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Introduction to Rural Marketing

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The rise in rural marketing provided volume growth to all leading companies in the beginning of 90¶s. Rural markets are facing many challenges to target rural markets. Higher rural incomes driven by agricultural growth have increased the purchasing power to consume branded and value-added products in rural areas. Marketers and manufacturers are increasingly aware of the purchasing power, size and demand base of the Indian hinterland. Efforts are been made by them to understand the attitude of rural consumers. Marketers want to follow the principle of WALK THEIR WALK and TALK THEIR TALK. Marketing mix is framed according to rural tastes and lifestyles. For example: MIRC ELECTRONICS, which owns the Onida television brand, launched IGO, which was positioned as a value-for-money brand targeted at rural markets, especially customers who were upgrading their black-and-white TVs, which constitutes 65% of the total colour television buyers. The ad campaign screamed loudly in rural lexicon: ³kasam se, kya TV hai!´

Objective:
The objective of this chapter is to understand: yThe concept and scope of rural markets yThe nature and attractiveness of rural markets yRoadblocks of Indian Rural Markets ySolutions to problems of rural markets

Definition of Rural Marketing:
According to Prof. Ramkishen Y, ³Rural marketing is the process of developing, pricing, promoting, distributing rural-specific goods and services, leading to exchanges between urban and rural markets, which satisfies consumer demand and also achieves organizational objectives.´

Rural marketing can be defined as the process where all the marketing activities like prospects, transforming those needs into offer, sales and marketing activities etc. are done specially for rural areas. Let us understand this definition and its implications: y Rural marketing involves a two way marketing process. y Every want is backed by an ability and willingness to buy. These are known as µdemands¶. Marketers are now trying to satisfy the rural demands by customizing the products and manufacturing the products as per the demand.

Classification of Rural Marketing: 1. Urban to Rural: It involves the selling of products and services by urban
marketers in rural areas. These include: Pesticides, FMCG Products, Consumer durables, etc.

2. Rural to Urban: Here, a rural producer (involved in agriculture) sells his
produce in urban market. This may not be direct. There generally are middlemen, agencies, government co-operatives, etc who sell fruits, vegetables, grains, pulses and others.

3. Rural to rural: These include selling of agricultural tools, cattle, carts and
others to another village in its proximity.

Features of Indian Rural Markets:
yLarge, 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. yMajor 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.

yStandard 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. yTraditional 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. yRising 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.

yInfrastructure 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. As part of planned economic development, the government is making continuous efforts towards rural development. In this age of liberalization, privatization and globalization, rural market offers a big attraction to the marketers to explore markets that are untapped.

Statistical Approach to Rural Marketing:
y Government agencies like IRDA (Insurance Regulatory and Development Authority) and NCAER (National Council for Applied Economic Research) define µrural¶ as ³villages with a population of less than 5,000, with 75% of the male population engaged in agriculture, etc.´ y Two-thirds of the country¶s consumers live in rural areas, which are around 700 million people, and almost 26% of the National income is generated there.

y 10 consecutive monsoons have led to 26% of GDP as returns from agriculture. This has increased their purchasing power. y India is divided into 597 districts, and has 6,38,667 villages, of which 32% can be reached as they are connected by pucca roads. y However, 68% of the rural market lies untapped due to various reasons ranging from inaccessibility to lack of awareness. y In all there are more than 3.8 million retail outlets in rural India, averaging 5.8 shops per village. y The rural market has been growing at 3-4% per annum, adding more than 1 million new consumers every year. y It now accounts for close to 50% of the volume of consumption of fastmoving consumer goods (FMCG) in India. As a result Rural India is becoming an important part of the market development strategies of all FMCG and consumer durables companies as well as service companies.

Characteristics of Rural Marketing:
India is a big country and its rural markets have varied characteristics that change from people to people, region to region. Some of the main features of India¶s rural markets are: 1. Diverse Nature: There are 6,38,667 Indian villages in ally Out of these 50% share a very small population of less than 500 and a limited purchasing power. Many of these villages don¶t even have a single shop. y In the second category there are 2,50,000 villages with a population between 500-2000. There are at least 5 shops per village. y Lastly there are 60,000 villages with a population of more than 2000. y Companies should try and focus on the last two categories more as they have high potential. Regional disparities heavily influence economic development, social interaction patterns, mobility patterns and awareness levels. y This in turn influences purchasing power. 2. Urban Market Saturation: y There is a cutthroat competition in urban markets, which have reached a stage of saturation.

y As a result, marketers are shifting focus to greener pastures in rural markets, as there is equal number of households in rural areas as in urban areas.

1) Rising Disposable Income of Rural Customers: y New tax structures, good monsoons, the green revolution and the Administered Pricing Mechanism (APM) have raised disposable incomes in rural areas. y It is ironic that rural people spend so lavishly on weddings, ceremonies and festivals amidst deficiency. y Today the rural consumer shop for µvalue¶. It is this µincome¶ that the companies are going to tap in the near future. 2) Rising Literacy Levels: Nearly 45% of rural Indians are literate out of which 59% are men and 31% are women. Around 12 crore people in villages are literate as compared to 12.5 crore in urban India. Every year produces 60 lakh literate people. Farmers are remarkably well informed about the changing world around them. The increased enrolment in schools has also generated a wave of rural demand for lifestyles and aspiration products. Hence, one cannot make generalizations about Indian Rural Markets. 3) Spread of Cable Television: The growth of satellite TV channels has had a major impact on villagers. It has led to a change in lifestyle and consumption patterns. Television has high capacity to raise interest levels as it has greater accessibility compared to other media. Rural consumers now aspire to buy brands rather than to just purchase commodities.

y y y y y

y y y y

Evolution of Rural Marketing

PHASE I

ORIGIN Before Mid1960 (from independence to green revolution)

FUNCTION

MAJOR PRODUCTS

SOURCE MARKET

DESTINATION MARKET

Agricultural Marketing

Agricultural Produce

Rural

Urban

II

Mid- Sixties (Green revolution to Preliberalization period) Marketing Of Agricultural Inputs Agricultural Inputs Urban Rural

III

Mid- Nineties (Postliberalization period on 20th century) 21st century Rural Marketing

Consumables And Durables For Consumption & Production Urban & Rural Rural

IV

Developmental All products & marketing services

Urban & Rural

Urban & Rural

1. 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.

2. 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. 3. Phase III (Post-liberalization period on 20th 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. 4. Phase IV (21st 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.

The objective of rural marketing in the current phase is the improvement of the quality of life by satisfying the needs & wants of the customers, not through atandalone products or services, but by presenting comprehensive & integrated solutions which might involve a set of inter-related products & services.

Till recently, the focus of marketers in India was the urban consumer and by large number specific efforts were made to reach the rural markets. But now it is felt that with the tempo of development accelerating in rural India, coupled with increase in purchasing power, because of scientific agriculture, the changing life style and consumption pattern of villagers with increase in education, social mobility,

improved means of transportations and communication and other penetrations of mass media such as television and its various satellite channels have exposed rural India to the outside world and hence their outlook to life has also changed. Because of all these factors, rural India in now attracting more and more marketers.

Increase in competition, saturated urban markets, more and move new products demanding urban customers, made the companies to think about new potential markets. Thus, Indian rural markets have caught the attention of many companies, advertisers and multinational companies. According to a recent survey conducted by the National Council for Applied Economic Research (NCAER), the purchasing power of the rural people has increased due to increase in productivity and better price commanded by the agricultural products. By and large this rise in purchasing power remains unexploited and with the growing reach of the television, it is now quite easy for the marketers to capture these markets.

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.

Coming to the frame work of Rural Marketing, Rural Marketing broadly involves reaching the rural customer, understanding their needs and wants, supply of goods and services to meet their requirements, carrying out after sales service that leads to customer satisfaction and repeat purchase/sales.

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.

Scope of Rural Marketing

Opportunities 1. Infrastructure is improving rapidly In 50 years only, 40% villages have been connected by road, in next 10 years another 30% would be connected. More than 90% villages are electrified, though only 44% rural homes have electric connections. Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected by STD.

2. Social indicators have improved a lot between 1981 and 2001 Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses halved (41% to 23%). Percentage of BPL families declined from 46% to 27%. Rural literacy level improved from 36% to 59%. Low penetration rates in rural areas, so there are many marketing opportunities Durables CTV Refrigerator Urban 30.4 33.5 Rural 4.8 3.5 Total (% of Rural HH) 12.1 12.0

FMCGs Shampoo Toothpaste

Urban 66.3 82.2

Rural 35.2 44.9

Total (% of Rural HH) 44.2 55.6

CONCLUSION
‡ Rural India offers tremendous opportunity for any company to tap. ‡ Companies face many challenges in tackling the rural markets. ‡ Important factors being an understanding of the rural customers' needs, a reliable distribution channel, and an effective marketing communication strategy to put their message across to the rural consumer

Table of contents
1) Introduction 2) Objective 3) Definition of Rural Marketing 4) Classification of Rural Marketing 5) Classification of rural consumers 6) Characteristics of Rural Marketing 7) Evolution of rural marketing 8) Nature of rural market 9) Scope of Rural Marketing 10) Conclusion