orange, lime etc. thus, giving an opportunity for everyone
to pick their choice. These soft drinks are non-alcoholic and manufactured in hygienic
conditions, thus making them safe to be consumed by anyone and everyone.
The major brands that we export and supply are - Fanta, Thumps Up, Limca, Mangola & Mazaa,
which are available with us at competitive prices.

62

Red Chili Powder

Different varieties of red chilies ranging from guntur, byadgi, kashmiri, bird eye chilli and the
ghost chili (which is having highest heat value (1000,000 SHU) in the world) are available with
us. Our chilies are superior in quality, intensively colored and are aromatic in nature. Completely
unadulterated, our chilies are available in various forms including whole, grounded, blended and
flake.

Coriander Seeds
We offer green coriander, which include the single parrot and double parrot quality. It is
popularly known for its culinary and medicinal properties. Widely used for flavoring the food,
this is available in the form of not only fresh leaves but also in dried powdered form. Best in
quality, our coriander has an aromatic odor and is packaged in different corrugated and poly
pouches. Moreover, it is free from mold, dirt particles and foreign matters.

63

Indian Mango Chutney

The indian mango chutney surge into favor amongst chefs as sauces as they liven up almost any
food with a fruity mix of sweetness and spice. It ideally compliments turkey sandwich or can be
added to salad dressing as it is very spicy and rich in flavor.
Ingredients:
4 varieties of mangoes ranging from raw to partly ripe. Among spices it contains cinnamon, big
cardamom, mace, paprika, ginger powder, salt and honey.

Betel Leaf Chutney

Best for curing the toothache and bleeding gums and checking the foul odor from mouth, the
ingredients of our betel leaf chutneys include 3 types of betel leaves - kapoori, maghoba and
benarasi;

clove,

mace,

salt

and

ajwain

Thyme/

carom

seeds).

This chutney flavor is widely popular and has become one of the preferred range of chutneys
amidst people at large. The standard as well as customized packaging options that are provided
in this range, is specifically done to befit the demands of our clients.

64

Coriander Chutney
Prepared from fresh coriander leaves, the ingredients of our coriander chutney include: fresh
coriander leaves, dried coriander leaves, amla (Indian gooseberry), sauf, shahi jeera (Black
cumin seed), sonth & amchur.
We offer different packaging options in our coriander chutneys, which include - the poly
pouches, plastic or glass jars and other options. Different sizes and quantities are developed in
these to exactly match your demands.

Mint Chutney
Famous for providing excellent cooling and soothing effect on the stomach particularly after a
spicy treat or during the summer season, the ingredients of our spicy mint chutney include: mint,
dill, rose petals, sandalwood, fennel and salt.
Our spicy mint chutney are packaged in different sizes of jars, made of steel or plastic, and you
can choose from the bulk and minimum ordered quantity packaging options from this.

65

Coconut Chutney
Widely used chutney along with South Indian dish, the ingredients of our coconut chutney
include - coconut, curry leaves, mustard seeds, sesame oil, salt and pepper.
A wide array of customized as well as standard packaging options is available in these chutneys,
to accord with your demands.

66

PRODUCT CATEGORIES

HAIRCARE

SKINCARE

ORAL CARE

FOOT CARE

KIDS & BABY

SHAVING

HOUSE & HOME

SPECIAL OFFERS

NEW PRODUCTS

SPECIAL OFFERS
Softening Foot Lotion

20% extra free across the range

Haircare

Skincare

67

Oral Care, Foot Care & Shaving

Kids & Babies

Household

NEW PRODUCT
Nuage Body Moisturiser

Cracked Heel Cream

68

ROLE of IT in FMCG Organization

Just think of a situation: "Delivery of right stock to wholesaler/ distributor once/ twice a
week"
Lets not go into National level delivery and try our hands with State first. Lets take Uttar Pradesh
with number of Wholesalers/ Distributors (WDs)
We all know that India market in general is heterogenous and also the states. Even a city like
Lucknow will have diverse people with different disposable incomes, lifestyles etc. Lets divide
into Lucknow city into different small markets. Some market will smoke Wills Classic and others
are extremely loyal to CAPSTON.
So its not toy handling to first of all estimate the demand for different regions. Lets assume even
if you the right estimates for all markets for the next month (which actually is idealistic), how
will you decide how much to deliver to different WDs every next few days. Lets go to some
basics:
1. WD has a constraint of stock capacity which make him impossible to stock for the whole
month, also it may lead to expiry of the products.
2. WD dont have the financial capacity to buy stock for a month, which make him appropriate to
stock for few days.

69
SO there are huge calcuations required to come up with a DELIVERY SCHEDULE for a
particular month. Here comes the ROLE OF IT - Information Technology. ITC has done it right
by implementing SAP R/3. Let me mention few of its benefits:
1. Provide real time Stock on Hand
2. Brand wise pipeline is maintained
3. Analyze the data to get the trends in the sales and other variables.

FICCI survey projects growth in FMCG sector

1. The survey attributes the reflected buoyancy to the following factors:
1. Several cost saving measures
2) Various tax benefits
3) Rising demand
4) Growing GDP
5) Good monsoon
6) Strong economic fundamentals
7) The expected policy packages to be announced by the new government for
farmers for raising rural income is bound to stimulate growth further. The FICCI
Survey offers insights into the dynamics of growth in a competitive market
environment. The salient features of development the survey has identified
include:

The improvement has been much more pronounced in volume terms than in value terms
for most of the products.

Post liberalization period provided the consumers the opportunity to make choices
amongst the products of domestic companies and imported products.

One of the greatest achievements made by the FMCG industry has been the sachet bug
which have helped the companies to introduce products in smaller package sizes, at lower
price points and reach new users and to expand market share for value added products in
urban India.

Several cost saving measures, various tax benefits, rising demand, good monsoon have
helped the industry to achieve positive growth.

70

Most of the multinational companies have started sourcing their products from India.
HLL has become the production center in respect of personal consumer products like oral
care, skin care products, soap , detergents globally for Unilever.

There has been a trend from shift to own manufacturing from third party manufacturing
or procuring goods from third party small-scale manufacturers.

Though the companies are going global, they are focusing on the overseas markets like
Bangladesh, Pakistan, Nepal, Middle East and CiS countries because of the lifestyles,
consumption habits similar to India. Godrej Consumer, Marico, Dabur, Vicco laboratories
are among the companies.

The offshoots and mushrooming of regional companies which are posing a threat to
bigger FMCG companies like HLL. The rise of Jyothi Laboratories, throwing challenge
to Reckitt Benckiser is a case in point.

FMCG market remains highly fragmented with almost half of the market representing
unFMCG, unpackaged home made products. This presents a tremendous opportunity for
makers of FMCG products who can convert consumers to FMCG products.

There is competition between the organized and the unorganized sectors in the FMCG
sector.

Marketing and distribution are very important in FMCG companies. New products
require a large investment in product development, market research, awareness campaign,
developing franchise for a new brand advertisements, free samples and product
promotions.

All these developments have made the consumers strong , who are in a position now to
choose a variety of products, from a number of companies, at different price points.
Bargaining power of customers is high.

Key factors to success are distribution (in rural markets) and advertising (in urban
markets). Critical factors for success are the ability to build, develop and maintain a
robust distribution network.

The fact that a lot of women have started looking for specialized products has driven
growth.

71

Rural India
The Challenge
Electricity Shortage Sporadic Power Supply
Acute Water Shortage.
Poor Transportation availability.
Consumer Finance Options
Can we make energy saving products?
Can we give him a washing machine which consumes less water?
Can we give him access to buying products near by his location??
The Solution
Set up of a Life style Research Team which would analyze the needs & preferences of the
consumer , Indepth..
Understand at length his comfort levels in terms of what he wants and what he would spend for
what he wants..
Make products and service available for him to suit his needs & Preferences..
Have a deep pocket network to make products available for him at a close proximity from
where he.
Rural Market is the key to survival in India.
The Road Map 4 Point Mantra
Regional Marketing Approach
Deep Channel Penetration
Sophisticated & Deep After sales Service
Rural Centric Marketing Promotions
LGs Rural Foray
LG India- tripled the number of its retail & distributor outlets in rural areas from 2004 to 2006.
The avg. price of its Sampoorna range of CTVs came down to about the price so competitive
that, thereby bridging the gap between CTVs and other local B/W TVs.

72
It also tapped local forms of entertainment like annual haats and fairs and made huge
investments in infrastructure for distribution and marketing.
KEY STRENGTHS
1.Media Prima Berhad (Media Prima) is the largest integrated media group comprising various
media platforms such as television (TV) broadcasting, radio broadcasting, content creation,
events management and print. With such a broad presence within the media industry, Media
Prima is well-equipped to become a comprehensive one-stop centre, catering to the specific
needs of the advertisers and more focused to reach the viewers and listeners in a more effective
and efficient manner. Media Prima also leverages on high quality programmes and best of breed
content to cater to the viewers and listeners.
The portfolio segmentation adopted by Media Primas Television and Radio Networks are
outlined below:
The ippr study presents evidence that jobs in several occupational groups and some sectors carry
a persistent risk of low pay and continuing household poverty. The sectors with the highest risk
include hotels and catering, retail and healthcare. All are substantial employers in rural England,
A detailed rural analysis is currently being carried out and will be presented in the final report to
be published by ippr this summer. Concerns about low levels of rural pay have been repeatedly
drawn to my attention. Low pay is clearly a real risk for workers in several local rural
economies.
Lower weekly wages is a persistent and widespread feature of employment in rural workplaces,
when compared with many urban areas.
Overcoming this disparity is perhaps the most deep seated challenge that needs to be tackled by
employers, public authorities and private support services.
Young people in rural areas are another group, vital to maintaining sustainable rural
communities, for whom full and fulfi lling employment has not been achieved in many rural
areas.

73

Enterprise
Very small firms are a significant feature of the business base in local rural economies, to a
greater extent than is the case across the rest of Englands economy. Sole traders and microbusinesses provide a greater share of employment in rural than urban economies.
In 2002 the Government adopted a new policy framework Small Business and Government
The Way Forward. One of its seven themes focuses on encouraging a more dynamic start-up
market, for which a Comprehensive Strategy for Start-ups (Dti, 2003) was adopted. This focused
attention on measures to enhance the rates of new enterprise formation, especially in
disadvantaged areas and under-represented groups. CRC analysis records that growth in new
enterprise formation is marginally higher in rural than other districts an increase of 7% in
businesses registering for VAT between 1995 and 2004. (CRC 2007. The state of the countryside,
2007 p.89. ). However, data of new business accounts opened in high street banks, gathered and
analysed by Barclays reports even higher levels of enterprise than suggested by VAT registration
rates. (Barclays Bank, 2007 Mainstream Business Start up Rates). Rates of new business
accounts opened in many rural districts considerably outstripped those in urban areas, with
noticeably higher rates in some remote and peripheral localities that appear to be performing
poorly using the governments VAT-dependent indicator. This suggests that there is considerable
interest in starting new fi rms in rural England but may hint at low levels of growth of many of
these new firms.
Increasing entrepreneurship amongst women is a specific aim of the governments enterprise
policy. Similarly Barclays analysis described above, reported that men and women had achieved
parity of new fi rm start-ups in rural districts such as Derbyshire Dales; Eden and South
Lakeland, Cumbria; and in the Forest of Dean.

74

Figure 6
Trends in rural workplaces 1998-2005
Year

1-10
Employees

Rural

1998

200 or more

Total

Employees Employees

52,661

9,986

1,952

437,293

446,965
19.9

57,7
9.7

11,374
13.9

2,144
9.8

518,265

386,788

65,200

15,297

3,601

470,886

444,441

70,627

17,179

3,716

535,963

14.9

8.3

12.3

3.2

13.8

1998

750,006

118,474

28,046

7,192

903,718

2005

825,047

123,591

31,742

7,847

988,227

10.0

4.3

13.2

9.1

9.4

1998 - 2005 % change

1998
2005

1998 - 2005 % change

Urban

Employees

50-199

372,694
2005

Mixed

11-49

1998 - 2005 % change

18.5

Source: Annual Business Inquiry, 2006 as analysed by CRC

27. As shown in Figure 6 above, the numbers of small and medium sized firms in rural have
grown at or above the rates in urban and mixed districts or boroughs. Numbers of sole traders
have declined across this geography resulting in slow convergence between economies of rural
and urban areas. More firms aspire to grow than decline.
28. Economists and business policy advisors identify 10 employees or more as a threshold that
indicates the creation of a substantial firm. The Small Business Service used a definition of highgrowth firms as those achieving at least 1million turnover and/or 10 or more employees by the
fourth year of trading.

75
29. Rural areas have been well represented in lists of national to regional winners including
Sherwood Energy Village (national winners in 2005), The Welland Strategic Partnership
(national runners up, 2006).

Skills, recruitment and training

30. Human capital is recognised by policy makers, owners and employees to be an important
influence on the quality and performance of enterprises, services and organisations. Most rural
districts are better endowed with human capital in terms of educational attainment than urban
areas, with between 20% and 30% of residents qualified to NVQ 4-5 levels, some of whom may
not be in work. Many better qualified employees may work in urban or distant workplaces,
attracted by better choice of employment, better pay and rewards. Others may be self-employed.
Thus employers in areas of apparently well-qualified workforce may also report lack of skilled or
qualified employees.
31. Across England, a small minority of employers regularly report vacancies, the level
decreasing with greater rurality. Around 7-9% report hard-to-fill vacancies and just over half of
these are skills-related recruitment difficulties. These levels increase with fi rm size and vary
across rural England. However, village enterprises account for a slighter higher share of the hardto-fi ll vacancies than their share of Englands employment (12% compared with 9%). Low
number of applicants with required skills is the main reason for such vacancies in all localities.
Additionally, more village employers also attributed diffi culties to too few applicants and too
remote location/poor public transport. A quarter of all such vacancies in villages and small towns
may be unfilled due to location and poor transport. Whilst most recruitment difficulties seem to
focus on skilled trades positions, rural employers seem to have greater difficulties than urban
counterparts in recruiting skilled managers and professionals. Report to CRC by IFF Research).
The irony is that 1 in 3 directors of public listed companies also live in rural communities.

76
32. Rural areas, face two particular skills and training challenges:

Poor availability and access to further and higher education and training providers limit

the means, or raises the costs, of doing so.

33. Overall the evidence of skill shortages and gaps, recruitment and training in rural areas
reveals four key features:

Rural firms are less likely than urban firms to have staff that are not fully proficient at

their jobs, with the exception perhaps of staff in elementary occupations, an important group in
rural businesses.

Rural firms are less likely to have provided training for their work force than their urban

equivalents, and are less likely to have formal training or human resource management
processes. 40% of all rural employers had neither a business plan, training plan nor a training
budget (the equivalent level in urban employers falls to below one third).

Rural employers with such processes, engaged in training, and successful at recruiting,

are likely to provide more training days per trainee than urban employers. (CRC, 2006. Skills
development and deficiencies in rural England: Report to CRC by IFF Research).
34. Rural and urban employers cite the need for government funding to aid them to recruit and
provide training of their staff. In CRCs 1,600 business Rural Insights: Business survey 2007,
financial assistance was reported as the leading action that government could take to make it
easier to recruit or retain staff
35. It is also important not to presume that a declining employment base in farming and
associated land management practices justifi es a substantial reduction in publicly-supported
training in these skills. The physical environment of rural England is a national asset.
Countryside and rural skills, sustain healthy communities, urban as well as rural. They enable
England to produce the essentials of life, and to conserve our high quality and historic rural
landscapes, air, water and soil, wildlife, buildings and cultural qualities. These attract and benefit
at least three groups:
urban residents and visitors;
owners of businesses who relocate to start or run businesses linked to the land and rural
environment; and

city and regional economic agencies that market proximity to rural areas to attract

property developers and business investment clients.

77

I conclude that skills and training make important contributions to economic growth,

employability and to the wellbeing of citizens. Motivating more rural employers to adopt formal
processes and steps to train their employees would help release some of the unfulfi lled potential
of rural economies.
36. There is however, some evidence of an urban bias. A perception

has developed, that

innovation has been overly focused on technology and that innovations, assets and drivers tends
to be focused on cities and so overlook rural areas.

78

Competition
Businesses frequently cite competition as one of their greatest obstacles to success. This is no
different in rural England (Small businesses in rural areas an analysis of the Annual Small
Business Survey, 2004). This response is often shorthand for unfair competition. On my visits I
am made aware of such practices or perceptions the ability of larger firms to hold out for and
secure planning permissions that small firms cant win; leaner buying practices and payment
regimes enforced by larger fi rms on suppliers; the Tesco town influence on small independent
shops; difficulties faced by sole traders and micro firms to win public contracts. I have little
doubt that owners of very small fi rms in our towns and cities would raise similar concerns.
However, sole traders and micro firms make up a larger share of the stock and outputs of
businesses in rural areas. Therefore rural economies need government action to reduce such
fiscal, regulatory, legal protection, procurement and practice distortions with more urgency. I
regularly hear complaints about the difficulties of securing planning permission for business
growth and development. This needs tackling, especially in countryside areas and villages.
It is argued that competition produces better outcomes for consumers and more efficient
practices by producers. Rural firms are perceived by many to be sheltered from the effects of
competition, beneficial or harmful, as they operate in local markets with few competitors. This is
an unreal view. Rural England includes many market towns in which firms compete for custom
from residents and visitors. Firms with head offices in rural areas operate branches in urban
areas, and many more urban fi rms have rural branches. CRCs Rural Insights: Business Survey
2007, a survey of 1,600 firms in rural and urban England, found that urban, rather than rural
firms were more likely to have their main customer base in local areas. Village firms have a
greater share of customers in national and international markets. Rural firms respond positively
to fair competition.
Many of the challenges presented to me in preparing this advice and listed in paragraph 7 of my
Introduction, result from or are made worse by inadequate investment. This is true for example
of poor public transport, lack of affordable housing and inferior broadband provision.
Capital or revenue investment in physical works and in support organisations also determines
communities ability to withstand flooding, storm and other environmental shocks and recover

79
from these and economic shocks. Such funds can be drawn from commercial, public or third
sector sources.
Investment in physical capital is an important infl uence on productivity and growth. (HM
Treasury 2002. Productivity in the UK: Evidence and the Governments approach.) Evidence
from national to sub-regional levels consistently shows that net capital investment per business,
per local authority district and per capita is noticeably lower in most rural district. Evidence also
demonstrates that many rural local authority districts attract lower levels of Total Revenue
Expenditure, and Aggregate External Financing (AEF) per head, and are expected to generate a
greater proportion of their own funds from within the area. As local authorities are given greater
roles in fostering economic growth, such weaknesses will affect the level of economic growth
that can be achieved.
I am advised that rural enterprises outside land related, or farm diversification activity are (again)
unlikely to benefit much from the RDPE. I regret this.
Rural Area Flexibility Analysis
1. Types and estimated numbers of rural areas: (Describe the types and estimated number of rural
areas to which the rule will apply.)
2. Reporting, record keeping and other compliance requirements; and professional services:
(Describe the reporting, record keeping and other compliance requirements of the rule and the
kinds of professional services that are likely to be needed in a rural area to comply with the rule.)
3. Costs: (Estim ate the initial capital costs and any annual cost to comply with the rule,
indicating any likely variation in such costs for different types of public and private entities in
rural areas.)
4. Minimizing adverse impact: (Explain how the rule is designed to minimize any adverse impact
on rural areas, including information regarding whether the approaches suggested by SAPA or
other similar approaches were considered.)

80

Accessing Financial Services in Rural Areas

81

Formal and informal financial services

Rural finance is about providing financial services secure savings, credit, money transfer and
insurance in rural areas. Indeed, financial services can play an important role in rural
development:
Savings and insurance schemes:
Assist the rural population in reducing vulnerability to risks, planning more reliably for the
future and saving for upcoming investments, as well as smoothing out irregular income flows
and covering unexpected expenses. The latter is particularly important in rural areas where
income depends on agricultural cycles.
Loans for investments and working capital:
Are crucial elements that enable rural entrepreneurs to make investments, seize economic
opportunities, and purchase agricultural inputs and working capital. Shortterm consumption or
emergency loans can help households to avoid difficult situations that might have forced them to
sell an asset. However, loans are not always favourable: some poor borrowers experience
difficulties in repaying their debts, due either to circumstances beyond their control (e.g.
sickness, theft, natural disasters) or to a lack of knowledge and wrong investment strategies.
Lending among relatives, neighbours and friends: entrepreneurs usually rely on family
savings or borrow money from friends to make small investments, and in emergency situations
people tend to borrow from acquaintances. Such loans are usually repaid without interest.

Moneylenders and pawnbrokers: in the absence of formal institutions people typically rely on
moneylenders to obtain loans. Moneylenders often ask for usurious interest rates and sometimes

82
try to recover the loans by violent means. On the other hand, moneylenders can provide loans
rapidly in an emergency, and they do not ask for collateral.

Community self-help schemes such as self-help groups (SHG), rotating savings and credit
associations (ROSCAs), community-based savings and credit mechanisms are useful instruments
to encourage savings, provide small-scale insurance and avoid debt at exorbitant interest rates.

Challenges of rural finance

Many obstacles still make it difficult for rural households and entrepreneurs to access financial
services. Accordingly, both service users and financial institutions offering services in rural areas
are confronted with a broad array of challenges:
High transaction costs:
Provision of financial services in rural areas is associated with high unit costs both for
institutions and for their clients. This is due to the fact that infrastructure for transport,
communication and information technology is less developed in rural areas, as well as to the
remoteness of these areas. Clients frequently have to travel long distances to deposit savings or
repay a loan. As they usually travel on foot, this can cost them an entire working day. Rural
financial institutions face additional costs for ensuring security and managing liquidity. High unit
costs are usually passed on to the clients, with the result that users in rural areas frequently pay
higher interest rates than people in urban areas.
Higher risks:
Credit risk is higher in rural areas both for borrowers and for rural financial institutions. The
revenues of rural households, whose incomes mostly depend on seasonal agricultural and
livestock production, are volatile due to fluctuating weather conditions and pests or diseases. In
addition, price fluctuations are high in the agricultural sector. Generally, rural households depend
on one or two sources of income only, increasing the risk of credit default. Many households

83
either entirely lack collateral or do not have a legal title to their house or land. Financial
institutions thus have no means of securing their credits against defaulting.
Defaulting clients run high risks as well: financial institutions will typically impose punitive
interest rates for delayed payments and might even confiscate assets of defaulting clients.
Higher rates of illiteracy:
In developing countries illiteracy rates are particularly high in rural areas. Poorly educated
people face an additional challenge in accessing financial services: it is difficult for them to
analyse credit risks and the profitability of a loan or savings scheme, to provide all documents
and information (such as a business plan) required to apply for a loan, and to understand
conditions and contracts. Some institutions fail to communicate interest rates and commissions in
a transparent manner, and small prints in contracts can contain additional costs for borrowers.

Addressing the difficulties

Promotion of rural finance remains a priority of many governments, donors and NGOs, since
several challenges still need to be addressed. Rural finance can be promoted by supporting
informal schemes such as communitybased savings groups, as well as by fostering formal
institutions through technical assistance (supply-side measures) and assisting poor households
and small enterprises in accessing financial services (demand-side measures). In addition, donors
can support the development of favourable policy and regulatory frameworks. Various
approaches have been developed over the last decades to address the challenges of rural finance.
In the 1970s and 1980s, governments channelled subsidised credits through centrally managed
development banks; NGOs and development projects promoted access to credit through socalled
revolving funds.
In the mid 1980s, a shift occurred towards a more demand-oriented approach, with the aim of
building inclusive and sustainable financial systems. This approach takes the demand of farmers
and rural entrepreneurs for savings, loans and insurance as an entry point. Indeed, when
institutions offer financial products tailored to the needs of the rural population, low-income

84
households do use saving schemes, are willing and able to pay interest rates, and buy insurance
to cover their risks.
Moreover, experience has shown that financial institutions only increase their outreach to rural
areas, but also to poorer clients if they can cover their costs. Several financial institutions (such
as Bank Rakyat in Indonesia, BAAC in Thailand, and FDL in Nicaragua) have demonstrated that
it is possible to operate in rural areas and be financially sustainable. Key lessons learnt in recent
years include the following:
Need orientation:
Rural households and small entrepreneurs have specific needs which may vary from those of
urban clients. An institution thus has to offer a variety of financial products and flexible services
that are adapted to rural clients. For instance, in rural areas most households depend on
agricultural cycles. Monthly or even weekly deposits for loan repayment and savings
accumulation, as they are promoted by urban microfinance institutions, are simply not tailored to
the needs of rural clients. It is therefore important that financial institutions understand the cash
flow of rural households and offer adapted loan repayment and savings collection schemes. For
example, such a scheme can involve monthly interest rate payments, while the capital is paid
back in two or three instalments after the harvest.
Minimizing risks:
While financial institutions in rural areas often lack collateral or the possibility to legally enforce
contracts, they can use social links (for example through group savings and lending) to redsuce
their risks. The so-called linkage model combines informal systems such as selfhelp groups with
formal banks. Groups are linked to the bank through a group contract, so the bank does not have
to deal with each client separately. This way the bank or microfinance institution can reduce its
risks and transfer transaction costs to the self-help group.

Building on existing institutions:

85
Wherever possible, promoters of rural finance should build on existing institutions rather than
create new ones. One way of doing this is to provide commercial banks with technical assistance
to extend their services into rural areas (so-called downscaling). Furthermore, donors can
support existing institutions in reducing costs and, thus, interest rates by helping them to develop
more efficient distribution mechanisms and new products and to increase their efficiency through
training, but also by assisting poor households and small enterprises in accessing financial
services.
Unfortunately, even if financial institutions offer their services at reasonable costs, interest rates
for loans remain high in rural areas. There is generally little or no competition among financial
institutions in rural areas, and, consequently, the pressure to reduce interest rates is low.
Competition needs to be fostered by attracting more financial institutions to rural areas. This is
turn, requires a favourable legal, economic and political environment.

A conducive environment for rural finance

A precondition for the development of rural financial systems is a stable political and macroeconomic environment. Uncertainty about the future political situation of a country and its
economic development, particularly inflation, are unfavourable conditions for investments.
Moreover, policymakers should give clear signals in favour of rural development, especially the
development of inclusive financial institutions in rural areas. Improved road infrastructure,
telecommunication possibilities and security in rural areas are essential in reducing transaction
costs of financial services in rural areas, but also in promoting trade linkages between rural and
urban regions and in attracting other economic actors.

Economic and legal framework conditions

Rural areas generally lack legal environments enabling a sound development of the financial
system and the economy. In more concrete terms, land tenure and property rights are frequently
unclear, the administration is slow and inefficient, law enforcement is costly and slow, and the
court system lacks transparency and efficiency. Any measures to improve these aspects will help
to promote rural financial systems. Every country regulates its formal financial sector through
state laws and regulations. In order to accommodate a well-functioning financial sector, a

86
countrys legal and regulatory framework should be clear and transparent, promote competition
among institutions, and be favourable for the development of financial services for those persons
who have been traditionally excluded from the formal banking sector.
Given the particular difficulties of financial institutions operating in rural areas, laws and
regulations should be designed to foster the development of rural financial institutions. While
regulations are certainly necessary, overly strict regulations can also become a disincentive for
institutions interested in expanding into rural areas. For example, in many countries regulations
require financial institutions serving the agricultural sector to accumulate higher regulatory
liquidity reserves, both because these institutions face higher portfolio risks and because their
clients have no hard collateral. This discourages financial institutions from lending to the
agricultural sector. In addition, when regulations are too strict, informal micro finance providers.

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Agricultural production and financial services

An overwhelming majority of the rural population in developing countries depends on
agriculture for survival. Rural financial institutions thus often provide services for activities
related to agriculture, such as input supply, production, or distribution and marketing of
agricultural products. As pointed out above, providing financial services to the agricultural sector
involves specific challenges related to sector-specific risks and to other specific characteristics of
agricultural activities, such as seasonality and long maturation processes. Loans for agricultural
production or livestock breeding usually have longer terms than those for trade or small industry.
In addition, rural households need financial services that are adapted to the agricultural cycle,
such as savings schemes to provide cash for the season in between harvests, or transfer schemes
for remittances for migrants who leave the rural areas for seasonal work. There is also a need for
agricultural insurance schemes among small farmers who have to protect themselves against
weather-related risks.

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CHAPTER-3

89

RESEARCH METHODOLOGY
Effective market research involves 5 steps: Defining the problem and research objectives.
Developing the research plan.
Collecting the information or data
Analyzing the information.
Presenting the findings.
The first step in the scientific methods of research study is the research design.
RESEARCH DESIGN:
It is the plan structure and strategy of investigation convinced so as to obtain answer to research
question. It is purely and simply the framework or plan for study that guides the collection of
analysis of data. It is a blueprint that is followed on completing the study. Designing of a
research plan calls for decisions on the Data sources, Research approaches, Research
instruments, Sampling plan, and Contact methods.

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The Methodology
Data collection
Data collection is a key activity of research. Data collection method is the backbone of research
design; there are two types of data
1. Primary data primary data is a data gathered first time by the researcher. Primary data can
be collected through observational studies, market surveys or experiments.
2. Secondary data secondary data is the data collected by any other person other than the
researcher .the data collected may be internal or external. Collected data may be for the same
purpose or any other purpose.
Keeping in mind the research objective, the problem is to collect the relevant and required
information. the information required is a collection of coherent or relevant numerical
observations or events with their relevance with each other.

Collection of secondary data

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Internal Sources

*Sales
Records
*Credit
Record
*Internal
Record

External Sources

Published
*Directories
*Periodicals
*Financial Records
*Statistical Sources

Commercial
*Demographic data
*Store audit data
*Diary panel data
*Advertising
explosive data

1. Various publications of FMCG products, or of international bodies and their subsidiary

organizations.
2. Technical and trade journals.
3. Books, magazines and newspapers.
4. Reports prepared by research scholars, industries, economists etc. in FMCG markets.
5.

Public records and statistics, historical documents, and other sources of published

information.
6. Main support in data collectionis provided by internet & different websites related to FMCG
markets.

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CHAPTER-4

93

DATA ANALYSIS & FINDINGS

1. Why do you demand a particular brand?
Group belonging
Parents attention
Competition amongst friends
Avoid bulling from friends who have FMCG stuff

5
10
22
13

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Analysis
From above chart, it is clear that, a buyer want to use a superior brand from his
competition (friend).Therefore to satisfy his demand, he usually ask for a product which
is not available among his/her friend.

2. When deciding what to buy?

Do parent ask you for your advice
Do you have an opinion but dont discuss it
Tell parent what you think they should buy
Dont have any opinion

17
11
15
7

95

Analysis
As seen from the above graph, parents not only ask advice from their members before buying a
product, but at the same time family member to buy a product or to why buy a particular brand.

3. Why do you think advertisements are shown on TV?

Entertainment
Education
Whats new
To sell product
TV stations get money from ads

8
12
7
8
15

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Analysis
When ask why ad are shown on TV, 12 peoples out of 50 told that they are shown to educated
viewer while a majority of 15 children were favor that ad are mainly shown, as TV stations get
informations from ads.

4. Which brand?
Toothpaste
Hair oil
Biscuits
Shampoo
Chocolate

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Analysis
When asked which product you like more, then Costly products was wellhead with 20 votes than
Cheap which has only 5 votes against it. It clearly shows the love of Cheap & best toward FMCG
products.

5.) Does advertisement is an important tool which influences opinion building process of them ?
YES
NO
CANT SAY

32
15
3

98

Analysis
When parents were asked that whether ad influence their child or not , then a

majority more

than 60% , 32 were in favour of the questions.

6.) Do you think that Brand loyalty has increased has a result of organized product?

Yes
No
May Be

23
21
6

99

Analysis:
23 fmcg market feel that Brand loyalty have increased while 21 fmcg market felt that there is no
effect on brand loyalty because of brand loyalty.

7.) What factors would you consider to increase Brand Loyalty?

Discount offer by company

Quality
Increase in promotional

12

activities
After sales service

12

13

13

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Analysis:
There were mixed reactions when Rural peoples were asked, how then can brand loyalty. On the
whole fmcgs were confused in how they can increase brand loyalty.

8.) Do you think because of organized FMCG products the demands for local product have
decreased?
a) Yes

15

b) No

35

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Analysis:
There were clear reactions when Rural peoples were asked, because of organized FMCG
products the demands for local product have decreased. 70% people said NO

9.) Is purchasing behavior of customers have changed because of shopping malls?

a) Yes

38

b) No

12

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Analysis:
When we asked regarding purchasing behavior of customers have changed because of shopping
malls 76% people are agreed that due to shopping mall the rural purchase decreased.

10.) Has Indian FMCG sector has benefited because of investments from foreign?
a) Yes

10

b) No

34

c) Cant say

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Analysis:
When we asked, Has Indian FMCG sector has benefited because of investments from foreign
68% people are not agreed that FMCG sector has not been benefited because of investments
from foreign.

Findings

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Overview Of FMCG Sector
What are FMCGs
WE regularly talk about things like butter, potato chips, toothpastes, razors, household care
products, packaged food and beverages, etc. But do we know under which category these things
come? They are called FMCGs. FMCG is an acronym for Fast Moving Consumer Goods, which
refer to things that we buy from local supermarkets on daily basis, the things that have high
turnover and are relatively cheaper.

FMCG Products and Categories

Personal Care, Oral Care, Hair Care, Skin Care, Personal Wash (soaps);
Cosmetics and toiletries, deodorants, perfumes, feminine hygiene, paper products;
Household care fabric wash including laundry soaps and synthetic detergents; household
cleaners, such as dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners,
insecticides and mosquito repellents, metal polish and furniture polish;
FMCG in 2006
The performance of the industry was inconsistent in terms of sales and growth for over 4
years. The investors in the sector were not gainers at par with other booming sectors. After
two years of sinking performance of FMCG sector, the year 2005 has witnessed the
FMCGs demand growing. Strong growth was seen across various segments in FY06. With
the rise in disposable income and the economy in good health, the urban consumers
continued with their shopping spree.
Food and health beverages, FMCG flour, FMCG sugarcane, bakery products such as
bread, biscuits, etc., milk and dairy products, beverages such as tea, coffee, juices, bottled
water etc, snack food, chocolates, etc.
Frequently replaced electronic products, such as audio equipments, digital cameras,
FMCG Products, CTVs; other electronic items such as Refrigerator, washing machines,
etc. )

SWOT ANALYSIS

105
Analysis of FMCG Sector
Strengths:
1. Low operational costs.
2. Presence of established distribution networks in both urban and rural areas.
3. Presence of well-known brands in FMCG sector.
Weaknesses:
1. Lower scope of investing in technology and achieving economies of scale, especially in
small sectors.
2. Low exports levels.
3. "Me-too" products, which illegally mimic the labels of the established brands. These
products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
1. Untapped rural market.
2. Rising income levels, i.e. increase in purchasing power of consumers.
3. Large domestic market- a population of over one billion.
4. Export potential.
5. High consumer goods spending.
Threats:
1. Removal of import restrictions resulting in replacing of domestic brands.
2. Slowdown in rural demand.
3.Tax and regulatory structure.

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CHAPTER-5

SUGGESTION AND RECOMMENDATIONS

I believe that our rural economies have much unfulfilled potential. To a fair extent this can

107
be unlocked through better access and adjustments to national and regional economic
programmes.
In some areas rural businesses are contributing proportionately less economic output than
would be expected from their employment and business base. The challenge is to extend
growth and productivity across more firms, employees and communities in rural England.
The evidence and solutions offered in this report are aimed at securing a step change in the
performance and resilience of our rural economies, and the commitment from the public
sector to their future. I believe that specific activity and government support is needed, in
four areas:

inspiration and leadership;

investment;

innovation; and

Empowerment of rural communities to tackle environmental disruptions.

I want the Government to build upon its new Innovation White Paper, and overturn

the perception of spatial and technology bias. I want DIUS and BERR to work with CRC
and rural organisations to ensure a clear and relevant rural dimension to Innovation policy
and programmes.
In the Enterprise section above, we have shown that whilst many small firms aspire to
grow, surveys suggest that many rural small firms fail to achieve their potential. We have
also shown in Appendix 2 t.hat the turnover per firm and per employee in rural areas often
lags behind the average output in mixed and urban districts. Boosting innovation in rural
England is a clear imperative.
Recent work by Eric Stam and colleagues at the University of Cambridge, examined the
influences on new firms growth and those aspects that particularly influenced growth to
reach a 10 employees threshold. (Stam, E, Gibcus, P and Garnsey, E, Dynamic
Capabilities and the growth of new fi rms. Paper presented at Policy Studies.

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109

CHAPTER-6

CONCLUSION
In the end it is certain that FMCG companies will have to really gain inroads in the rural
markets in order to achieve double digit growth targets in future. There is huge potential
and definitely there is lot of money in rural India but the smart thing would be to weigh in
the roadblocks as carefully as possible. The companies entering rural market must do so

110
for strategic reasons and not for tactical gains as rural consumer is still a closed book and
it is only through unwavering commitment that the companies can make a dent in the
market. Ultimately the winner would be the one with the required resources like time and
money and also with the much needed innovative ideas to tap the rural markets.

High levels of employment and self-employment but recruitment of graduate and

young school leavers is lower than in urban firms and may be holding back sustainable
employment and innovation. Poor choices of jobs in some districts are reducing the
employment prospects for some groups and the willingness to seek work by other groups.

Healthy signs of enterprise and entrepreneurship business creation rates,

including by women and in knowledge-based firms are strong, as are survival rates of
small firms, but outputs of many existing businesses are lower than appears to be the case
elsewhere.

Good educational and skill levels educational achievements are generally high

and skill shortages not a marked barrier to many rural firms. Nevertheless some rural areas
consistently report low skill levels, which may partly explain low wage levels. Poor access
to recruitment and training support hinder the employability of young and economically
inactive people in some rural areas.

Competitiveness is generally strong more rural firms are likely to sell to national

and international markets than urban, but outcomes of competitiveness are often weak.

LIMITATION OF STUDY
The study may have some limitations which are listed below:
1. Time factor was considered to be a major constraint.

111
2. The survey was conducted only in Lucknow district. Hence, the results from the study
may or may not be applied to other areas.
Report is on the basis of small sample size.

BIBLIOGRAPHY
The following books and websites have been consulted for writing up to this project:

112
1. Books: 1. Kotler, Philip Marketing Management Published by Pearson Education

(Singapore)

Pte. Ltd.
2. Kothari, C.R Research Methodology Published by New Age International (P) Ltd.
3. Cooper Business Research Published by Tata McGraw Hill
2. Websites:-

www.google.com
www.economictimes.com
www.indiainfoline.com
3. Magazines and Newspapers.
Economic Times
Business India
Business Standard
The Times Of India

113

ANNEXURE

QUESTIONNAIRE
Name..
Age.

114

Gender.
1.) What factors would you consider to increase Brand Loyalty?
a) Discount offer by company
b) Quality
c) Increase in promotional activities
d) After sales service
2.) Do you think because of organized FMCG products the demands for local product have
decreased?
a) Yes
b) No
3.) Is purchasing behavior of customers have changed because of shopping malls?
a) Yes
b) No
4.) Has Indian FMCG sector has benefited because of investments from foreign?
a) Yes
b) No
c) Cant say
5.) Do you think that Brand loyalty has increased as a result of Organized FMCG sector?
a) Yes
b) No
c) May be

6.) What percentage of people visiting your store change into final customers?
a) 10%-20%
b) 20%-30%

115
c) 30%-40%
d) Above 40%
7.) Has footfall in shops have increased because of shopping malls?
a) Yes
b) No
8.) Which of the following activities would you prefer to attract consumers?
a) Discounts Offer
b) Free gifts
c) Giving training to staff
9.) Which factors do you consider while purchasing from FMCG sector?

a) Good supporting staff

b) Good ambience
c) Various offer
d) Quality
10) What reasons do you think results in change in consumer buying behavior?
a) After sales service
b) Sales personnel behavior
c) Interaction with staff members