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A STUDY ON PURCHASING PATTERN OF

RURAL CONSUMERS
INTRODUCTION
The world of today is changing fast. India is no exception. Especially after the
opening up of the economy, the pace of change that India and its people are
experiencing in their socio-cultural is mind boggling. India, with its wide diversity,
offers a fascinating scope to study the host of changes which developmental
activities have brought about in its social & economical framework. While it is
possible to get some estimates of the macro changes taking place in India, it is
impossible to get any accurate measures of the subjective experiences that proceed,
accompany or follow such changes. However, the fact remains that the profile of
the Indian market is vastly different from what it was earlier. Although these
changes are difficult to measure at the micro level, nevertheless, they have been of
great significance to marketers. Any marketer is keen in closely monitoring the
changes in terms of numbers and specially keeping regular track of the changing
pattern of consumers aspirations and competitive actions. In our country 70% of
the total population lives in villages. Revolution and economic reforms in India
have brought out several changes in the whole market environment, especially in
rural market.
It is widely acclaimed that India is one of the largest consumer market in the world.
Estimation signs that the Indian consumer market is likely to grow four times by
2025. India's overall retail sector is expected to rise to US$ 833 billion by 2013 and
to US$ 1.3 trillion by 2018, at a Compound Annual Growth Rate (CAGR) of 10
percent.

Real India lives in villages. About 75 percent of Indian population lives in rural
area. In the country we have 6.45 lacs villages out of which only 13 percent
villages have population above 2000. More than 50 percent of the sales of FMCG
and Durable companies come from the rural areas. The McKinsey Report on the
Rise on Consumer Market in India predicts that in twenty years the rural Indian
market will be larger than the total consumer markets in countries such as South
Korea or Canada today, and almost four times the size of todays urban Indian
market and estimated the size of the rural market at $577 Billion.

LITERATURE REVIEW

The rural Indian population is large and its growth rate is also high which shows
that the Indian rural market has great potential which needs to be captured.
The purchasing power in rural India is on steady rise and it has resulted in the
growth of the rural market.
The rural audience has matured enough to understand the communication
developed for the urban markets Television has been a major effective
communication system for rural people and, as a result, companies can identify
themselves with their advertisements. Socio-economic changes (lifestyle, habits
and tastes, economic status)
INDIAN CONSUMER SURVEY REPORT 2013

Consumer optimism still falling. The decline in Indian consumer optimism


observed in 2011 intensified on the back of continued adverse macro conditions.
Compared to 2011, more people expect lower salary increases and expect personal
finances to worsen, making it a bad time for large-ticket purchases. Only 5% of
consumers we surveyed expect inflation to fall. Confidence in the government is
also waning.

Signs of down-trading in discretionary items. Not surprisingly there was a


temporary reversal in 2012 of the up-trading trend observed in 2011. The
preference for purchasing unbranded products again rose. Fewer people bought
smartphones and more now want to buy an entry-level car. This trend is reflected
in the commentary of many companies who operate in discretionary consumption
categories and are indicating a growth slowdown.
Rural doing better than urban. Spending patterns show a significant
divergence across rural and urban India. While the mean household income of
urban India declined 3%, it increased 6% in rural India. Car penetration has
stagnated in urban India, but doubled in the past two years in rural.
Low penetration bodes well for long-term growth. Another silver lining for
the long-term growth potential of India is low penetration across categories. Of the
eight countries surveyed, ownership of cars, smartphones and electronic items is
the lowest in India. They are among the lowest consumers of items, such as beer,
spirits, meat and cigarettes. While spending on education has come off this year, at
~10% of household income it is still pretty high compared to other countries. This,
combined with the greater participation of rural India and lower income categories,
bodes well for Indias consumption story.

SEVERAL MYTH ABOUT THE RURAL SECTOR

The belief that rural people do not buy brands.


The belief that rural customer buy cheap products. In reality they seek value for
money.
The belief that the rural market is homogenous mass. In fact it is fascinatingly
heterogeneous.
The census of India defines rural as any habitation with a population density of less
than 400 per square kilometers where at least 75% of male working population is
engaged in agriculture & where there exists no municipality or board leaning aside
Hindustan Uniliver Limited & ITC, most companies in the FMCG sector would
define rural as any place with the population up to 20,000. Rural consumers are
fundamentally different from their urban counterparts & different rural geographies
display considerable heterogeneity calling for rural specific & region specific
strategies e.g. a farmer in rural Punjab is much more progressive than his
counterpart in Bihar. A farmer in Karnataka is far more educated than one in
Rajasthan & so on.
An urban individual is free to take independent purchase decision. In a village,
because of strong social structure, including caste consideration and low literacy
level, community decision making is quite common. Companies face many
challenges in tackling the rural markets. Marketing is all about Getting to know
your customer. But having largely ignored this cardinal principle, most corporate
in rural markets find that success has eluded them.
The rural market account for market worth of 27$ billion. About 285 millions live
in urban India whereas 792 million resides in rural areas. 72% of Indias
population resides in its 600000 villages. Many companies like Colgate-Palmolive,
HCL & Godrej etc. have already furrows into rural households but still capturing
the market is a different dream. For quite sometime now, the life of the rural India
has been the subject of animated discussions in the corporate suites, with the urban

markets getting saturated for several categories of consumer goods and with rising
rural income. For example, Tata chemicals ran a chain called Tata Kisan Kendra
which offered services ranging from agriculture input to financing to advisory
services. Hindustan Levers is offering deals to farmers to cover operation from the
pre harvest to post harvest stage. Mahindra & Mahindra limited, Indias largest
farm equipment company & its subsidiary Mahindra Shubhlabh services has
operated in eleven states with 7 lacs strong Mahindra tractor customer base& 400+
dealers provide a complete range of products and services to improve farm
productivity and establish market linkages to the commodity market chain.
BUYING BEHAVIOR:
Once the marketer has insured both economic and physical access to its product it
needs to evaluate the buying behavior of consumers in rural areas.
To understand the buying behavior of rural consumers, we must go to the factors
that influence their buying behavior. The factors include:
1. Socio-economic environment of the consumer
2. Cultural environment
3. Geographic location
4. Education/literacy level
5. Occupation
6. Exposure to urban lifestyles
7. Exposure to media and enlarged media reach.
8. The points of purchase of products.
9. The way the consumer uses the products
10. Involvement of others in the purchase.

11. Marketers effort to reach out the rural markets


Some of these points are discussed in some detail below:
INFLUENCE OF CULTURE:
Culture and tradition influence perception and buying behavior. For example, the
preference in respect of color, size and shape is often the result of cultural factors.
Rural consumers perception of products is strongly influenced by cultural factors.
GEOGRAPHIC LOCATIONS:
Rural consumer behavior is also influenced by the geographic location of the
consumers. For example, nearness to feeder towns and industrial projects influence
the buying behavior of consumers in the respective clusters of villages. We are
discussing this aspect in detail in the section on market segmentation in rural
markets. To cite one more example of how geographic location affects buying
behavior, we can point out the fact that the lack of electricity in many rural
households acts as a barrier to the purchase of certain consumer durables.
EXPOSURE TO URBAN LIFESTYLES:
Extent of exposure of rural consumers to urban lifestyles also influences their
buying behavior. An increased exposure and interaction with urban communities
has been the trend in recent years.
THE WAY THE CONSUMER USES THE PRODUCTS:
The situation in which the consumers utilize the product also influences their
buying. The example of lack of electricity affecting buying behavior illustrates this
point as well. Lack of electricity automatically increases the purchase of batteries
by rural consumers. Similarly, since rural consumers cannot use washing
powders/detergent powders that much, as they wash their clothes in streams or
ponds, they go in more for washing bars and detergent cakes.
PLACES OF PURCHASE:

Buying behavior of rural consumer also varies depending on the place of purchase.
Different segments of rural buyers buy their requirements from different
places/outlets. Some buy from the village shopkeepers; some from village
markets/fairs; others buy from the town that serves as the feeder to the rural area.
It is also seen that the same buyer buys different requirements from different
places. For understanding the buying behavior of the rural consumer correctly, the
marketer must ask the question: Where from do they buy the products and why?
INVOLVEMENT OF OTHERS IN THE PURCHASE:
Involvement of others in the purchase in the purchase decision is yet another
relevant factor in this regard. There has been a change here in recent years. In the
past, the head of the family used to make the purchase decision all by himself. In
contrast, the involvement of the other members of the family in the purchase
decision has been growing in recent years. An increase in literacy coupled with
greater access to information has resulted in this development. The marketer has to
reckon the role of the influencers while sizing up the buying behavior of rural
consumers.
MARKETERS EFFORTS TO REACH OUT THE RURAL MARKET:
In recent years, many corporate companies have been trying hard to develop a
market for their products in the rural areas, investing substantially in these areas.
This has brought about some change in the way buyers purchase different products.
Developmental marketing has created discriminating buyers and hitherto unknown
demand in the rural market.
All the above factors influence the buying behavior of rural consumer and hence
their responses to the marketing mix variables, and the reference points they use
for purchase decisions.
BRAND EQUITY:

Brand equity is another aspect of perception. Some of the brands like Colgate,
Marlboro are popular brands in rural areas. It might therefore be advantageous to
retain these brand names and packaging in rural areas, although companies might
want to use the local language on the package itself.
PRICE-QUALITY RELATIONSHIP:
The next aspect of perception is price quality relationship. Mostly rural area
consumers rely on word of mouth communication more than price as a means to
judge quality.

COMPARATIVE STUDY OF RURAL AND URBAN CONSUMERS

Location:. Urban consumers prefer location as the major factor for choosing the
particular store as compared to rural consumers because it reduces the commuting
distance, so he/she chooses retail store in his/her nearby locality.
Reference: References from family & friends plays major role in choosing a
particular store for rural consumers than for urban consumers, because of their
economic conditions, they dont go in search of the information related to the retail
store so they go by word of mouth.
Brand name: Brand name is widely considered by urban consumer but its not of
much importance to a rural consumer as urban customer is more brand conscious,

he goes in search of a particular brand in choosing a retail store and brand is


considered as status symbol amongst urban consumer.
Discounts: Discounts on commodities attract rural consumers more wherein the
urban consumer is not distracted by the discounts because of their income factor.
The per capita income of rural customer is low compared to urban customers.
Service: Having Services like Free home delivery, pay by card, retailers loyalty
card is of prime importance for Urban consumer where as rural consumer doesnt
give much importance to the factor because he just goes & gets the products due to
ignorance/literacy.
Comfortness: Ease of shopping like getting all the products or different brands at
one place is the factor which attracts urban customer rather than rural customer
Product variety: A variety amongst products is paid attention equally by both rural
& urban customers.
Parking Facility: Urban customers perceive a retail store with parking facility as
the bonus for their tension free shopping than their rural counterparts because in a
city like Bangalore parking is the biggest challenge for the customers and the urban
customer doesnt want to go in search of parking place which is very time
consuming.
Others opinion: Previous buying experiences of their fellow rural consumers are
of prime importance for rural consumers.
Product Availability: Product Availability plays important role for Urban
Customers than the rural customers. The urban customer makes sure about the
availability of product before travelling to the retail store, so that his efforts doesnt
go in vain in reaching the retail store.
Entertainment: Though Entertainment plays vital role between both the
consumers, urban consumer gives more importance as he/she feels it as part of
relaxation. Urban customer thinks entertainment is of prime importance while

shopping at a retail store as he wants to relax amidst his busy schedule whereas
rural customer rarely pays any attention to entertainment factor as his focus is just
for shopping.
FAMILY SIZE Rural consumer behavior is also influenced by family size and
structure. As the family size increases so does the consumption of products. In such
a case, the demand for family pack or the economy refill pack increases. Likewise
large families have more bread earners which mean higher family income and thus
more consumption of products. This often leads to multi brand consumption of a
product category among different family members.
PRICE It is the amount of money a consumer must pay to obtain the right to use a
product (Hawkins, Best and Coney 2001).The right price influences the quantities
of various products or services that the rural consumers will buy. Marketers often
erroneously perceive price as their only bludgeon when targeting rural consumers.
In reality rural consumers are driven by value for money and not price alone. High
priced products with difficult to handle features is generally not liked by rural
consumers. Gillette Guard was launched to provide high quality shave at an
affordable price for men in the rural areas. Rural consumers generally compare a
products price to a reference price considered reasonable for a certain type of
product. The reference price is based on either the memory of past prices or on the
price of other products on the same shelf or the same product line. Based on the
reference price the consumer judges whether prices are too high, too low or on
target. Rural consumers are deeply involved in the purchase of agricultural
products and wedding items. Here price plays an important role, but not at the cost
of quality.
AGE The purchase of products and their forms are influenced by age. Like urban
areas this is highly visible in case of rural areas. For instance in the age group of
twenty to forty the consumption of motorcycle, mobile, readymade clothes is more

as compared to a person above sixty. For example, in rural area, young adults
exhibit a marked preference for mobile handsets with the latest features and
technology whereas elders are content with second hand mobiles with simple and
basic features.
ADVERTISING Low literacy level, poor media reach and exposure and the huge
and diverse rural audience characterized by variations in language, culture and
lifestyle poses multiple challenges for communicating with the rural audience. For
rural consumers the message has to be simple and logical. The use of education
with entertainment and slice of life appeals gets more acceptances. The FM radio
station has truly matured radio as a medium of rural communication. Television is
the fastest growing and most popular mass medium in rural areas. Conventional
outdoor media includes wall paintings which is a widespread form of advertising in
rural Bihar. Wall paintings are important as they remind rural people constantly of
the brand name and logos, in addition to highlighting the key brand promise.

RURAL MARKET OPPORTUNITIES

The Indian growth story is now spreading itself to Indias hinterland, not just
witnessing an increase in its income but also in consumption and production. The
economy is vibrant, income is rising, and the habits, tastes, preferences, and
attitudes are changing rapidly. Nowhere these changes are evident in the rural
areas. The rural market has grip of strong countrys shops, which affect the sale of
various products and services in the rural market. The companies are trying to
trigger growth in rural areas. The low rate finance availability has also increased
the affordability of purchasing the costly products by the rural people. Although
with the substantial upgradation in purchasing power, increased brand
consciousness pattern and rapid spread of communication network , rural India
offers a plethora of opportunities, all waiting to be harnessed, the marketers lack of
in-depth knowledge of the villages psyche, strong distribution channels and
awareness that are indeed the fundamentals for making a dent into the rural
markets. Indias rural market offers a huge potential for the marketers and seems to
be the replacement of urban market. The rural market is extremely attractive with
its vast demand base and offers the following opportunities The rural market is
now acknowledge viable market that has captured the attention of marketers, it
already accounts for 56% of Indias total income, 64% of expenditure and 33% of
savings. Infrastructure is also developing fast, leading to the better connectivity by
road (67% villages are connected by all-weather roads), by phone (30% teledensity in rural areas), and access to mass media through television. Increased
electrification of households (60%) has opened up the rural market for durables.
All these factors have increased the purchasing power and the demand base for and
access to new goods and brands, as seen over the past decade.
The future of the rural India looks brighter. Future predictions of income are very
positive, suggesting that the present income will change as the proportion of the
poor earning less than USD 1 per day drastically shrinks over the next decade to

almost half. The majority of the rural population will be earning between USD1to
5 per day, and the proportion with the incomes of over USD 5 per day will increase
three-fold. Rural India is fastly moving from poverty to prosperity. The rural
population earning more than USD 5 per day per capita income holds great
promise for the marketers. Rural income constitutes around 56%shares of the total
income in India.
The per capita in rural India has increased from INR 4860 in 1994-95 to INR
15,173 in 2010. The middle class grew six fold in this decade and expected to grow
from 32 million in 2005 to 208 million in 2025. Income growth per households is
expected to accelerate from the current 2.8 percent to 3.6 percent by 2025. Good
monsoons and two-fold increase in the support price of food grains in the last
decade have contributed to improving agriculture prosperity as well as to a INR
720 billion loan waiver, which benefitted 40 to 45 millions farmers. A major shift
to cash crops will increase the income from agriculture. The continuing increase in
prosperity leads to increase in the demand of consumer and non-consumer goods in
rural areas. An increasing labour force participation in non-farming activities has
led to more income earning opportunities, and this trend is likely to grow in future,
which further promote the marketers to enter into the rural market.
An increasing number of people have given up farming (declined from 63% to
50% during 2000-2010) on account of land fragmentation, declining profitability,
and increasing nuclearization of families. India is no longer an agrarian economy.
There is an increasing incidence of supplementary occupation-an occupation
pursued either in addition of primary occupation, or on seasonal basis to augment
income. Thirty percent of rural households have a supplementary occupation. Out
of these, 56% have been stated as self-employment in agriculture as their
supplementary occupation.

Over the next decade, it is expected that the rural infrastructure will improve
drastically, with approximately 100% road connectivity, electrified villages,
literacy, television households, 80% pucca households and 50% mobile
penetration. The government has spent INR 480 billion in the year 2010-2011
Bharat Nirman Programmes, leading to rapid infrastructure development, and 53
percent increase from 2009-2010. The government has the target to create 10
million hectares of additional potential, to provide allweather connectivity to all
habitants with over a 1,000 population , to provide electricity to 1,25,000 villages
and to construct six million houses in rural areas, and to connect telephonically all
habitants. The infrastructure development attracts the marketers in rural areas. The
rural enterprises, especially non-farming has doubled 25 million between 19902025, absorbing an 20 million workforce largely in services like trading and
transportation, and social services, which have emerged as rapidly grow in sectors
in rural areas. Out of the total of 41.8 million enterprises in the country, 25.5
million (61%) are located in the rural areas. These are the driving force of demand
base for the rural people.
Rural markets are also very viable targets for marketers as a young population;
rising income and low penetration of many consumer durables imply that they are
a strong source of demand. Moreover, the consumption pattern in rural areas is
witnessing a shift from necessities to discretionary products. The survey has
revealed that about one in every two rural households now has a mobile phone and
around 42 per cent of rural households owned a television in 2009-10, up from 26
per cent in 2004-05. Internet and mobile revolution has given rural India a
complete makeover. Rural areas offer a great potential for growth in internet usage
with the number of claimed internet users in these spaces to be reached at 45
million by December 2012, according to the recent IMRB survey, conducted
jointly with the Internet and Mobile Association of India (IMAI). The penetration

of the computer literates among the rural population is 8.4 per cent while the
penetration of claimed internet users has grown from 2.68 per cent in 2010 to 4.6
per cent in 2012. The penetration of active internet users has enhanced from 2.13
per cent in 2010 to 3.7 per cent in 2012.
Rural market offers significant growth potential. Growing adaptability to
innovative products is increasing in the minds of rural customers. The following
points important to notice in this respect:
The major Indian consumer base present in rural areas, the FMCG sales have
grown at 6-7 percent over the last couple of years, and rural markets contribute
about 40-50 percent of revenue, which is very impressive. The demand for the
personal care products grew faster in rural areas than urban areas. Most of the
FMCG corporations have increased their hiring in rural India in order to establish a
rural contact and increase visibility. The rural market will be a key growth driver
for FMCG majors planning to expand their domestic business. It is estimated that
more than two-thirds of the next generation youth will come from rural India.
The rural retail market is currently estimated at US $ 112 billion, or around 40%
of the US$ 280 billion Indian retail market. There has been a greater shift from
purchasing nearby towns towards purchasing locally. This phenomenon has
important implications for the rural marketers. The marketers can reach the rural
customers by effectively utilizing the rural retail system.
The rural market volume is an indication of the market attractiveness and this is
influenced by the market size and also the market profile. The large base of
population and increasing income make the rural market an attractive proposition
for marketers. The market volume is captured by the consumption expenditure.
Challenges of Rural Market in India
The rural market offers a vast untapped potential, it should be recognised that it is
not easy to operate in the market, because of several attendant challenges. Rural

market remains untapped because of mainly three challenges:-distance, diversity,


and dispersion. As much as Rural India presents a great opportunity, there are still
many challenges that have to be overcome. Dispersed population and trade, large
number of intermediaries in the value chains leading to the higher costs, scarce
bank and credit facilities for rural customers and retailers, highly credit driven
market and low investment capacity of retailers are the other roadblocks. Thus,
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 into the rural segments.
1) The large population base and number of households indicates a widely spread
out market and it is a challenge for the marketer to service this dispersed market.
The number of the villages is more than five lakhs and is not uniform in size.
Nearly half of the population lives in middle sized villages which have a
population ranging from 1000 to 5000 persons. These types of distribution of
population warrants appropriate distribution and promotion strategies to decide the
extent of coverage of rural market.
2) The rural per capita income is low as compared to urban area. Low per capita
income leads to low purchasing power. This apart, the distribution of income is
highly skewed, since the landholding pattern, which is basic asset, is itself skewed.
Thus, rural market presents a highly heterogeneous scene. Therefore few
challenges arise in this respect, like; off-taking of any product by rural consumer,
maintaining of inventory levels, distribution system options, and frequency of
distribution. This aspect should be carefully considered by the marketers.
3) There are lacks of proper physical communication facilities in rural areas.
Nearly half of the villages in the country do not have all-weather roads. Therefore

reaching these villages is very physically taxing. Hence, distribution efforts put up
by the marketers prove to be expensive and ineffective.
4) The rural market, by and large, are characterized by underdeveloped people and
consequently underdeveloped market. A vast majority of rural people is not
financially stable and is tradition-bound, fatalistic, mired in age-old customs,
traditions, habits, taboos, and practices. Unfortunately, the impact of agricultural
technology has not been felt uniformly throughout the country. The large segments
of rural population have remained untouched by technological breakthroughs.
5) There are vast variations in the levels of literacy amongst rural people. Around
two-fifth of the rural population is illiterate and only one-fifth holds a matriculate
or higher degree. Also, literacy levels vary hugely among different states. These
variations pose a challenge to easy and clear comprehension of the message by all
sets of rural audience. The limited reach of mass media in rural areas and its
regional and state variations pose limitations on a universal approach to
communication for rural consumers. Also different perceptions, traditions, and
values across states and in some case within a state; are other obstacles in
communication development.
6) The distribution of products continues to pose an immense challenge to
marketers because reaching of 7.8 million retail outlets spread across 6,40,000
villages and feeding a retail network of villages shops is a distribution nightmare.
The challenges for the suppliers is the small size of each villages with low
throughout per outlet, coupled with the high cost of distribution since these villages
are some distance away from distributors. These factors make high quality
distribution unviable. The distribution of any product in the rural areas; agricultural
inputs, consumables or durables, should necessarily follow a seasonable pattern.
The demand pattern in the rural areas is seasonable. The distributions in the rural
areas are frequent and not uniform throughout the year. The rural market in India is

undergoing a massive change. These changes have resulted in shifting the


marketable battlefields from urban to rural. Most of the companies treat rural
market as a dumping ground for the lower end products designed for urban
audience. But, this scenario is slowly changing and importance is given to the need
of the rural customer. Considering the emerging issues and challenges, government
support is necessary for the development of marketing. The government may adjust
suitable budget allocations to rural infrastructure plans, and proper supervision for
effective plan implementations. Marketers should understand these challenges and
then making strategies in the light of these challenges to face them and to tap the
rural Indian market and importance is given to the need of the rural customer.
Considering the emerging issues and challenges, government support is necessary
for the development of marketing. The government may adjust suitable budget
allocations to rural infrastructure plans, and proper supervision for effective plan
implementations. Marketers should understand these challenges and then making
strategies in the light of these challenges to face them and to tap the rural Indian
market.

Analysis of Rural marketing Scenario