Rural Market and Marketing

By
Dr. Mahima M Dubey
 Introduction
• Rural marketing is a type of marketing in which activities are planned according to the
needs and requirements of the people living in the rural areas. Marketing is the
process of identifying the needs and wants of the consumers, then prepare that
particular product or service in order to satisfy them, keeping in consideration the
benefits of the organization. This concept applies to every type of marketing, whereas
when we talk of rural marketing the emphasis is to be given on the rural areas.
• The focus remains on the people who are living in the remote areas, and the
marketing activities should be planned accordingly. Seeing this, now-a-days many
companies are turning towards the rural market to expand their scope, and to
overcome competition or to restart or give new shape to competition. A lot of focus is
required to be given on the rural markets because rural markets are the “tomorrow’s
markets”.
• In order to understand the term “Rural Marketing” we have to first understand the
term ‘Rural’. There is much confusion associated with the word rural as there is no
accepted definition of the term. However there are different perceptions of the term
and some of them are- To some, rural means a place with less than one lakh
population; others consider the income level of the population to determine the rural
segment.
 Rural Market?
• If the income levels are less than Rs.11,000/- per annum then the segment is a
rural segment. Yet to some others the term rural means smaller towns and
mofussil areas having population of less than 10,000 persons.
• Even the corporate sector faces this confusion about the term rural. In the
absence of any clear concept of the rural area, there will not be a proper
understanding of the rural problems and hence the marketing considerations and
strategies might tend to go wrong.
• In the absence of any standard definition of the term rural, let us understand it by
studying the definition of the term ‘Urban’. The Census Department of India
defines the term ‘Urban’ as (a) All places with Municipality, Corporation,
Cantonment Board or Notified town area committee, (b) All the places with a
minimum population of 5,000 persons, with at least 75% of the male working
population engaged in non-agricultural activity and with a population of at least
400 persons per square kilometre or 1000 persons per square mile. If we exclude
the areas that come under the above definition, the remaining areas can be
considered to be the rural areas.
• When marketing activities are carried out in the rural markets it is known as ‘Rural
Marketing’.
 Rural Marketing in India – Definitions Provided by
National Commission on Agriculture
• In the process of defining rural market, for the purpose of clarity, it has been
attempted to firstly, deal these two terms ‘market’ and ‘rural’ separately and then
combine them into one, later.
• The term, ‘market’ is used in many contexts. For example, the urban market, the
rural market, the agriculture market, the commodity market etc. Thus, market as a
concept is most confusing. According to economist’s view, market is a physical place
where buyers and sellers get together, and a transfer of title takes place as goods are
exchanged.
• Thus, markets include the people who sell the goods and services and also those who
purchase them. Another view is that market refers to the people with buying power
and willingness to buy. In the present study, both the views have been taken into
account.
• With regard to the term ‘rural area’ also there is no unanimity among the authorities.
A few authorities defined a geographical place as a rural area with a population of
10,000 while few others defined – place with a population of 20,000 as rural area.
But, for the present study, the criterion adopted by the census of India, 1981 for
defining an urban area has been taken as the basis for defining the rural area.
 FMCG- Fast Moving Consumer Goods
• Accordingly, rural area is defined as a place with human habitation of 5000 and below with
agriculture as the main economic activity and with a density of population less than 400 sq.
km. Some areas with a population more than 5000 are also classified as rural area in view of
the agriculture being the main economic activity of a vast majority of population in that area.
• On the basis of the definitions of the above two terms, the rural market may be defined as
any market that exists in the rural area with a population less than 10,000 where the areal
density of population at any population nucleation is low without any significant
infrastructure.
• In other words, total market of India excluding the urban markets can be called as rural
market. These rural markets are mostly unintegrated, very small in size and rudimentary in
nature.
• According to the National Commission on Agriculture – “Rural Marketing is a process which
starts with a decision to produce a saleable farm commodity and it involves all the aspects of
market structure or system, both functional and institutional, based on technical and
economic considerations, and includes pre and post-harvest operations, assembling, grading,
storage, transportation and distribution.”
• According to Thomsen – “The study of Rural Marketing comprises of
all the operations, and the agencies conducting them, involved in the
movement of farm produced food, raw materials and their derivatives,
such as textiles, from the farms to the final consumers, and the effects
of such operations on producers, middlemen and consumers.”
• The above two definitions reflects only one side of the coin and are
narrow in explanation, i.e., it explains only the movement of goods
from rural to urban areas, whereas, the rural markets also need
agricultural inputs like seeds, fertilizers, pesticides, cattle feed and
agricultural machinery, as well as the rural population needs
consumables, consumer durables and services also. That’s why the
urban manufacturers have entered the rural markets with
consumables, consumer durables and services.
 Rural Marketing in India – Nature
• The rural market is quite different from urban markets. Agriculture is the chief economic
activity in rural areas, the entire village population is associated directly or indirectly to
agriculture. In the process of development of civilisation agriculture and pastoral life along
river banks are the first form of settled life.
• In the Bronze Age, major civilisation evolved. Archaeological evidence reveals that bronze
industry supplied tools and implements to agriculture. Textiles, paper, iron and furniture
making developed to lid man in his economic activities.
• Agriculture supplies inputs for fabrication into manufactures cotton, oil seeds spices etc.
All food items had a marl origin. Villages were self-contained units, which traded their
produce for gold, arm and precious stones. The rural society has high status persons and
the poor ones.
• The distribution of land was made by state, which belonged to the state- The British rule
for more than three centuries was the worst blow to the rural society. The worst blow was
to cottage and small scale industries, cultivation of indigo, tea and jute, development of
timber trade and denudation of forests.
• The terms of trade were not favourable to Indian farmers. In these circumstances farmers
were forced to live in deprivation and poverty. British India was with the princely states
under the administration of Rajas and Nawabs; the big states had all the powers except
defence and foreign affairs.
• Agriculture and industries based on raw-materials and local skills
are identified for the development of the rural economy. An
integrated approach was evolved to take care of projects ranging
from milk and milk-products to horticultural products like fruits,
vegetables, flowers, herbs, etc.
• The processing of these is not widespread in rural areas. Modern
technology is too accessible to enterprises there. It is beyond
the financial capacity of an average entrepreneur. The low cost
and labour based technologies have been the common mode of
village industry. As a result, the rural products do not enjoy
competitiveness in a wider market. Most of the products are
consumed locally.
 Rural Marketing in India – Types of Rural Markets: Periodic Markets, Mobile Traders and Permanent
Retail Shops

• The rural marketing structure is not uniform in all parts of the country. The
type of structure prevalent in a particular State or Region depends on
various factors like the state of development of agriculture, condition of
transport and communication facilities, purchasing power of population, etc.
• In the North-Eastern region and far-flung areas of the country where the
‘agricultural production and levels of income are low and communication
and transport facilities are not available the marketing structure comprises
predominantly. Primary markets like hats and shandies which have sprung-
up at convenient places to cater to the needs of the local population.
• At the other end are areas in North-West like Punjab and Haryana where the
agriculture and other facilities are developed. The market structure
comprises a larger number of organised markets.
• However, rural markets of India can be broadly categorised into three types.
 Type # 1. Periodic Markets:
• Periodic markets are the important characteristic feature of the rural marketing in India. In
spite of urbanisation and development of retail stores, periodic markets are also playing an
important role in rural economy as well as in social life of the rural masses. The periodic
marketing function is performed by two institutions, viz., fairs, and weekly markets.
• A fair denotes a gathering of people who assemble at regular intervals in certain fixed places
—generally around shrines or other religious institutions. Although, by far the largest
number of fairs have a religious background, there are some which owe then origin to purely
economic considerations.
• A general concept regarding Inn is that they are simply an occasion for the recreation of rural
folk. These fairs provide an opportunity for rural people for yearly and half-yearly, sometimes
be-biennial or once in 12 years like that of Kumbha-Mela, Godavari Pushkarmas, etc.
• The purchase and sale of goods, etc. The important fairs draw people not only from surround
ing tracts, but also from very distant places. There are about 1700 fairs organised in different
parts of the country involving produce and also livestock. There are a few fairs which are
attended by a few lakhs of population and there are others which are attended by a few
thousands.
• On an average, the attendance per fair works out at about 16,000. The periodicity of fair
varies from one fair in one state with that of another in other States also from one region to
another within the State. The time schedule of a fair may vary between 1 day to 7 days.
 The various types of fairs include:

• i. On the basis of Primary Purpose:

• (a) Religious fair,
• (b) Commercial fair,
• (c) Commodity fair,
• (d) Cattle fair,
• (e) Exhibition fair, and
• (f) Mixed fair.
• ii. On the basis of the periodicity:
• (a) One-day fair,
• (b) Short- duration fair, and
• (c) Long-duration fair.
• iii. On the basis of their importance or area of
influence:
• (a) Local fair,
• (b) Regional fair,
• (c) Inter-regional fair or national fairs
• Now-a-days international fairs are also organised by the Governments. Festivals of India,
organised by the Government of India in important cities of several countries like USA,
France and Germany, etc., belong to this category. However, with the change in rural
economy, the pattern of shopping in fairs has also been changed.
• The development of permanent shops in rural areas and easy contact with towns have
also changed the shopping practice of the rural people. But the importance of fairs is still
the same, due to behavioural pattern of rural people who always wait for the purchase of
many items. The State Governments are also helping in popularizing the fairs.
• Paintings, hats, shandies, bazaars are different names employed in various parts of the
country to designate periodical markets held usually once or twice a week and in some
cases even often. They are commonly known as weekly markets. However, there is slight
distinction between these terms.
• For example, the term paints, is used in united province to denote a periodical market
dealing more in agricultural produce than in livestock, whereas in a hat the reverse is the
case.
• As the goods and services of daily market or permanent shops are not available in remote
rural areas, most of the villages are not connected with all-weather roads. Added to this,
the state of agriculture is subsistence, peasants have to dispose their meagre surpluses on
one hand and have to purchase limited manufactured goods on the other.
• Created out of this situation in rural areas are weekly markets, and to purchase their
daily consumption goods. A periodic market is a public gathering of buyers and sellers of
commodities meeting an appointed or customary location at regular intervals. Though
the time varies between different regions, in most of the cases these meet once in a
week.
• The number of hats or weekly markets held in various parts of the country are
estimated around 22,000. These markets are found in greater numbers (80%) in the
eastern and north eastern regions of the country comprising Assam, Bengal, Bihar,
United Provinces and Central Province.
• Out of the States, Hyderabad State occupies the first position with as many as 1,000
hats. Gwalior, Travancore, Mysore and Bhopal followed with 300,225, and 200 hats
respectively.
• Most of the weekly markets serve an area within a radius of 8 to 16 kms. In some States
like Maharashtra and Tamil Nadu, these markets serve a larger area while in
northeastern states these serve a smaller area. Transactions are mostly on cash basis
though the barter system is still in practice.
• The volume of produce traded, commodities traded, number of villages and the
population served by the weekly markets differ considerably from State to State and
from market to market within the same State. For example, the number of villages
served varies from 27 in the case of markets in Andhra Pradesh to 277 in case of
markets in Bihar.
• In terms of the population served, the variation is 40,000 in
respect of a market in Andhra Pradesh to 1,83,000 in the case of
market in Gujarat.
• However, the weekly markets at the village level are generally
devoid of most of the market facilities. The consumers are
subjected so many malpractices indulged in by the traders both
in purchasing farms produce from the rural masses and also in
selling their required consumer goods to them.
• In spite of this, these markets serve as an important marketing
institution in rural areas. Most of the agricultural labour who get
their wages once in a week visit these markets and purchase
their consumption goods.
 Type # 2. Mobile Traders:

• There is another important agency known as mobile traders to fulfill the limited needs like vegetables,
fruits, clothes, utensils, cosmetics, spices, toiletries etc. of rural consumers. The practice of mobile
trading is not a new one, but even in ancient India this phenomenon was common.
• The mobile traders are those merchants who move from one place to another, from one house to
another in order to sell those commodities which are often required by rural masses. As it is rightly
observed by Stine, important reason for the existence of mobile trader is that when the maximum
range is smaller than the threshold requirement of the firm, the firm either ceases to function or else it
becomes mobile.
• Even in those villages where there are permanent shops and weekly markets, there is a phase for
mobile traders because of behavioural pattern of rural masses. Mobile traders move from one village to
another on foot or bicycle or buses, bullock carts, etc. They visit the villages once or twice in a week.
Sometimes, they visit those villages which are on the way of weekly markets in return direction after
attending these weekly markets.
• While moving from one house to another within the village they loudly announce the name of the
commodity which they sell such as chadar, (bed sheet), pandlu (fruits), gajulu (Bangles), palu, perugu
(milk and curd), etc. There will be too such haggling in price fixation. The payment is made either in
cash or in kind in the form of foodgrains. Sometimes these traders extend credit upto periods harvests.
• Mobile traders move in groups or 3 to 5 persons carrying different types or similar types of articles.
They move only in those parts of the village, they have decided at the time of the entry. Female mobile
traders are also found significantly dealing in cosmetics, utensils, toiletries, plastic goods, spices, etc.
• During harvesting season, the frequency of visits by mobile traders is more. Most of these traders
belong to certain castes like Poosala in Andhra Pradesh. These mobile traders are an integral part of the
rural marketing system.
 Type # 3. Permanent Retail Shops:
• Permanent retail shops are developed as the population of villages increased, their
incomes improved, the demand for goods and that too on daily basis increased. The
traditional fairs, weekly markets or peddlers were not able to meet the situation and
this led to the emergence and growth of permanent shops.
• Permanent shops were set up as a result of the demand of the rural inhabitants
primarily of the same village. The number of shops, their various forms largely
depends upon the size of the population of the village, their incomes, purchasing
power, their preferences, etc.
• In the Indian context, the most sophisticated types of retail outlets comparable to that
of western countries are found in metropolitan cities, while in rural areas (with
population less than 10,000), only the traditional independent general stores or small-
scale retailing are prevailing.
• In rural areas, only traditional methods of distribution, i.e., wholesaler and retailers
are working as usual. The modern methods of distribution, such as chain stores, super
markets and franchise shops are not existing in rural areas because of small size of
villages and lower income of rural folk.
 Rural Marketing in India – Significance of
Rural Markets
• Every sales executives today if asked which market he would prefer to serve, the immediate answer would be.
“Rural Markets”. A number of factors have been recognised as responsible for the rural market boom.
• Some of them are:
• 1. Population Increase- Increase in population, and hence increase in demand. The rural population in 1971 was
43.80 crore, which increased to 52.50 crore in 1981, and 72 crore in 1994 and it is about 78 crore in 2000.
• 2. Addition in the Rural Increases- A marked increase in the rural income due to agrarian property.
• 3. Development of Villages- Large inflow of investment for rural development, programmes from government
and other sources.
• 4. Development of Educational Facilities- Increase in literacy and educational level among rural folks, and the
resultant inclination to lead sophisticated lives.
• 5. Increasing Contract- Increased contract of rural people with their urban counterparts due to development of
transport and a wide communication network.
• 6. Role of Foreign Goods- Inflow of foreign remittances and foreign made goods into rural areas.
• 7. Prosperity- The general rise in the level of prosperity appears to have resulted in two dominant shifts in the
rural consuming systems. One is conspicuous consumption of consumer durables by almost all segment of rural
consumers, and the second, the obvious preference for branded goods as compared to non-branded goods of
rural origin.
• 8. Change in Buying Behaviour- Changes in the laud tenure system causing a structural change in the ownership
pattern and consequent, changes in the buying behaviour.
• Rural Marketing in India – Approaches: Availability, Affordability,
Awareness and Acceptance
• The rural market may seem very attractive because of its vast size and
largely untapped markets. C.K. Prahalad, the renowned management
guru had talked about the huge market potential offered by the world’s
poor in his book the fortune at the bottom of the pyramid. According to
him, commercial success can be successfully combined with societal
development if multinational companies targeted the population of the
developing world in a way that would fulfill the needs of both.
• But entering the rural market is not so easy. There are some problems
specific to this kind of market. The 4 a’s approach is a consumer-
oriented model that explains the uniqueness of rural markets.
• The 4 a’s are:
 Approach # 1. Availability:
• The biggest challenge is to ensure availability of goods and services in the markets.
Rural markets do not have a proper physical distribution system like those in urban
markets. India’s 6,38,000 villages are scattered all over the country and each village
would have particular distribution problems. Village areas do not even have a well-
developed roadways system.
• Many of the roads are not even pucca, and are rendered useless during the monsoons.
The mountainous villages become inaccessible during landslides and snow storms.
Therefore it is a big challenge to ensure availability of products at far flung areas. To
counter such problems, big companies like the global giant unilever’s Indian subsidiary
Hindustan unsilver have built a strong distribution system to reach the remotest of the
villages.
• More traditional forms of transport like bullock carts, auto rickshaws and even boats in
some parts of Kerala are used in the rural distribution system. Coca cola has developed
a special distribution system to deliver its products to the village areas. Some
companies even open up factories and offices in such areas to penetrate the market.
 Approach # 2. Affordability:

• Key to successful rural marketing lies in selling goods and services that can be
afforded by villagers. Most of the rural population depends upon agriculture for
livelihood and as such their income is irregular. Also the per capita income of the
rural areas is lower.
• It is estimated that more than two-thirds of Indian villagers belong to low income
group, and thus they are very much price-sensitive. A villager will purchase a
particular product only if he feels that he is getting enough value for it.
• Rural population normally does not indulge in conspicuous spending. In order to
sell to the village markets, many organizations developed low priced options
specifically suited to the rural customer’s pockets. Britannia’s tiger biscuit is a low
priced snack which is popular among village kids.
• In the year 1998, Lg electronics introduced its sampoorna television range targeted
at rural buyers. Procter and gamble brought out tide naturals, a comparatively
cheaper detergent powder. Most brands of shampoo are available in sachets priced
at Rs. 2-3.
 Approach # 3. Awareness:
• It is significant to create awareness about the product in the minds of the
customers. The mass media for reaching rural people should be chosen
carefully. It should be kept in mind that even today the media reach is
lower in villages.
• Television ownership is very low in villages and viewership is limited to
doordarshan channels even for those who watch television. Print media
will be ineffective because of low literacy rates.
• Among electronic media, radio and cinema have a comparatively wider
coverage in villages. Advertisements in regional languages broadcast on
local radio stations will influence consumer thinking.
• Outdoor advertising options like banners, billboards, wall paintings,
posters, etc. can be used successfully in rural areas. Advertisements
should be in local languages so that people can easily understand them.
Hindustan unsilver makes use of street performers like magicians, singers
and dancers to promote its products.
 Approach # 4. Acceptance:
• The most important issue in rural marketing is to make the customers accept the
product. Villagers are more likely to resist change and are slower in adopting newer
products. So it is vital to assure them about the benefits and value they can get by
purchasing a particular product. Since rural people would not spend their precious
money on wasteful products, producers should offer goods that suit the villagers’ needs.
• People in a rural Chinese province used washing machines to wash not just clothes, but
also vegetables. Chinese appliance maker Haier group leveraged this opportunity and
modified their washing machine to enable washing farm produce safely. The villagers
happily purchased this machine, giving Haier group a competitive advantage over rivals.
• Marketers should facilitate the process of product acceptance—coca cola provides low
cost ice boxes to its rural distributors who do not have electricity or refrigerators. The
customers should feel that a product is worth the efforts they are making to get it.
• Rural people are more price-sensitive and believe in getting the maximum value out of
whatever they buy. Many models of Nokia mobile phones are equipped to handle SMS
facilities in regional Indian languages making it user friendly for non-English speaking
groups.
 Rural Marketing in India – Assumptions
• Many assumption prevail about rural marketing. For instance, one assumption is
that the rural buyer is not very discriminating. Once he is persuaded to buy a
particular product, he develops a strong affinity for it, and if satisfied, becomes
brand loyal.
• As a result, Indian manufacturers are generally known to prefer selling fewer
items at higher prices than selling more items at lower prices. A contrary view is
that the rural buyer, being suspicious of the marketer’s hard-sell techniques, is
quite discriminating, and is not easily persuaded.
• Yet another assumption is that the rural buyer is not particularly been about
quality and packaging.
• Some other assumption can be quoted. But all these need deep probing for
assuring at valid and reliable conclusions. Consumer’ research, thus, is
indispensable for entering the rural segment of the market. The pace of
urbanisation has brought into existence new markets for pronumerous consumer
goods.
 The rural market consists of two segments,
viz.-
• i. The market for consumption goods including consumer durables, and
• ii. The market for investment goods, including agricultural inputs. Rural consumers in both
these segments are far less homogeneous than their urban counterparts, and also differ from
region to region. A number of research studies have been made on the behaviour of rural
consumers towards agricultural inputs like fertilizers, pesticides, sprayers and food-grains.
• The rural markets are green pastures for any marketer, provided his marketing plan are
attuned to the specialities of rural markets. The rural market is estimated to be growing
faster, compared to urban market. Being a new market, it could be easily manipulated,
provided the manufacturers develop an insight into the behavioural patterns of rural
consumers.
• The potential of rural markets is said to be like that of a woken up sleeping giant. This is
substantiated in a study of market growth conducted by the Operations Research Group
(ORG) during a six year period (1983-89). The study revealed that the offtake of rural markets
for packaged consumer products accounted for Rs. 2,083 crores in 1989.
• The growth works out to 184 per cent, compared to the figure for 1984. Against this, the
increase in urban market off take was from Rs. 1,855 crore in 1984 to Rs. 3,628 crore in 1989,
working out to a 96 per cent crawl.
 Rural Marketing in India – Reasons for
Increase in the Importance of Rural Markets
• Cut Throat Competition in Urban Markets:
• Now-a-days people say that there is lot of competition in the market. Actually it is
not only lot of competition but cut throat competition, especially in the urban
areas. Companies are playing on the basis of price. Every big company is trying to
swallow the small and new companies. Prices are going down steeply just
because of the tough competition.
• Apart from the price factor, companies have started increasing product features
and added value to their products to compete in the market, without increasing
the prices. The concept is increase the utility and value and decreases the prices.
Irrespective of the above facts, there are certain products which have already
achieved the maturity level or have reached the saturation level. Demand is not
increasing in these sectors so the best strategy is to explore new markets for the
products.
• So rural marketing is turning out to be a market for the packaged products with a
minimum or no competition. Firms can generate demand and increase profits.
 2. Socioeconomic Changes:
• Today a revolution has come in the rural areas which in turn have brought a change in the socio-
economic conditions. This is basically in terms of increase in the productivity of the agriculture. Most of
the income of people residing in rural areas comes from agriculture. Due to the adoption of the latest
technology the yield per acre or animal has increased considerably.
• One of the major reasons behind these changes is the Government Policies to uplift the agriculture and
remote areas, and the opening of the cooperatives in some major belts of India. Because of adoption of
latest technology, production has increased which has resulted in the increase in income of farmers.
Due to increase in income the rural customer also wants to be in the same frame as the urban
customer.
• Urge for increasing income and better standard of living by the rural customers has motivated the
companies to go and spread their business activities in these areas. Some fertilizer companies have
started adopting villages for increase in their production. Some companies have taken it as a social
cause for the upliftment of remote areas. Integrated rural development programs encompass health,
education, latest technology farming products sales, development of industry etc.
• Another reason for this change is the media which has reached in the rural areas. Specially Television
has brought a revolution in this area. Today we have so many regional channels. Customer can be made
aware of the latest products, their utility, new brands, etc. With the increased income and aspiration for
standard of living, with this kind of awareness provided by the media, the companies are motivated to
go and take charge of the rural areas.
• 3. Scope and Size of Rural Market:
• Today the size and scope of rural market is increasing at a very fast pace. A major
part of Indian population lives in the rural areas which are now turning as a new
market. Now the rural market is not limited to the sale of fertilizers and pesticides
but it is going beyond that with the increase in the income and the aspiration level.
• Urge for good standard of living has opened the rural market as an opportunity for
the companies to come and grab the market. Now in rural areas also there is a
demand for TV, Cars, Shampoo, packaged goods etc.
• 4. Occupation:
• Most of the rural customers are engaged in farming, trading, poultry work,
plumbing, electric works, dairy, etc. We have different varieties of the occupation in
the rural areas. In rural areas also big farmers usually possess almost everything like
TV, fridge, furniture, and other home appliances etc. of the major brand. Small
farmers have scarcity of resources and funds etc. so there is no question of
possessing almost any branded products, specially costly products.
5. Reference Groups:
In rural areas there are totally different reference groups. Any person
who is having a say in their area, a respect in the society and a place in
the hearts of the residents form a reference group. Higher the profile
and requirement of these people in the society, higher will be their
influence on them. They are basically health workers, doctors, teachers,
panchayat members, local bodies, samiti members, bank managers etc.

6. Media Types:
Now-a-days televisions, presentations, display, radio etc. has taken the
place of old traditional folk programmes like ‘Nautanki’. Because of the
literacy rate being so low, print media is not so effective.
Rural Marketing in India – Factors Contributing to the Change in the Rural Markets
• While a variety of factors, acting in concert, have brought about this change, three factors
deserve special mention.
1. Concerted Efforts at Rural Developments:
• As a part for planned economic development, the government has been making
concerted efforts towards rural development. Plan after plan, it has been committing large
outlays to sectors like agriculture, animal husbandry, irrigation, flood control, and khadi
and village industries. They have generated new employment, new income and new
purchasing power among the rural people.
2. The Green Revolution:
• The green revolution has been the next major factor. A technological breakthrough took
place in Indian agriculture. Rural India derived considerable benefit from the green
revolution. Today, rural India generates 170 millions tonnes of food grains per year and an
equally substantial output of various other agricultural products.
• It produces 14 billion eggs, 80 millions broilers and 40 million tonnes of milk per annum
obviously, rural India is acquiring a new power.
3. The Expectation Revolution:
• The expectation revolution among the rural folks completed the process. More than the
green revolution, the revolution of ‘rising expectations’ of the rural people influenced the
marketing environment of rural India. While the expectation revolution did not in itself
result in any additional purchasing power, it brought about a powerful change in the
environmental dynamics.
• It enlarged the awareness of the marl people; it kindled their hopes; it strengthened their
motivation to work, earn and consume. Political and social changes taking place in the
 Rural Marketing in India – Marketing Mix for
the Rural Markets
1. Product Decisions:
The product for rural market must be little bit different from the
product for urban market. The product should be easy to use, simple,
easily serviceable, and easily maintainable. Take the example of tube
wells which are very easy to use and maintain in the fields as
compared to electrical motor systems. The product literature should
be easily understandable, it should be simple and in simple or local
language.
Packaging should be given due weightage i.e. product should be
available in small pack sizes (100 gm, 200 gm, 500 gm etc.) because
rural consumer prefers to buy one unit as compared to urban buyers
who purchases in bulk quantities. Focus can be on providing products
in small sachets packs like in the case of shampoo, pan masala etc.
• 2. Pricing Decision:
Law of demand says ‘Higher the price of the products, lower will be the demand
of the product and lower the price of the product, higher will be demand for that
product’. This law is totally applicable in the rural markets. Because of the
relatively lower income, the rural consumer is more sensitive towards price.
Marketers have to plan their activities in order to bring down the cost of
production. They have to bring down the price in order to attract the customers
e.g. Nirma Washing Powder.

• 3. Promotion Decisions:
Television, Radio, Presentation, Displays can be used to promote the marketing
activities of the company. Programmes like folk dances, rural fairs, nautankis, local
contests can be taken into consideration to promote the company’s products.
Personal selling can also play an important role in this respect. ‘Brand’ can be
established through visible logos etc.
• 4. Distribution Decision:
In order to send the products of the company
to the rural customers the company should
provide its products to local retailers or
distributors. Company cannot wait for the
customers to come to the city and purchase the
products. The company may arrange for mobile
vans to send their products in the rural areas or
focus on weekly markets of the rural areas.
Rural Marketing in India – Role, Types and Minimization of Risk in Rural
Marketing

• Risk plays a vivid role in the profitability and successful functioning of rural marketing or any
marketing system. There are number of theories’ of profits like uncertainty, contingencies
theory, risk bearing theory, M.P. theory.
• The theory which is acceptable to most of the economist is the risk bearing theory- Hardy has
defined Risk as uncertainty which may give you ample of benefits or it may ruin badly.
• At one place, he points out that no risk no profit, more risk more profits. He has defined the risk
theory as, “Profit is the reward of uncertainty and Risk Bearing”. Risk is inherent in all marketing
transactions. There is the risk of the destruction of the produce by fire, rodents or other
elements, quality deterioration, price fall, change in tastes, habits or fashion, and the risk of
placing the commodity in the wrong hands or area.
• There is a time lag between the production and consumption of arm products. The longer the
time lag, the greater the risk. The risk associated with marketing cannot be dispensed with for
this risk contributes to profit. Someone has to bear the risk in the marketing process.
• But most of the risk is taken by market middlemen, for they have the capacity to bear it.
Whenever risks are greater and varied, the margin taken by the risk bearers is higher, and vice
versa. One who holds the commodity in the process is the bearer of the risk, because of which
lie may be better off or worse off.
 Types of Risk:

1. Physical Risk:
This includes a loss in the quantity and quality of the
product during the marketing process. It may be due to
fire, flood, earthquake, rodents, insects, pests, fungus,
excessive moisture or temperature, careless handling and
unscientific storage, improper packing, looting or arson.
These together account for a large part of the loss of the
produce at the individual as well as at the macro level. Such
losses are a loss to society, too, and must be averted to the
extent possible.
2. Price Risk:
The prices of rural products fluctuate not only from year to year, but during the
year from month to month, day to day and even on the same day. The changes
in prices may be upward or downward. Price variation cannot be ruled out, for
the factors affecting the demand for, and the supply of, rural products are
continually changing.
A price fall may cause a loss to the trader or farmer who stocks the produce.
Sometimes, the risks are so great that they may result in a total failure of the
business, and the person who owns it may become bankrupt.

3. Institutional Risks:
These risks include the risks arising out of a change in the government’s budget
policy, in tariffs and tax laws, in the movement restrictions, statutory price
controls and the imposition of levies.
 Minimization of Risks:
The agencies engaged in marketing activities worry about the risks associated at every stage; and they continually try to
minimize the effects of these risks. A risk cannot be eliminated because it also carries profit. The agencies which do
not take risks hardly earn profit.
The risk management by the adoption of some of the measures listed below may minimize the risks:

a. Reduction in Physical Loss:

• The physical loss of a product (quantity and quality both) may be reduced by the adoption of the following measures:

• (i) Use of fire-proof materials in the storage structures to prevent accidents due to fire;
• (ii) Use of improved storage structures and giving necessary pre-storage treatment to the product to prevent losses in
quality and quantity arising out of excessive moisture, temperature, attacks by insects and pests, fungus and rodents;
• (iii) Use of better and quicker transportation methods and proper handling during transit; and
• (iv) Use of proper packaging material.

b. Transfer of Physical Losses to Insurance Companies:

• The burden of physical risk may be minimized by shifting it is insurance companies. There are specialised professional
agencies to bear such risks. They collect some premium and provide full compensation to the party in case of loss
due to the reasons for which the products are insured. In this way, the company insures a number of farmers against
losses.
 c. Minimisation of Price Risk:
The risk associated with the variation in prices may be minimized by the adoption
of the following measures:
• (i) Fixation of minimum and maximum prices of commodities by the
government and allowing movements in prices only within the defined range;
• (ii) Making arrangements for the dissemination of accurate and scientific price
information to all sections of society over space and time- This should include
information on market demand, average under a particular crop, estimates of
market supply and of the import and export of commodities.
• (iii) An effective system of advertising may reduce price uncertainty and create
a favourable atmosphere for the commodity;
• (iv) Operation of speculation and heading. The price risk associated with the
commodities for which the facility of forward trading is available may be
transferred to professional speculators through the operation of hedging. A
detailed exposition of speculation and hedging follows.