Rural Marketing.

UNIT:1

I.DEFINATION OF RURAL AREA:

The Census of India (2001) Defines Rural as that What is not urban. And Urban is

(a) all places with a Municipality, Corporation or Cantonment or Notified Town Area
(b) all other places which satisfied the following criteria:
(i) a minimum population of 5,000.
(ii) at least 75% of the male working population was non-agricultural.
(iii) a density of population of at least 400 sq. Km. (i.e. 1000 per sq. Mile)

Definition of Rural Marketing:

According to National Commission on Agriculture “Rural marketing is a process which starts with a decision to produce a salable farm commodity and it involves all the aspects of market system, and includes pre and post harvest operations i.e. assembling, grading, storage, transportation and distribution”.

According to the census of India village with clear surveyed boundaries not having a municipality, corporation or board, with density of population not more than 400sq.km and with at least 75 per cent of the male working population engaged in agriculture and allied activities would quality as rural. According to this definition, there are 6.38,000 villages in the country. Of these, only 0.5 cent has a population above 10,000 and 2 per cent have population between 5,000 and 10,000. Around 50 per cent has a population less than 200.

II.Evolution in Rural Marketing

1.Phase One( Pre 1960’s) :Agricultural inputs in rural areas

Agricultural marketing”

Farming methods were primitive and mechanisation was low

Markets un organised

Marketing rural products in rural and urban areas

2.Phase Two ( 1960s to 1990s) :

Green Revolution

Companies like Mahindra and Mahindra, Sri Ram Fertilisers

 Rural products were also marketed through agencies like KVIC

3.Phase Three( 1990s to Present)

Demand for consumables and durables rise

Companies find growth in urban markets stagnating or falling

NATURE AND CHARACTERISTICS OF THE RURAL MARKET:

Large & Scattered market

Heterogeneous Market

Income from Agriculture

Standard of living

Infrastructure Facilities

1. LARGE & SCATTERED MARKET:

It consist approximately 75 crore rural consumers who live approximately 6, 38,365 villages.

Abut 1,45,098 villages or 23% of the total number of village in India have population less than 200 and another 21% have population between 200 and 500 .

But on the other hand 13% villages have 50% rural population and they posses 60% rural wealth

2. STANDARD OF LIVING:

Over 70% of the rural population is employed in small scale agricultural and related occupations. This dependence on agricultural and natural factors.

This unreliability factor in case of rural income makes the rural consumers extremely conscious in their purchase behavior.

3. INFRASTRUCTURE FACILITIES:

The infrastructural facilities like road, warehouse , communication system and financial facilities are inadequate in rural areas. Road do not connect nearly 50% village in the country.

Over 50% rural household have access to electricity as main source of lighting but 46% use kerosene for lighting.

Income from Agriculture:

Nearly 55% of rural income comes from the agricultural hence rural prosperity is tied with agricultural prosperity to a great extent.

4. HETEROGENEOUS MARKET:

As many as 20,000 ethnic groups are present rural India and this poses a formidable challenges to the marketer.

There are 24 languages and 1,642 dialects (boli) varies ever 100 km or so it extremely difficult to develop a uniform promotional message.

CONTRIBUTING FACTORS FOR RURAL DEVELOPMENT:

AGRICULTURE REVOLUTION

  • 1. Consistent good monsoons
  • 2.Better procurement prices fixed for various crops.
  • 3.Better yields due to many research programs (seeds provided by the government
  • 4.New improved tax structures
  • 5. Spread of education
  • 6. Improved infrastructure
  • 6 Better banking facilities
  • (financial assistance given by NABARD)
  • 7. Government schemes like IRDP,JRY.
  • 8. Increased expenditure in plan outlay (from 14000 cr.in 7th plan to 30,000 cr.in 8 th plan.
  • 9.Increased penetration of electronic media
  • 10. Life style changes
  • 11. 50 % of today’s rural income is not coming from the agriculture sector.
  • 12.Up gradation from local brands to branded ones and from low priced bands to premium ones.
  • Increasing influence of the youth in the buying decisions

III. SIZE AND NATURE OF RURAL MARKETS

1. Urban markets are becoming increasingly complex, competitive and saturated.

2. Large size of rural markets –

742 million people (73 % of the population)

200 million households (70% of total households)

3.As per the census (2001) rural segments comprises 13.5 crore household which constitute 72% of total households in India with 48 crore adults individuals.

Note:But the rural market is not homogenous across the country .

Demographic details of Indian Rural Markets:

  • About 285 million live in urban India whereas 742 million reside in rural areas, constituting 72% of India's population resides in its 6, 27,000 villages.
  • The number of middle income and high income households in rural Indian is expected to grow from 46 million to 59 million.
  • Size of rural market is estimated to be 42 million households and rural market has been growing at five times the pace of the urban market.
  • More government rural development initiates.
  • Low literacy rate
  • Increasing agricultural productivity leading to growth of rural disposable income. Lowering of difference between taste of urban and rural customers.

(Note: For More information pl refer PPT)

PROFILE OF RURAL CONSUMER

Profile of Rural Consumer

  1. Size of the rural consumer
  2. Location pattern of rural consumer
  3. Low literacy level of rural consumer
  4. Occupation of rural consumer
  5. Income of rural consumer
  6. Savings of rural consumer
  7. Reference groups: Primary health workers, doctors, teachers, and panchayat members.
  8. Conscious customer: Though not educated, very conscious about value for money.
  9. Brand loyalist
  10. High degree of involvement: He checks and rechecks particularly for purchasing expensive and durable products.
  11. Interpersonal communication: Its accounts 80% of the communication process in village. Hence word of mouth recommendation by users has great influence.
  12. Media habits: TAMASHA in Maharashtra and NAUTANKI in UP is a popular form of entertainment which can be used as promotional media.

Classification of Rural Consumer

  1. Affluent Group: This group is very small and almost negligible. This group can afford luxury products. E.g. chilly merchants in Guntur (AP) and wheat farmers in Punjab.
  2. Middle Class: This class is about 300 million in size and continues goes on expanding. It forms the base for demand of manufactured goods in the country. E.g. jute farmers in West Bengal and sugarcane farmers in UP.
  3. Poor: This class is about 250 million in size. Their purchasing power is very low. E.g. poorest farmers of jawar and bajra of Bihar and Orissa.

Methods for Motivating Rural Consumers

  1. Mass Communication
  2. Education
  3. Sales Force
  4. Physical Distribution
  5. Live Demonstration

Rural Customer v/s Urban Customer

URBAN MARKET / RURAL MARKET
Mostly concentrated / Widely spread and scattered
High infrastructural level / Low infrastructural level
High density of population per sq km / Low density of population per sq km
Good physical connectivity and high mobility / Poor physical connectivity and low mobility
Incomes are more stable and permanent / People work in less certain environment
Occupations are government employment, business, industry etc. / Mostly agricultural occupation
Income received at regular income / Acute seasonality in income receipts
Large number of interactions with persons and less frequent between same persons / Less number of interactions with persons and more frequent between same persons
Social norms are less visible / Social norms influencing individuals
Cast influence indirect and less visible / Cast influence direct and strong
High exposure to variety of products / Low exposure to variety of products
High brand awareness / Low brand awareness
High exposure to marketing researchers and multiple source of information / Low exposure to marketing researchers and limited source of information
More convenient buying, more retail outlet per 1000 population / Less convenient buying, less retail outlet per 1000 population

.Rural Profile / Features of Rural Market in India

Large and scattered market: According to 2001 census rural population is 72% of total population and it is scattered over a wide range of geographical area.

  1. Diverse socio-economic background: This is different in different parts of the country and brings diversity in rural markets.
  2. Changing demand pattern: Demand pattern of rural customer is fast changing due to increasing in income and credit facilities offered by banks like ‘kisan credit card’.
  3. Major income comes from agriculture: About 60% of the rural income is from agriculture and hence the demand for consumer goods is high during harvesting season.
  4. Saving habits: Rural consumer is now having saving habits due to the efforts of co-operative and commercial banks.
  5. Traditional outlook: Rural customer values old customs and traditions.
  6. Low standard of living: Rural consumer have low standard of living because of low literacy, low per capita income and social backwardness.
  7. Poor infrastructure facilities: Facilities like roads, warehouses, communication system, etc. are inadequate in rural areas. Hence physical distribution becomes costly.
  8. Media reach: The reach of pint media is 10% followed by TV 31%, radio 31% and cinema 33%.

10.Communication: As per Indian Express report about 6 lakhs villages are without telephone facilities.

11.Electrification: About 88% of villages have been electrified and rest will soon get electricity by “Rural Electricity Corporation”.

Potential of Rural Market

With urban market showing signs of saturation, companies are excited about the potential of rural India. Some major companies that have focused in the rural sector are Philips, Parle, Proctor & Gamble, Colgate-Palmolive, Godrej Soap, Bajaj Auto, TVS, Atlas Cycle and HUL.

V .RURAL MARKETING STRUCTURE and CONSTITUTION MODEL:

1. Conducting rural market research

2. Segment the rural market

3. Study the lifestyle of the different segment of the population

4. Develop profile of rural consumers of different marketing segments

5. Define and priorities their needs in general terms

6. Develop specific needs profile for a product category in that region

7. Select target market

8. Develop / modify marketing mix

9. Implementation

10. Control.

VI .RURAL MARKET INFRASTRUCTURE:

Infrastructure is the basic physical and organizational structures needed for the operation of a society or enterprise,[1] or the services and facilities necessary for an economy to function.[2] The term typically refers to the technical structures that support a society, such as roads, water supply, sewers, power grids, telecommunications, and so forth. Viewed functionally, infrastructure facilitates the production of goods and services; for example, roads enable the transport of raw materials to a factory, and also for the distribution of finished products to markets. In some contexts, the term may also include basic social services such as schools and hospitals.[3] In military parlance, the term refers to the buildings and permanent installations necessary for the support, redeployment, and operation of military forces.[

A well-knit and coordinated system of transport plays an important role in the sustained economic growth of a country. India has a well-developed transport network comprising rail, road, coastal shipping, air transport etc.
The total length of roads in India is over 30 lakh kms including both metalled and unmettaled roads. In terms of road length, India has one of the largest road networks in the world. The national highways account for less than 2% of the total road network but carry 40% of the movement of goods and passengers
The total rail route length is about 63,000 km and of this 13,000 km is electrified. The railways carry over 11 million passengers and 11 Lakh tones of goods everyday.
India has a long coastline, about 90% of sea borne trade is handled via major ports of Kandla, Mumbai, Nhava Sheva, Marmagao, Cochin, Tuticorin, Chennai, Vishakapatnam, Paradwip, Haldia,Goaand Kolkata.
Air travel is a fastest means to reach in any part of the world. Domestic air services is looked after by Indian airlines and private airlines while the international airport service is looked after by Air India. Mumbai, Chennai, Kolkata and Delhi are the four major international airports of India

Rural Marketing-Challenges and Opportunities:

Scope / Attractiveness of Rural Market / Why Companies Go Rural ?

  1. Large Population: According to 2001 census rural population is 72% of total population and it is scattered over a wide range of geographical area
  2. Rising Rural Prosperity: Average income level has improved due to modern farming practices, contract farming, industrialisation, migration to urban areas and remittance of money by family members settled abroad.
  3. Growth in Consumption: There is a growth in purchasing power of or rural consumers. The average per capita household expenditure is Rs. 382.
  4. Changing Lifestyle: Lifestyle of rural consumer changed considerably.
  5. Life Cycle Advantage: The products, which have attained the maturity stage in urban market, is still in growth stage in rural market. E.g. popular soaps, skin cream, talcum powder, etc.
  6. Market Growth Rate Higher than Urban: As per the survey made by NCAER the growth rate of FMCG market and durables market is higher in rural areas. The rural market share is more than 50% for products like body talcum powder, toilet soaps cooking oil, hair oil etc.
  7. Rural Marketing is not Expensive: To promote consumer durables inside a state costs Rs one crore while in urban areas it will costs in millions.

Constraints in Rural Marketing

Vastness and Uneven Growth:India has about 5 lakhs villages, which are scattered over a wide range of geographical area, and also they are not uniform in size.

  1. *Transport Problem: Transportation infrastructure is very poor in rural India. Though India has the fourth largest railway system in the world, many villages remain outside the railway network. Many villages have only kaccha roads while many of rural interiors are totally unconnected by roads. Because of this the physical distribution is difficult in rural areas.
  2. Communication Problems: Communication infrastructure consisting of posts, telegraphs and telephones is inadequate.
  3. Warehousing Problems: Central Warehousing Corporation and State Warehousing Corporation do not extend their services to the rural parts. The warehouses at mandi level are managed by co-operative societies who provide services to members only.
  4. Many Languages and Dialects: The number of language and dialects vary widely from state to state, region to region and even from district to district. Though the recognized languages are only 16 the number of dialects is around 850.
  5. Market Organisation & Staff: Rural marketing needs large marketing organisation and staff to have an effective control, which requires huge investment.
  6. Non-Availability of Dealers: It is not possible to have direct outlets in each rural market; firms have to have service of dealers, which is not easily available.
  7. Hierarchy of Market: Rural consumers have identified market places for different items of their requirements. Thus depending upon the purchase habit of rural people, the distribution network of different commodities has to be different.

MAJOR CHALLENGES:

1High distribution costs

2. Low per capita disposable income that is half the urban disposable income.

3. Large no. of daily wage earners

4. Acute dependence on the vagaries of the monsoons

5.Seasonal consumption linked to harvest and festivals

6. Inaccessibility to conventional advertising media

7. Poor roads,power problems

8. Banking and credit problems

9. High initial market development expenditure

10.Wholesaler and dealer network problems

11. Highly dispersed and thinly populated markets

12. Social and cultural backwardness of the rural masses.

13. Low level of exposure to different product categories and product brands.

14. Cultural gap between urban based marketers and rural consumers.

The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always been difficult to gauge the rural market. Many brands, which should have been successful, have failed miserably. More often than not, people attribute rural market success to luck. Therefore, marketers need to understand the social dynamics and attitude variations within each village though nationally it follows a consistent pattern.While the rural market certainly offers a big attraction to marketers, it would be naive to think that any company can easily enter the market and walk away with sizable share. Actually the market bristles with variety of problems.

The main problems in rural marketing are:

  • Physical Distribution
  • Channel Management
  • Promotion and Marketing Communication

The problems of physical distribution and channel management adversely affect the service as well as the cost aspect. The existent market structure consists of primary rural market and retail sales outlet. The structure involves stock points in feeder towns to service these retail outlets at the village levels. But it becomes difficult maintaining the required service level in the delivery of the product at retail level.

One of the ways could be using company delivery vans which can serve two purposes- it can take the products to the customers in every nook and corner of the market and it also enables the firm to establish direct contact with them and thereby facilitate sales promotion. However, only the bigwigs can adopt this channel. The companies with relatively fewer resources can go in for syndicated distribution where a tie-up between non-competitive marketers can be established to facilitate distribution.

As a general rule, rural marketing involves more intensive personal selling efforts compared to urban marketing. Marketers need to understand the psyche of the rural consumers and then act accordingly. To effectively tap the rural market a brand must associate it with the same things the rural folks do. This can be done by utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals, celebrations, festivals, melas and other activities where they assemble.