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R URAL M ARKETING : W HY

W HY ???...

The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban.

. rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991. .  As a result of the growing affluence..W HY ???.

tea.  The rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased.. What is more. washing soap. bicycles. the rural market for FMCG products is growing much faster than the urban counterpart. pressure cookers.. fans.W HY ???. salt and toothpowder. The rural market accounts for half the total market for TV sets.   . blades.

.. comprises all places that are not urban" (of nearly 6. only 20K have population more than 5K)  .000 and have at least 75 per cent male working population in outside the primary sector and have a population density of at least 400 per square kilometer. municipality.  The Census defined urban India as . cantonment board etc or have a population of at least 5.W HAT ???."All the places that fall within the administrative limits of a municipal corporation. Rural India.4 lakh villages. on the other hand.

promoting and distributing ruralspecific goods and services. leading to exchanges between urban and rural markets. pricing. which satisfies consumer demand and also achieves organizational objectives.R URAL  MARKETING Rural marketing is the process of developing. .

W HAT ???  FMCG companies (Ex HUL & ITC) define rural as any place with population less than 20K Agri-input companies & consumer durable companies consider places with population less than 50K  .

   . but because most consumer markets were getting cluttered. there are too many players eating into each other's market share. This is where the rural markets play an important role.W HY ??????  The growth rates of consumer products were slowing down not because the markets were getting saturated in terms of penetration as in the US. Operating margins come under pressure and new growth markets have to be explored. intensifying the battle for market share. The companies. reduce prices in urban areas and invest heavily in sales promotion. therefore. While overall volumes continue to grow reasonably well.

49. there are as many 'middle income and above' households in the rural areas as there are in the urban areas.W HY ???  According to a National Council for Applied Economic Research (NCAER) study. At the highest income level there are 2. the money available to spend on FMCG (Fast Moving Consumer Goods) products by urban India is Rs.  .500 crores in rural India.6 million households in rural areas. According to Hindustan Lever Limited. 63. There are almost twice as many 'lower middle income' households in rural areas as in the urban areas.3 million urban households as against 1.500 crores as against is Rs.

W HY ??? As per NCAER projections. . Thus. In urban India. the same is expected to grow from 46 million to 59 million. the absolute size of rural India is expected to be double that of urban India. the number of middle and high income households in rural India is expected to grow from 80 million to 111 million by 2007.

W HY ??? The NCAER study on ownership of goods indicates the same trend. It segments durables under three groups – (1) Necessary products . (3) Lifestyle products .Transistors. Marketers have to depend on rural India for the first two categories for growth and size. rural India will be significant over next five years.CTV and refrigerators. wristwatch and bicycle. Even in lifestyle products. .B&W TV and cassette recorder. (2) Emerging products .

ONE O F THE FIRST MARK ET I NG FIRMS TO REAL IZ E THE POTENTIA L O F RURA L AND DECIDED TO FOCUS ON RURA L I ND IA MARKE T IN G .  Today rural India is not 100 per cent dependent on an agrarian economy.A NUGRAH A M AD ISON . cropping season.  . 50-60 per cent of the rural population is involved in other businesses. etc. So. So today. there is a growing middle class with a monthly income in rural India and it is a drastic change from the past where their income was totally dependent on the monsoon. Unlike in the past where the ratio between those who involved in agriculture and in other business was 75-25. A lot of people belonging to the second generation are getting white-collar jobs in nearby towns. if not 60:40. today the estimated ratio is 50:50.

especially the agricultural labourers. Haryana. there are still a lot of poor people.   . Of course. Tamil Nadu. Kerala and parts of Maharashtra come under the developed rural India.A NUGRAH A M AD ISO N …  This has resulted in a definite growth in the prosperity level in rural India. But there is a growing middle class with regular income and the rural rich are becoming richer. Andhra Pradesh. Punjab. The divide between urban and rural India is thinning among the top segment of rural India. The rural rich are almost like urban India.

A NUGRAH A M AD ISON …  The rural youth today is an important trigger in changing the profile of rural India. if there is a problem in agriculture. they are all doing very well. They ensure that they have steady flow of income.  . and it gets reflected in their eagerness to earn more and live better. And. About 40 per cent of the graduates coming out of Indian universities today are from mofussil areas. they do something else. So. Their aspirations are similar to the urban youth.

There is a huge market waiting to be tapped in rural India. This shows the potential exists in rural India. But what is being spent by urban India is being done by only a small percentage of the population. About 25 per cent of the urban India is spending as much as 75 per cent of what rural India is spending.  .A NUGRAH A M AD ISON …  The total expenditure of urban India is almost equal to what has been spent by rural India.

W HY ??????  For Coca Cola India “The rural market was tempting since it comprised 74 per cent of the country's population." .113 villages with a population of more than 5. 41 per cent of its middle class. there is tremendous potential. 58 per cent of its disposable income and a large consuming class” “13. If you can crack it.000” "The real market in India is in the rural areas.

Andhra Pradesh. almost double of what it had five years ago. the millennium belongs to the Class III and IV rural-urban towns”  It is estimated that an average rural Indian household has five major consumer appliances (2006). Bihar. . West Bengal. Kerala and Tamil Nadu  National Council for Applied Economic Research “While the 1980s saw a boom in Class I towns with the spread of television.W HY ?????? 9.Uttar Pradesh.988 villages are in seven states . Maharashtra. the Class II towns showed strong growth in the 90s propelled by reforms.

By comparison.“  Samsung The urban market is a replacement and upgradation market today . the rural market is zooming ahead at around 25 per cent annually. washing machines.W HY ??????  Videocon Appliances The reasons for heading into the rural areas are fairly clear. The rural market is growing faster than urban India now. refrigerators and airconditioners is growing annually at between 7 per cent and 10 per cent. The urban consumer durable market for products like colour TVs.

.W HY ???. Between June 2002 and December 2003.5 per cent while the urban expenditure grew by 9. cloth and shelter. they are looking at how to live better” . “After the basic needs of food. rural per capita consumption expenditure grew by 11..6 per cent.

the young and the educated in the villages are already large in number. exposure. 40 per cent of all those graduating from colleges are rural youth. They are the decision makers and are not very different in education.  Rural expenditures on Fast Moving Consumer Goods (FMCG) were growing at an impressive rate of 20 -25% (2004) . attitudes and aspirations from their counterparts at least in smaller cities and towns.HUL…  Today. And this number is increasing.

12 per cent. third. The "social sector" includes the informal and unorganised sector. fourth and fifth financial years.  Currently. SOCIAL TARGETS MAY BE SET HIGHER The Insurance Regulatory and Development Authority of India (IRDA) is considering an increase in the minimum rural and social obligations for insurers akin to the priority sector lending of banks.I NSURERS ' RURAL . 9 per cent. Both life and non-life insurers have to insure 20. respectively. Non-life insurers have to rake in 5 per cent of their gross written premium from the rural years after the third year of operation. second.000 lives from the social sector in the fifth year of operations. 14 per cent and 16 per cent of their policies in rural areas in the first. economically vulnerable and backward classes from the rural and urban areas. life insurance companies are mandated to sell 7 per cent. .

a revised prescription would be due. There is untapped potential in this segment. . said insurance company officials.IRDA  Revisions The regulation on rural and social obligations can be amended once in five years and with private insurers entering the sixth year of operations.

R URAL P ROSPERITY  Thirteen consecutive good monsoons since 1990 (ex 2002.700 crores since 1998 (40mn Credit plus Debit cards in Urban India)    . 03) 600% increase in five year plan outlay for rural development from 8th to 10th FYP. 230% increase in the flow of institutional credit from agriculture (1997-98 to 2004-05) 41mn KCC issued amounting to Rs. 97.

000 rural haats (supermarkets) in India that exceed the total number of retail chain stores in US (35. hence disposal surplus in rural is much higher. Billing per cell phone in rural AP is more than in Hyderabad.000) Nearly 85% of villages have Public Telephone. .R URAL P ROSPERITY  Consuming class household in rural are equal to urban.     60% of 2 crores who signed up for rediffmail & 50% of online shopping are from small towns. There are 42.

 . according to recently released Central Statistics Office data.000 crore in 20002001 to Rs 93. However. Top industry executives say that the rural market share in a number of categories has touched 40 to 50 per cent.R URAL C ONSUMPTION  Consumption of major FMCG categories increased from Rs 68. the scorching pace of rural consumption makes urban sales hikes seem like a mere crawl.000 crore in 2005-06.

C HALLENGE Understanding rural consumers. . Price-sensitivity is another key issue. reaching products to remote places. overcoming prevalent attitudes and habits of rural customers and creating brand awareness. communicating with heterogeneous rural audiences Servicing rural markets involved ensuring availability of products through a sound distribution network.

C HALLENGE  Rural specific and region specific strategies are required. Barging into community decision making   Opinion leadership is in transient phase (School teacher/ sarpanch and young graduates) Adaptation Vs critical mass  .

M YTHS  Rural Market is a huge mass. (They seek value for money)  Rural people don’t buy brands . ( Its vastly heterogeneous)  Rural customers buy cheap products.

T HE P OINT … The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. Mr Carlo Donati." . "about rural India could be wrong and one should focus on high GDP growth areas. "Any generalization" says Mr Donati. Chairman and Managing-Director. be it urban. while admitting that his company's product portfolio is essentially designed for urban consumers. cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive. semi-urban or rural. Nestle.

 Finally… .

. -Fragmented Media habits.nearly 6 lakh villages -746 million people  Saturation in urban market -Peak touched in most product categories -Highly aware/demanding customers.R EASONS FOR ENTERING RURAL MARKET  Large Population Base: . -Increased competition.

the cumulative growth in number of families coming under ‘Middle-high’ income category: Urban Rural =353% =519%   Growing consumption Improved Connectivity of rural areas.  Increasing income in rural areas:-From 1989-90 to 2009-10.CONTD . .R EASONS .

-Influence of Youth. Changing Life-style: -Improved literacy rate.  Scope for improving penetration rate.CONTD . -Influence of Immigrants/commuters. .R EASONS .  -Better media reach.