Unit 2nd

Rural marketing
Definition: A Rural Consumer is an end-user of the products offered in rural markets. More
precisely, a rural consumer is the one who buys goods & services for self-consumption, reselling
or reproduction in the rural areas.

The rural consumer has less disposable income. So, they prefer to buy less expensive products.
They differ from the urban consumers in respect of lifestyles and thinking.

The user’s needs and wants of the rural market are different. Thus, the rural consumer possesses
distinctive characteristics.

Rural Consumer

Definition: 

A Rural Consumer is an end-user of the products offered in rural markets. More

precisely, a rural consumer is the one who buys goods & services for self-
consumption, reselling or reproduction in the rural areas.

The rural consumer has less disposable income. So, they prefer to buy less
expensive products. They differ from the urban consumers in respect of lifestyles
and thinking.

There is a significant change in the rural consumers due to the growth in:-

 Disposable Income
 Education Facilities
 Media Reach
 Urban Interactions
 Reach of the marketers

Rural markets came out as potential markets over the years. With the markets,
there is a growth in consumer base having varied characteristics.
Therefore, rural marketers analyze the consumption pattern and lifestyle of the
consumer. To remain competitive, the marketers develop rural and region-
specific marketing strategies.

Hence, the marketers must explore and understand rural consumers’ buying habits
and preferences. This is helpful in meeting the organizational marketing objectives
and earning profits.

Content: Rural Consumer

1. Characteristics
2. Types
3. Myths
4. The exploitation of Rural Consumers
5. Rural Consumer Behaviour
6. Factors Affecting Rural Consumer Behaviour
7. Conclusion
Characteristics
The user’s needs and wants of the rural market are different. Thus, the rural
consumer possesses distinctive characteristics.

Education

Consumers are less literate due to fewer educational facilities.

The marketers need such strategies which generate product awareness considering
this characteristic. They can incorporate an audio-visual medium of
communication in their marketing campaign.

Low-Income Levels

The income of the rural consumer has grown over the years. But still, their
disposable income is spent on basic necessities. They prefer affordable products
and purchase only the required quantity of goods.

The marketers must launch their products in small packaging and at lower rates.
Occupation

The consumption pattern of rural consumers largely depends upon their income
and occupation. It is observed that the occupation of a rural consumer is framing in
general.

There exist other professions as well, like service providers, technical workers, etc.
The companies must launch such products in markets that satisfy all consumer
groups.

Impact of Reference Groups

In rural areas, the consumer is often influenced by a few people. Consequently,

there is a significant change in their buying behaviour.

The rural marketers must plan their strategies that positively impact these
influencers.

The people who may influence rural consumers may include:

1. Local Vendors
2. Teachers
3. Bank ManagersLocal Leaders
4. Health Workers, etc
5. Media Habits
People residing in rural areas are less literate, as discussed above. Thus, print
media does not have much impact on rural consumers.
The companies must use those communication channels that reach consumers
quickly.

Brand Loyalty

Rural consumers tend to be loyal to brands. With the development, rural

consumers are well aware of the available brands.

Some brands have successfully created a strong consumer base in the rural
markets.
Value for Money

It is the main characteristic of rural consumers. Consumers look for quality

products at justified prices.
Rural marketers should try to create a sense of trust in the mind of the consumers.
And offer products that deliver maximum benefits as per their value.

Types of Consumers

We can categorize users of rural areas into three categories mentioned below:

 Households: The customers who purchase products for self-consumption.

The goods purchased are consumed and not used for further production. They
buy products for:-
 Family Needs
 Personal Use
Rural Industrial: This type of consumer buy products for reproduction. The
industries buy raw materials from the market, reproduce them into a new
product.
Rural Resellers: They are the retailers of the rural areas. The rural resellers
don’t consume the products. However, they buy the products to resell them in
the local markets.
Myths about Consumer in Rural Areas

There are some myths about the Rural Consumer. Rural marketers need to know
the real picture to develop an effective strategy.

Following are several myths related to the rural consumer:

1. Buy only low priced products

The rural consumer seeks value for money. That doesn’t mean they only buy
low priced goods. They make purchase decisions based on quality,
functionality, and product availability.
 2. Homogeneous consumer base
Marketers have a misconception that all rural consumers are homogeneous.
But research reveals that in rural areas consumer base is diversified. Their
taste and preferences differ from one another.
3. Buy whatever the companies offer to them
Consumers brand loyalty make marketers think that consumers will buy
anything they offer. But, companies must make continuous initiatives to
attract and retain their consumers.
4. No brand awareness
With the increase in literacy rate and widespread use of the Internet and
Broadcast media, consumers are aware of the products. Consequently, they
can differentiate among various brands and products available in the market.
5. Many uses of products
It is perceived that rural consumers use a product in multiple ways. This may
be an outcome of the incomplete information provided to the user about the
products.
The marketer must convey the correct usage and directions for the use of the
products.
The exploitation of Rural Consumers

 Wrong measurement of the goods.

 Undue high prices of the products are charged.
 The sale of fake and duplicate products in the rural markets.
 Misguiding consumers by giving wrong product information.
 The sale of expired medicines in the market.
 The dominance of the suppliers, producers and officials by creating groups.


Factors influencing rural consumer purchase decision

India in last twenty years showed a remarkable shift in its economic, social and technological
environment. By the liberalization and privatization policies and the subsequent phenomenon of
globalization have led to huge inflow of foreign investments and entry of large MNCs in India.
Many domestic Indian organizations of the field those in ICT, automobile, textile and
engineering products have expanded their operations into overseas markets. As products and
markets are turning global, organizations are facing competition both in the domestic as well as
in the international markets.
Task of marketers has become more challenging due to shift in the demographic profile and
demands of consumers. Organizations of industries such as FMCG, telecom, insurance, financial
services, consumer durable and automobiles are nowadays employing innovative marketing
practices for their survival and also to increase their market share

These organizations are now shifting their focus from the saturated metros and tier-I cities to the
rural and semi urban towns, to increase their revenues and market. But rural areas have their own
limitations in terms of number of villages with low population density, accessibility,
infrastructure, telecommunication network, illiteracy, social and cultural backwardness and low
income.
Besides this almost seventy percent of Indian population stays in the rural areas and the revenue
generated by the agricultural sector in the total GDP is less than seventeen percent. The
maximum of rural population has comparatively low income as well as consumption rate
compared to their urban areas. Still yet they have aspirations and wants for most of the urban
products.
The factors that have created rising demands among rural buyers are increase in literacy levels,
migration to urban sectors, growth in media and telecommunication, availability of bank credit
schemes, globalization of market, low price technology products (such as television, mobile,
fridge, camera, etc.), government sponsored employment generation, and tax concessions and
loan waivers.
Rural people nowadays are no longer ignorant and resigned to their fate. Today a rural buyer not
only has purchasing power but he is also better informed about the price and demand of the
products for which the money is being spent. They are looking for better quality, durability and
multi utility of the products and services offered in the market to them.

Socio-cultural Factors
Socio-cultural environment is an important part of environment — culture, traditions, beliefs,
values and lifestyle of the people within a limitation of society constitute the socio-cultural
environment.
The following elements play a big role in the decision making stage to a large extent as to what
the people will buy and how they will consume.

Culture
Culture is the combination of factors like religion, language, education and upbringing. Accurate
information on the consumption habits, lifestyle and buying behavior of the rural people can be
obtained through a survey of the socio-cultural environment.
Cultural shifts carry the marketing opportunity as well as threats and also carry the cultural
dynamics, the needs and feelings of rural people which need to be understood.

Social Class
Social class is one of the main concepts in socio-cultural environment. A society consists of
different social classes and all social classes are determined by income, occupation, literacy level
etc. of its members. Each class has its own class values according to lifestyle, behavior etc.
These values have a strong consumption pattern and paying behavior of the member of the class.

Social and Cultural Environment

The society and polity across the country varies between different religions, castes and linguistic
groups. Common socio-cultural behavior has been mapped as distinct sociocultural regions,
which may be spread across political boundaries. The influence of social practices shows itself in
consumer preference for product features, product size, shape and color.
The source of information also gets influenced by social practices. Along with cultural dynamics,
the needs feelings of rural people also need to be understood. Marketers would first understand
this and then design and launch products accordingly. For example, Cadbury’s has launched
Chocobix, a chocolate- flavored biscuit, on the basis of research theory and understanding that
rural mothers will always opt for biscuits instead chocolates for their children.

Caste System
Indian Society had a scheme of social gradation, with the Brahmins at the head of the hierarchy,
followed by the Kshatriyas, the Vaishya’s and the Shudras at the bottom. The castes in
themselves have sub-castes which are claiming social supremacy over the other.
Marketers have to be sensitive towards the caste systems and accordingly products in rural areas.
While developing advertisements, brand communication and promotion plans, marketers should
have to be sensitive to ensure relevance of characters and message which doesn’t affect any caste
system.

Population
India is the largest democracy in the world occupying 2.4 percent of the world’s geographical
area and supports 16 percent of whole world population. More than 72 per cent of the total
population of our country resides in rural areas.
The estimated size of India’s rural consumers can be estimated from the following table. This
table highlights the rural and urban population of India between 1981 and 2001
 Increase over Previous decade
1981 1991
2001 1991

Rural Population (in 50.20 60.21 66.0 +10.01 +5.79

crore)

Urban Population 15.62 24.18 32.6 +8.56 +8.42

(in crore)

Total 65.28 84.39 98.6 18.57 14.21

According to this table, around 72 percent of the total population of our country lives in rural
areas. This provides the marketers a larger market as compared to the urban market. So, growth
in population is the main contributing factor that leads the marketers to have an eye on this
particular segment.
In terms of the number of the people, the Indian rural market is almost twice of the entire market
of the USA and the USSR. But we have to consider other factors while studying rural marketing
environment like occupation pattern, spending pattern, economic reforms, source of income
generation and infrastructure facilities etc.

All India

Census year Population(in lakhs) Decadal Growth Rate

Rural Urban Total

1901 2125.4 258.5 2383.9 -

1911 2261.5 259.4 2520.9 2.3

1921 2232.3 280.9 2513.2 -0.31

1931 2455.2 334.6 2729.8 11.00

1941 2745.1 441.5 3186.6 14.22

1951 2986.5 624.4 3610.9 13.31

1961 3602.9 798.4 4392.3 21.64

 1971 4390.5 1091.1 5481.6 24.80

1981 5238.7 1594.6 6833.3 24.66

1991 6286.9 2176.1 8463.0 23.86

2001 7416.6 2853.6 10270.2 21.34

The above table shows you the population and its growth between 1901 and 2001 and also how it
is now growing rapidly.
Though the proportion of rural population to total population of country is showing a slight
decrease over the years, but in absolute numbers rural population is increasing at a higher rate
than the urban population. The increasing rate of population in rural areas provides scope for
marketing of consumer durables goods and services.

Occupation
Occupational pattern of rural people also has an impact on the nature of income generation,
which will in turn affect the expenditure pattern. Purchase behavior of the rural consumers
depends upon the nature of occupation and the consistency in the generation of income.

Occupation Proportion Of Rural Population

Agriculture 50

Agriculture Labour 27

Business 10

Non-Agricultural Labour 9

Salary Earners 2

Not gainfully employed 2

Total 100
A major section of the rural population relies on agriculture and allied activities for occupation.
So, the income in the hands of rural people is very much conditioned by the status of agriculture
and other allied activities.

Literacy Level
The literacy level of rural people has a considerable impact on the marketing strategies to be
adopted by the marketing team especially in communication with the rural people. Higher the
level of literacy, the easier it becomes for companies to penetrate into rural areas.

1971 1981 1991 2001

Sex
Rural Urban Rural Urban Rural Urban Rural Urban

Male 34 61 41 66 58 81 57.9 81.1

Female 13 42 18 48 31 64 30.6 64

Total 24 52 30 57 45 73 44.7 73

From the table, we can make out that there has been a rise in the literacy rate during the last two
decades, changes in the literacy rate from 1991 was only marginal. It can be further noticed that
only 45 percent of rural people are literate in our country even today.

Land Distribution & Use

One of the main obstacles for marketers to exploit the rural market potential has been the
largeness of rural markets in terms of the areas it covered. It is much easier to divide it according
to the needs of the urban population because of concentration, but it is very difficult in the case
of rural market because of their widespread nature.
The following table shows the distribution of villages in India −

Population No.of Villages Percentage to total

Less than 200 114207 17.29

200-499 155123 24.3

500-999 159400 25.0

 1000-1999 125758 19.7

2000-4999 69135 108

5000-9999 11618 1.80

10000 and above 3061 0.5

Total 638.356 1000

This clearly shows that rural population is distributed in almost about 638365 villages. It is
also noted that villages are not uniform in size. About 42 percent of the villages in India has
population of less than 500 people in it.
 

Opportunities in Rural Market

To solve the problems of rural market and rural marketing in India, the following points need to
be considered by marketers −

Physical Distribution and transportation

Regarding the problems of physical distribution, the marketers may have stockiest/ clearing-
cum-forwarding (C&F) agents at strategic location for facilitate the physical distribution for its
products in the rural market. The important advantage of this scheme is that the costs of physical
distribution can be shared between the companies and stockiest.
The different modes of transportation based on availability of tracks should also be beneficial to
the companies. Even to this day, bullock-cart plays a very vital role in physical distribution
where the roads are not available. Some of the leading MNCs use delivery vans in rural areas.
These delivery vans take the products to the retail shops in every corner of the rural market and
enable the companies to establish direct sales contact with majority of the rural consumers. This
in turn helps in sales promotion.
Rural Market and Retail Sales Outlets
The rural market consists of a number of retail sales outlets along with low price shops under the
public distribution system. The government should take initiatives to encourage private
shopkeepers and cooperative stores to come forward and establish their business in rural areas.
Fertilizer companies should open their outlets for proper distribution of fertilizer to the farmers.
In addition, the companies dealing in consumer goods can also apply this model and appoint a
number of retailers in rural market and attach them to the stockiest who distributes the goods to
the retailers as per the potential demand of the market. This approach will help the companies
penetrate into the interior areas of the rural markets.

Sales Force Management

To solve the problems of sales force management, the company takes due care in the recruitment
and selection of sales people because the traits they require are different from that of the urban
sales persons. These sales people must be fluent in the local/regional language and also have
patience to deal with rural consumers.
Controlling and operating of such a large and scattered sales force, supervising them in sales
calls, guiding and attending to their official and personal problems, and motivating them for
getting better results should be an exciting and challenging task for the sales manager. Thus, the
people operating in rural areas should have an inherent zeal to serve the rural peoples and to
connect with them.

Marketing Communication
For marketing communication in rural areas, the companies should use organized forms of media
like TV, Radio, cinema and POP (point of purchase) advertising. In recent times, television is
gaining popularity in rural areas but due to lack of supply of electricity, radio is performing quite
better.
The rural people need demonstration, short-feature films and direct advertisement films that
combine knowledge and perform as better rural marketing communication. The companies now
also use audiovisual publicity vans that sell the products with promotion campaign directly.
Companies can also organize village fairs, drama shows, and group meetings to convince the
rural consumers about the products and services.
For the rural markets, those sales people are preferred for selection who are willing to work in
rural areas like Sarpanch, Pradhan’s and other elderly persons. Marketers can also approach them
to propagate their messages, because these persons could be effective communicators within the
rural peoples.
Demand Base and Size
Indian rural market has a vast demand base and size. Rural marketing involves the process of
developing, promoting, distributing rural area specific products and service exchange between
rural and urban market which satisfies customer demand and also achieves organizational goals.
As a part of development program economic development is concern, government is making
continuous efforts towards rural development.
Coca Cola Base in Indian Rural Market
The case focuses on the rural marketing initiatives undertaken by the cola major - Coca Cola in
India. The case discusses the changes brought about by Coca Cola in distribution, pricing and
advertising to make inroads into rural India.
The case also discusses the concept of rural marketing, the hidden opportunity and its
characteristics in a developing country like India. Further, it also provides details about its
biggest competitor PepsiCo's rural marketing initiatives

Types of requirements of Rural Demand

 Rural marketing requires special promotion efforts, such as AVP van, demonstrations, and
group meetings due to the unique characteristics of the market. The media and the methods have
to be formulated accordingly.

A classic feature of Indian rural markets is the well-bonded community structure, which
recommends advertising and marketing to have a community feel. Promoting brands in rural
markets necessitate a special dealing. Word of mouth is an important message carrier in rural
India. Opinions of spiritual and religious leaders have a very strong impact on the promotion of
any product in the rural market.

Rural marketing is a specialized niche. Marketing in the rural markets demands a tremendous
amount of money to promote a brand in a small village. There are few effective ways of
attracting the rural markets with less expense.

Street shows are quite popular in villages. There are many examples of effective street shows
being employed to promote a product.

Wall paintings are used in villages to promote products. It is a popular technique which has two
benefits. The wall is painted without any expense for the owner, and on the other hand, the
advertiser doesn’t have to spend anything more than what he does for the paint. Hence it is a
win-win situation.

An audio announcement in bus stands has a great impact on the promotion of brands and
products in small towns. A lot of companies have created history by using bus stands for product
promotions and brand building. With intelligent product selection and extraordinary ideas,
companies have been successful and have made the best of the situation.

An experienced rural service provider can do wonders in marketing and in advertising your
brand. Working with local agencies to accomplish a rural advertising initiative is similar to
learning a new language. Employing an experienced service provider to work with can help
escape these drawbacks. The familiarity of the experienced personnel with respect to rural
markets can avoid common mistakes and enlarge your chances of a triumphant rural advertising
opportunity.

Personal communication holds substantial value in rural communities. Personal presence in a

community aids a brand build its reputation of ‘being in the community’. Inclusion in a loyal
client base secures those within the community than those without.

A few years ago, consumer electronics company LG launched a special marriage package for
rural markets. The package included a basic television, washing machine, and a refrigerator.
Understanding that these are the articles the people in rural areas gift for weddings, which proved
to be a blockbuster scheme.

Employing the above strategies will furnish a base for a successful rural advertising campaign.
Success in multiple communities can establish a brand loyalty that generates real returns.

Large scattered market

 The rural market in India is large and scattered which means that it consists of approximately
around 63 crore customers across 5, 70, 000 villages throughout the country.
 The rural population has increased by 125 in the last decade and accounts for over 40% of the
Indian economy.
 The market offers great opportunities in comparison with the urban sector. It blankets the
maximum population and regions, hence consists of the maximum number of consumers.
Rural market accounts for almost 70% of the total Indian population.

Pricing

 Price is the most crucial factor that influences the buying decision of a customer in a rural market.
 They can compromise on quality for a lower price and magnet towards discounts and sales.
 The payment mostly functions on a credit basis. They are accustomed to postponing payments.
Promotion

 Personal selling works well for rural masses. Rural customer’s magnet to local and regional
promotional efforts.
  Their reference group is a combination of educated and illiterate family members residing in
urban areas. They strongly believe their religious or spiritual readers who are a dominant part
of their reference groups.
 Articles like knives, rings, bangles, key-chains, caps, gas lighters, portraits, lamps calendars, and
cards with religious impression are favourable promotional articles in a rural market.
 Visual advertisements published in local magazines and newspapers in their regional language
might work wonders.
Products
 Customers in your rural markets bank on the utility of a product compared to status and prestige.
They believe in simple and effective products that serve them in the long run.
 They reciprocate to products that equate with their religious beliefs and social norms.
 They favour products that can be used and that benefit all family members rather than the
personal-use ones.
 Branding, packaging, and labelling have minimal influence on this market segment.
 They are less concerned or unaware of the after sales services associated with products like the
guarantee, warranty, services, and so on.
Distribution

 Purchases are mostly made from known retailers and salesmen. Rural markets don’t
believe in mall culture or the bigger departmental stores.
 Purchase mostly happens from retail outlets situated in rural or suburban areas.
 They are not keen on home delivery. They seek instant possession. Since they lack
patience, they are found eager to possess and use products immediately.
 Caste, religion, political parties, religious and spiritual leaders play a significant role in
choosing retailers.
 Online marketing has not yet secured its place in rural areas. They normally place
frequent small orders with their retailers and lack storage facilities.

Hierarchy of Rural markets

 The lands in India consist of about 650,000 villages. These villages are enclosed by about 850 million
consumers making up for about 70 per cent of population of our country and contributing around half of
the country’s Gross Domestic Product (GDP). Consumption patterns in these rural areas are gradually
changing to as equal as the consumption patterns of urban areas.

Some of India’s largest consumer companies serve one-third of their consumers from rural India.
Owing to a favorable changing consumption trend as well as the potential size of the market,
rural India provides a large and attractive investment opportunity for

private companies. India’s per capita GDP in rural areas has grown at a Compound Annual
Growth Rate (CAGR) of 6.2 percent since 2000.
Market Structure

The structure of the rural market can be defined by interlinking the Product and Consumer flow
processes as mentioned in the illustration below. We have taken the buyer and seller to define
different systems in rural markets.

Quadrant I: It explains a situation in which both the buyer and seller are from rural area. This is
a constant economy system in which all rural produce is consumed within the system.

Quadrant II: It explains that the majority of people concentrate on Quadrant II situation, which
unsustainably is tried by marketers to sell urban products in rural markets.

Quadrant III: It is necessary to develop an urban-rural marketing linkage, so that both urban
and rural products can freely move across both the markets. Marketing should work as a process
of motivation to deliver and improve standards of living of rural people and consumption rural
products by urban people.

Quadrant IV: It explains a situation in which both the buyer and seller are from urban area. This
is a constant economy system in which all urban produce is consumed within the system.

Market Segmentation
Rural India accounts for a total of 55% of the manufacturing GDP. They were host to nearly 75%
of the new factories built in the last decade. Rural consumption per person has increased by 19%
yearly between 2009 and 2014.

Rural marketing strategies include the following:

  Segmentation: This includes heterogeneity in rural market, prerequisites for effective market
segmentation, degrees of segmentation, basis of segmentation and approaches to rural market
segmentation.
 Targeting: This shows the evaluation and selection of segments, coverage of market segments.
 Positioning: This identifies, selects, develops and communicates the positioning concept in
market.
The following are the degrees of segmentation:

 Mass Marketing: In this, all the consumers are being treated the same. It allows the
company to target the maximum number of consumers. For example, HUL has offered
only one detergent that is “Surf” to all consumers but Norma entered the market and
grabbed a sizeable market share because of which HUL woke up and introduced
wheel.
 Segment Marketing: Marketers determines the potential of the market and its consumers
segments which are substantial enough to target and respond by offering low-priced
products and products that are designed appropriately.






Problems in rural marketing as Warehousing and Transportation

While undertaking rural marketing a marketer faces three different problems connected
with the Physical Distribution of goods.

 They are:
 (a) Problems of Transportation: Not all villages in India are connected by railways and
waterways. The only reliable means for transportation of goods are the road ways and
they too are not all-weather. The transportation infrastructure of rural India is poor and
inadequate to transport people and goods effectively.
 (b) Problems of Warehousing: The facilities for storage in the rural areas, are even worse
than the transportation facilities. Neither the Central nor the State Warehousing
Corporation has been able to extend storage facilities to the rural areas. Though there are
private warehouses in rural areas, they are meant for their exclusive use.
 (c) Problems of Communication: The rural areas either do not have the basic minimum
postal services like telephone and telegraphs, or if they are available they are very
inadequate and not very effective. Communication is the basic requirement for marketing
activities.
 Due to lack of these infrastructural facilities, a marketer entering the rural market has to
incur additional expenditure or compromise on the quality in either case it is the rural
customer who suffers, in the form of higher prices and poor quality.
 Transportation problems
 Transportation infrastructure is quite poor in rural India. Though India has the 4th largest
railway system in the world, many parts of the rural India remain outside the rail
network. As regards road transport, nearly 50% of the 576000 villages in the country are
not connected by roads at all. Many parts in rural India have only kacha roads and many
parts of the rural interiors are totally unconnected by roads with any mandi level town. As
regards carriers, the most common mode is the animal drawn cart. Because of these
problems in accessibility, delivery of products and services continues to be difficult in
rural areas.
 Warehousing problems
 In warehousing too, there are special problems in the rural context. Business firms find it
quite difficult to get suitable godowns in many parts of rural India. And there is no public
warehousing agency in the interiors of rural India. The central warehousing corporation
(CWC) and the state warehousing corporation (SWC’s) which constitute the top tier in
public warehousing in India, do not extend their network of warehouses to the rural parts.
They go only upto the nodal points or major market centers. The warehouses at the mundi
level which constitute the second tier in the warehousing chain are mostly owned by
cooperatives. And the same is the case with rural godwons, which form the third tier.
None of these tiers function as public warehousing agencies ; they provide the
warehousing service only to their members. As such, a business firm has to manage with
the CWC/SWC network which stops with the nodal points, or it has to establish its own
depots or stock points run by its stockists / distributors. Of course, in such cases, the
commercial advantages of operating through a public warehousing agency like
CWC/SWC are lost to the firm.
 Communication problems     
 Communication infrastructure, consisting of posts and telegraph and telephones, is quite
inadequate in rural areas. Since communication is the first requirement of efficient
marketing, lack of proper communication infrastructure poses difficulties, especially in
physical distribution.
 Cost-Service Dilemma Gets More Acute
 The effect of these problems on the physical distribution front is certainly felt by any
business firm venturing into the rural market.  They adversely affect the service aspect as
well as the cost aspect. Maintaining the required service level in the delivery of the
products at the retail level becomes very difficult. At the same time, physical distribution
 costs get escalated with 80 per cent Of the total rural consumers living in the ‘less than
1,000 people’ category of villages. The scattered nature of the market and its distance
from the urban based production points, compound the difficulty arising from the
constraints in transportation, warehousing and communication.  Larger pipeline stocks
and bigger inventories in warehouses are the natural outcomes of these constraints.  It
means higher costs of transportation, higher inventory carrying costs and transit and
storage losses. And as we will see in detail in the next section, costs of distribution
channels too are much higher in the rural context.  Consequently, the total distribution
cost per unit is higher by as much as 50 per cent on an average in the rural market, as
compared to the urban market. In fact, the experiences of some companies operating in
the rural market show that the cost of distribution in rural areas is two and a half times
that of urban areas.

Solving of Physical Distribution Problem

 The marketers have to find solutions to the distribution problems. While deriving
solutions, the marketers have to keep in mind cost and the service to the consumers.
Some of the solutions are as follows:
 Shared Physical Distribution Responsibility with Stockists or C&F Agents
 With a view to keeping the costs low, some firms try out remote control marketing. But
experience shows that firms with major aspirations in rural marketing cannot depend on
such remote-control operations; they cannot take the route of ‘simply consigning the
goods’ and retiring the bills through banks.’ For them, effective presence in the market is
a must. While it may not be necessary to have a netw6rk of own stock points throughout
the marketing territory, the firm should have a network of stockists or clearing cum
forwarding agents (C&F agents) at strategic locations for facilitating physical distribution
can be shared by the firm and the stockists.
 Combining different modes of transportation
 As regards transportation, the system of rail-cum-trucks for long distance movement,
trucks for medium/ short distance movement and delivery vans and bullock carts for local
haulage should effectively serve the purpose. Water transport too, has a role in specific
areas. Bullock cart has a special role in rural distribution. Business firms operating in the
rural market of the country have to appreciate that the bullock carts play a major role in
secondary transport. They are available in plenty and they are ideal for the rural roads.
 Company delivery van
 Companies like Hindustan Lever, TOMCO, Brooke bond – Lipton and ITC who are the
pioneers in rural marketing in India, have successfully experimented with company
delivery vans, for resolving the distribution problems in the rural market. The delivery
van takes the products to the retail shops in every nook and corner of the rural market.
 Besides resolving the problem of product delivery, the van also serves certain vital
secondary purposes – it enables the firm to establish direct sales contact with thousands
of rural consumers; it also helps the firm in sales promotion. But the cost of operating
such vans is quite high. And the proposition can work only if the market/ area assures
business potential enough to cover such costs. In the case of HLL, ITC, etc… they knew
that such a level of business would accrue only out of a sustained and long term
marketing effort and market presence. These firms had the resources, as well as the will
to stay in the market. Through the system of operating the vans, they were not just
solving a transportation problem, they were developing the market. And they were
viewing the costs as a long term investment.
 Syndicated distribution
 While the company delivery vans are very useful in rural distribution, the idea cannot be
easily implemented by firms with relatively less resources. Syndicated distribution may
be of help in such cases, the firms can come together and encourage an independent
agency to operate such delivery vans with a view to hiring its services. The delivery van
here becomes a syndicated service.
 Assistance form stockiest
 The Company can also get assistance from stockiest. The stockiest can own or hire vans
or trucks and accordingly distribute the goods to the retailers and the dealers. The
company should help finance such kind of plant and projects.
 Central Warehousing Facility
 The Central Warehousing Corporations (CWC) and The State Warehousing Corporations
(SWC) should also pay attention in providing suitable warehousing in rural areas. At
present the CWC and the SWC concentrate their warehousing activities only at major
markets. The smaller markets are handled by cash starved gram panchayat’s or Satellite
municipalities. There is an urgent need to have good warehousing facilities at local
market to. These have to be provided either by the government or the companies
operating in particular areas. A system can be devised where in a group of companies can
come together and have common warehousing facilities. Here the cooperative rule can
also help provide good warehousing facilities in rural areas.
 Sorting out communication problems
 The communication problems in the villages can be sorted out (mostly) by the
government alone. The marketer must make the government must make the government
realize the importance of rural markets and the corresponding network of post, telegraph
and telephones. Locally there are examples of private telephone exchanges that have
worked wonders for specific areas. However small exchanges have limited scope.
Recently the government has alone sent corporate partnership in printing and
disembursing postal and telegraphic material. However the experiment doesn’t seem to
have caught on
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