VARIABLES THAT DIFFERENTIATE RURAL FROM URBAN

Rural Occupation Environment Size of Community Density Homo/Hetero Population Social Stratification Cultivators Predominance of nature Small Lower Homogenous Status determined by birth Urban Manufacturing Man-made environment Large More Heterogeneous Status determined by economic, educational and political factors

Social Mobility System of Interaction

Cannot change occupation Any and all can change Few but personal and durable relations Numerous but impersonal and short lived

THE RURAL ENVIRONMENT

DEMOGRAPHIC ENVIRONMENT Growth in the rural population: Rural pop has grown by over 200 million over the last two decades. The proportion of rural households continues to be 70% and is expected to stabilized in the event that the rural thrust continues. Change in rural family structure: Traditionally households in rural India were joint families but with the rise in pop, the resulting pressure on land and several other socio-economic factors (education, separate sources of income, migration, etc.) joint families are now breaking apart. They are moving towards nuclear model. A new concept of individualized joint families is emerging in which families stay in the same house but have separate kitchens. Due to this the range and number of branded products entering the family is likely to increase. Age: 35% of rural pop is in the consuming age group of 15-34 years. This is expected to grow in the future.

 Education: 20% of the rural pop is SSC/HSC pass-outs. The literacy rate has gone up from 53% in 2000 to 63% in 2010. Literacy rate is higher in southern region of the country as compared to the north. Occupation: Agriculture was the principle occupation in rural India. It is now being replaced by non-traditional occupations, including shop/trade, skilled work and salaried jobs. Rising literacy levels, improved and upgraded skill sets and new technology have encouraged people to take up new occupations. 75% of pop is engaged in agriculture but only half of the rural income is generated by them. The other half is generated by the non-agricultural pop and they make rural India rich. Culture: Common socio-cultural behaviors have been mapped as socio-cultural regions (SCR). Rural India has a large number of CSRs. For e.g., in UP alone there are 5 CSRs- Avadh, Budelkhand, Purvanchal, Braj, Rohelkhand.

PHYSICAL ENVIRONMENT Infrastructure: The Pradhan Mantri Sadak Yojna is yet to connect smaller villages of India. Road coverage is low and as such bullock carts become crucial for transportation but they are very timeconsuming and not cost effective. Radio and TV: Radio coverage is very high. 99.14% of the area is covered. Doordarshan is the worlds largest terristrial broadcaster and its coverage is 92%. Press and Media: There are around 82,222 registered newspapers in India but they have a poor reach in rural areas. Only 15-20% of copies reach the rural pop. Postal Services: 90% are located in rural areas. Telecom and Mobile Services: 219 million rural people use mobile phones. The last 8 years have witnessed a 26-fold growth in teledensity. Marketing Infrastructure: 47000 haats and 25000 melas are held annually in rural areas with an annual turnover of 50,000 crores.

 Public Distribution System: PDS is a system of distribution of essential commodities to a large number of people through a network of Fair Price Shops (4.8 lakhs) also called ration shops. 80% of these are in rural areas only. Land Distribution: It is highly skewed, 75% of the households own 25% of the land. Land holding is used as a proxy for income in rural market segment by marketers.
Food crops are cultivated by small farmers. The produce is kept for own use and the balance is sold Non-food crops are cultivated by rich farmers and the whole of it is marketed and because of this their disposable income is high.

TECHNOLOGICAL ENVIRONMENT: Green Revolution (food grains) Yellow Revolution (oil seeds) White Revolution (milk) Blue Revolution (fish) Golden Revolution (fruits and vegetables) This created jobs due to the growth in local manufacturing which introduced mechanized processing. Also NGOs are using technology to create awareness, provide training, health care, education, etc.

PROBLEMS IN RURAL MARKETING

High initial market development expenditure High distribution and promotion costs (vastness and uneven spread) Many languages (29 official) and dialects (1700) Low level of literacy (Kerala- 90% Bihar 44%, Pop below poverty line, Orissa- 48% Punjab- 6%) Inadequate infrastructure facilities Low per capita income Logistics (storage and transport) Seasonal Demand (after the crop is sold only then the people have money available with them) Small retailers cannot carry stock without adequate credit facilities

REASONS FOR ATTRACTIVENESS OF THE RURAL MARKET

Large Volume: Volume driven growth Saturation trends in urban markets: This is because of
increased competition, reduced profitability margins, extensive market penetration

Rising rural propensity: The income levels and purchasing power of rural India is on the increase because of
Increasing farmers income (96 million Kissan Credit Cards have been issued by the govt. Remittance from abroad

People have high disposable incomes (even though income per capita is low) because they do not have to pay house rent, tax, etc. Market size: Rural sales account for 40-50% of the sales of most FMCG companies.
Dabur-50%, Marico-45%, HUL- 40% and Emami- 50%.

Nearly 70% of the toilet soap users are in rural areas.

 Market Growth: Rural markets are growing two times faster than urban markets. Rural India buys 46% of soft drinks, 49% of motorcycles and 39% of cigarettes. 68% of the total personal products sold in India in FY 12 were sold in rural areas. Scope of increasing penetration: According to the National Sample Survey, in 2009-10, the percentage of rural households having
Bicycles 54.9%, Motorcycles 13.9%, Motor car 1.4%, Television 41.7%, Fridge 7.1%

This clearly shows that a lot of opportunity for market penetration is still present in rural markets. Increasing outlay of rural development:
National Rural Employment Guarantee Scheme (NREGS) Minimum support price for farm produce Infrastructure development (rural road development) Improved communication (telephones) Improved weekly markets (better shades and facilities)

SEGMENTATION
Why: Market is not homogeneous but heterogeneous . Definition: Segmentation is the sub-division of a heterogeneous market into homogeneous sub-sets of customers. Philip Kotler defines it as, Sub-dividing a market into distinct and homogenous subgroups of consumers, where any group can conceivably be selected as a target market to be met with a distinct marketing mix. FACTORS INDICATIVE OF RURAL HETEROGENITY Socio-cultural differences Variation of population size and density Diff in the level of infrastructure development Diff in levels of media exposure (media dark, grey and green) Variation in literacy levels (Bihar vs. Kerala) Diff in income levels Family structure (large joint vs. nuclear)

DEGREES OF SEGMENTATION
Mass Marketing In mass marketing the marketer targets the entire consumer base. The seller engages in mass production and uses the mass distribution system to reach all the customers in the market. The promotional and advertisements are very much generic in nature attract the entire consumer base. Mass market can be profitable for the seller as it leads to lower cost of production and higher margin due to mass production. For mass marketing, the price is kept low to attract customers from all income level. At the same time, Mass marketing leads to high competition in the market and high advertising and promotional cost to reach to all the potential customers. One best example of mass marketing would be Mosquito coil, Toothpaste, Detergent etc.

Segment Marketing In Segment marketing, the seller or marketer divides the market into different segments depending on the consumers buying behavior, requirements, purchasing power, location and age level. Segment marketing helps the marketer to connect to each type of customers in the best possible way. Most company uses different market segments to market its entire list of products which caters to different market levels. The promotional and advertising activities for a particular focus only to the target market for that product only. Example can be Utsav Distemper for people using chuna

Niche Marketing In Niche marketing, the seller caters to a very specific market segment which requires more attention and very high quality of services. Here the market segment size is very small which enables the seller to provide the niche area of services. The main requirements or characteristics of Niche marketing are Customers have distinct set of needs or requires distinct set of services Seller or service provider needs more skill or niche skill to provide niche services Niches services come up with some more specialized services Comes up with premium prices for higher quality and niche services Examples in rural context can be tractors that doubles up as a thrasher also.

Micro Marketing In micro marketing the marketer focuses on individuals or small groups of customers. They tailor products to satisfy a particular need or taste. Eg. Daburs Anmol (mustard and amla based hair oil) launched for North Indian rural areas for consumers who use loose mustard oil. It can be further categorized into: Local Marketing: In Local marketing, the seller or the marketer only concentrates in the local market. The products also have the local appeal or the local usage and the promotional activities are planned based on the location only with local flavors. Individual Marketing: It is almost same as Direct Marketing where the marketers target the individual customers separately either through direct communication channels or salesmen.

REQUIREMENTS FOR EFFECTIVE SEGMENTATION

Differentiable (distinguishing factors) Measurable (described in exact terms and differences understood) Accessible (reach) Substantial (homogeneity and largeness)

TYPES OF SEGMENTATION
Geographic segmentation Region- NSEW Population and density Climate (summer- use of talcum, winter- use of health tonics) Culture (56 socio-cultural regions) Demographic Segmentation Age and lifestyle (nappies for babies, toys for kids, trendy clothes for teenagers) Family structure Income (seasonal ordaily/weekly) (deprived, aspirers, etc) Land ownership (land lord, rich farmers, small ormarginal farmers, agricultural labourers) Education (illiterate, semi literate, literate) House type (pakka, semi pakka, kachcha) Occupation Religion Caste

Psychographic Segmentation Social class (upper, lower, middle based on income, education, etc) Lifestyle (trend setters, followers, traditionalists) Personality (self confidence, sociability, adaptability, sensitivity, autonomy) Behavioral Segmentation (best way to segment) When do people buy? OCCASIONS (during or after harvest) Why do people buy? BENEFITS SOUGHT (concerned more with utility than appearance) Do they buy once/more? USER STATUS (majority fall within potential users and new users) How much do they buy? USAGE RATE Do they repeat the buy? LOYALTY STATUS Where do they buy? PLACE OF PURCHASE (daily- village shops, weekly- haats, monthly/occasinally- nearby towns, melas, jatras)

Availability The first challenge in rural marketing is to ensure availability of the product or service. Indias 7, 00,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. They are highly dispersed. Given the poor infrastructure, it is a greater challenge to regularly reach products to the far-flung villages. Marketer should plan accordingly and strive to reach these markets on a regular basis. Marketers must trade off the distribution cost with incremental market penetration. Eg- Hindustan Lever has built a strong distribution system which helps its brands reach the interiors of the rural market.

 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 act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics has set up 45 area offices and 59 rural/remote area offices to cater to these potential markets. Affordability The second major 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 who are on daily wages. A part of it has been mentioned in product (first P). A solution to this has been introduction of unit packs by some companies. Most of the shampoos are available in smaller packs.

 Eg- Fair and lovely was launched in a smaller pack. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50- gm packs. Hindustan Lever has launched a variant of its largest selling soap brand, Lifebuoy. Coca-Cola has addressed the affordability issue by introducing the smaller bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Some product also can be made affordable by making available the loan facility by having alliance with banks.

Acceptability The next challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. Eg- LG Electronics have developed a customized TV for the rural market named Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Coca-Cola provided low-cost ice boxes in the rural areas due to the lack of electricity and refrigerators. It also provided a tin box for new outlets and thermocol box for seasonal outlets. HDFC Standard LIFE topped private insurers by selling policies in rural sector. The company tied up with non-governmental organizations and offered reasonably-priced policies in the nature of group insurance covers.

Awareness A large part of rural India is inaccessible to conventional advertising media. The media penetration in rural areas is only about 57%. For a rural consumer, outing is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Haats, mandis and melas are the place of opportunities to promote awareness about the product. Eg- 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 the 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.