The Road into Rural India

Understanding rural marketing

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Rural Marketing

•Understanding the Rural environment  - Session 1

•Rural v/s urban marketing- Session 2

•Rural marketing v/s marketing of rural products- Session 2

•Problems/ Challenges in rural marketing- Session 3

•Rural marketing strategy- Session 4

•Analysis and presentation of case on issues in rural marketing (group

exercise)- Session 5

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Genesis of Rural India•India Pre Independence was largely agrarian. •Pandit Jawaharlal Nehru’s vision of Industrialized India led to creation of the Public Sector corporations. •High dependence on agriculture meant that wealth in Rural India was a subset of crop cycles. •Poor irrigation facilities leading to over dependence on monsoon. •Absence of a organized banking system led to rise of Money lenders and dalals who ensured that the poor stayed poor. •Agriculture practices were backward and medieval with no access to knowhow on the same. •Poor productivity led to poor yields. •Illiteracy levels were high with no access to schools and colleges. •Tightly regulated land reforms. •Division of land among led to smaller holding. •Poor infrastructure such as roads, electricity.

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EN

VIR

ON

ME

NT

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AN Market SegmentationMarket Segmentation

1%

18%

38%

Tractor Penetration

Source: NSSO 05-06

Source: CMIE Report

Total Land Holding-116 M Ha

Bottom end of the PyramidBottom end of the PyramidE

NV

IRO

NM

EN

TA

L S

CA

N

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Rural Market Has Arrived

742 million people Rural is bigger than urban

FMCG's 53% Durables 59% Source: NCAER,2002

Estimated annual size of the rural market FMCG Rs 65,000 Crore Durables Rs 5,000 Crore Agri-inputs (incl. tractors) Rs 45,000 Crore 2 / 4 wheelers Rs 8,000 Crore Total Rs 1,23,000 Crore

Source: Francis Kanoi, 2002

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Rural Market Has Arrived

Some impressive facts about the rural sector. In 2001-02, LIC sold 55 % of its policies

in rural India. Of two million BSNL mobile connections,

50% in small towns/villages. Of the six lakh villages, 5.22 lakh have a

Village Public Telephone (VPT)

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Rural Market Has Arrived 41 million Kisan Credit Cards issued (against 22 million

credit-plus-debit cards in urban) with cumulative credit of Rs 977 billion resulting in tremendous liquidity.

Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from these towns on Rediff online shopping site

42 million rural HHs availing banking services in comparison to 27 million urban HHs.

Investment in formal savings instruments: 6.6 million HHs in rural and and 6.7 million in urban

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Rural Income Dispersal Projection

Consumer Class

AnnualIncome

1995-96 2006-07

Very RichAbove Rs 215,000

0.3 0.9

Consuming Class

Rs 45,001- 215,000

13.5 25.0

ClimbersRs 22,001-

45,00031.6 49.0

AspirantsRs 16,001 -

22,00031.2 14.0

DestitutesRs 16,000 &

Below23.4 11.1

Total 100.0 100.0Projections Based on 7.2% GDP Growth

All figures in %

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Distribution of Towns in India

Town Class Population No of towns % of total towns

Class I 1 lac and above 423* 8.2

Class II 50,000-99,999 498 9.6

Class III 20,000- 49,999 1386 26.9

Class IV 10,000- 19,999 1560 30.2

Class V 5,000- 9,999 1057 20.5

Class VI less than 5000 237 4.6

Total no of towns

  5161 100.0

Source: Census 2001

90 % of durables purchased by rural people are from these 1900 towns

*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354

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Rural Consumer Insights

In rural India, brands rarely fight with each other, they just have to be present at the right place.

Many brands are building strong rural base without much advertising support. Chik shampoo, second largest shampoo brand. Ghadi detergent, third largest brand.

Fewer brand choices in rural : number of FMCG brand in rural is half that of urban.

Buy value for money, not cheap products

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Rural Consumer Insights

Rural India buys. Products more often (mostly weekly). Buys small packs, low unit price more

important than economy. Distribution and pricing are the mantras

to success in rural India.

Even expensive brands like Close up, Marie biscuits, Clinic shampoo are doing well because of deep distribution.

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MYTH 1: Rural Market Is a Homogeneous Mass

REALITY Heterogeneous population

16 languages State wise variations in rural demographics

Literacy (Kerala 90%, Bihar 44%) Population below poverty line (Orissa 48%,

Punjab 6%)

Big Landlords

Traders,Small Farmers

Marginal Farmers

Laborers, Artisans

Source: Planning Commission, GoI

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MYTH 2: Disposable Income Is LowREALITY

Number of middle class HHs (annual income Rs 45,000- 2,15,000)Rural 27.4 millionUrban 29.5 million

Per Capita Annual IncomeRural Rs 9,481 Urban Rs 19,407 Total Rs 12,128 Source: NCAER,2002

Rural incomes CAGR was 10.95% compared to 10.74% in urban between 1970-71 and 1993-94

Source:ETIG,2002-03

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MYTH 3: Individuals Decide About Purchases

REALITY Decision making process is collective

Purchase process- influencer, decider, buyer, one who pays can all be different. So marketers must address brand message at several levels

Rural youth brings brand knowledge to HH

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Distribution of Villages

Source: Census 2001

Population No of villages % of total villages

Less than 200 92,541 15.6

200-500 127,054 21.4

501-1000 144,817 24.4

1001-2000 129,662 21.9

2001-5000 80,313 13.5

5001-1000 18,758 3.2

Total no of villages

593,154* 100.0

17% of villages account for 50% of rural population & 60% rural wealth

Hardly any shops in these 2.2 lac villages

*Inhabited villages, total number of villages is 638, 691

• There is money at BOP.

• Access to BOP markets.

• The BOP markets are Brand – Conscious.

• The BOP market is connected.

• BOP consumers accept advanced technology readily

• Create the capacity to consume.

• The need for new goods and services.

• Dignity and choice.

• Trust is a Prerequisite

• A philosophy for developing products & services for the BOP

- small unit packages

- low margin per unit

- high volume

- high return on capital employed

• Price Performance

• Innovation : Hybrids

• Scale of Operations

• Sustainable Development : Eco-Friendly

• Identifying Functionality : Is the BOP different

from Developed Markets?

• Process Innovation

• Deskilling Of Work

• Education Of Customers• Designing for Hostile Infrastructure• Interfaces• Distribution : Accessing the Customer• BOP markets essentially allow us to challenge

the Conventional Wisdom in Delivery of Products and Services

Changes in Farmer Changes in Farmer LifestyleLifestyle

Mobile phone for easy connectivity

Two-wheeler for smooth ride

Tiller for physical comfort

*Source: Shining Emotional Surplus

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Factors driving change• Rapid fragmentation of land. Hence sustainenance on land alone is difficult.

Hence multiple revenue options.

• Younger generation looking for easier, better and faster options.

• Labour availability getting increasingly difficult to due more attractive earning options for all classes of people.

• Shortage of labour driving mechanization.

• Increasing focus of Govt and NGO towards rural India (Banks, Agri Universities, Farmer Co-ops, SHG etc)

• Rapidly penetrating cell and internet network which opens up window to information.

• Food Inflation across the world helping in realizing better prices for crops hence better liquidity.

• Infrastructure projects like Golden quadrilateral, dams driving up land prices and opening up avenues for usage of locally available farm machinery.

Impact of Corporate in Rural Agri-space

ITC E- choupal, Frito Lays, Essar Non fuel initiatives, Mahindra Shubhlabh, Rallis.

• Improved cultivation through better quality of seeds, fertilizers knowhow.

• Sourcing of crops at higher prices and higher volumes.

• Imparting knowhow of modern Agri-practices like drip irrigation, soil testing, water testing.

• More honest and transparent dealings as compared to local agents such as brokers, grain traders.

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Infrastructure Improving Rapidly

In 50 years only 40% villages connected by road, in next 10 years another 30%.

More than 90 % villages electrified, though only 44% rural homes have electric connections.

Rural telephone density has gone up by 300% in the last 10 years, every 1000+ pop is connected by STD.

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Infrastructure Improving Rapidly

70% of R1,R2, R3 can be reached through mass media.

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Climbing Social Indicators

Between 1981 to 2001 Number of pucca houses doubled from 22% to

41% and kuccha houses halved (41% to 23%)

Percentage of BPL families declined from 46% to 27%

Rural Literacy level improved from 36% to 59%

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Opportunity & Challenges

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Marketing Opportunities

Low penetration rates in rural

% of rural HH

Durables Urban Rural Total CTV 30.4 4.8 12.1 Refrigerator 33.5 3.5 12.0

FMCGs Urban Rural Total Shampoo 66.3 35.2 44.2 Toothpaste 82.2 44.9 55.6

Source: NCAER 2002

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Marketing Opportunities R1 - 4% R2 - 11% R3 - 37% R4 - 48% Low rural consumption in FMCGs (rich HHs)

urban rural

Annual consumption Rs 13,000 Rs 9,400

Rural consumption volumes (R1+R2+R3) Toothpaste 88% Toothpowder 79% Shampoo 88%

So this half of the population consumes over 75% of FMCG volumes

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Challenges in the Future

Reaching the product to remote rural locations and entering more rural homes (penetration)

Increasing rural incomes (market growth)

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Challenges in the Future Making effective use of the large available

infrastructure Post offices 1,38,000 Haats (periodic markets) 42,000 Melas (exhibitions) 25,000 Mandis (Agri markets) 7,000 Public distribution shops 3,80,000 Bank branches 32,000

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Challenges in the Future

Using IT to transform markets

ITCs e-choupal and other IT initiatives (EID parry, Amul dairy information system kiosk)

STD revolution/ mobile connectivity

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Challenges in the Future Proliferation of large format rural retail stores

DSCL Haryali stores M & M Shubh Labh stores TATA/Rallis Kisan Kendras Escorts rural stores Warnabazaar, Maharashtra (annual sale Rs 40 crore)

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Rural v/s urban marketing

• Rural Marketing: The marketing of products and services in areas designated as Rural is defined as Rural Marketing.

• Urban Marketing: The marketing of products and services in urban areas is defined as Urban marketing.

Rural v/s urban marketing

• Are the two really different?????

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Rural v/s urban marketing

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Areas with a population ranging between 1 to 10,000 where in people will be predominantly engaged in agriculture can be called a Rural Area.

Areas with a population ranging between 10,000 to a Lac are called Semi Urban. They can represent characteristics of both a village and a town depending on their location. E.g. Sangli, Nasik,

LG Electronics defines all areas other than the 7 metros as Rural.

• Create the capacity to consume.

• There is a latent need for new goods and services.

Hierarchy of Needs

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Branded Consumables and durables(Organized)

Farm and Non Farm goods and services

Handicrafts, handlooms textiles, leather products, vegetables, fruits

PRODUCTION

URBAN RURAL

R

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4 P- The Basics

Rural Consumer Classification

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1995-96 2006-07

Affluent Cars, Jeeps, luxury durables 1.6 5.5

Well off Air conditioners, M/cycle, fridge, WM, Stereo, TV

2.7 5.8

Climbers M/cycle TV, Mixer , Sewing M. 8.3 22.4

Aspirants Cycle, fans, iron, 26 44.6

Destitutes Cycle, pots, pans 61.4 20.2

Characteristics of Rural Customer

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Age and Stage of Life

Occupation and Income

Economic circumstances

Lifestyle: Activities: e.g. farming with kirana shops, LIC agents, teachers, working at local

industries.

Interests: Cinema, Natak, Nautanki, Kushti, Cricket, football

Opinions: Political and others

Demographics: Age, education, locations, community etc.

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Classification of Needs

Needs can be bifurcated into 2 categories:

Articulated : Needs which are stated and addressed by the product or service.

Unarticulated: Needs which are not stated but are fulfilled with the purchase of the product or service.

Both Articulated and Unarticulated needs can be:

“REASONS TO BUY”

4Ps to 4As

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Acceptability:

A product or service being offered has to be acceptable to the segment for which it is being produced.

Levels of the Products/ services being offered:

Core Benefit Basic Product Expected ProductAugmented Products Potential Products

Classification of Products in Rural Areas

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Customizing Products for Rural Areas

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Long shelf life

Ability to withstand extreme weather/ harsh conditions

Safe storage

Choice of quantity in which it is to be used.

Robust and attractive packaging which does not corrode

the features and benefits of product.

New Product Development

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Adaptation/ Innovation: Existing products being

altered to suit rural usage conditions.

Creation: building a new product around needs

from ground up.

4Ps to 4As

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Affordability:

Parameters of Affordability:

Right Price

Choice of quantity

• A philosophy for developing products & services for the BOP

- small unit packages

- low margin per unit

- high volume

PRICING STRATEGY

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Any Pricing strategy from a marketer’s point of view should:

Allow for profit maximization.

Minimum returns on sales turnover.

Allow the intended customer to buy.

From a customer’s point of view he/she will expect:

Value for money (which can be interpreted as maximum product at minimum cost) e.g. “Ek ke saath ek muft” Pro-rata cost applied across any quantity that is purchased.

SOME COMMON STRATEGIES

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OPTIONAL PRODUCT PRICING: Cost of Basic Product is kept low. Add on are charged higher rates.

CAPTIVE PRODUCT PRICING: This involves product which exist in 2 or more parts where the 2nd part is captive without which the product cannot be used. It is the captive part which is charged.

ENTRY STRATEGIES (PRICING)

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PENETRATION PRICING: Introductory prices which are kept low.

ECONOMY PRICING: No frills pricing by cutting down manufacturing cost.

VALUE PRICING: Offering customer value e.g fragrance, fortified Atta.

COINAGE PRICING: Prices are those which can be paid by coins e.g Rs. 1, 2, 5.

PYSCHOLOGICAL PRICING: Branded goods being charged extra over local goods.

DISCOUNTS & ALLOWANCES

4Ps to 4As

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Availability:

Proximity to user

Core Benefit is delivered

Available at the right price

At the desired time.

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Distribution of Villages

Source: Census 2001

Population No of villages % of total villages

Less than 200 92,541 15.6

200-500 127,054 21.4

501-1000 144,817 24.4

1001-2000 129,662 21.9

2001-5000 80,313 13.5

5001-1000 18,758 3.2

Total no of villages

593,154* 100.0

17% of villages account for 50% of rural population & 60% rural wealth

Hardly any shops in these 2.2 lac villages

*Inhabited villages, total number of villages is 638, 691

Distribution

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Identifying the existing prime markets/ Classification of markets high/ medium/ low volume villages.

high/medium/ low volume tehsils.

high/ medium/ low volumes districts.

Ability to Identify emerging new markets

Identifying the type of outlets Dealers/ Stockist/Franchisees/ village shops

Identifying costs involved in transportation/ logistics Primary/ secondary/ tertiary

Common Distribution models

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Hub and Spoke (Satellite Distribution):

Common Distribution Models

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Syndicated Distribution:

In this method a company ties up with another company that has established network in the rural market.

e.g. P&G and Marico, TATA and FIAT.

Emerging Distribution Models

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Corporate SHG Tie up: Levers TTK TVS

ITC E-Choupal Initiative Essar Non fuel initiatives for distribution of: Castrol lubes Exide Batteries

Banks distributing insurance products, gateways for airtel, vodafone etc.

Ideal Distribution Model for Rural

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Per Capita Sales (PCS)= Annual Sale Market Population

Low PCS Distribution models: Shaktimaans, SHG, Pheriwalas.

Average PCS: Retailers, hardware shops,

High PCS models: Village Haats, Mandis, Rural Malls, Dealers, Stockists , Wholesalers,

4Ps to 4As

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Awareness:

Creating Awareness :

Product/ Benefit

Availability

Price

AICDA Model of Communication

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MESSAGE CONTENT

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MESSAGE CONTENT

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RATIONAL: Value for Money, utility of product

EMOTIONAL: Messages that establish an emotional connect. E.g Cadbury

ASPIRATIONAL: Messages that induce customer to fulfill aspirations.

MORAL: Ethical, Rightful e.g “Atithi Devo Bhava”

MESSAGE SOURCE

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LIKEABLE: Sachin Tendulkar or Shah Rukh Khan delivering a message.

TRUSTWORTHY: Tata Namak, LIC “ Zindagi ke Saath bhi, Zindagi ke Baad bhi”

EXPERT SOURCE: e.g. local mechanics, masons, doctors, Eureka Forbes “ Paani ka Doctor”

MEDIA OPTIONS

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CONVENTIONAL MASS MEDIA

NON-CONVENTIONAL MEDIA

PERSONALIZED MEDIA

Television Haat and mela Direct mailerRadio Folk media (puppet

show, magic show)Point of sale

(demonstration, test rides, plant visits)

Press Video van  Word of mouthCinema Mandi Interpersonal

communicationOutdoor: wall

painting, hoarding

 

BRANDS IN RURAL INDIA

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Category Avg No. of Rural Brands

Avg No of Urban Brands

Toothpastes 3 7

Toothbrushes 3 6

Biscuits 3 9

Hair Oil 3 7

Tractors 14

Availability of fewer brands leads to fewer choices leading to a “stickiness” which should not be mistaken for brand loyalty.

CREATING BRANDING IN RURAL INDIA

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Colours: Association with colour “ Dabur ka Lal Danth Manjan”

Numbers: 555 Detergent, 302 Pataka bidi

Name: Surf detergent, “Kachchua chchaap “, Dalda

Visuals: Washing powder Nirma, “Do Boond zindagi ke” with Big B.

FAKE BRANDS

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Fake brands gain entry into markets using the:

Cheaper than original platform

Lack of awareness/ illiteracy among buyers to differentiate

CATEGORY OF FAKES :

o LOOK ALIKES: Packaging is identical, though names are different.

o SPELL ALIKES: Pomes for Pond’s, Colmate for Colgate

o DUPLICATES: Identical in every sense (name and packaging)

Session 3

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Segmentation

Targeting

Positioning

Rural Consumer Behaviour

Issues and Challenges in Rural Marketing

SEGMENTATION & TARGETING

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Decision Actions

Segmenting • Identifying the bases for segments• Developing profiles of different markets

Targeting • Evaluation of segments for their attractiveness• Deciding the market coverage strategy.

Positioning • Identifying competitive advantage of brand• selecting the competitive advantage.• communicating the competitive advantage.

SEGMENTATION

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The markets can be segmented on the basis of:

Socio-cultural

Population and population density

Stage/ Level of development

Media exposure

Literacy levels

Economic

PREREQUISITE FOR SEGMENTATION

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MEASURABLE

ACCESSIBLE

DIFFERENTIABLE

SUBSTANTIAL

DEGREES OF SEGMENTATION

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Some of the most common approaches to Segmentation:

Mass Marketing

Segment Marketing

Niche Marketing

Micro Marketing• Localized• Individual

SEGMENTATION IN RURAL MARKETS

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In view of the constraints of the rural markets a more simplified approach to RURAL MARKET SEGMENTATION is as follows:

Geographic

Demographic

Psychographic

Behavioural

GEOGRAPHIC SEGMENTATION

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Regions

Culture

Climate

DEMOGRAPHIC SEGMENTATION

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Age and Life cycle

Income/ Economic/ Occupation

Education

Religion and Caste

PSYCHOGRAPHIC SEGMENTATION

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Social Class• Upper • Middles • Low

Lifestyle• Trendsetters• Adopters• Traditionalist

BEHAVIOURAL SEGMENTATION

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Occasions for buying

Benefit sought

Frequency of usage

Loyalty status

Frequency of purchase.

TARGETING

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The 3 Aspects of Targeting:

Evaluation

Selection

Coverage

Factors for Evaluation

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Size

Growth Rate

Accessibility

Profitability

Economies of scale

Element of Risk

SELECTION

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Segmentation Type of marketing

Examples

None Mass Marketing Ghari, Nirma,

Substantial Segment Platina, Pulsar,

Selective Niche Jain Pav Bhaji, Hallal Chicken

COVERAGE

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Coverage can be classified into 3 categories:

Undifferentiated

Differentiated

Concentrated

POSITIONING

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Positioning involves:

Identifying the unique features (USP) over competition products

Selecting the features that lend the brand a distinct competitive advantage.

Directing all communication around the competitive advantage.

Consumer Behaviour

An Introduction

What is Consumer Behaviour?

Those decision making processes and activities directly involved in: Obtaining, Consuming Disposing

of products and services.

Need to study ?

‘You cannot take the consumer for granted any more’

Therefore a sound understanding of consumer behaviour is essential for the long run success of any marketing program

Why is this important?

• Out of 11000 products launched by 77 companies, only 56% are present five years later – Kuczmaski & Associates

• Only 8% of new product concepts offered by 112 leading companies reached the market. Out of this 83% failed to reach marketing objectives – Group EFO Ltd., Marketing News, Feb 1, 1993, Pg 2

A new product must satisfy consumer needs, not the needs and expectations of

management.

Consumer sovereignty presents a formidable challenge but skilful marketing can affect both motivation and behaviour if the product or service offered is designed to meet consumer needs and expectations

A sales success occurs because demand either exists already or is latent and awaiting activation by the right marketing offering

All managers must become astute analysts of Consumer motivation and Behaviour

Three foundations for marketing decisions Experience Intuition Research

Enhancing Consumer Value-Add Marketers have to constantly innovate after understanding their consumers to strip out costs permanently by focusing on what adds value for the customer and eliminating what doesn’t.

Variables involved in Consumer Behaviour

• Stimulus – ads, products, hunger pangs.• Response – physical/mental reaction to the stimulus.• Intervening variables – mood, knowledge, attitude,

values, situations, etc.

Overall Model of Consumer BehaviourDecision ProcessesExternal Influences

Internal Influences

Culture, Marketing, Family Social status Reference groups Subculture Demographics Activities

Perception Learning Memory Motives Personality Attitudes Emotions

Problem Recognition

Information Search

Alternative Evaluation & Selection

Outlet select & Purchase

Post purchase Processes

Self-Concept&Learning

Rural Consumer Behavior Patterns

• Majority will opt for tried and tested products.

• Inertia is high. Hence rate of change is low.

• Seeking opinion and reinforcing the same through repetitive consultation before buying high value items.

• Touch and try is preferred mode for taking a decision.

• General feeling is that everybody is out to cheat them, hence relationship building is critical.

• Price sensitivity is high.

• Willingness to adopt and innovate is high if solution provided is effective.

• Seeks to build a high level of trust.

Consumption, Satisfaction, Divestment

Consumption

The act of purchase is normally followed by consumption or use. Evaluation continues into the act of consumption by a satisfaction/dissatisfaction response. The probability of repurchase is determined at this point

Options for consumption

• Usage at the earliest convenient opportunity• Short-term storage in anticipation of a later usage opportunity• Long-term storage with no specific or anticipated use in mind• Abort consumption process

Buyer’s Regret

Post decision doubt (dissonance)• A certain threshold of dissonance-motivated tension is surpassed• The action is irrevocable• There are other un-chosen alternatives with qualitatively dissimilar

but desirable attributes• The choice is made entirely by free will, without any compulsion

Post-Modern Consumption Research

• Sacred Consumption: e.g Newly purchased Consumer Durables• Profane Consumption: e.g Public buses, rural passenger vehicles• Compulsive consumption: e.g Mobile Phones, Gutka, Tobacco

SatisfactionA post-consumption evaluation that a chosen alternative at least meets or exceeds expectations

Categories of consumer expectations

• Equitable performance – normative judgement of consumer of product performance given the costs and efforts taken to purchase and use

• Ideal performance – the optimum or hoped for performance level

• Expected performance – what the performance probably will be

Expectancy Disconfirmation Model

The CS/D response takes one of 3 forms

• Positive Disconfirmation – Performance is better than expected• Simple Confirmation – as per expectations• Negative Disconfirmation – worse than expectations

Divestment

• Outright disposal• Recycling• Remarketing