UNIT I Rural Management The activity and process of managing the development process in the rural areas.

professionalizing the management of rural organization calls for attaching the specific but unmet needs of the sector with the formal techniques and skills of management professional. Importance of rural management Rural management is to control, handle, and organize the rural natural and human resources and properly utilize this for the development of rural people in a fixed time or period. Market size and physical structure of rural society Market size can be given in terms of the number of buyers and sellers in a particular market or in terms of the total exchange of money in the market, generally annually (per year). When given in terms of money, market size is often termed market value, but in a sense distinct from market value of individual products. For one and the same goods, there may be different (and generally increasing) market values at the production level, the wholesale level and the retail level. For example, the value of the global illicit drug market for the year 2003 was estimated by the United Nations to be US$13 billion at the production level, $94 billion at the wholesale level (taking seizures into account), and US$322 billion at the retail level (based on retail prices and taking seizures and other losses into account). The scientific study of rural society as a specialized area of sociology is a development of the twentieth century and prior to World War II had its growth principally in the United States. Since 1950 such study has developed institutional support in many countries. The central concern in the sociological study of rural society is with its social organization—the social systems (or subsystems) and their interrelationships within rural society, with urban society, and within the total society. This study has been approached with ecological, cultural, and behavioral emphases. Demographic analysis has had an important place. Some areas of rural sociological analysis are closely related to the concerns of other social science disciplines; for example, settlement patterns with human geography and land tenure with agricultural economics. The adoption and diffusion of technological innovations is one of the areas to which rural sociologists have given special attention. Sociological investigation of rural society may be classified into four broad categories: studies using rurality as the independent variable; comparative studies of rural societies; studies for which rural society is the setting within which family systems, ecological systems, cultural systems, personality systems, and other phenomena are analyzed; and studies of social change within each of the previous three categories. Importance of rural society. Despite the ever-accelerating rate of urban growth throughout the world, especially of large cities, since 1800, a majority of the world’s population is rural and a majority of the nations of the world have predominantly rural populations. The percentage of the world’s population living in localities of less than 20,000 was 97.6 in 1800, 95.7 in 1850, 90.8 in 1900, and 79.1 in 1950 (United Nations, Bureau of Social Affairs, 1957, pp. 111-143). For major world areas, the estimates of the percentage of the population living in places of less than 20,000 in 1950 were: Africa, 91; Asia, 87; Central America, 79; South America, 74; U.S.S.R., 69; Europe (excluding the U.S.S.R.), 65; North America, 58; and Oceania, 53 (Joint UN/UNESCO Seminar on Urbanization in the ECAFE Region, Bangkok, 1956, 1957, p. 98). This percentage decline in rural population has been accompanied by an increase in the number of persons living in localities under 20,000; the estimated number was 1,897.8 million in 1950, compared with 1,460.1 million in 1900. In the majority of the less-developed countries, the rural population has continued to grow in numbers, whereas in the higher-income countries the pattern has varied in recent decades.

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The functions of rural society. The production of food and other raw materials is a basic function of rural societies; indeed, in modern society the survival of the urban sector is dependent upon the effective conduct of this function. Historically, rural society has also functioned as a supplier of people to the city; the relative importance of this rural-to-urban migration is probably greatest in societies that are undergoing modernization. A third distinctive function of rural society is its custodianship of natural resources. Fourth, modern rural societies increasingly serve a residential function for persons with urban-centered sources of livelihood. Finally, in times of societal crisis, there has been a tendency for rural society to perform a “security” function, as represented by urban-torural or postponed rural-to-urban migration. In addition, economic functions ancillary to or independent of the primary or “field” activities are characteristically found in rural areas in some form and in some degree but are not considered as distinctive functions of rural society. Rather, the type and extent of these nonprimary functions vary widely among countries and over time. The meaning of rural A uniform definition of the concept “rural” is crucial if sociological analysis is to result in valid generalizations. In the past decade, increased attention has been given to considering the minimum and essential criteria of rural society. Recent research has found that some characteristics once advanced as attributes of rural society may also be found in the city; close personal primary-group relations are one example. The interchange of people between rural and urban areas through large-scale migration, the influence of urban-centered mass media, greater interdependence of rural and urban economies, and other types of increased systemic linkage are believed to have reduced rural-urban differences. Also, research revealing the diversity within both rural and urban societies has led to a re-examination of the rural concept. Social change in rural society The trend toward modernization of traditional rural societies, which has been under way for well over a century in North America, Great Britain, and western Europe, has accelerated and become more pervasive during the twentieth century, especially since World War n. Rural societies of the modern type are so interlinked with their national systems and the international system that the changes in their social organization are highly similar in many respects. Traditional-type rural societies are generally moving toward the same type of linkage. The process by which a traditional, largely isolated and segmented, rural society becomes a modern-type rural society integrated with the national society is a special case of the more general process of societal change. Although there are complex theoretical and methodological problems involved in the analysis of social change, there is considerable agreement about the direction and universality of major changes that have been under way in social and cultural systems. These major changes have been expressed in such highly general terms as increased structural differentiation, or specialization, of social systems; more universalistic norms; and the growth of a rational orientation (Moore 1963; Parsons 1964). This discussion of social change will focus on the following selected factors, which have special significance for the rural social changes of the present century: the growth and application of technological and scientific knowledge; the increase in urbanization; the growth of the money-and-mar-ket economy; and the increase in purposive innovation, reflecting rationality and a favorable attitude toward change. These factors may operate partly independently and partly in association and may be in part and in some ways circular in their effects. In large measure, they operate generally as external forces for change in rural societies and their social systems. The changes which these forces generate within rural communities in turn produce additional internal community changes. Empirical data for use in describing the current situation, measuring changes, and making comparative studies are most adequate for the more modern rural societies, such as those in North America, western Europe, and Japan, but even for these there are major deficiencies. In general, the available information on the rural societies of the world is less complete regarding social organization and the different categories of social systems than it is for population, technology, physical resources, and production, although these data may be reflective of social organization variables. Characteristics of rural markets • • • • • Out of the total 6,30,000 villages in India less than 500 people live in 50% of these villages 40% (300 mn) live in 7% (50,000) villages Only 1% (6300 villages) have more than 5000 people Owner/ farmers constitute 34% of the house hold sectors in rural India and they account for 65% of TV purchases Even though literacy levels are on the rise in rural India it is of limited meaning in terms of marketing as by definition literate people can only sign their names

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• • • • • •

Economic Status The average household income of the urban population (Rs.36,000p.a) is thrice that of the rural (Rs.12,000p.a). According to NCAER (National Council of Applied Economic Research) the lower income group (<70,000) will shrink by 55% in 2006-2007 and upper income groups (>1,40,000) will double in 2006-2007 The aspirants, lower middle and middle class are the largest segment and are the largest base for durables and FMCG goods The well off segment like the wheat farmers in Punjab are as of today a negligible base The destitute i.e. the lowest income group have a very low purchasing power. % Of per capita expenditure on food in the rural area is 61% as compared to urban which is 50% For other items it is: FMCG 15% (URBAN) 10% (RURAL) Durables 5% 3% DEMAND The demand for goods is irregular as it is seasonal and agriculture dependant It depends on the harvest periods. Their cash flows are better after harvest. It is festival and marriage linked. For e.g. The demand for sweets would go up during Durga pooja in villages in Bengal. Companies like Heinz use festivals to sponsor “pandals” at various pooja sites and indirectly promote their products.

• • •

SOCIO-ECONOMIC REFORMS It is possible for India to reach par with the developed countries of the work. The problem is we do not have a good governance required to achieve such results. We have to take hard decisions in governance by eliminating corruption and going in for hard economic and social reforms. We have to evaluate our current social sector spending which is nothing more than useless. We have to reduce our public debts to acceptable levels and shed unproductive government activities. Big reforms in government control about important aspects of economy such as railways, road sectors, ports, electricity, banking, aviation, R&D, education, etc, by allowing private and foreign investments. This will generate huge employment for all people. The labour laws of the country is another inhibiting factor for any industry. The laws should be changed and must be brought at par with GCC countries. Exploitation of labour can be charged with serious and heavy penalties to the company. Control of population by education, women's empowerment and other social and economic measures. There is no short cut to success. Unless we change ourselves, we cannot even think of being at par with rest of the Asia, leave alone achieving developed country status. Use of Durables and Non-Durables by Indian Rural Folk Rural India is undergoing a sea change as a result of multi-pronged activities undertaken for overall development of the villages. There is a clear indication of increasing prosperity in rural India. This prosperity has led to an increase in the demand for durable and non-durable goods On one side are the fast-moving consumer goods (FMCG) and the consumer durables companies. On the other are consumers in rural India, potentially the largest segment of the market. Finally, the two are coming together. The fact that this has not happened in the past is not for want of trying. In several categories, rural India already accounts for the lion's share. According to MART, a New Delhi-based research organization that offers rural solutions to the corporate world, rural India buys 46% of all soft drinks sold, 49% of motorcycles and 59% of cigarettes. This trend is not limited just to utilitarian products: 11% of rural women use lipstick. Other numbers are equally revealing. According to the National Council of Applied Economic Research (NCAER), an independent, non-profit research institution, rural households form 71.7% of the total households in the country. Spending in this segment is growing rapidly and consumption patterns are closing in on those of urban India. Jagmohan Singh Raju, a professor of marketing at Wharton, says: "No consumer goods company today can afford to forget that the rural market is a very big part of the Indian consumer market. You can't build a presence for a brand in India unless you have a strategy for reaching the villages."

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Several European multinational firms -- and a few U.S. firms -- have been making inroads into rural India for years. Companies such as Unilever, Phillips and Nestle have long been known to India's rustic dukaandaars, or merchants. Among U.S. firms, companies such as Colgate and Gillette have made considerable headway. According to Raju, marketing to rural customers often involves building categories by persuading them to try and adopt products they may not have used before. "A company like Colgate has to build toothpaste as a category, which means convincing people to change to toothpaste instead of using neem twigs to clean their teeth, which was the traditional practice," he says. "This is difficult to do and requires patience and investment by companies. It's not like getting someone to switch brands." Companies that have figured this out are doing better in the villages than in the cities. Soft drinks giant Coca-Cola is growing at 37% in rural markets, compared with 24% in urban areas. According to Hansa Research, a market research firm that has published a Guide to Indian Markets 2006, the penetration of consumer durables has risen sharply in India's villages between 2000 and 2005. In color TVs, sales are up 200%; in motorcycles, 77%. In absolute numbers, however, the penetration is still low. Coke, for instance, reaches barely 25% of the rural market. This means the upside potential is huge for companies that develop effective rural marketing strategies. According to NCAER, the low penetration rates can be attributed to three major factors: low income levels, inadequate infrastructure facilities and different lifestyles. But income levels are going up, infrastructure is improving and lifestyles are changing. Almost a third of the rural population now uses shampoo compared with 13% in 2000, according to Hansa Research. FMCG and consumer durables companies have in the past tried tinkering with all the four 'P's -- product, pricing, promotion and place-- of the marketing mix. Hindustan Lever -- which is in the process of changing its name to Hindustan Unilever to reflect the fact that it is the Indian subsidiary of the Dutch conglomerate -- is among India's largest FMCG companies. It has been highly successful in marketing in rural India and has been a pioneer in reaching out to the smallest of villages with innovative products such as single-use packets of shampoo that sell for a penny. (The rural consumer uses shampoo on rare occasions; she does not want to invest in a bottle.) Independent agencies run media vans that show movies in distant villages. They have live promotions and demonstrations during breaks. The area where innovation has moved to center stage is in the fourth P -- place (or distribution). Infrastructure has always been the bugbear of the Indian marketer. Distribution channels can make or break a company's rural marketing efforts. To sell in villages, products must be priced low, profit margins must be kept to the minimum and the marketing message must be kept simple. “RURAL MARKETING” Rural marketing involves the process of developing, pricing, promoting, distributing rural specific product and a service leading to exchange between rural and urban market which satisfies consumer demand and also achieves organizational objectives. It is a two-way marketing process wherein the transactions can be: 1. 2. Urban to Rural: A major part of rural marketing falls into this category. It involves the selling of products and services by urban marketers in rural areas. These include: Pesticides, FMCG Products, Consumer durables, etc. Rural to Urban: Transactions in this category basically fall under agricultural marketing where a rural producer seeks to sell his produce in an urban market. An agent or a middleman plays a crucial role in the marketing process. The following are some of the important items sold from the rural to urban areas: seeds, fruits and vegetables, milk and related products, forest produce, spices, etc. Rural to Rural: This includes the activities that take place between two villages in close proximity to each other. The transactions relate to the areas of expertise the particular village has. These include selling of agricultural tools, cattle, carts and others to another village in its proximity. Rural marketing requires the understanding of the complexities. Indian agricultural industry has been growing at a tremendous pace in the last few decades. The rural areas are consuming a large number of industrial and urban manufactured products. The rural agricultural production and consumption process plays a predominant role in developing the Indian economy. This has designed a new way for understanding a new process called Rural Marketing.

3.

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The concept of rural marketing has to be distinguished from Agricultural marketing. Marketing is the process of identifying and satisfying customers needs and providing them with adequate after sales service. Rural marketing is different from agricultural marketing, which signifies marketing of rural products to the urban consumer or institutional markets. Rural marketing basically deals with delivering manufactured or processed inputs or services to rural producers, the demand for which is basically a derived outcome. Rural marketing scientists also term it as developmental marketing, as the process of rural marketing involves an urban to rural activity, which in turn is characterised by various peculiarities in terms of nature of market, products and processes. Rural marketing differs from agricultural or consumer products marketing in terms of the nature of transactions, which includes participants, products, modalities, norms and outcomes. The participants in case of Rural Marketing would also be different they include input manufacturers, dealers, farmers, opinion makers, government agencies and traders. Rural marketing needs to combine concerns for profit with a concern for the society, besides being titled towards profit. Rural market for agricultural inputs is a case of market pull and not market push. Most of the jobs of marketing and selling are left to the local dealers and retailers. The market for input gets interlocked with other markets like output, consumer goods, money and labour. Evolution of Rural Marketing PHASE I ORIGIN Before Mid-1960 (from independence to green revolution) Mid- Sixties (Green revolution to Preliberalization period) Mid- Nineties (Post-liberalization th period on 20 century) 21 century
st

FUNCTION Agricultural Marketing

MAJOR PRODUCTS Agricultural Produce

SOURCE MARKET Rural

DESTINATION MARKET Urban

II

Marketing Of Agricultural Inputs Rural Marketing

Agricultural Inputs Consumables And Durables For Consumption & Production All products & services

Urban

Rural

III

Urban & Rural

Rural

IV

Developmental marketing

Urban & Rural

Urban & Rural

1.

2.

3.

4.

Phase I ( from Independence to Green Revolution): Before the advent of the Green revolution, the nature of rural market was altogether different. Rural marketing then referred to the marketing of rural products in rural & urban products. Phase II (Green Revolution to Pre-liberalization period): During these times, due to the advent & spread of the Green Revolution, rural marketing represented marketing of agriculture inputs in rural markets & marketing of rural produce in urban areas. th Phase III (Post-liberalization period on 20 century): The third phase of rural marketing started after the liberalization of the Indian economy. In this period, rural marketing represented the emerging, distinct activity of attracting & serving rural markets to fulfill the need & wants of rural households, peoples & their occupations. st Phase IV (21 century): Learning from its rural marketing experiences after the independence, the corporate world has finally realized the quick-fix solutions & piecemeal approaches will deliver only limited results in the rural markets. And, if an organization wants to tap the real potential of the rural market, it needs to make a long-term commitment with this market. Its approach & strategies must not focus in just selling products & services, but they should also aim at creating an environment for this to happen.

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Rural marketing has become the latest mantra of most corporate. Companies like Hindustan Lever, Colgate Palmolive, Britannia and even Multinational Companies (MNCs) like Pepsi, Coca Cola, L.G., Philips, Cavin Kare are all eyeing rural markets to capture the large Indian market. Nature of Rural Market    Large, Diverse and Scattered Market: Rural market in India is large, and scattered into a number of regions. There may be less number of shops available to market products.  Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied with agriculture prosperity. In the event of a crop failure, the income of the rural masses is directly affected. Standard of Living and rising disposable income of the rural customers: It is known that majority of the rural population lives below poverty line and has low literacy rate, low per capital income, societal backwardness, low savings, etc. But the new tax structure, good monsoon, government regulation on pricing has created disposable incomes. Today the rural customer spends money to get value and is aware of the happening around him. Traditional Outlook: Villages develop slowly and have a traditional outlook. Change is a continuous process but most rural people accept change gradually. This is gradually changing due to literacy especially in the youth who have begun to change the outlook in the villages. Rising literacy levels: It is documented that approximately 45% of rural Indians are literate. Hence awareness has increases and the farmers are well-informed about the world around them. They are also educating themselves on the new technology around them and aspiring for a better lifestyle.  Diverse socioeconomic background: Due to dispersion of geographical areas and uneven land fertility, rural people have disparate socioeconomic background, which ultimately affects the rural market. Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution is a challenge to marketers who have found innovative ways to market their products.

 

Is rural marketing transactional or developmental in its approach? It is true, rural markets have become an attractive proposition for commercial business organizations. The role of rural marketing as such is more developmental than transactional. It is more a process of delivering better standard of living and quality of life to the rural environment taking into consideration the prevailing village milieu. Transactional Vs Developmental: For better comprehension of this role let us distinguish development marketing and transactional marketing. Table brings out the differences in brief. Transactional Vs Development Marketing

S.No. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Aspect Concept Role Focus Key task Nature of activity Participants Offer Target group Communication

Transactional Consumer orientation, Marketing concept Stimulating and conversional marketing Product-market fit Product innovations and communications Commercial Corporate enterprises, Sellers Products and services Buyers Functional

Development Society orientation, societal concept Catalytic and transformation agent Social change Social innovations and communications Socio-cultural, economic Government, voluntary agencies, corporate enterprises, benefactors Development projects/schemes/programs Beneficiaries and buyers Developmental

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10.

Goal

11. 12.

Time-Frame Motivation

Profits Customer satisfaction Brand image Short-medium Profit-motive Business policy

Market development Corporate Image Medium-Long Service-motive Ideological or Public policy

Model: The model of rural marketing represents a combination of the transactional and developmental approaches. • Rural marketing process is both a catalyst as well as an outcome of the general rural development process. Initiation and management of social and economic change in the rural sector is the core of the rural marketing process. It becomes in this process both benefactor and beneficiary. Innovation is the essence of marketing. Innovative methods of social change for successful transformation of traditional society are virtual. Such a change narrows the rural-urban divide. The process of transformation can be only evolutionary and not revolutionary. The growth of the rural market can be a planned evolutionary process based on strategic instruments of change rather than constitute just short-term opportunities for commercial gains. The exposure of ruralites to a variety of marketing transactions during the change process puts them in the role of beneficiaries than of just `buyers' of modern inputs and infrastructural services. Communication is the vital element of rural marketing. It should serve to resolve social conflicts, encourage cooperation and strengthen competitive spirit during interactions between rural and urban as well as within rural areas. Another critical point for communication is the point of conversion of ruralite from an "induced beneficiary" to an "autonomous buyer". Classification of rural consumers The rural consumers are classified into the following groups based on their economic status: • The Affluent Group: They are cash rich farmers and a very few in number. They have affordability but not form a demand base large enough for marketing firms to depend on. Wheat farmers in Punjab and rice merchants of Andhra Pradesh fall in this group. The Middle Class: This is one of the largest segments for manufactured goods and is fast expanding. Farmers cultivating sugar cane in UP and Karnataka fall in this category.  Poor: This constitutes a huge segment. Purchasing power is less,but strength is more. They receive the grants from The   government and reap benefits of many such schemes and may move towards the middleclass. The farmers of Bihar and Orissa the fall under this category. Roadblocks of Indian Rural Markets There are several roadblocks that make it difficult to progress in the rural market. Marketers encounter a number of problems like dealing with physical distribution, logistics, proper and effective deployment of sales force and effective marketing communication when they enter rural markets. The major problems are listed below. 1. 2. 3. 4. Standard of living: The number of people below the poverty line is more in rural markets. Thus the market is also underdeveloped and marketing strategies have to be different from those used in urban marketing. Low literacy levels: The low literacy levels in rural areas leads to a problem of communication. Print media has less utility compared to the other media of communication. Low per capita income: Agriculture is the main source of income and hence spending capacity depends upon the agriculture produce. Demand may not be stable or regular. Transportation and warehousing: Transportation is one of the biggest challenges in rural markets. As far as road transportation is concerned, about 50% of Indian villages are connected by roads. However, the rest of the rural markets do not even have a proper road linkage which makes physical distribution a tough task. Many villages are located in hilly terrains that make it difficult to

• •

• •

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connect them through roads. Most marketers use tractors or bullock carts in rural areas to distribute their products. Warehousing is another major problem in rural areas, as there is hardly any organized agency to look after the storage issue. The services rendered by central warehousing corporation and state warehousing corporations are limited only to urban and suburban areas. 5. Ineffective distribution channels: The distribution chain is not very well organized and requires a large number of intermediaries, which in turn increases the cost and creates administrative problems. Due to lack of proper infrastructure, manufacturers are reluctant to open outlets in these areas. They are mainly dependent on dealers, who are not easily available for rural areas. This is a challenge to the marketers. 6. Many languages and diversity in culture: Factors like cultural congruence, different behaviour and language of the respective areas make it difficult to handle the customers. Traits among the sales force are required to match the various requirements of these specific areas. 7. Lack of communication system: Quick communication is the need of the hour for smooth conduct of business, but it continues to be a far cry in rural areas due to lack of communication facilities like telegraph and telecommunication systems etc. The literacy rate in the rural areas is rather low and consumer’s behaviour in these areas is traditional, which may be a problem for effective communication. 8. Spurious brands: Cost is an important factor that determines purchasing decision in rural areas. A lot of spurious brands or lookalikes are available, providing a low cost option to the rural customer. Many a time the rural customer may not be aware of the difference due to illiteracy. 9. Seasonal demand: Demand may be seasonal due to dependency on agricultural income. Harvest season might see an increase in disposable income and hence more purchasing power. 10. Dispersed markets: Rural population is highly dispersed and requires a lot of marketing efforts in terms of distribution and communication. Attractiveness of rural market

1 2 3 4 5 6 7 8 1.

Large population Rising prosperity Growth in consumption Life cycle changes Life cycle advantages Market growth rate higher than urban Rural marketing is not expensive Remoteness is no longer a problem Large Population: The rural population is large and its growth rate is also high. Despite the rural urban migration, the rural areas continue to be the place of living majority of Indians. Rising Rural Propensity: INCOME GROUP ABOVE RS. 100,000 RS. 77,001-100,000 RS. 50,001-77,000 RS. 25,001-50,000 RS.25,000 & BELOW 1994-95 1.6 2.7 8.3 26.0 61.4 2000-01 3.8 4.7 13.0 41.1 37.4 2006-07 5.6 5.8 22.4 44.6 20.2

2.

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Thus we see that population between income level of Rs. 25,000- 77,000 will increase from 34.3% in 1994-95 to 67.0% in 2006-07. The rural consuming class is increasing by about 3-4% per annum, which roughly translates into 1.2 million new consumers yearly. 3. Growth in consumption: PER CAPITA HOUSEHOLD EXPENDITURE (IS RS.) LEVEL NO. STATES Punjab Kerala Haryana Rajasthan Gujarat Andhra Pradesh Maharastra West Bengal Orissa Tamil Naidu Uttar Pradesh Karnataka Assam Madhya Pradesh Bihar EXPENDITURE 614 604 546 452 416 386 384 382 381 381 373 365 338 326 289

High (Above Rs 382/-)

7

Average (Rs. 382/-)

5

Low (Below Rs. 382/-)

3

Distribution household’s income wise (projection in Rs Crore) 2001 – 02 RURAL TOTAL 0.26 12.04 5.7 18.04 2006 – 07 RURAL TOTAL 0.52 16.72 3.68 20.90

INCOME GROUPS HIGH MIDDLE LOW TOTAL Spending pattern (Rural Household’s in Rs.)

NO. 0.07 7.73 5.09 12.89

% 26.9 64.2 88.7 71.4

NO. 0.12 10.32 3.52 13.96

% 23.1 61.8 95.7 66.7

ITEM FOOD ARTICLES TOILETRIES WASHING MATERIAL COSMETICS OTC PRODUCTS OTHERS TOTAL

% 44 20 13 10 4 9

RICH 147 67 43 33 13 30 333

POOR 73 33 22 17 6 15 166

AVERAGE 95 43 28 21 9 19 215

Average rural household spends on consumables excluding food grains, milk & vegetables are Rs. 215/-. 4. Life style changes: Income vs. usage of packed consumer goods (% of household using)

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GOODS WASHING CAKES/BARS TOILET SOAPS TOOTH PASTE/POWDER TALCUM POWDER TEA (PACKAGED) 5. Life cycle advantage: STAGES IN LIFE CYCLE PRODUCT Popular soaps Premium soaps Washing powder Skin creams Talcum powder URBAN

MONTHLY HOUSEHOLD INCOME (RS.) UP TO 350 351 – 750 751 – 1500 60 78 86 57 72 89 22 36 65 20 25 41 22 30 48

1501 + 91 93 85 63 64

Maturity Late growth Late growth Maturity Maturity

MARKET GROWTH RATE % 2 11 6 1.1 4

RURAL Growth Early growth Early growth Growth Growth

6.

Market growth rates higher: Growth rates of the FMCG market and the durable market are higher in rural areas for many products. The rural market share will be more than 50% for the products like toilet soaps, body talcum powder, cooking medium (oil), cooking medium (vanaspati), tea, cigarettes and hair oil. Rural marketing is not expensive: Conventional wisdom dictates that since rural consumers are dispersed, reaching them is costly. However, new research indicates that the selling in Rural India is not expensive. According to one research it costs roughly Rs.1 Crore to promote a consumer durable inside a state. This includes the expenses of advertising in vernacular newspapers, television spots, in-cinema advertising, radio, van operations and merchandising and point of purchase promotion. Campaign like this, which can reach millions, costs twice as much in urban area. Remoteness is no longer a problem: Remoteness in a problem but not insurmountable. The rural distribution is not much developed for the reasons, Lack of proper infrastructure such as all-weather roads, electrification and sanitation, and Lack of marketer’s imagination and initiative. Marketers have so far, failed in analyzing the rural side and exploiting rural India’s traditional selling system- Haats & Melas.Their near obsession with just duplicating the urban-type network and that too with very limited success, has kept them blind to the potential of these two outlets. RURAL VS URBAN MARKETING-SUMMARY NO. 1 ASPECT PHILOSOPHY 2 MARKET DEMAND COMPETITION CONSUMERS URBAN Marketing & Societal Concepts & Relationship Marketing RURAL Marketing & Societal Concepts, Development Marketing & Relationship Marketing Low Mostly From Unorganized Units

7.

8.

 

High Among Units In Organized Sector

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3

4

LOCATION LITERACY INCOME EXPENDITURE NEEDS INNOVATION/ADOPTION PRODUCT AWARENESS CONCEPT POSITIONING USAGE METHOD QUALITY PREFERENCE PRICE SENSITIVE
LEVEL DESIRED DISTRIBUTION

Concentrated High High Planned, Even High Level Faster High Known Easy Easily Grasped Good Yes Medium-high Wholesalers, stockists, retailer, supermarket, specialty stores, & authorised showrooms Good High Print, audio visual media, outdoors, exhibitions etc. few languages Door-to-door, frequently Contests, gifts, price discount Good opportunities

Widely Spread Low Low Seasonal, Variation Low Level Slow Low Less Known Difficult Difficult To Grasp Moderate Very much Medium-low Village shops, “Haats”

5

CHANNELS

6

TRANSPORT FACILITIES PRODUCT AVAILABILITY PROMOTION ADVERTISING PERSONAL SELLING SALES PROMOTION PUBLICITY

Average Limited TV, radio, print media to some extent. More languages Occasionally Gifts, price discounts Less opportunities

Special Products for Rural Markets: • Rural Transporter: Mahindra & Mahindra is busy developing the prototype of what it calls a ‘Rural Transporter’ – basically a hybrid between a tractor and a rural transport vehicle. The product at 20-25 HP will be targeted at those who cannot afford a normal tractor and would also fulfill the need of family transporter that could take in the rural roughs but would be much more comfortable and safer than the conventional tractor-trolley. Sampoorna TV: LG Electronics, the Korean firm has rejigged the TV to appeal to local needs. It spent Rs. 21 Lacs to develop a set that would have on-screen displays in the vernacular languages of Hindi, Tamil and Bengali. The logic, rural consumers unfamiliar with English would still be able to use the TV without being intimidated. Titan Watches: A recent NCAER study revealed that there is a great potential for watches in rural areas. In fact it is considered to be a high priority list. It was also found that a rural consumer looks for the ruggedness of the watch more than the urban consumer does. He prefers thick watches than slim watches. The biggest problem that the Marketers are facing in the Rural Markets is Of IMITATIONS. Imitations may result in two types of goods depending upon the purpose, commitment, and competence of imitator. A poor imitator will end up in producing deceptive, spurious, fake, copycat products. He dupes the gullible customer by offering products having close resemblance with the original. In quality, it is poor cousin to the original. On the other hand, a poor imitator may even produce an improved version of the original product. In this scenario the job of the Marketer becomes even more difficult in the sense that he has not to fight other competitors but also the imitated products.

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The advantages that these products enjoy in the rural markets are that the Imitators who are in the villages are making these and they are offering More Margins & Better credit Facilities. To solve this problem the Marketer has to educate the consumer about his product and show him the benefits of his products over the imitated ones. Need-Product Relationships and the changes happening in Rural India Needs Old Products New Products Brushing Teeth Washing Vessels Transport Irrigation Hair Wash Neem sticks, Charcoal, Rocksalt, Husk Coconut fiber, Earthy materials, Brick Powder, Ash Bullock Cart, Horses, Donkeys Wells, Canals, Water lifters, Wind Mills Shikakai powder, Retha, Besan Toothpaste, tooth powder Washing Powders, soaps and liquids Tractors, LCVs, Mopeds, Scooters, Motor cycles Bore-wells, Motors, Power Generators, Pump Sets Shampoos and hair care soaps

IT services Indian villages are finally getting to benefit from the IT revolution in India. E-Panchayats are slowly taking over rural India and an 'E-medicine' scheme for rural areas has been launched by the Gujarat government's health department in May 2008. A study by internet research firm JuxtConsult reveals that one out of every seven regular internet users is from the rural belt and surprisingly, the rural net users are younger than their urban counterparts. Moreover, BPOs are slowly growing roots in rural areas. • • • Comat Technologies (P) Ltd, a Bangalore-based global business solutions organisation has 800 rural business centres in Karnataka and 290 centres in Haryana. It will soon open centres in Sikkim, Tripura, Uttarkhand and Uttar Pradesh. SerWizSol, a Tata enterprise, has a 250-seater BPO at Ethakota in rural Andhra Pradesh, and one in rural Gujarat in Mithapur which is a 100-seater. SREI Sahaj e-Village Ltd will set up 25,000 IT kiosks to be known as common service centers (CSC) across West Bengal, Bihar, Orissa, Assam, Uttar Pradesh and Tamil Nadu, by 2010.

Automobiles The Indian automotive industry currently has a turnover of US$ 34 billion. However, the automobile market remains untapped in rural India which has a strong purchasing power. Nearly 50 per cent of the Indian rural market, which includes 220 million households, is potential car buyers. Two-wheeler penetration in rural belts is still very low with less than 10 per cent households owning a two-wheeler. Sensing a huge opportunity many automobile companies are trying to woo the rural consumer. • Hyundai Motors India has introduced a new marketing initiative – 'Ghar Ghar Ki Pehchaan'-- to tap the India rural car market. The company has rolled out special schemes for government employees in rural areas and members of gram panchayats on the purchase of Santro. After establishing a strong foothold in urban and semi-urban markets, Maruti Suzuki has launched a pan-India campaign -

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'Mera Sapna Meri Maruti' - to tap the rural market. • • Hero Honda has devised a major expansion strategy for the rural markets and is planning to strengthen retail financing to support the initiative, which could lead to setting up of its own finance arm. M&M, Bajaj Auto and TVS Motor have also launched special marketing schemes for rural markets.

Consumer durables A survey carried out by the Federation of Indian Chambers of Commerce and Industry (FICCI), indicated that the consumer durable goods sector is all set to witness 12 per cent growth in 2008. The rural market is growing faster than the urban markets, although the penetration level in rural area is much lower. The rural Indian market, which accounts for nearly 70 per cent of the total number of households, witnessed a 25 per cent annual growth while the urban consumer durables market reflected an annual rate of 7 to 10 per cent. Many leading companies are now increasing their presence in rural India. • • LG has set up 45 area offices and 59 rural and remote-area offices. Samsung rolled out its 'Dream Home' road show which was to visit 48 small towns in 100 days in an effort to increase brand awareness of its products.

The road ahead The rural revolution is fuelled by rising purchasing power, changing consumer habits, increased access to information and communication technology, better infrastructure and increased government programmes to boost the rural economy. The recent study by Associated Chambers of Commerce and Industry of India (ASSOCHAM), disclosed that around 200 million out of 700 million rural population in India are engaged in agricultural and non-agricultural activities, and have a decent per capita income. A large section of the rural population is choosing dairy, food processing and packaging as professions, beyond traditional farming. Furthermore, large retail players like Reliance, Spencer's and Subhiksha are procuring farm commodities in bulk directly from farmers, giving them better money for their produce. The rural population is now looking at better options beyond post offices and commercial banks for higher returns on their surplus earnings. However, Rural India lacks a good distribution system. Rural Indian purchasing habits exhibit an "earn today, spend today" mentality. Most rural homes have restricted storage space and no refrigeration so villagers tend to only buy their immediate requirements. To succeed, corporations need to understand the psyche of the rural family along with the rural distribution network. For example, Hindustan Lever used a strategy of volume driven growth in rural markets, which was hugely successful. Insurance According to a report, 'Insurance in Next 2 Years', by The Associated Chambers of Commerce and Industry of India (ASSOCHAM), in May 2008, the insurance sector size was estimated at US$ 12.8 billion, and it is likely to see an unprecedented growth of 200 per cent, touching US$ 51.2 billion by 2009-10. Rural India may offer a business opportunity worth US$ 23 billion for the insurance companies if the segment can be wooed with innovative saving schemes at affordable premiums. Presently, only eight to ten per cent of rural Indian households are covered by life insurance. The remaining ninety per cent offer a huge potential for insurance companies. India's untapped rural market holds tremendous growth opportunities for life insurance companies with business worth US$ 231.67 million for insurance firms. According to international consultancy firm Celent, the rural market will grow to a potential of US$ 1.9 billion by 2015 from the current US$ 487 million. • MetLife India Insurance Company Ltd is planning to launch 'MetSuvidha', an affordable endowment life insurance plan, aimed at tapping the rural market through Viswas, a rural retail chain of agricultural inputs.

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Life Insurance Corporation of India (LIC) has set a target of selling four million policies in rural areas in the current financial year.

Another opportunity lies in offering low-interest personal loans to the rural population, at the rate of six to seven per cent compared to 10 – 12 per cent in the urban areas, for renovating or modernising their houses and at the time of marriages of family members or relatives. Pharmaceuticals The Indian pharmaceuticals market is regarded as one of the fastest growing in the world. In 2006-07, this market was valued at over US$ 7 billion with the rural segment having a remarkable share of this market. Driven by factors such as rising rural incomes and a strong distribution network, India's rural pharmaceuticals market is also experiencing strong growth. Industry estimates say that while small towns contribute 20 per cent to the country's pharmaceuticals market, rural areas account for 21 per cent. In 2006-07, the rural Indian market was estimated at around US$ 1.4 billion, having grown at about 40 per cent in 2006-07 against 21 per cent in the previous year. • • Telecom A Gartner forecast revealed that Indian cellular services revenue will grow at a CAGR (compound annual growth rate) of 18.4 per cent to touch US$ 25.6 billion by 2011, with most of the growth coming from rural markets. With the next 100 million mobile subscribers expected to come from non-urban areas, many Indian mobile service providers are targeting the rural market with aggressive tariffs and low-cost handsets. • • • • Nokia has announced that it is taking up several initiatives in the areas of microfinance, distribution and value-added services specifically for farmers, as part of its strategy to address India's rural market. BSNL plans a US$ 125.383 million spend on its rural telecom infrastructure in West Bengal, over the next one year. Spice Telecom will be launching local market rates for commodities across Karnataka to connect with rural customers. Spice has localized contents available in Punjabi and Kannada. Airtel has tied up with IFFCO to reach farmers directly. Farmers will receive free voice messages twice daily on farming techniques, weather forecasts, dairy farming, rural health initiatives, fertilizer availability, loan information and market rates. Additionally, farmers can also call a dedicated helpline, manned by experts from various fields, to get answers to their queries. Airtel's new initiative will offer mobile handsets bundled with Airtel mobile connection ranging from US$ 30.711 to US$ 36.843. Reliance Communication has also targeted the rural segment in a big way with its low tariff initiative like the Grameen Programme for rural subscribers. Most of the pharmaceuticals companies use local post-offices as their distribution platform. Some companies are conducting health-care workshops in the rural areas by tapping the local doctors. Nicholas Piramal has focused on general practitioners to cater to rural markets to increase its penetration with a field-force of 800 people.

• • Retail

According to a study, conducted in Sep 2007, by the Confederation of Indian Industry (CII) on the Indian rural retail sector, opportunities in rural retail were estimated to be over US$ 34 billion in 2007. This figure is expected to touch US$ 43 billion in 2010 and go up to US$ 58 billion by 2015. The rural markets in 2008 have grown at 25 per cent compared to the 7-10 per cent growth rate of the urban consumer retail market. The retail sector offers opportunities for exploration and investment in rural areas.

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• •

ITC launched India's first rural mall, 'Chaupal Sagar', which offers products ranging from FMCG to electronics appliance to automobiles. ITC has 23 stores across India. The 'Hariyali Bazaar' by the DCM Sriram Group had initially started off by providing farm-related inputs and services and now plans to introduce the complete shopping basket soon. It has 180 stores across India. The centres are also IT-enabled and provide farmers critical data like inputs and access to weather forecasts, market prices and other technical knowledge. Tata Chemicals with Tata Kisan Sansar has set up agri-stores to provide products and services. Indian Oil Corporation (IOC) is planning to invest US$ 189.103 million in rural areas during the financial year 2009. Reliance, Spencer's and Subhiksha are also expanding in rural areas.

• • •

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UNIT II Rural Consumer Behaviour Consumer Buyer Behaviour refers to the buying behaviour of final consumers - individuals and households who buy goods and services for personal consumption. All of these final consumers combined make up the consumer market. The consumer market in this case is Rural India. About 70% of India’s population lives in rural areas. There are more than 600,000 villages in the country as against about 300 cities and 4600 towns. Consumers in this huge segment have displayed vast differences in their purchase decisions and the product use. Villagers react differently to different products, colours, sizes, etc. in different parts of India. Thus utmost care in terms of understanding consumer psyche needs to be taken while marketing products to rural India. Thus, it is important to study the thought process that goes into making a purchase decision, so that marketers can reach this huge untapped segment. Factors influencing buying behavior The various factors that affect buying behavior of in rural India are: Environmental of the consumer - The environment or the surroundings, within which the consumer lives, has a very strong influence on the buyer behavior, egs. Electrification, water supply affects demand for durables. Geographic influences - The geographic location in which the rural consumer is located also speaks about the thought process of the consumer. For instance, villages in South India accept technology quicker than in other parts of India. Thus, HMT sells more winding watches in the north while they sell more quartz watches down south. Family – it is an important buying decision making organization in consumer markets. Family size & the roles played by family members exercise considerable influence on the purchase decisions. Industry observers are increasingly realizing that at times, purchase of durable has less to do with income, but has more to do with the size of the family & that’s where rural India with joint family structures, becomes an attractive proposition. Economic factors – The quantum of income & the earning stream are one of the major deciding factors, which determine to a great extent, what the customer will be able to buy. Many people in the rural market are below poverty line & for large number of people, agriculture is the primary occupation. More than 70% of the people are in small-scale agricultural operation. These factors affect the purchase decision. Place of purchase (60% prefer HAATS due to better quality, variety & price) Companies need to assess the influence of retailers on both consumers at village shops and at haats. Creative use of product ex Godrej hair dye being used as a paint to colour horns of oxen, Washing machine being used for churning lassi. The study of product end provides indicators to the company on the need for education and also for new product ideas. Brand preference and loyalty (80% of sale is branded items in 16 product categories) Cultural factors influencing consumer behaviour Cultural factors exert the broadest and deepest influence on consumer behaviour. The marketer needs to understand the role played by the buyer’s culture. Culture is the most basic element that shapes a person’s wants and behaviour. In India, there are so many different cultures, which only goes on to make the marketer’s job tougher. Some of the few cultural factors that influence buyer behaviour are: Product (colour, size, design, and shape): There are many examples that support this point. For example, the Tata Sumo, which was launched in rural India in a white colour, was not well accepted. But however, when the same Sumo was re-launched as Spacio (a different name) and in a bright yellow colour, with a larger seating capacity and ability to transport good, the acceptance was higher. Another good example would be Philips audio systems. Urban India looks at technology with the viewpoint of ‘the smaller the better’. However, in rural India, the viewpoint is totally opposite. That is the main reason for the large acceptance of big audio systems. Thus Philips makes audio systems, which are big in size and get accepted in rural India by their sheer size. Social practices: There are so many different cultures, and each culture exhibits different social practices. For example, in a few villages they have common bath areas. Villagers used to buy one Lifebuoy cake and cut it into smaller bars. This helped lifebuoy to introduce smaller 75-gram soap bars, which could be used individually. Decision-making by male head: The male in Indian culture has always been given the designation of key decision maker. For example, the Mukhiya’s opinion (Head of the village), in most cases, is shared with the rest of the village. Even in a house the male head is the final decision maker. In rural areas, this trend is very prominent. Changes in saving and investment patterns From gold, land, to tractors, VCR’s, LCV’s

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4 A’s approach of Indian Rural Market

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The rural market may be appealing 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 MNC’s are meeting the consequent challenges of availability, affordability, acceptability and awareness (the socalled 4 A’s) Availability 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 saturation. 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, stockiest 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 market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices.

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Affordability 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 who are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Most of the shampoos are available in smaller packs. Fair and lovely was launched in a smaller pack. Colgate toothpaste launched its smaller packs to cater to the travelling segment and the rural consumers.Godrej recently introduced three brands 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 so-called `Bimaru' States. Hindustan Lever, among the first MNC’s to realize 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-tomix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and multi serve sachet of 200 gm priced at Rs 15. Acceptability 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 customized 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 crores in total premium. The company tied up with non-governmental organizations and offered reasonably-priced policies in the nature of group insurance covers. With large parts of rural India inaccessible to conventional advertising media — only 41 per cent rural households have access to TV — building awareness 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 branded products is treated as a special treat or luxury.

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Awareness Brand awareness 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 branded products is treated as a special treat or indulgence.

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Hindustan Lever relies heavily on its own company-organized media. These are promotional events organized by stockiest. 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 it’s 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. The key dilemma for MNC’s ready to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. Evolving a New Marketing Mix for Selling to Rural Indians 12.2% of the world lives in Rural India. Put in a different context, this works out to 1 in 8 people on Earth. Being able to successfully tap this growing market is every marketer’s dream. However, myths abound. India’s rural markets are often misunderstood. A clear distinction needs to be made with regard to the reality versus the image of rural India. If such a distinction is not made, we will be unable to distinguish between the serpent and the rope and the rope and the serpent. The rural market is not homogeneous. Though the aggregate size is very large, individual subsets of this market tend to be rather small and disparate. Geographical, demographical, statistical, logistical differences are very apparent. Positioning and realities regarding the potential of each of these market segments differ and lie at the very core of forming the strategy for the rural markets. The face of Indian agriculture is changing from dry land and irrigated agriculture into high-tech and low-tech agriculture. Farmers in states like Maharashtra and Andhra Pradesh have reaped the benefits of adopting new age farming practices, including green house cultivation, fert-irrigation and hydroponics. This has radically changed the economics of farming, with the investment in these systems lowering the cost of cultivation, increasing yields due to integrated crop management practices and reducing the dependence on rainfall. As a result, disposable income has grown sharply. The aspirants are becoming climbers showing a sustained economic upturn as purchasing power is increasing in the rural markets. The proportion of very rich has increased five- fold. The growing incomes have modified demand patterns and buyer behaviour. Moreover, the need for a product or service is now adequately backed up with the capacity, ability and willingness to pay. However, the market still remains largely unexploited. At most times, potential markets need to be found and at times, even created. Such creation of demand needs efficient management of the supply chain. To increase market share, behavioural change needs to be at the forefront of any strategy. Further, due to the diversity of this market, marketers need to think, plan and act locally. It is therefore essential to develop an accurate Marketing Mix for selling to rural Indians.

Product The Rural market is not a homogenous set of customers with preferences frozen in time. When developing products in any category, marketers must identify the typical rural specific needs. Urban products cannot be dumped onto rural markets without modifications. Tailor-made products are better received by the rural audience as the consumers feel empowered and tend to dentify with the offering. For instance, shampoos or soaps with distinctive, strong rose or jasmine perfumes are very popular with the rural women in South India. The urban women do not identify as strongly with these perfumes. Sachetization is also a distinctly rural-driven phenomenon. As demand in several categories is being created, intensity of use is quite low. On average, rural folk would use a shampoo only once a week. Habits take time to change and making unit sachet packs affordable is the key to inducing trial and purchase. Systematic, in-depth research that can help understand the depths of the mind of the villagers, their buying criteria, purchase patterns and purchasing power are an essential input while developing rural specific products or services.

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A common error has been to launch a completely stripped down version of the urban product in the rural market, with the objective of offering the lowest possible price. This is not what a rural consumer wants. What is required is to introduce a product with ‘essential’ features, whose needs are recognized and for which the consumer is willing to pay (value-adding features). Product developers should aim at eliminating all the cost-adding features, i.e., features which a consumer is unwilling to pay for as he sees no obvious utility. This would “redefine value” in the minds of the consumer and tremendously increase product acceptability. Product development is severely constrained by legislation in the case of agricultural inputs like fertilizers, insecticides and pesticides. In the case of fertilizers for instance, though levels of deficiency of nutrients have increased significantly over the past decade, no significant changes in formulations notified under the Fertilizer Control Order have taken place. This has severely restricted the availability of cost effective specialty fertilizers of global standards to Indian farmers. Technological know-how for manufacture of such fertilizers exists within the country. However, farmers using modern farming practices are unable to get an assured supply of such farm inputs due to draconian legislation. A move to liberalize the sector could perhaps consider the accepted worldwide norm of allowing manufacturers with a strong R&D base to decide their own formulations with the government machinery conducting checks on market samples of finished products to ensure that they live up to the labelled specifications. This would be a major policy initiative that would give a huge impetus to innovative product development in the farm sector. Product life cycles as are becoming shorter and these are having their impact on company life cycles. Thus for any company wishing to develop its product portfolio, allegiance to the classic American P-A-L Principle of Partnership - Alliances - Linkages is a basis for survival.

Pricing Every marketer must realize that the rural consumer is not a miser. He is not simply looking for the cheapest product in every category. He understands and demands value for money in every purchase that he makes. Pricing therefore is a direct function of factors including cost-benefit advantage and opportunity cost. Pricing offered to consumers should be for value offerings that are affordable. Price sensitivity is extremely high and comparison with competitive prices is common. Consumers seem to create narrow psychological price bands in their minds for product groups and price elasticity beyond the extreme price points is very high. The perceived utility or value of the product or service is the ultimate decision making factor. It is certain however, that buying cheap is not the primary objective. Rather, it is “buying smart”. A study revealed that the average rural consumer takes approximately 2 years to decide on buying a watch! He will not do so unless he is totally convinced that he is getting value for Money. Impulse buys and purchases for conspicuous consumption are also extremely few and far Between considering the “value for money” factor that reigns supreme in most rural purchase decisions. It must be remembered that the rural consumer does not have a budget problem. He has a cash flow problem. This is because the village folk receive funds only twice a year. At these times, he is capable of making high volume purchases. At all times, however, the unit price is critical and so is the pack size. Because of this, in the lean season when there is a cash flow crunch, marketers need to provide financial products, schemes or solutions that suit the needs of the rural population. Promotions & Advertising There are a lot of barriers that militate against homogenous media and message delivery. These barriers stem from the fact that rural markets vary immensely in terms of tastes, habits and preferences leading to different expectations of every segment of the population. However, one fact is certain across all areas. The rural consumer likes to touch and feel a product before making a choice. Demonstrations are undoubtedly the most effective promotional tool that shapes purchase decisions of the rural population. Demonstrations establish the credentials of any new technology used in developing the product. In today’s information era, it is very important for companies to wise-up on emerging technologies. It has in fact become a medium to attract larger audiences for a product demonstration. Technology must be used to prepare a database of customers and their requirements. The use of video using mobile vans and even large screen video walls at events should be arranged. The classic conundrums of reach and coverage of the media are shattered. Several creative communication media have been used by various companies to tackle the problem of having to use visual communication and non-verbal communication to reach the rural

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audience. This is required because a large proportion of the rural population cannot read or write. Alliances with cottage industries, dharmsalas, panchayats, post offices and police stations for advertising have also helped immensely. More importantly, in rural India, experience has proved time and time again that word of mouth is the key influencer. Intermediaries are the foundation to rural distribution. If the intermediary understands and is constantly reminded about your product, then the end user will not be allowed to forget. The companies must reinforce this highly effective medium and use all their innovation and money tom develop more dramatic point of sale and point of contact material. This becomes all the more important when in rural India, more often than not, the overlap between the product categories sold in a single outlet in tremendous. For instance, a store may call itself as a grocery store but will stock everything from groceries to vegetables to fertilizers and may at times even stock medicines. In such cases, the point at which the customer actually comes in contact with a product may not be the point at which the sale is affected. The re-use capacity and colour of the container in which the product is packed is also a crucial factor. In fact, reusable packaging is considered a major aid in promoting sales for products in the rural market. Consumer and Trade schemes that Incentivise Spending using discount coupons, off season discounts, free samples, etc. encourage spending. Lucky draws and gift schemes are a major hit in most states. The use of local idioms and colloquial expressions are an excellent way to strike a rapport with the rural consumer and must be borne in mind when developing media plans and public relations programmes. No high voltage publicity is required. The rural consumer is very down to earth but equally discerning and marketers need to step into the shoes of the rural folk while creating product promotion campaigns. Another unique feature of rural markets is that the Decision making process is collective. The persons involved in the purchase process - influencer, decider, buyer, one who pays can all be different. So marketers must address brand messages in their campaigns at several levels. Apart from regular household goods, several agribusiness companies have also started providing gift schemes with offers for free jewellery that influences the ladies to pressure the farmers to purchase agricultural inputs from select companies. This promotion strategy thus makes women influence purchase decisions that they would ordinarily not be involved in. Youth power is becoming increasingly evident in villages. Rural youth bring brand knowledge to the households. This has forced several companies to change the focus and positioning of their products and services towards this segment that is growing in absolute number and relative influence. There are other attributes in the promotion strategy which are explained as under: 1. Mass media: In the present world mass media is a powerful medium of communication. The following are the mass media generally used: Television. Cinema Radio Print media: Handbills and Booklets, posters, stickers, banners, etc. 2. Personal selling and opinion leaders: In personal selling it is required that the potential users are identified and awareness is created among them about the product, its features, uses and benefits. This can be achieved only by personal selling by highly motivated sales person. In fact the word of mouth information holds lot validity in rural areas even today. This is the reason why opinion leaders and word of mouth are thriving among rural consumers. An opinion leader in rural areas can be defined as a person who is considered to be knowledgeable and is consulted by others and his advice is normally followed. The opinion leaders may be big landlords or politicians or progressive farmers. 3. Special campaigns: During crop harvest and marketing seasons it is beneficial to take up special promotion campaigns in rural areas. Tractor owners (tonee) conducted by MRF Limited is one such example. Brooks Bond carries out marches in rural areas with band, music and caparisoned elephants to promote their brand of tea. Mandi and Mela magic At last count, India witnessed over 50,000 melas. Of these 25,000 meals are held to signify religious, cultural festivals as well as local fairs and events. On an average, visitors at these melas spend between Rs. 5,000 to Rs. 50,000 a day. For example, 3 lakh people

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visited the annual mela at Navchadi which lasts for 7 days in Meerut. The largest such mela is the Maha Kumbh Mela which is visited by an average of 12 crore people. There is however, a caveat when an organization is considering using mela for marketing their products. Is the audience at this mela fit for promotion of the product at hand? What are the psychographics of this audience? What is the motivational and behavioural impetus that brings visitors to each of these melas. On considering these questions, it has been observed that melas are fit to generate product exposure, package familiarity, brand reminder and word of mouth. However, for products that need concept marketing and those that have high prices, such melas are not suitable promotion media. This is because the time and the mood of the people that visit these melas are not right to digest technical information or for making large purchases. People come to melas to have a good time and are not reminded of such high technology or high priced products when they return home. In the words of Mr. Neville Gomes, Managing Director of Multimedia Aquarius, promotion at melas is like a “one night stand”. There will be no reminder later. Thus, a large amount of qualitative judgment is indeed in planning promotions at melas by media planners. Place place is the major reason behind the evolution of rural marketing as a distinct discipline. A village as a place for promotion, distribution & consumption is very different from a town or city, thus the general marketing theories can’t be applied directly in rural markets. Reaching the right place is the toughest part in today’s rural marketing, as most of the products reach up to the nearest townships of any village, but due to higher distribution costs, these products fails to reach the village as the distribution channel fails to put in the required efforts. Most of the times, the rural retailers themselves go to the urban areas to procure these goods. Rural markets imply complex logistical challenges that show up as high distribution costs. Significance of Distribution No matter how well devised a company’s product, pricing or promotion strategy, the most crucial link in ensuring the success of rural marketing efforts is distribution. Distribution must be strengthened and this would raise investment cost barriers for new entrants. In Rural India, the selection and use of distribution channels is a nightmare. The reason for this is very clear when we consider that on an average, Urban and Rural India both have approximately 3 million retail outlets. However, Urban India has only 4,000 towns where these outlets are located. On the other hand, Rural India’s 3 million outlets are located in 6.3 lakh villages. Thus, marketers are faced with the problem of feeding 3 million shops located in vastly diverse areas each of which records an average sale of only Rs.5,000 per outlet. Further compounding this problem is the fact that even this meagre sale is mostly on credit. The diversity in the distribution of shops is the self-limiting factor in terms of servicing the rural distribution network.

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The distribution of outlets however shows that a marketer need not be present in all markets at all times. Being present in 6 lakh villages is virtually impossible for an organization of any size. Rural wealth and demand is concentrated typically at satellite towns, district headquarters, assembly markets and such central locations. Rural distribution has a rigid hierarchy of markets that make channel decisions relatively structured.

It is essential for rural marketing companies to understand this hierarchy. Rural folk are habituated to travelling once a week for their weekly purchases to a satellite town. They do not expect such items to be present in every village. For durables where the outlay involved is typically large, the purchase would be made in an assembly market for reasons of choice and availability of adequate cash flow. This is due to the fact that it is at assembly markets that auction yards are present where the farmers congregate to sell their output. After such sale of produce, they are cash rich and can afford to make such purchases. It is therefore not necessary for a marketer of TV sets to take their distribution channel all the way down to the village shop. A TV will not be sold there as the cash flow does not exist at that point in the hierarchy of markets. A television distributor must be present at assembly markets which are much smaller in number, more controllable, easier to reach and service. Keeping the hierarchy in mind will help decide the optimum level of penetration required to reach a critical mass of rural consumers. Haats Haats are the nerve centre of Rural India. They are a readymade distribution network embedded in the fabric of rural society for over 1000 years. They have been held on a regular basis across the length and breadth of the country for over 1000 years. Right from the time of Chandragupta Maurya, Haats are seen as a place for social, cultural and economic interchange. One in every five villages with a population of over 2000 has a haat. In villages with less than 2000 people this figure reduces to 1 in 20 villages. Typically, an average haat will have close to 300 stalls. A haat usually serves around 5000 visitors. Considering that the average population of an Indian village is approximately 1000, each haat serves 5 villages. A study estimates that 47,000 haats are conducted in rural India. These rural super markets are much larger than all the world's K-marts and Wal-marts put together. A lot of re-distribution also occurs through haats. This is because, a large number of retailers and sub-wholesalers buy from haats for their village stores. What is most attractive to marketers is that 90% + of sales in haats are on cash basis. Traditionally, in village shops a lot of credit sales occur due to the fact that in a small geographic area of a village, everybody knows everybody. Considering that over 5000 visit a haat from 5 villages, the system gets derelationalised. Apart from the 90% cash sale, 5 to 7% is conducted on barter system and the rest 3 to 5% is on credit. Also attractive to companies wishing to use the system is the low selling overheads. Participation fees at haats are a flat Re.1 to Rs.5 per stall and this rate is common to a giant like Hindustan Lever and the smallest local seller. Distribution costs must be reduced through optimum utilization of the network. Thus, incorporating haats in the distribution strategy of a rural marketing organization selling consumer goods and FMCG products (typically once a week purchase items) is a tremendous opportunity. Perhaps the other most important factor to consider while developing rural distribution strategy is that the move from transactional marketing to relationship marketing is most evident in the village market. A strong bond needs to be created with every consumer

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even in the remotest village and the smallest town. Marketing in Rural India is undoubtedly a long-haul exercise and one that involves great expense. Only those with a strong mind, a tough heart and stiff hands survive. There is also a need to realise that the dealer is the company's "unpaid" sales force. It is essential to educate and involve him as he is the local company representative and is the only member in the channel of distribution that is in direct contact with the final consumer. The dealers' feedback needs to be obtained as the direction for future strategy emanates here.

MARKRTING STRATEGIES TO CAPTURE RURAL INDIA  SEGMENTATION OF RURAL MARKET The first step is to develop & implement any strategy for the rural market should include the appropriate segmentation of the rural market. The important thing is that appropriate segmentation basis need to be applied. Different product categories have different rural markets to cater to & these can be selected by applying different criteria of segmentation. The organization can do the following thing to start with: Focus on select markets. Focus on select villages. BY COMMUNICATING AND CHANGING QUALITY PERCEPTION  Companies are coming up with new technology and they are properly communicating it to the customer. There is a trade of between Quality a customer perceives and a company wants to communicate. Thus, this positioning of technology is very crucial. The perception of the Indian about the desired product is changing. Now they know the difference between the products and the utilities derived out of it. As a rural Indian customer always wanted value for money with the changed perception, one can notice difference in current market scenario. BY PROPER COMMUNICATION IN INDIAN LANGUAGE  The companies have realized the importance of proper communication in local language for promoting their products. They have started selling the concept of quality with proper communication. Their main focus is to change the Indian customer outlook about quality. With their promotion, rural customer started asking for value for money.

 

BY TARGET CHANGING PERCEPTION  If one go to villages they will see that villagers using Toothpaste, even when they can use Neem or Babool sticks or Gudakhu, villagers are using soaps like Nima rose, Breeze, Cinthol etc. even when they can use locally manufactured very low priced soaps. Villagers are constantly looking forward for new branded products. What can one infer from these incidents, is the paradigm changing and customer no longer price sensitive? Indian customer was never price sensitive, but they want value for money. They are ready to pay premium for the product if the product is offering some extra utility for the premium.

BY UNDERSTANDING CULTURAL AND SOCIAL VALUES  Companies have recognized that social and cultural values have a very strong hold on the people. Cultural values play major role in deciding what to buy. Moreover, rural people are emotional and sensitive. Thus, to promote their brands, they are exploiting social and cultural values. BY PROVIDING WHAT CUSTOMER WANT 

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The customers want value for money. They do not see any value in frills associated with the products. They aim for the basic functionality. However, if the seller provides frills free of cost they are happy with that. They are happy with such a high technology that can fulfil their need. As "Motorola" has launched, seven models of Cellular Phones of high technology but none took off. On the other hand, "Nokia" has launched a simple product, which has captured the market. BY PROMOTING PRODUCTS WITH INDIAN MODELS AND ACTORS  Companies are picking up Indian models, actors for advertisements as this helps them to show themselves as an Indian company. Diana Hyden and Shahrukh Khan are chosen as a brand ambassador for MNC quartz clock maker "OMEGA" even though when they have models like Cindy Crawford. BY ASSOCIATING THEMSELVES WITH INDIA  MNCs are associating themselves with India by talking about India, by explicitly saying that they are Indian. M-TV during Independence Day and Republic daytime make their logo with Indian tri-colour. Nokia has designed a new cellular phone 5110, with the India tri-colour and a ringing tone of "Sare Jahan se achcha".

BY PROMOTING INDIAN SPORTS TEAM  Companies are promoting Indian sports teams so that they can associate themselves with India. With this, they influence Indian mindset. LG has launched a campaign "LG ki Dua, all the best". ITC is promoting Indian cricket team for years; during world cup they have launched a campaign "Jeeta hai jitega apna Hindustan India India India". Similarly, Whirlpool has also launched a campaign during world cup.

BY TALKING ABOUT A NORMAL INDIAN  Companies are now talking about normal India. It is a normal tendency of an Indian to try to associate him/her with the product. If he/she can visualize himself/herself with the product, he /she become loyal to it. That is why companies like Daewoo based their advertisements on a normal Indian family. BY DEVELOPING RURAL-SPECIFIC PRODUCTS  Many companies are developing rural-specific products. Keeping into consideration the requirements, a firm develops these products. Electrolux is working on a made-for India fridge designed to serve basic purposes: chill drinking water, keep cooked food fresh, and to withstand long power cuts.

BY GIVING INDIAN WORDS FOR BRANDS  Companies use Indian words for brands. Like LG has used India brand name "Sampoorna" for its newly launched TV. The word is a part of the Bengali, Hindi, Marathi and Tamil tongue. In the past one year, LG has sold one lakh 20-inch Sampoorna TVs, all in towns with a population of around 10,000.

BY ACQUIRING INDIAN BRANDS  As Indian brands are operating in India for a long time and they enjoy a good reputation in India. MNCs have found that it is much easier for them to operate in India if they acquire an Established Indian Brand. Electrolux has acquired two Indian brands Kelvinator and Allwyn this has gave them the well-established distribution channel. As well as trust of people, as people believe these brands. Similarly Coke has acquired Thumps up, Gold Spot, Citra and Limca so that they can kill these brands, but later on they realized that to survive in the market and to compete with their competitor they have to rejuvenate these brands.

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BY EFFECTIVE MEDIA COMMUNICATION  Media Rural marketing is being used by companies. They can either go for the traditional media or the modern media. The traditional media include melas, puppetry, folk theatre etc. while the modern media includes TV, radio, and e-chaupal. LIC uses puppets to educate rural masses about its insurance policies. Govt of India uses puppetry in its campaigns to press ahead social issues. Brook Bond Lipton India ltd used magicians electively for launch of Kadak Chap Tea in Etawah district. In between such a show, the lights are switched of and a torch is flashed in the dark (EVEREADYs tact). BY ADOPTING LOCALISED WAY OF DISTRIBUTING  Proper distribution channels are recognized by companies. The distribution channel could be big scale Super markets; they thought that a similar system can be grown in India. However, they were wrong; soon they realized that to succeed in India they have to reach the nook and the corner of the country. They have to reach the "local Paan wala, Local Baniya" only they can succeed. MNC shoe giants, Adidas, Reebok, and Nike started with exclusive stores but soon they realized that they do not enjoy much Brand Equity in India, and to capture the market share in India they have to go the local market shoe sellers. They have to reach to local cities with low priced products.

BY ASSOCIATING THEMSELVES WITH INDIAN CELEBRITIES  MNCs have realized that in India celebrities enjoyed a great popularity so they now associate themselves with Indian celebrities. Recently Luxor Writing Instruments Ltd. a JV of Gillette and Luxor has launched 500 "Gajgamini" ranges of Parker Sonnet Hussain special edition fountain pens, priced at Rs. 5000. This pen is signed by Mr. Makbul Fida Hussain a renowned painter who has created "Gajgamini" range of paintings. Companies are promoting players like Bhaichung Bhutia, who is promoted by Reebok, so that they can associate their name with players like him and get popularity. MELAS  Melas are places where villagers gather once in a while for shopping. Companies take advantage of such events to market their products. Dabur uses these events to sell products like JANAM GHUTI (Gripe water). NCAER estimates that around half of items sold in these melas are FMCG products and consumer durables. Escorts also display its products like tractors and motorcycles in such melas. PAINTINGS  A picture is worth thousand words. The message is simple and clean. Rural people like the sight of bright colors. COKE, PEPSI and TATA traders advertise their products through paintings. Product Strategies The specific strategies, which can be employed to develop or modify the products to targets the rural market, can be classified as follows: .1. Small unit packing: Given the low per capita income & purchasing habits of the rural consumers, small unit packages stand a good chance of acceptance in rural market. Single serve packets or sachets are enormously popular in India. They allow consumers to buy only what they need, experiment with new products, & conserve cash at the same time. This method has been tested by products life shampoos, pickles, biscuits, Vicks cough drops in single tablets, tooth paste, etc. Small packing’s stand a good chance of acceptance in rural markets. The advantage is that the price is low and the rural consumer can easily afford it. Also the Red Label Rs. 3.00 pack has more sales as compared to the large pack. This is because it is very affordable for the lower income group with the deepest market reach making easy access to the end user satisfying him. The small unit packing’s will definitely attract a large number of rural consumers.

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2. New product designs: Keeping in view the rural life style the manufacturer and the marketing men can think in terms of new product designs. The rural product usage environment is tough because of rough handling, rough roads & frequent power fluctuations. Thus, all these environmental factors must be considered while developing the products meant for rural audience. Nokia’s 1100 model is a very good example of a customized model for rural markets. Its design has been modified to protect it against rough usage in rural environment; it is dust resistant & has a small torch light in view of the frequent power cuts in rural India. It is also introduces messaging in Hindi language now, in some of the economically priced models in order to cater to the semiurban or rural consumers. This is in real terms, thinking global & acting local. 3. Sturdy products: Sturdiness of a product is an important factor for rural consumers. The product should be sturdy enough to stand rough handling, transportation & storage. The experience of torch light dry battery cell manufacturers supports this because the rural consumers preferred dry battery cells which are heavier than the lighter ones. For them, heavier weight meant that it has more over and durability. Sturdiness of a product either or appearance is an important for the rural consumers. 4. Utility oriented products: The rural consumers are more concerned with utility of the product and its appearance Philips India Ltd. Developed and introduced a low cost medium wave receiver named BAHADUR during the early seventies. Initially the sales were good but declined subsequently. On investigation it was found that the rural consumer bought radios not only for information and news but also for entertainment. 5. Brand name: For identification, the rural consumers do give their own brand name on the name of an item. The fertilizers companies normally use a logo on the fertilizer bags though fertilizers have to be sold only on generic names. A brand name or a logo is very important for a rural consumer for it can be easily remembered. Many a time’s rural consumers ask for peeli tikki in case of conventional and detergent washing soap. Nirma made a peeli tikki especially for those peeli tikki users who might have experienced better cleanliness with the yellow colored bar as compared to the blue one although the actual difference is only of the color. e.g.: Coca-Cola targeted the whole Indian rural market with the positioning of “Thanda Matlab Coca-Cola” advertisements because most of the villagers say when wanting a drink refer to it as Thanda…… so Coca-cola used that word. Pricing strategies 1. Low cost/ cheap products: This follows from the product strategy. The price can be kept low by low unit packaging’s like paisa pack of tea, shampoo sachets, vicks 5 grams tin, etc. this is a common strategy widely adopted by many manufacturing and marketing concerns. 2. Refill packs / Reusable packaging: In urban areas most of the health drinks are available. The containers can be put to multipurpose uses. Such measures can a significant impact in the rural market. For example, the rural people can efficiently reuse the plastic bottle of hair oil. Similarly the packages of edible oil, tea, coffee, ghee etc can be reused. Pet jars free with the Hasmukhrai and Co Tea, Ariel Super Compact. 3. Application of value engineering: in food industry, Soya protein is being used instead of milk protein. Milk protein is expensive while Soya protein is cheaper, but the nutrition content of both is the same. The basic aim is to reduce the value of the product, so that a larger segment can afford it, thus, expanding the market. 4. Large volume-low margins (Rapid or slow penetration strategy): Marketers have to focus on generating large volumes & not big profit margins on individual products. If they price their product at a level which can lead to good volumes, then they can still generate good returns on the capital employed. 5. Overall efficiency & passing on benefits to consumers: For rural products, the strategy should be to cut down the production, distribution & advertising costs & passing on these benefits to the customers to further increase the turnover. Most often, it has been observed that advertising has less to do with product sales in the rural areas. If an organization gets the price point right, then it can work in rural market. 6. Low volume-low price strategy: This strategy of reducing prices by reducing the package size in order to make it appear more affordable, is delivering very good results for a large number of FMCG product categories, in the rural markets of India. In categories where maintaining the price point is extremely critical, this strategy is delivering very good results. 7. Ensuring price compliance: Rural retailers, most of the times, charges more than the MRP. The manufacture has to ensure price compliance either through promotional campaigns, as was done by Coca Cola, or by ensuring the availability of products at the retail outlets directly. Promotion strategies Customized promotional media & messages need to be developed by the organizations to effectively target the rural market. The following strategies can be considered while developing promotional campaigns for the rural markets: Think Global Act Local

1.

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2.

3.

4.

5.

Rural population is diverse, but the commonalities of their ethos & simple living habits need to be understood for advertising to succeed. For that, the theme of the advertisement needs to revolve among universal themes, such as family-love. But the context, storyline, language & idioms should be such that the rural audience of different rural market segments can relate to. Think in Local Idiom This is the need of the advertising professionals who can think like the rural people. The only we can have insights like ‘Thanda matlab Coca Cola’. There should be the use of language writers who understands the rural & regional pulse better. Simplicity & Clarity All promotional messages targeted at rural audience need to be simple & clear, which can be easily understood, & they should not include any confusing elements. It is preferable that it has only a few propositions at a time. Bombarding rural consumers with too much, in less time can easily confuse them & leave them bewildered. Promotional message should highlight only the functional values of the product & explains how those values can make the consumer’s life even better & solve any of his problems. Narrative Story Style The promotional message can be delivered in the form of an entertaining story with a message depicting how the brand delivers “larger good” to the family & society. The theme of the story line can be about how the product can solve the problems of the rural consumers. Choice of Brand Ambassador Brand Ambassador for the rural markets need to be picked carefully as urban successes might not get replicated in the rural markets. That is why Govinda in the Mirinda as boosted the sales of the drink in the rural markets. An organization might spend a lot of money in hiring a brand ambassador only to find out later that it had little impact on the rural consumer. DISTRIBUTION STRATEGY Many companies view the rural markets as great opportunity for expanding their sales but find distribution as a major problem. Unfortunately, it is almost impossible to transplant strategies which work successfully in urban markets onto rural markets, namely, extensive retailing and sustained pull generation through mass media advertising. The road blocks to reach the rural customers are:

• • • • •

Lack of adequate transport facilities. Large distances between villages. Lack of pucca roads connecting villages to nearest townships. Lack of proper retail outlets Lack of mass media infrastructure. The marketers were of the opinion that the villagers would come to nearby towns and buy the products that they want. What has been found is that if we have to serve the rural consumer we will have to take our products to him through the channels that he is using and some innovative ways of getting to him.

The following distribution strategies formulated for the rural category. 1. Coverage of villages with 2000 and above population: Ideally, coverage of villages with up to 2000 and above population could be the break-even point for a distribution setup. By doing so the percentage of villages covered comes to only 10% of all the villages, but the rural population covered will be substantial, to the extent of about 40 to 45 percent. With a distribution network in about 55,000 villages, which have a population of 2000 persons & above each, one can cover about 25 crores rural consumers. This strategy is good to begin with & then subsequently, villages with lesser populations can be added. 2. Segmentation: the number of villages in India is huge & it is not viable to contact & serve all villages directly. Therefore, companies or distributors can carefully examine the market potential of different villages & target the villages that can be served in a financially viable manner through an organized distribution effort. 3. Use of co-operative societies: There are over 3 lacks co-operative societies operating in rural areas for different purposes like marketing cooperatives, farmer’s service cooperatives and other multipurpose cooperatives. These cooperatives have an arrangement for centralized procurement and distribution through their respective state level federation. Such state level federation can be motivated to procure and distribute consumables items and low value durable items to the members to the society for serving to the rural consumers. Many of the societies extend credit to the members for purchases.

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4. Utilization of public distributory system: The PDS in the country is fairly well organized. The revamped PDS places more emphasis on reaching remote rural areas like the hills and tribal’s. The purpose of PDS is to make available essential commodities like food grains, sugar, kerosene, edible oils and others to the consumers at a reasonable price. The shops that distribute these commodities are called fair price shops. These shops are run by the state civil Supplies Corporation, co-operatives as well as private entrepreneurs. Here again there is an arrangement for centralized procurement and distribution. The manufacturing and marketing men should explore effective utilization of PDS. 5. Utilization of multipurpose distribution centers by petroleum/oil companies: In order to cater to the rural areas the petroleum/oil companies have evolved a concept of multipurpose distribution centers in rural areas. In addition to petrol/diesel, lubricants, these outlets also stock consumables agricultural inputs like fertilizers, pesticides and seeds. It is estimated that there are about 450 such outlets in operation in the country. The rural consumer who has tractors, oil-engine pump sets and mopeds frequent these outlets for their requirement. These outlets can be profitably utilized for selling consumables and durable items also. 6. Distribution up to feeder markets/mandi towns: Keeping in view the hierarchy of markets for the rural consumers, the feeder markets and mandi towns offer excellent scope for distribution. The rural customers visit these towns at regular intervals not only for selling the agricultural produce but also for purchasing cloth, jewelry, hardware, radios, torch cells and other durables and consumer products. From the feeder markets and mandi towns the stockiest or wholesaler can arrange for distribution to the village shops in the interior places. This distribution can be done by mopeds, cycles, bullock-carts, camelbacks etc. depending upon the township. 7. Shandies/Haaths/Jathras/Melas: These are places where the rural consumers congregate as a rule. While shandies/heaths are held a particular day every week, Jathras and melas are held once or twice a year for longer durations. They are normally timed with religious festivals. Such places attract large number of itinerant merchants. Only temporary shops come up selling goods of all kinds. It can be beneficial for companies to organize sales of their product at such places. Promotion can be taken, as there will be ready captive audience. For convincing the manufacturing and marketing man with regard to the importance of these places from rural marketing point of view a visit to such places is necessary. It is estimated that over 5,000 fairs are held in the country and the estimated attendance is about 100 million rural consumers. Biggest fair ‘Pushkar Mela’ is estimated to attract over 10 million people. There are 50 such big rural fairs held in various parts of country, which attract urbanite also like ‘Mankanavillaku’ in Malappara in Kerela, Kumbh Mela at Hardwar in U.P. ‘Periya Kirthigai’ at Tiruparunkunaram in Tamil Nadu. Merits: • Convenience: The entire market can be related to large departmental stores in cities, where the advantage is a one-stop shopping exercise. These outlets crop up every week, providing consumers immense choice and prices. Attractive: The weekend shopping is not only convenient but also entertaining. The markets start early and will be over by lunch. Afterwards, there will be entertainment. In respect of transactions, it is an attractive place to those who want to buy second hand durables and to those who prefer barter transactions. Further the freshness of the produce, buying in bulk for, a week and the bargaining advantage attract the frugal and weeklong hard working rural folk. Availability: It is a market for everyone and for everything. Household goods, clothes, durables, jewellery, cattle, machinery, farming equipment, raw materials and a host of products are available. 8. Agricultural Input Dealers: Fertilizers should be made available to the farmers within the range of 4-5 km from their residence, as per the essential commodities act. This is why there are about 2 lakh fertilizer dealers in the country, both in cooperative & private sector. Example of Varana Nagar in Maharashtra proved an eye opener in this regard where the sugar and milk co-operatives have totally changed the life style of people. The supermarket in Varana Nagar caters exclusively to rural consumers. Similarly a cooperative supermarket called ‘Chintamani’ in Coimbatore (T.N) arranges free transit of rural consumers to the supermarket of their purchases. 9. Joint distribution by Non-competing Companies: As the cost of distributing the products in the rural market through distribution vans can be unviable for a single company, different non-competing companies can come together to jointly operate distribution vans for the rural market. This will enable them to share the cost of operating the van & on account of the sharing of the cost by four or five companies; the entire operation can become financially viable for all the players. 10. Personal Selling Network: It is very successful distribution channel being developed by companies like HUL. It adds a personal touch to the marketing, as the salesmen are the resident of the village or community itself, making it easier to sell the product & maximise sales for the company. THE OLD SETUP

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The historically available people & places for distribution include: - Whole seller, Retailer, Vans, Weekly Haats, and Bazaars & Shadies. 1. Wholesalers The Indian wholesaler is principally a Galla – Kirana (food-grain) merchant who sustains the belief that business is speculative rather than distributive in character. He is a trader / commodity merchant rather than a distributor and therefore tends to support a brand during boom and withdraw support during slump. The reason for this speculative character and dormant role of wholesalers are: • • Indian market was largely sellers market. There was no need for active sales growth. Companies laid more emphasis or retailers in urban areas, who are very large in number. As a result of retail based distribution was weakened. Rural markets were neglected by many. The occurrence of retail outlets was low. Therefore many companies were dependent on whole salers. The current need is to activate and develop wholesaler of the adjoining market as a distributor of products to rural retail outlets and build his loyalties to the company. 2. Retailers There are different kinds of retailers. Shops within the village  Shops located on the main road and not exactly within the village  Kasba market or the tahsil market.  Village retailers have traditionally been among the most mobile of rural residents. Often doubling up as money lenders. Their multi – person interaction in the closed village society. As a result retailers play a significant role. I.   CREDIBILITY: He enjoys the confidence of the villagers. His views are accepted and followed by the rural people whose awareness and media exposure levels are low. (II.     III.  The urban retailer is not trusted. He is seen as a businessman with profit motto. His view points are evaluated with other sources of information.)

INFLUENCE LEADER: His role as influence leader is indisputable. From tender twig of neem to washing powder retailer testimony has been vital part of the product adoption process. The role of urban retailer is weak. The urban consumers have numerous sources of information. Although retailer’s opinion is sought it may not be 100% believed and followed. BRAND PROMOTER: In rural market retailers remains the deciding factor to sell particular brand.

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 purchase promotion. 

Retailers helps in identification and selection of brands, there is less influence of shelf displays and point of Presence of spurious brands is an ample testimony to this view. (- The urban retailer has a limited role as a brand promoter. - He cannot directly, recommend the brands. - He is to intelligently drive home his recommendations, as urban consumers do not trust him completely. It is through shelf displays and incentive offers that he has to push the brands.) RELATIONSHIP MARKETER Village retailer practices relationship marketing. He caters to a set of buyers who have income from immovable land resources and would be static over a much longer time span. The relationship could extend beyond three generations, backed by historical credibility of the retailer as a product referral. (- on the contrary, the urban retailers have to make an effort to adopt relationship marketing. His customers base comprises largely the mobile service class prone to shift residence at least once, if not more, in less than a decade. This limits the time span and perspective of the retailer – customer relationship.) HARBINGER OF CHANGE In an environment relatively isolated from external developments, he has been harbinger of change. He is one of the main sources of information and opinion as well as supplier of product and services. (As against this, we find urban retailer, wielding limited influence in changing the product choices and quality of life of consumers.)

-

IV.   

-

V.  

3.

Vans Mobile vans long since, have an important place in distribution and promotion of the products in villages.

4.

JK Dairy launched whitener ‘Dairy Top’ in small 50 gm sachets priced at Rs. 6.50. It decided to make a concerted foray into rural India in 1996. It hired vans to penetrate the rural interior, each van traveling around 125 km a day, 25 days a Weekly Haats, Bazaars, Shandies month.
The haats are the oldest outlets to purchase household goods and for trade. These markets are very well organized with shopkeepers having pre-assigned spaces for them to sell their wares. A typical market is in an open field with ample space for displaying all sorts of goods. Its location changes every week. These markets have different names in different regions. But they are strikingly similar in what they sell. It is reported that there are, in all, about 47,000 haats held throughout the country.

Media Vehicles Through the rural markets offer big attractions to the marketers, one of the most important questions frequently asked is “How do we reach the large rural population through different media and methods? Mass Media Radio Cinema Local Media Haats, Melas, Fairs Wall Paintings Personalized Media Direct Communication Dealers

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Press TV

Hoardings Leaflets Video Vans Folk Media Animal Parade Transit Media

Sales Persons Researchers

Formal media It includes Press and print, TV, Cinema, Radio, and Point of purchase and Outdoor advertisement. Reach of formal media is low in rural households (Print: 18%, TV: 27%, Cinema: 30%, and Radio: 37%) and therefore the marketer has to consider the following points:

Newspapers and magazines: English newspapers and magazines have negligible circulation in rural areas. However local language newspapers and magazines are becoming popular among educated facilities in rural areas. Examples: Newspapers: Eenadu in A.P., Dina Thanthi in Tamil Nadu, Punjab Kesari in the North, Loksatta in Maharashtra and Tamil magazine Kumudam are very popular in rural areas.

Television: It has made a great impact and large audience has been exposed to this medium. HLL has been using TV to communicate with the

rural masses. Lifebuoy, Lux, Nihar oil etc are some of the products advertised via television. Regional TV channels have become very popular especially in Southern states. Examples: SUN TV is very popular even in rural areas in Tamil Nadu and Asianet is a preferred regional channel in Kerala. Many consumer goods companies and fertilizer companies are using these TV channels to reach the rural customer.

Radio: Radio reaches large population in rural areas at a relatively low cost. Example: Colgate, Jyoti Labs, Zandu Balm, Zuari industries are some of the companies using radio communication programme. There are specific programmes for farmers like Farm and Home/Krishi Darshan in regional languages. The farmers have a habit of listening to regional news/agricultural news in the morning and the late evening. The advertisement has to be released during this time to get maximum coverage in rural areas. Another advantage is that the radio commercial can be prepared at short notice to meet the changing needs of the rural folk. Example: Release of a pesticide ad at the time of outbreak of a pest or disease in crops.

Cinema: About 65% of the earnings from cinema are from rural markets. Film viewing habits is high in certain states like Tamil Nadu, Karnataka and Andhra Pradesh. Village theatres do roaring business during festivals by having four shows per day. The monthly charge for showing an ad film is within Rs.500. Local distributor or dealer who has good contacts with cinema houses in villages can

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easily monitor this activity. Examples: Films on products like Vicks, Lifebuoy and SPIC fertilizers are shown in rural cinema halls. Apart from films, Ad slides can also be screened in village theatres.  Outdoor advertisements: This form of media, which includes signboards, wall painting, hoarding, tree boards, bus boards, dealer boards, product display boards etc, is cost effective in rural areas. Symbols, pictures and colours should be used in POPs meant for rural markets so that they can easily identify the products. Generally rural people prefer bright colours and the marketer should Utilize such cues.

Point of purchase: Display of hangings, festoons and product packs in the shops will catch the attention of prospective buyers. However a clutter of such POP materials of competing companies will not have the desired effect and is to be avoided.

Direct mail advertising: It is a way of passing on information relating to goods or services for sale, directly to potential customers through the medium of post. It is a medium employed by the advertiser to bring in a personal touch. In cities lot of junk mail is received by all of us and very often such mails are thrown into the dustbin whereas a villager get very few letters and he is receptive to such mailers.

Wall paintings: It is an effective and economical medium for communication in rural areas, since it stays there for a long time depending upon the weather conditions. The cost of painting one square foot area is just Rs.10. Retailers welcome painting of their shops so that the shop will look better. Walls of farm houses, shops and schools are ideal places for painting and the company need not have to pay any rent for the same. The walls have to be painted at least one or two feet from ground level. It is better to take permission of the owner. Very often the owner takes responsibility for taking care of the wall painting. Painting to be avoided during election time and rainy season. The matter should be in the form of pictures, slogans for catching the attention of people. Companies marketing TV, fans, branded coffee/tea, toothpaste, pesticides, fertilizers etc. use wall painting as promotion medium in rural areas.

Tree boards:

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These are painted boards of about two square feet in dimension having the picture or name or slogan of the product painted on it. The cost of such a painted board is about Rs.80. These boards are fixed to the trees on both sides of the village road at a height of about 10 feet from ground level. These boards attract the attention of slow moving vehicles like cycles, bullock carts and tractors and people walking on the road. Considering the poor condition of roads, even the buses move at slow speed through village road. Fertilizer and pesticide companies in rural areas extensively use tree boards. These are low priced promotion items and can be used by consumer goods companies too.

Informal/Rural specific media These media with effective reach and personalized communication will help in realizing the promotional objectives. Companies to suit the specific requirements of rural communication are using a variety of such media effectively and some of the more important media and methods are given below.

Farm-to-Farm/House-to-House visit: Rural people prefer face-to-face communication and farm visits facilitate two-way communication. The advantage is that the sales person can understand the needs and wants of the rural customer by directly discussing with him and answer his queries on products and services. Potential customers in the village are identified and the company’s/distributor’s representative makes farmto-farm visits and highlight the benefits of the products. The person carries with him literature in local language and also samples of products. The person does not sell the product but only promotes the use of the product. Very often the local dealer also joins the representative in making farm-to-farm visits. The dealer clarifies the terms and conditions of sale and also makes independent follow up visits for securing orders. Example: This approach has been found to be very effective for agricultural machinery, animal health products and agricultural inputs. Many LIC agents and companies dealing with high value consumer durables have tried this method with success in rich rural areas.

Group meeting: Group meetings of rural customers as well as prospects are an important part of interpersonal media. The company is able to pass on the message regarding benefits of the products to a large number of customers through such meetings. Group meeting of key customers are conducted by banks, agricultural inputs and machinery companies in rural areas. The bankers visit an identified village, get the village people in a common place and explain the various schemes to the villagers. Such meetings could be organized in prosperous villages for promoting consumer durables and two wheelers also. Example: MRF Tyres conduct tractor owners meet in villages to discuss repairs and maintenance of tractors.

Opinion leaders: Villagers place more emphasis on the experience of others who have used a product/brand to make purchase decision. Opinion leader is a person who is considered to be knowledgeable and is consulted by others and his advice is normally followed. Such opinion leaders could be big landlords, bank official, panchayath-president, teachers, extension workers etc. Examples: a) Mahindra Tractors use bankers as opinion leaders for their product. b) Asian Paints promoted its Utsav brand of paint by painting the village Sarpanch’s house a few months prior to the launch if the branch to demonstrate that the paint does not peel off.

The Melas: Melas are of different types i.e. commodity fairs, cattle fairs and religious fairs and may be held only for a day or may extend over a week. Many companies have come out with creative ideas for participating in such melas. Examples: a) Britannia promotes Tiger Brand Biscuits through melas. b) The mahakumbh at Allahabad is the biggest mela in India. HLL has put up 14 stalls in the mela grounds for promoting Lifebuoy. Handcarts have been deployed for increasing access.

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The Haats: Traditionally on certain days of week, both the sellers and buyers meet in the village to buy and sell goods and services. These are the haats that are being held regularly in all rural areas. The sellers arrive in the morning in the haat and remain till late in the evening. Next day they move to another haat. The reason being that in villages the wages are paid on weekly basis and haat is conducted on the day when the villages get their wages. For the marketer, the haat can be an ideal platform for advertising and selling of goods. By participating in haats and melas, the company can not only promote and sell the products but also understand the shared values, beliefs and perceptions of rural customers that influence his buying behaviour.

Folk dances: These are well-appreciated form of entertainment available to the village people. The folk dance “Kuravan Kurathi” is popular in Tamil Nadu. The troupe consists of dancers, drummers and musicians and they move in a well-decorated van from one village to another village singing and dancing. In a day the troupe covers about 8-10 villages. As soon as the van reaches a village, film songs are played to attract the attention of the villages. This is followed by folk dances. Mike announcement is made about the company’s products and leaflets are distributed. After the dance programme, queries, if any, about the products are answered by the sales person. Folk dance programme costs about Rs.5000 per day and therefore these programmes are conducted during the peak season in selected villages. Examples: Fertilizer and pesticide companies organize folk dance programmes during peak season in selected markets. Thumps Up has sponsored Lavnis, the folk dance programme of Maharashtra and over 30 programmes have been arranged in selected rural markets.

Audio Visual Publicity Vans (AVP Vans): AV unit is one of the effective tools for rural communication. The van is a mobile promotion station having facilities for screening films slides and mike publicity. The sales person makes a brief talk about situation in the village, the products and the benefits. The ad film is screened along with some popular film shots and this continues for about 30 minutes. At the end of the film show, he distributes handbills and answers queries of the customers. The whole operation takes about 1-2 hours depending upon the products under promotion, number of participants in the meeting and time taken for question and answers. The vans move to the next village for the second show. The cost of running a fully equipped AVP unit is about Rs.4000 per day and AVP van operation has to be considered as an investment for business development in rural areas. Example: Companies such as HLL, Colgate, and Phillips have made effective use of AVP vans for popularizing their products in rural areas.

Product display contests: Package is an integral part of the product. Its main purpose is to protect the product during transit, to preserve the quality and to avoid any loss in quality and quantity. The main purpose of this contest is to remind the customer to buy the product as soon as he enters the shop. Another objective is to influence the dealer to stock the product and support the company in increasing the sales. The display contest has to be announced well in advance and promotional materials to be distributed to all the selected dealers in a geographical area. Prizes for best displays are announced to motivate the dealers; the contest lasts for about a month. A well-

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planned product display contest not only increases the involvement of dealers in the company’s products but also increases the sales during the contest period. This is used for promoting consumer goods such as shampoos, soaps and toothpaste.  Field demonstration: This is based on the extension principle “seeing is believing” and is one of the most effective methods to show the superiority of the company’s products to the customers. A progressive farmer who is an opinion leader is selected and the demonstration is conducted in his field in the presence of a group of farmers in the village. The farmers observe the results in the field and the local dealer calls on them in their farms and persuades them to buy the particular brand of pesticide or fertilizer. Examples: a) Spraying a particular brand of an insecticide against insect pests and showing the farmer how effectively the insects are controlled. b) Demonstrating the use of tractor/implements for different agricultural operations. c) Hawkins pressure cooker has demonstration representatives who carry out demos in rural households. The representative receives 1% commission for every customer who approaches the dealer via demonstrations. e) Similarly effectiveness of detergents, pressure cookers, vaccum cleaners and mosquito coils could be promoted by demonstrations in selected markets.  Field days: These are extension of field demonstrations. One of the main objectives of following modern agricultural practices is to increase the yield. The company organizes demonstrations in a piece of land belonging to progressive farmers. All the fertilizers, pesticides, nutrients etc. are applied after making field observations. Just before harvest, all the important farmers are invited to see demonstration plot and see for themselves how the yields are better in the plot compared to other fields. Field demonstrations/field days consume lot of time and efforts and therefore have to be planned well.

Information centers: They provide latest information on cultivation of crops, fertilizer application, weed, management and control of pests and diseases. Experienced agricultural graduates who make frequent visits to the field and advice farmers on modern agricultural practices manage the centers. They also provide information on farm implements, seeds, fertilizers, pesticides, diesel engines, sprayers and tractors etc. Many consumer goods companies have opened show rooms in prosperous rural areas. Example: Hero Honda has opened extension counters with show room facilities in major rural markets.

Life-style marketing: Each rural market segment has certain special features i.e. they share common life-style traits. They include village sports, religious events, prominent personalities and role models. Examples: Textile mills maintaining community gardens, Mineral water companies supplying clean drinking water during summer festivals in villages and Consumer goods companies sponsoring Kabaddi. Choosing media vehicles

The choice of different media vehicles for any market is based on an analysis of the standard features like: reach, frequency, cost & availability. Depending on the factor of reach & frequency, the different media can be classified into the following categories. This categorization can help the marketer to make a decision about which type of media would be more suitable to the product & the organization. (a) High reach High frequency • Jeep based advertising • Wall painting • Bus stand & bus panels • Haats • Hoardings • Postal branding (b) Low reach High frequency • Co-operative notice board

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• • • • • • (c) • • • • • (d) • • • • •

Shop front painting Tin plating – house Dealer boards Village boards Well tiles Calendars/labels High reach Low frequency Van based advertising Melas Direct to home Folklore group Exhibitions/created events Low reach Low frequency Tin painting – tree/shops Leaflets Posters & banners Streamers Danglers

THOMPSON RURAL MARKETING INDEX The rural market is classified in to 3 parts- Consumer Market, Industrial Market & Service Market of different geographical areas and its potentials. Apart this TRMI explains the Rural Industrial market in parts of Constituents- Agricultural & allied activities, Product Consumables Its all inputs require for farming and Durables- That means latest technologies uses in farming activity.

UNIT III STRUCTURE AND TYPE OF AGRICULTURAL MARKET Dimensions of Market: 1. 2. 3. 4. 5. 6. 7. 8. 9. Based on Location Based on Area / Coverage Based on Time Span Based on Volume of Transaction Based on Nature of Transaction Based on Degree of Competition Based on Number of Commodities Based on Nature of Commodities Based on Stage of Marketing

10. Based on Extent of Public Intervention CLASSIFICATION OF MARKETS 1. Location:

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 

Village Markets – Located in small villages, major transaction takes place among buyers and sellers of a village. Primary Wholesale Market – Located in big towns, near center of production of agricultural commodities, a major part of produce is brought for sale by the producer-farmer themselves. Transaction is between farmers and traders. Owned by market committees, local bodies / private individuals and are periodically held wherein every shopkeeper has to pay rent for the space he occupies.

Secondary Wholesale Markets – Located in district head quarters / important trade centers / near railway junctions, major transaction takes place between village traders and wholesalers. The bulk arrival in these markets is from other markets. The produce in these markets is handled in large quantities. There are specialized marketing agencies performing different functions such as; commission agents, brokers, weighmen.

Terminal Markets – where the produce is finally disposed off directly to the consumer / processor / assembled for export and possesses sufficient warehousing and storage facilities covering a wide area extending over a state or two.

 2.

Sea board Markets – Located near sea shore, meant for import / export of goods.

Area / Coverage:  Local / Village Markets – Buying and selling activities are confined among buyers and sellers drawn from same village or nearby villages, mostly perishable commodities in small lots. Ex: fresh milk, vegetables    Regional Markets – buyers and sellers for commodities are drawn from a larger area. Ex: foograins National Market - buyers and sellers are at national level. Ex: dural commodities like jute, tea World Market - buyers and sellers are drawn from whole world. Ex: coffee, gold, silver, cotton

3.

Time Span:    Short period Market – few hours, products of highly perishable nature. Ex: fish, milk Long Period Markets – larger period, less perishable. Ex: foodgrains, oilseeds Secular Markets – permanent nature. Ex: manufacture goods, timber

4.

Volume of Transaction:   Wholesale Markets – Commodities are bought and sold in large quantities / bulk. Transaction is between traders. Retail Markets – Commodities are bought and sold as per consumer requirements.

5.

Nature of Transaction: a. b. Spot or Cash Market: A market in which goods are exchanged for money immediately after the sale. Forward Market: Purchase and sale of commodities takes place at time ‘t’ but the exchange of commodity takes place on some specific date in future i.e. ‘t+1’.

6. a. b.

No of Commodities: General Market: All types of commodities such as food grains, oilseed, fibre crops etc. are bought and sold. Specialised Market: Transactions take place only in one or two commodities e.g. food grains market, cotton markets, mango markets.

7. a.

Degree of competition: Perfect Market: Large number of buyers and sellers.

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b.

Imperfect Market: Monopoly, Duopoly, Oligopoly, Monopolistic competition  large no of sellers deal in heterogeneous and differentiated form of a commodity.

8. a. b. c. 9. a.

Nature of Commodities: Commodity Market: deals in goods and raw materials such as wheat, barley, cotton etc. Capital Market: deals with bonds, shares and securities. Service Market: deals in providing service e.g. consultancy Stage of marketing: Producing market: Those markets, which mainly assemble the commodities for future distribution to other markets. Located in producing areas.

b.

Consuming Markets: Which collect the produce for final disposal to the consuming population located in areas where production is inadequate or in thickly populated urban centers.

10. Extent of public intervention: a. Regulated markets: Markets in which business is done in accordance with the rules and regulations framed by the statutory market organisation and represent different sections involved in markets. The marketing costs are b. Unregulated markets: Business is conducted without any set rules and regulations. Traders frame the rules for the conduct of business and run the market. AGRICULTURAL INPUTS Agricultural inputs are among the most important requirements for achievement of successful production operations and satisfactory profitability both for agricultural projects and farmers. Almithal Agricultural Company is backed up by an extensive experience in availing high standard agricultural inputs with needed technical consultation, to assure optimum and efficient supply and use of these inputs for their intended purposes. In general agricultural inputs include the following: First: Seeds and seedlings: These are considered the corner stone of the agricultural production operations. Consequently, they should be registered in the origin country, and supplied by known and trusted resources. They should possess high germination efficiency, and should be free of diseases, pests, and impurities. Examples are vegetable seeds for open and protected agricultural fields and structures, seeds of wheat, barley, and fodder; fruit seedlings, and natural and tissue culture date palm trees seedlings. Second: Agricultural Fertilizers: They supply plants with needs of nutritional substances and elements through roots and leaves, to promote natural plant growth and increase productivity. Based on formulations, fertilizers can be divided into the following: 1. Chemical Fertilizers - including: o Nitrogen Fertilizers: such as urea (46%-48% N2) is commonly applied to grain crops at a rate of 550-650 kg/hectare in batches depending on the type of crop; ammonium phosphate (21% N2) fertilizer which includes compound nitrogen fertilizers such as the famous fertilizer 23 :23:zero (23% N2 , 23% P2O5, 0% K). Phosphate Fertilizers: such as mono-phosphate fertilizer (P2O5), phosphoric acid fertilizer 52-60% P2O5.Compound phosphate fertilizers include mono-ammonium phosphate (MAP) which contains 11% N2, 52% P2O5; di-ammonium phosphate (DAP) which contains 18% N2, 46% P2O5.Fertilizer quantities and addition batches

o

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depend on crop type. In grain crops (wheat, barley, and sorghum) 300-450 kg/hectare/season should be added in one batch prior to planting o o Potash Fertilizers: such as potassium sulphate (K2SO4). Other Compound Fertilizers: prepared at varying ratios of nitrogen, phosphorous, and potassium (NPK), and some are supplemented with micro elements necessary for plant germination. Microelements Fertilizers and Plant Growth Regulators: they include: Manganese, Zink. Chlorine, Iron, Magnesium, Copper, Boron, and Amino Acids.

o 2.

Organic Fertilizers - Including: o Natural Organic Fertilizers: they are usually fermented and sterilized before use, and their origin could be agricultural or animal waste. Pure Organic Fertilizers: These are extracted from natural origin such as humic acids fertilizers. Physical fertilizers can come as liquid, suspension, solid, or granulated.

o

Third: Agricultural Insecticides: These are substances which kills insects. Most commonly these are synthetic organic compounds, applied as sprays by farmers, but they may also be applied in granular or powder forms. They are used in controlling insects and protecting plants and stored crops against diseases and harmful insects. They include the following types: 1. Chemical Insecticides they include: o o o Insecticides: protection against and control of insect pests harmful to plants and stored crops. Fungicides: protection against and control of fungi harmful to plants. Herbicides: selective herbicides kill specific targets of unwanted plants leaving the desired crop relatively unharmed. Chemicals non-harmful to health: these are sprayed into some grain crops stems to divert harmful birds from attacking the crop. It also controls hazards of field mice through application of chemical poison, which may be hazardous to health and hence shall be used in a safe manner and according to strict regulations.

o

2.

Organic Insecticides (Natural):

These types of organic insecticides are considered friendly to the environment, with absent negative effects to public health, and they are usually extracted from natural resources such as certain types of trees, and they are usually sprayed in the fields, or used as pellets or fumigants in crop stores. Fourth: Post Harvest Inputs: • • • • • Various packages (plastic, polystyrene, carton, films,tin, and wood ) for fruits , vegetables, grain crops, and dates. Cleaning and sterilizing materials for preparation of crop stores, and control and minimization of hazardous effects of pests and insects of crop stores. Fumigants for crop treatment aiming at killing insects in all their life stages. Disinfection materials added to water used for washing and cleaning agricultural products specially fruits such as dates. Fruit waxing materials.

Social Structure of rural society

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Rural Social Structure: every society has certain units. It is these units that form the social set up or social structure. These units are inter-related and through their study, it is possible to study the behavior patterns of the society. This is true of the Indian society, particularly the Indian Rural Society.

In Indian Rural Society, different villages are the units and they have geographical, moral and other types of structures. Their behavior pattern, there believes ideas, faiths etc. are also different from one another. For the proper study of the Indian Rural Society, the units that from the social structure have to be studied.

Rural Social Structure:

we have just now seen that the villages form the units of the Rural Society. These villages have their own structure. The structure formed out of the following units:-

1) Family 2) Caste System 3) Internal Organisation 4) Religion 5) Economic System.

If scientific and proper study of the Indian social structure is to be made, these units have to be studied in detail. Let us taken them up one by one. 1) The family: Family is the basic unit of Indian social structure. It occupied an important place in the Rural Society. Apart from performing various basic and important tasks, the family also brings about socialisation social control and also performs various basic and important tasks; the family also brings about socialaisation, social control and also performs various economic activities. It is the agency that controls the religion activities particularly in the Rural Society. It has the following characteristics:

a) Patriarchal family structure, b) joint family system, c) extended family structure. 2) Caste-System: The second unit of the social organisation of social structure of the Rural Society in the Caste System. Through the institution, the functions status, occupation role and social position are determined. In fact it is an inverse system or reverse system or traditions. The caste system is based on endogamy and sometimes has common economic position or linkage.

It is a perverts from of old economic classification. The following extract throws light on the origin of the Indian Caste System. The origin of Indian caste sometimes is traced from the penetration of the Aryans, who devised the system for the division of labor in their society. The traditional divisions have long since been complicated over laid by innumerable sub-division into multitude of several thousands different caste which marred the social structure of India.

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It clearly shown that Indian caste system is the result of different caste units. There is social stratification on the Rural Society which gives birth the caste-system. The caste system is based on certain customs and traditions. As a result of those customs and tradition various factors are determined, which in their form determine the Caste System as such is an endogamous group. Normally it has the following characteristics:-

1) Limited to the persons born within that caste. 2) Endogamous group, 3) Determined occupation. 3) The internal organisation: This internal organisation governs and determines the social and individual life of the people living in a particular village. Normally every village has a Panchayat and its head; it is elected with the consent of almost all the adult members of the village. Such as revenue, law and order etc, generally there is a village Panchayat, a village Nyay Panchayat, Panchayat of different castes and certain other social, religious and political group’s voluntary groups.

That are indented at helping the villagers are maintaining the religious customs and traditions play a vital role in determining the internal organisation and working of the villagers and village life. 4) Religion and religious organisation: Like caste, family internal organisation etc, religion is an important unit of the village social structure of organisation. In fact religion means worship of the super natural power. This super natural power means god and other gods and deities, worship of supernatural power and the ditties form an important part of village life. Villages have there own gods and deities.

In fact all those patrons of behaviors that are helpful in removing uncertainties of man’s everyday lie are known as religion. Indian life which in its real form it today represented only by the village life based on religion. 5) Economic system: Economic system has now come to occupy an important place in every social structure. In fact economic system determines not only the social structure but various other things. It includes the means and the system of production system of distribution, sharing of profit etc, according to Raymond forth; social and economic activities are inter-related have a mutual relationship.

They are interring dependent. In fact economic system very much determines the social structure. According to economic conditions the activities of a man are determined. This is true of the village society as well. The economic system of the villages is based of the following two factors:-

A) Functional specialisation and b) Inter-dependence.

In village society as we have seen earlier different castes have different occupations and functions. In other words their economic activities are determined by their social conditions. A particular social group has performed particular type of economic activities. For example the social group or the caste that is known as washer man is responsible for washing the clothes; no one can be to that profession.

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They have monopoly over the washing of clothes and they are prohibited taking to any other thing. In this manner they have a functional specialisation.

But in villages functional specialisation is not free from interdependence of people of a particular caste do a particular thing, members of other castes or social groups have to depend on them for fulfillment of their economic needs of earning their livelihood but also help the member of other social group to do their livelihood but also help members of other social group to do their job. Because of the backwardness of the economic position the social structure of the villages is also backward. It has to be studied in proper prospective so that real progress can be made. DISTRIBUTION STRATEGIES IN RURAL MARKETS Distribution strategy A 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 corner of the market and it also enables the firm to establish direct contact with them and thereby facilitates sales promotion. The mediocre companies with sizable resources may chip in for syndicated distribution. Haats and Melas could also be a great platform to display merchandise. Also, every region consisting of several villages is generally served by one satellite town termed as Mandi where people prefer to go to buy their durable commodities. If marketing companies use these feeder towns they can have a vast coverage of rural arena. Delivery Vans Companies can use their own delivery vans to reach the rural consumers. There are certain advantages of using delivery vans. They take the products to customers and retail outlets in every corner of selected rural markets and enable the company to establish direct contact with the consumers which helps in sales promotion. We can take the example of HLLs distribution strategy in rural market. In 1998, HLL landed "Operation Harvest" with an objective to increase penetration, increase brand awareness, encouraging trials and identification of key distribution points and retail points. Around 30,000 villages having high growth potential, having a population of at least 2000, and well connected by roads, were selected. The vans were retrofitted with a public address system and their audio-visual equipment. These vans covered six villages a day for six days in a week. The cycle was repeated couple of times in the same villages. On reaching the villages, they would play audio-cassette and video-films. These cassettes and films had songs and sequences from popular films with advertisement of HLL coming at some intervals. Company representatives distributed free samples. Small shops of villages were provided with HLL products like Lifebuoy and Wheel. This helped company to understand the potential of the market. Joint Distribution by Non-Competing Companies Companies having lesser distribution reach in rural areas can collaborate with companies already having wide network in rural market. This type of tie-up can prove to be beneficial as one can reach to large number of retail outlets by utilising the network and the other one can earn better revenue. Also, this type of joint collaboration can help both companies to reduce distribution costs and can convert operation which seems to be unviable into financially viable operation. Some examples of effective distribution tie-ups in rural market:  Samsung has tiedup with the Indian Farmers Fertilizer Cooperative (IFFCO). Thus, Samsung will use IFFCO's cooperative network for marketing the hand-sets to rural consumers over a wide area.  Nokia has entered into a partnership with HCL for distribution of its handsets.  Motorola and Nokia have partnered with TC e-Choupal which gave them wider reach in rural market. I  Procter & Gamble had tieup with Godrej and Marico Industries, and now it is planning one with Nirma as well for distribution of Camay Soaps.  Godrej has tieup with Jyothi Labs to use its extensive distribution network for marketing Godrej Tea across the country. Distribution up to Feeder Towns / Mandis

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Companies can cater to the needs of rural consumers by making their products available upto feeder towns or mandis. Feeder markets or mandis provide excellent scope for distribution of products like consumer durables, clothes, kitchen equipment, agriinputs and tools. The rural consumers visit these towns at regular intervals not only for selling their agricultural produce but also to purchase clothes, jewelry, hardware, radio, and other consumer durable products. Haats Along with permanent retail outlets, haats can also be utilised to make the products available to rural consumers. Haats are held on a particular day of every week. Typically, an average haat has 300 stalls. A haat usually serves around 5000 visitors. So if we consider average population of an Indian village to be 1000, then one haat caters to the needs of 5 villages. There are almost 47,000 haats in India. The sale per haat per day is Rs. 2.25 Lakh (approximately) and average sale per outlet is Rs. 900 (approximately). large number of retailers also buy products from haats for their village stores. About 90% of sales on haats are on cash basis. The participation fees at haats are a flat Re. 1 to Rs. 5 per stall which is very low. These figures show that targeting haats for distribution purpose can prove to be beneficial for companies. Companies can tap the rural consumers for clothes, cosmetics, FMCGs, kitchen equipments and agricultural tools at these haats. Leading manufacturers are introducing sachets of tea, blues and washing powders in these haats to create a demand and then meet the demand in affordable packages. Melas Over 25,000 melas are held every year all over the country. Out of these, 5000 are commercial melas, 2,000 are cultural melas and 18,000 religious melas. The following facts regarding melas will help us to understand their importance to marketers:  Number of visitors per mela is approximately 7.5 lakh.  On an average, 850 outlets are set in every mela. -up  Average sale per day in a mela is Rs. 25 Lakh.  Visitor turnout in a mela is very high.  A large part of the visitors in thesemelas are women and children, which is significant because rural women are restricted to leave village often. Melas are generally used to sell durables, high-priced items and new products launched. Examples of effective use of melas by marketers are:  Active participation of Maruti in rural melas like the kisan mela (Ludhiana), Sonepur mela (Bihar), Kila Raipur sports mela (Punjab) and Pushkar mela (Rajasthan). The melas provide both a platform for demonstration and improving product awareness, and also booking new sales.  In 2001, HLL ran a campaign at the Allaha ad Kumbh Mela to demonstrate to the visitors the importance of usage of soap for b better health and hygiene. Rural people in general believe that washing hands with water alone is enough, so there is no need to use soaps. HLL representatives educated them about use of soap for better health and hygiene. This awareness campaign has helped HLL to increase the sales of Lifebuoy in rural market. Hub & Spoke Method of Distribution The urban model of distribution in which the products are transported directly from the bottling plant to retailers is not very effective in rural markets as taking stock directly to retail point would be costly due to the long distance to be covered. So Coca Cola has opted for a hub and spoke method of distribution system. It worked this way: Coke bottles were transported from the bottling plants to the hubs (large distributors) and from hubs to spokes (smaller distributors) situated in small towns. These spokes then distribute the stocks to village retailers who cater to the demand in rural market.

UNIT IV

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MARKETING FINANCE Agricultural credit is of two types: 1.Production credit 2.Consumption credit

1.Production credit: (i) Short term: 15 to 18 months Loans to meet daily working capital requirements of farmers’ purchase of Inputs, payment of wages, hike charges of machinery or tools, electricity charges etc. (a) Cash component (b) Kind component: Co-operative marketing societies. (ii) Medium term: - Survey committee 15 months to 5 years. NABARD 18 months to7 years.  Creating capital assets.  Purchase of livestock, agricultural machinery, equipment etc.  Only a part of medium term loan is expected to be ventured in current production. The remaining is carried forward over the period of 7 years. (iii)Long term: -  5/7 years to 20/25 years. Land fencing, mechanization, construction of farm houses, storage facilities etc. 2. Consumption credit: It is basically for survival of farm families. Sources of agricultural credit: a) Co-operative credit: i) Primary co—operative credit: Short term ii) C-operative Land Development Bank: Medium term Limitations: i) Limited geographic coverage ii) Small and marginal farmers iii) Inconvenience in borrowing iv) Huge over dues V) Linked with ownership landholding b) RBI:

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Appointed AIRCSC, recommended: i) ii) The National Agri. Credit (Long term operations) fund; The National Agri. Credit (Stabilisation fund)

RBI issues guidelines: • • • Margins and security Credit norms finance: 30:70 cash: kind Recovery or default

c) SBI: It provides financial assistance to marketing for processing co-operatives as well as for co-operative sugar factories, LDB’s, industrial co-operatives etc. d) Commercial Banks: Direct finance is granted for agricultural operations for short and medium periods. Indirect finance is granted by providing advances for distribution of fertilizers or other inputs. These banks also finance for operation of FCI, State Government and their agencies for procurement. e) Agricultural Refinance: Parliament established Devt Corporation: 1963 ♦To co-ordinate, guide and assist long-term finance lending institution. ♦Helping in reduction of regional imbalances. ♦Reduction of regional disparities within states. ♦Economic upliftment of weaker section. f) R.R.B: (Features) ∆ ∆ ∆ Rural Based Cater to the needs of backward areas. Authorised capital structure: Authorised Capital- Rs. 1 Crore, Paid-up capital- Rs 25 Lakhs, Share Capital Ratio – 50:15:35 i.e. Govt: Own Deposits: Sponsoring Commercial Bank. ∆ Problems:  Problems in organization (Multi-agency control)  Increasing Losses.  Recovery Problems.  Problems in Management.

g) NABARD: Apex Body, which looks after the financial needs of agricultural and rural development. h) Government Finance:

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∆ ∆ ∆ ∆

Takkavi loans to release distress caused by the draughts, floods and the other natural calamities. TO assist the farmers to overcome emergencies. Land Improvement loans Act 1883 – Long-term loans. Agriculturists’ Loans Act 1884 – Short-term loans.

Factors Affecting Capital Requirements of an Agriculture- Marketing Firm: ∆ ∆ ∆ Nature and Volume of Business: Financial requirements for trading in high value crops like cumin, chillies, Cotton and oilseeds are higher than for trading in food grains . Whole sale business requires more than retail business. Necessity of carrying large stocks: This is in case of seasonal produce. Continuity of business during various seasons: Financial requirements are higher for continuing business than the seasonal businesses. ∆ ∆ Time required between production and sale: Financial requirements are higher for durable goods than the perishable ones. Terms of payment for purchase and sale: Whether payment will be in cash or credit or by instalments affect financial requirements of manufacturing middlemen. ∆ ∆ ∆ Fluctuations in the price: If the prices increase, the financial requirements increase. Risk – Taking capacity: A middleman with low risk – taking capacity often resorts to hedging and needs less finance than the middleman who takes risk. General conditions in the economy: During the period of price falls/recession, the financial requirements increase, since the marketing agency has to hold stock for a longer period in anticipation of a price rise.

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