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RURAL & URBAN CONSUMER BEHAVIOUR

Indias way is not Europes. India is not Calcutta and Bombay. India lives in her seven hundred thousand villages.....................Mahatma Gandhi, 1926

CONSUMER BEHAVIOUR
Meaning and definition
The study of consumer behaviour implies how and why a particular consumer or group reacts to decisions of producers. Consumer behaviour could be defined as those actions directly involved in obtaining, consuming, and disposing of products and services, including the decisions process that proceeds and follow the action. According to another author consumer behaviour is the behaviour that consumer display in scanning for purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. The study of consumer behaviour is the study of how individuals make decisions to spend their available resources (time, money, effort) on consumption related items. It includes the study of what to buy, when to buy, why to buy, from where to buy, how often to buy, and how often they will use it. Normally in consumer behaviour one studies the behaviour of consumers for consumption goods but in the study the behaviour of the buyer is also included. He may be user i.e. ultimate consumer or he may be buying for someone else. In a competitive environment, one cannot trust a product or a consumer. The producer has to produce what is demanded or what can be demanded. Study of consumer behaviour will help us to know what can be sold and what goods and services are likely to get rejected.

In certain products like medicines one buys on the prescription of a physician which is also a part of consumer behaviour. In case of capital goods that is plant, equipment, machinery, buildings etc the decisions are often based on technical advise of others. In case of industrial raw materials the decision is influenced by supplier of equipment. Then there are purely consumer goods with short life and once they are used they extinguish. They are called Fast Moving Consumer Goods (FMCG). There are other consumer goods

which are durable like cars, refrigerators, electrical iron, juicer-mixer, etc but they basically consumer items with long life. There are also goods like clothes, which are not consumed in one go but are used for long. The behaviour of consumers for all these products is taken on different considerations than short-term consumer goods like fruits, juices, ice cream or milk. In short consumer behaviour implies study of behaviour of purchaser of all goods and services whether purely consumer goods, intermediate goods or capital goods. In other words it implies study of attitude of all consumers in disposing of their resources. Further it is not confined to final users but also include study of attitudes, of all those who take investment decisions whether they consume themselves or buy for others. It also includes study of behaviour of those who are consultant, advisers and give their opinion to but or not to buy a particular thing and the study of factors which influence their advise/opinion. Consumer behaviour is an art and a science, economics, psychology, sociology. The study of consumer behaviour envelops all these and more. Be it a housewife buying a tube of tooth paste, an executive buying a tie, a school kid buying a pen or a multi-million dollar corporation buying heavy capital equipment, the process of buying is complex and, at times, intriguing. The consumer buying process is

influenced by the consumers financial position, personality, tastes, preferences, reference groups, social standing, and even the economic sentiment that is dictated by the status of the economy.

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.

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

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.

Factors influencing behaviour


The various factors that effect buying behaviour of in rural India are: 1. Environmental of the consumer - The environment or the surroundings, within which the consumer lives, has a very strong influence on the buyer behaviour, egs. Electrification, water supply affects demand for durables. 2. 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. 3. Influence of occupation The land owners and service clan buy more of Category II and Category III durables than agricultural laborers/farmers. 4. 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. 5. 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. 6. Brand preference and loyalty (80% of sale is branded items in 16 product categories)

Cultural factors influencing Rural 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 persons 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: 1. Product (colour, size, design, 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. 2. 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. 3. Decision-making by male head: The male in Indian culture has always been given the designation of key decision maker. For example, the Mukhiyas 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. 4. Changes in saving and investment patterns From gold, land, to tractors, VCRs, LCVs

Urban consumer behaviour


Family influences Family is an important influence on purchase decisions. Bonnet and Kassarjian say Attitudes towards personal hygiene, preferences for food items etc. are acquired from parents. Peer group influences Researchers say that peer groups are much more likely than advertising to influence attitudes and purchasing behaviour. Personality Personality also affects consumers attitudes. Traits such as

aggression, extroversion, submissiveness or authoritarianism may influence attitudes toward brands and products. Information and experience

According to learning theory, consumers past experiences influence their brand attitude and condition their future behaviour. It is seen that brand loyalty will quickly end if brand does not perform well. Therefore, information and experience also determines attitude. Situational influences shop? Antecedent states What kind of mood are you in? Have you just been paid? Do you shop for status or self-gratification? Purchase task - who are you buying for? Social surroundings - who are you shopping with? Physical surroundings - where are you shopping? Temporal factors - how much time do you have to

Urban consumer

Rural consumer

The Differences in Buyer behaviour


Rural Conservative Values, aspirations, needs traditional and based on culture, social customs, beliefs Eldest Male Member KDM Collective Sanction Urban Innovative Follow trends (including International) Varies Unheard of

Distinctive features of rural markets vis--vis urban markets


Features Demand pattern Spread Literacy level Per Capita Income Awareness of needs | Infrastructure Sources of information, communication Supply Product info guidance Consumer Protection Rural Seasonal Scattered Low Low Not entirely known Poor Word of mouth personal/ direct selling, TV, radio, unconventional media Erratic, untimely Needed No awareness Urban Uniform Concentrated Moderate Moderate Known Moderate All

Timely Adequate Increasing awareness

Rural product portfolio


Category I Pressure cookers Pressure pans Mono cassette recorders Bicycles Wrist watches (mech) II 2 in 1 (mono_ 2 in 1 (stereo) B & W TV (S) B&W TV (R) Instant geysers III (Items costing more thanRs.6,000) CTV (S) CTV (R) VCRs VCPs Scooters

Wrist watches Storage geysers (Quartz) Radio/ transistors Sewing machines Electric Irons Vacuum cleaners Ceiling fans Mixer/ grinders Table fans SOURCE: NCAER (Economic Times)

Mopeds Motorcycles Refrigerators Washing machines

CTV sales 65% in rural India Rural share of durables about 60% (esp. bicycles, wrist watches, radios/ transistors) Share of category I is declining and II and III is increasing. Purchase of goods under category III has increased by 25 % over the previous year, category II has increased by 15% and category I by 3%

Preference for brands Segment % of consumers who preferred branded items < 40% 40 80% >80%

Necessity/ pop ular

Coconut oil

Iodized salt

Toilet soaps

Tea Washing cakes Biscuits Blues (neel) Premium Refined oil Hair oils Bulbs

Washing powder Analgesics Toothpaste Razor blades Shampoo Batteries Rubs, balms Skin cream Toothbrushes Antiseptics Chyavanprash Digestives Mosquito repellents Shaving creams Tube lights

Demand Pattern
Durables Total (% of rural HH) CTV 12.1 Refrigerator 12.0 FMCGs Total (% of rural HH) Shampoo 44.2 Toothpaste 55.6 Urban 30.4 33.5 Rural 4.8 3.5

Urban 66.3 82.2

Rural 35.2 44.9

Some Myths:
1. Myth-1: Rural Market Is a Homogeneous Mass Reality: Its a heterogeneous population. Various Tiers are present depending on the incomes like Big Landlords; Traders, small farmers; Marginal farmers: Labors, artisans. State wise variations in rural demographics are present viz. Literacy (Kerala 90%, Bihar 44%) and Population below poverty line (Orissa 48%, Punjab 6%) 2. Myth-2: Disposable Income Is Low Reality: Number of middle class HHs (annual income Rs 45,000- 2, 15,000) for rural sector is 27.4 million as compared to the figure of 29.5 million for urban sector. Rural incomes CAGR was 10.95% compared to 10.74% in urban between 1970-71 and 1993-94. 3. Myth-3: Individuals Decide About Purchases Reality: Decision making process is collective. Purchase processinfluencer, decider, buyer, one who

pays can all be different. So marketers must address brand message at several levels.Rural youth brings brand knowledge to Households (HH).