Rural Marketing_MMS & PGDM

8/4/2019 Rural Marketing_MMS & PGDM

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Rural Marketing

(MMS & PGDM 2010-12)

- Alka Purohit.


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Introduction & Evolution

The rise of rural markets has been the most importantphenomenon of the 1990s, providing volume growth to allleading companies.

Many Challenges-

how to make the product affordable,

how to penetrate the villages

connectivity

Language barriers

Local brands

Rural mindset etc.

Marketers & manufacturers are aware of the vast purchasingpower, vast size, demand.

Efforts now being made to understand rural tastes, walktheir talk, marketing mix to be tailored as per their lifestyle.


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Cont..

Govt agencies like IRDA( Insurance Regulatory &Devlopment Authourity ) & NCAER ( National Councilfor Applied Economic Research) defines rural as-villages with a population less than 5,00 and 75%male population engaged in agriculture.

So, 2/3rdof the countrys population lives in rural areas& almost 26% of national income is generated there.

India is divided into 597 districts, 638,667 villages ofwhich 32% can be reached by pucca roads. However68% is still untapped.

Overall rural market has been growing at 3-4 % perannum adding more than 1 million consumerseveryday.

Thus,Rural market is becoming very prominent part ofthe marketing strategy of all FMCG, electronics, otherindustries, both National & Multinational.


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Definition & Scope of Rural Marketing

1. Census : Village - Basic unit for rural areas isthe revenue village, might comprise several

hamlets (Small areas)demarcated by physicalboundaries.

(Limitation)Term Rural does not specify thepopulation strata.

Town- Rural area but should satisfy the followingcriteria.

Population density>= 400/ sq. km.

Min population>= 5,000

75% of the male population engaged in non-agriactivity

(Limitation) Term Rural does not rule out 5,000+population villages.


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2. RBI Locations with population up to 10,000 to beconsidered as rural & 10,000 1000,000 as semi-urban.

(Limitation) Up to 10,000+ has not been considered.3. NABARD All locations irrespective of villages or town

, up to 10,000 population will be considered as rural.

(Limitation)- Village & town characteristics are not

defined.4. Planning Commission- Towns with population up to

15,000 population are considered as rural.

(Limitation) Town characteristics are not defined.

5. Sahara India- Locations having shops/commercialestablishments up to 10,000 considered as rural.

(Limitation) Population criteria & other characteristicsare not taken into consideration.

6. LG Electronics The rural & semi urban area is defined

as all other cities other than seven metros.


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In terms of Marketing, Rural India can be

defined in terms of absolute numbers:

For Consumer expendables / FMCG -

The rural market can be defined as all

locations having population up to 20,000irrespective of their status as village or towns.

For Consumer Durables

The rural market can be defined as alllocations having population up to 50,000.


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Defining Rural Marketing -

Acc. To National Commission on Agriculture: Ruralmarketing is a process which starts with a decision toproduce a saleable farm commodity and it involves all theaspects of market structure or system , both functional &institutional , based on technical and economicconsiderations and includes pre & post harvest operations,assembling, grading, storage, transportation and

distribution. Acc to Corporate Rural Marketing:

Rural marketing can be defined as a function that managesall activities involved in assessing, stimulating, andconverting the purchasing power of rural consumers into an

effective demand for specific products, thereby movingthese products and services to the people in rural areas tocreate satisfaction and a better standard of living therebyachieving organizational goals.


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Thus rural marketing is a two way process

that includes the flow of goods and servicesfrom urban areas to rural areas and vice versa

as well as flow of goods and services within

rural areas.


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Scope of Rural Marketing1. Rural India-Promising Market Place:

1. Liberalization of Indian economy-beginning of 1990s had far reachingconsequences which continued into the new millennium - arrival of

many well known MNCs came up which are famous brand in theinternational markets.

2.Intense competition & saturation of urban markets

3. Growth & Govt Plans- 5 yr plan outlay for rural dev prog., from 8 th to 10thplan ,230 % increase in the flow of institutional credit for agriculture,

between 1997-98 & 2004-05 & 41 million KCC issued, all helped in thegrowth of rural economy.

4. Improvement in Indian Agriculture - at macro level showed markedimprovement in terms of area covered, usage of fertilizers, qualityseeds, use of latest equipments etc. The agriculture sector has become a

much comfortable place with rising income levels.

5.Rise in Rural Income- Acc to NCEAR. Indian demographics report, annualhousehold income between, 45,001 and 215,000 in rural India equalsurban India. The rural income tends to become much higher since urban

counterparts 60-70% is spent more on necessities.


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2. Understanding Rural Consumer

Fundamentally different due to different rural geographies,heterogeneity, social structure, literacy levels, community decisionmaking etc.

3. New Influencers- Liberalization, global connectivity, informationtechnology etc have led to changes in the roles played bytraditional influencers in rural India. Sarpanch, Pradhan & otherleaders have been taken over by the new youth studying &

residing in urban areas, exposed to the latest brands, products &services. Migration of people is again another influencer.

4. Products- Modification of products for rural areas

e.g. cooking gas, pressure cookers etc. to suit the rural home maker.

New designing of electrical gadgets e.g. washing machine to suit hardwater.

Introduction of smaller economic packs of products by all companies.


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5. Rural Distribution-

Sound distribution system ensures effective business.

In the absence of malls, shopping complexes etc. marketers

need to find out the means, ways & places for selling theirgoods.

Direct Supply

Company Representatives

Around the corner supplyDealers network

6. Rural Communication

Strong need to reduce communication gaps & to build

reassurance & trust about product quality , service support &company credentials in the mind of rural consumers. E.g.touch, feel, face-to-face interaction, selling at haat , mandis,melas etc.

7. Rural Markets- The way ahead-

Access & Availability of products, Jo dikhta hai who bikta hai


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Affordability Small packs

Adaptation of 4 Ps ( product, price, place,

promotion ) to the 4 As (awareness, acceptability,availability, affordability).

Companies should not fight for limited rural pie

rather join hands with the govt to increase the sizeof the rural pie through, micro enterprises, public-

pvt partnerships, resulting in greater purchasing

power in our villages leading to greater demand ofour products.


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ass ca on o ura ar e s1. Urban to Rural (U to R )

Major part of rural marketing falls in this category.

Includes transaction of urban goods to rural areas. E.g. fertilisers,

seeds, pesticides, FMCG products etc.2. Rural to Urban ( R to U )

Transactions under this category falls under agriculturalmarketing where, a rural producer ( farmer ) sells his produce inurban market.

An agent or middleman plays an important role in this marketingprocess.

Eg. Milk, fruits, vegetables, spices, cotton, honey etc.

3. Rural to Rural

This includes activities that take place between two villages inclose proximity to each other. The transactions involve areas ofexpertise a particular village has.

Eg. Handicrafts, leather items, dress material,


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Classification of Rural Markets

Urban v/s Rural :Urban

1. Size & Characteristics:

City has a large population size growing at a

fast rate due to immigration from rural

areas for education & employment. The

population density is high. Towns aresmaller urban units.

2. Settlement Pattern:

a. The city settlement is compact though

spread over a larger area. Land use is

residential, commercial , industrial ,roads &streets ,institutional & community facilities.

etc.

b. Structure of houses is permanent & often

rises to more than one storey. Housing on

rental is highly prevalent.

c. Clustering pattern in cities is more on basisof class . In the initial phases of

Rural

Village is a human settlement with a small

administrative unit. It comprises few hundred

households and the population growth due to

immigration is insignificant. Migration fromvillage to city/town is to get better education

& employment.

a. Village has land for human settlement and

for cultivation . The settlements are

predominantly clustered but in somehouseholds settle on respective cultivable land

holdings.

b. Houses are largely semi-pucca or kuccha.

They are owner occupied.

c. Houses in village are clustered according tokinship, caste, or religious groups. Some


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Urban

d. Primary resource base is production &

distribution of industrial goods & services.

3. Occupation

Occupations are diverse, ranging from

professionals, semi-skilled to unskilled

workers. Occupational specialization I achieved

with higher education and training to buildskills. 3/4ths are salary earners shopkeepers

etc.

4. Realms of Activities

Interaction and mobility is spread over largegeographical , social, and economic area.

Relationship is more complex with differential

in personal and professional life. There is

erosion of role of custom, tradition & religion.

Formal mechanisms of social control are

needed in absence of community influence.

Rural

d. Land is the primary resource of livelihoods.

Other forms of resources are water bodies,

forests and mountains. Cows, buffaloes,

poultry are kept for household need for milk,eggs, meat.

Predominant occupations are cultivation &

agriculture labor. People continue to practice

traditional occupations. Skill up gradation with

technology has been limited. 2/3ths arecultivators & daily wage earners.

Restricted to smaller geographical, social, andeconomic areas. Individuals are recognized or

referred to on the basis of family, caste, village

etc. Individual behavior is governed by custom,

tradition and religion. Conformance &

compliance to mechanisms of social control is

through family, kinship and community.

/


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Rural Marketing Environment /

Structure1. Demographic Environment

a.Population Pattern: Though the population has come down moderately over the

years , there has been a considerable increase in total n

Growing population does not mean , growing markets until

the people over there have sufficient purchasing power. If the companies analyze their markets, right opportunities

can be taken up.

With the increased working population the purchasing

power of rural populace has gone up by 40% in 1991 to 42%in 2001.

Usually the largest age group shapes the marketingenvironment. Incase of rural, its school-going children,young adults(20-35 yrs) who define the consumption

pattern.


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Source: Census 20011971 1981 1991 2001

Total Population(million) 548.2 683.3 848.3 1026.9

Rural Population(million) - 524.0 628.8 741.6Rural proportion (%) 80.1 76.7 74.3 72.2

Decadal Variation - 19.8 16.7 15.2


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b. Occupational Pattern-

The demographic profile of people in a segmentnaturally affects their buying behavior also.

The wage-earner & salaried person will behave in adifferent manner.

A daily wage earner has to account for variation in

income, where as a salaried person will have assuredfixed amount and can plan expenses accordingly.

3/4ths of rural households are eithercultivators(farmers) or daily wage earners. The farmers

income is variable & seasonal, depends upon theharvesting season. Its that time when he is moreinclined to make purchases, like durables, highinvolvement products etc.


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ource-Heads Occupation Distribution of

Households(%)

Urban Rural All

Housewife 0.84 1.01 0.96

Cultivator 3.45 40.86 29.99

Wage Earner 20.93 35.28 31.12

Salary Earner 40.72 11.28 19.84

Professional 3.59 0.73 1.56

Artisan 6.90 3.41 4.42

Petty Shopkeeper 16.05 4.97 8.19

Businessman 3.68 0.46 1.40

Others 3.85 1.98 2.52

Total 100.00 100.00 100.00

Ph i l E i t


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Physical EnvironmentSettlements (scattered & clustered)

Villages comprise homestead land(aabadi) & cultivatedland(farms).

The settlement pattern is either in a cluster in the aabadi or inindividualized land holdings.

Houses are owner occupied and the structure is kuccha. Its quitecommon in village to find houses according to kinship, caste, orreligious groups.

Sometimes entire village is classified according to the basis ofsome predominant characteristic or caste etc.

Villages of less than 500 population generally do not have anyshop, but the no. of such villages has decreased by 5% over the

last 10 yrs. 25,000 villages in less than 500 pop category haveupgraded to the 500+ category.

Villages in the 2,000 + pop strata are the most prosperous. The no.Of such villages is increasing very rapidly. Over the last almost23,000 villages have upgraded to 2,000+ category. These villages

have around 16 shops.


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As per 2001 census these 17% villages in 2000+popu. Category account for 50% of the ruralpopulation & 60% of rural wealth. A marketer goingrural should target this category first.

Certain big villages are classified as towns since theyhave municipalities still retain rural characteristic

such as folk entertainment & weekly haat & mandis. Social interaction is a mix of urban & rural, the

economy though being connected to rural, is not

agriculture based rather a mix of trade, salariedemployees etc. Such towns are of primaryimportance to the marketers sp for durables &services.


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Village Community & Caste System:

Historically villages have been self sufficient & autonomous.Agricultural surplus have continued to sustain the economic

infrastructure, caste based occupations & trades havecontributed to self sufficiency.

Poor communications only reinforced these features, andpanchayat decided disputes among villagers.

Post independence village underwent changes, the close linkof rural produce with market & industry, gradual shift fromtraditional farming to commercial & mixed farming and thedependence on goods & services from outside plus theincreased role of media has made village dependent onexternal factors.

Migration of rural poor to towns & cities for regularemployment.

Changes in the panchayat structure under reforms fromconstitution, ensured democratic structuring & reservation

for ST & ST tribes & Women.

All ill b 18 li ibl d h


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All villagers above 18 yrs are eligible to vote and the

state administration is in a 3 tier panchayati raj

structure, district, block & village level & are

endowed with financial powers as well.

Traditionally, Indian society has a definite scheme of

social gradation, with Brahmins as Heads, followed

by Kshatriyas, Vaishyas, shudras. All the dimensionshave sub castes, cults etc claiming supremacy.

The developments post independence have

initiated changes in the traditional systems but thecaste complications still prevail in certain villages.

The abolition of Zamindari have brought certain

changes to empower the deprived.


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Marketers need to be sensitive to the caste system,

practices in rural areas, while developing ads,

communication & promotion plans to ensurerelevance of characters & message.

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h l l


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Technological EnvironmentThe changes in the rural technological environment were

triggered off by three major revolutions-

Green Revolution ( agri sector), White Revolution(milk sector),Non govt organizations( NGO)in development sector.

Green Revolution

The period from 1967 to 1978 heralded technological thrustinto rural areas aimed at improving food grain production.

Production of high yield varieties with the use of fertilizers ,pesticides, fungicides, etc. Farm equipments like, tractors,diesel pumps etc introduced mechanization into the farmsector.

Introduction of mechanized processing, spurring, growth ofmanufacturing sector.

Modernization & mechanization boosted productivity,industrial growth, created jobs, initiated a change in thequality of village life.


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White Revolution

Initiated by the govt to increase milk productivity. The projectof the Govt Dairy Development policy to produce milk

through cooperatives & moving processed milk to urbandemand sectors.

Gave a big boost to the dairy development & initiated theprocess of establishing the much needed linkages between

rural producers-urban consumers. Formation of producers cooperatives played a significant role

in institutionalizing milk production & processing.

Socio, economic, urbanization, changing lifestyles, food habits

etc. reinforced growth & demand for the dairy industry. Milkproduction has increased from 17 million tonnes in 1950 to84.6 million in 2001.

The most successful states under the same being, Gujarat,

Andhra Pradesh, Punjab, Haryana, western UP. Etc.


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NGOs confined to their own worlds are realizing the

importance of tying up with corporate, expanding

their activities. The corporate too are experiencingsaturation & competition eroding margins are

realizing the need for rural territory.

The innovative approach to business-socialpartnership is emerging as a win-win solution in

achieving objectives.

E.g. SEWA, Gujarat based NGO with ITC provides

direct access to the vast network of farmers,

covering 14 districts bypassing a chain of

middlemen. In return, SEWA farmers are getting an

assured market with better prices for their produce.

I 2003 ITC h d 250 t f d


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In 2003, ITC purchased 250 tonnes of sesame seed

from SEWA which procured it from 1,450 small &

marginal farmers. Farmers got much better price in

comparison. Other commodities like, groundnuts,wheat, cumin seed etc. were also taken up.

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Approach

Marketers need a mix of developmental & transactionalapproach.

Rural Marketing process needs to be evolutionary andnot revolutionary.

To be considered as an investment for a bettertomorrow.

Companies should focus on nurturing the markets as along term perspective than short term achievement.

Many companies suffered huge losses as they looked

up to short term gains rather than spending time inevolving their marketing mix & distribution, followingthe success of project Shakti by HUL.

Create avenues & opportunities ,mutually beneficial fortarget population & the company.

Rural Marketing_MMS & PGDM

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