RURAL

MARKETING
Introduction to Rural Marketing: Rural Marketing : Definition,
Characteristics and Dimensions of Rural Markets, Image of
Indian Rural Marketing and Approach to Rural Markets of India,
Rural Market Profile, Rural Market in India, Size and Scope, Environment of
Rural Markets in India, Constraints in Rural
Marketing and strategy to overcome the constraints.
DEFINITION
 Rural marketing is the process of
developing, pricing, promoting, distributing
rural specific goods and services leading
to exchange between urban and rural
markets, which satisfies consumer
demand and also achieves organisational
objectives”
Defining Rural India
Organization Definition Limitations
NSSO  rural not defined
( Census)  Population density < 400 / Sq Km
 75 percent of the male working
population is engaged in agriculture
No Municipal corporation / board

Planning  Towns upto 15,000 population are Town characteristics

Commission considered rural not defined
Cont’d
LG Electronics All places other than the Only clarifies what are
7 metros the cities

NABARD All locations with a Village & town

population upto 10, 000 characteristics not
considered “ rural” defined

Sahara Commercial Population

establishments located characteristics unknown
in areas servicing less
than 1000 population

Source: The Rural Marketing Book- Text & Practice, Kashyap. P and Raut. S ( 2007)
Defining Rural Marketing
National Commission on NGOs Corporate Rural
Agriculture Marketing Definition
Decisions to produce Marketing products Function that manages
saleable farm produced in rural areas all activities involved in
commodities involving to urban areas assessing, stimulating
all the aspects of the and converting the
market system or purchasing power of
Marketing products
structure, both rural consumers into
produced in rural areas
functional and in rural markets effective demand for
institutional, based on specific products and
technical & economic services to create
considerations and satisfaction & a better
includes the pre & post standard of living for
harvest operations. achieving organizational
goals.
Evolution of Rural Marketing

 Phase-I (before mid 1960)

Rural marketing referred to marketing of
rural products in rural & urban areas and
agricultural inputs in rural markets. It was
synonymous to “Agricultural marketing”
Phase II (1960-1990)

Green Revolution ushered in scientific

farming practices and transferred many
of the poor villages in to prosperous
busy centers. As a result demand for the
agricultural product went up
Phase III ( after mid 1990)

What was not considered so far during

the earlier phases was that of the
marketing of household consumables
and durables to the rural market
Attractiveness of Rural Market
 Large population
 Raising Prosperity
 Growth in Consumption
 Life style changes
 Life cycle advantages
 Market growth rates higher than urban
 Remoteness is no longer a problem
 Rural marketing is no longer a problem
NATURE OF RURAL MARKETING

 Large and scattered market

 Heterogeneous market
 Income from agriculture
 Standard of living
 Infrastructural facilities
APPROCHES TO RURAL MARKETS IN
INDIA
 
Urban Rural
     

 
Rural Urban
 
     

 
Rural Rural
Urban to Rural

 Urban marketers selling products and

services in rural areas e.g pesticides,
consumer durables etc. 
Rural to Urban

 Agricultural Marketing; rural producer

selling in urban market e.g. fruits,
vegetables, cotton etc. 
Rural to Rural

 Rural producer selling goods and services

to another rural consumer e.g. bullock
carts, agricultural tools etc. 
 RURAL MARKETING
Issues, Opportunities & Challenges

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Rural Market Has Arrived
 742 million people
 Rural consumption is bigger than urban
 FMCG's 53%
 Durables 59% Source: NCAER

 Estimated annual size of the rural market

 FMCG Rs 65,000 Crore
 Durables Rs 5,000 Crore
 Agri-inputs (incl. tractors) Rs 45,000 Crore
 2 / 4 wheelers Rs 8,000 Crore
 Total Rs 1,23,000 Crore
Source: Francis Kanoi
Latest McKinsey Report estimates that by 2020, Rural Consumer Market
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Will be worth Rs. 250,000 crores
 Rural Market Has Arrived
 Some impressive facts about the rural sector.
 In the first 6 months of 2005-06, rural India bought
30 lakh Life Insurance policies
 Of two million BSNL mobile connections, 50% in
small towns/villages.
 Of the six lakh villages, 5.40 lakh have a Village
Public Telephone (VPT). Additionally there are 2 lakh
PCOs – 90% of villages covered.
 By end 2007, there are likely to be 11.05 crore rural
phone subscribers
 For every Re.1/- per quintal increase in the
Procurement Price for grains, Rs. 170 crores added to
rural economy
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Rural Market Has Arrived
 55.6 million Kisan Credit Cards issued (against 60
million credit-plus-debit cards in urban) resulting
in tremendous liquidity.
 Of HHs earning Rs. 20 lakh + per year, 34% in
rural India. Also 15% of India’s crorepatis
 42 million rural HHs availing banking services in
comparison to 27 million urban HHs.
 Investment in formal savings instruments: 6.6
million HHs in rural and and 6.7 million in urban
 Over 50% of HLL’s Rs. 11700 crore sales turnover
is from rural markets

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RURAL TARGET MARKETS - CLASSIFICATION

Very Rich
0.8
1.6
Consuming
26.8 Class
41.3

54.7 Climbers
63.3

25.0
14.7 Aspirants

Destitutes

20.9 12.2

2001 - 02 2006-7 20
 Rural Income Dispersal
Projection All figures in %

Consumer Annual
1995-96 2006-07
Class Income
Very Rich Above Rs 215,000 0.3 0.9
Consuming Rs 45,001-
13.5 25.0
Class 215,000

Climbers Rs 22,001- 45,000 31.6 49.0

Aspirants Rs 16,001 - 22,000 31.2 14.0

Destitutes Rs 16,000 & Below 23.4 11.1

Total 100.0 100.0

> Projections Based on 7.2% GDP Growth

Consuming class households in rural nearly equal to urban.
 Rural Purchasing Power higher due to lower expenses on food, shelter, education & health
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Source : NCAER Indian Market Demographics Report

 Issues In Rural

 Distribution
 Understanding the rural consumer
 Communication
 Poor infrastructure

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 Distribution of Villages
Population No of villages % of total
villages Hardly any
Less than 200 92,541 15.6 shops in these
2.2 lac villages
200-500 127,054 21.4

501-1000 144,817 24.4

1001-2000 129,662 21.9

2001-5000 80,313 13.5

17% of villages
5001-10000 18,758 3.2 account for 50%
of rural
population &
Total no of villages 593,154* 100.0
60% rural
wealth
*Inhabited villages, total number of villages is 638, 691 23
Source: Census 2001
Distribution of Towns in India
Town Class Population No of towns % of total
towns
Class I 1 lac and above 423* 8.2

Class II 50,000-99,999 498 9.6 90 % of

durables
Class III 20,000- 49,999 1386 26.9 purchased by
rural people
Class IV 10,000- 19,999 1560 30.2 are from these
1900 towns
Class V 5,000- 9,999 1057 20.5

Class VI less than 5000 237 4.6

Total no of   5161 100.0

towns
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*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354 Source: Census 2001
 Rural Consumer Insights

 Rural India buys

 Products more often (mostly weekly).
 Buys small packs, low unit price more important
than economy.
 Distribution and pricing are the mantras to
success in rural India.

Even expensive brands like Close up, Marie biscuits, Clinic shampoo are
doing well because of deep distribution.
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 Rural Consumer Insights

 In rural India, brands rarely fight with each

other, they just have to be present at the right
place.
 Many brands are building strong rural base
without much advertising support.
 Chik shampoo, second largest shampoo brand.
 Ghadi detergent, second largest brand.
 Fewer brand choices in rural : number of FMCG
brands in rural are half that of urban.
 Buy “value for money”, not “cheap” products

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 MYTH 1: Rural Market Is a
Homogeneous Mass
REALITY Big

 Heterogeneous population Landlords

Traders,Small Farmers

Marginal Farmers

Laborers, Artisans

 16 languages, 800+ dialects

 State wise variations in rural demographics
 Literacy (Kerala 90%, Bihar 44%)
 Population below poverty line (Orissa 48%, Punjab
6%) 27
Source: Planning Commission, GoI
MYTH 2: Disposable Income Is Low
REALITY
 Number of middle class HHs (annual income Rs 45,000-
2,15,000)
Rural 27.4 million
Urban 29.5 million
 Per Capita Annual Income (not Purchasing Power)
Rural Rs 9,481
Urban Rs 19,407
Total Rs 12,128 Source: NCAER
 Rural incomes CAGR now estimated @ 15% vs 10% in
urban

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MYTH 3: Individuals Decide About
Purchases
REALITY

 Decision making process is collective

 Purchase process- influencer, decider, buyer, one

who pays can all be different. So marketers must
address brand message at several levels

 Rural youth brings brand knowledge to HH

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 Infrastructure Improving
Rapidly
 In 50 years only 40% villages connected by road,
in next 10 years another 30%.

 More than 90 % villages electrified, though only

44% rural homes have electric connections.

 Rural telephone density has gone up by 300% in

the last 10 years, every 1000+ pop is connected
by STD.
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Climbing Social Indicators

Between 1981 to 2001

 Number of pucca houses doubled from 22% to 41%
and kuccha houses halved (41% to 23%)

 Percentage of Below the Poverty Line families

declined from 46% to 27%

 Rural Literacy level improved from 36% to 59%

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Opportunity & Challenges

32
 Marketing Opportunities
 Low penetration rates in rural

% of rural HH

Durables Urban Rural Total

 CTV 30.4 4.8 12.1
 Refrigerator 33.5 3.5 12.0
 Mobile Phones 40.0 12.0 18.0

FMCGs Urban Rural Total

 Shampoo 66.3 35.2 44.2
 Toothpaste 82.2 44.9 55.6

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Source: NCAER
 Marketing Opportunities
 R1 - 4%
 R2 - 11%
 R3 - 37%
 R4 - 48%
 Low rural consumption in FMCGs (rich HHs)
urban rural
 Annual consumption Rs 13,000 Rs
9,400
 Rural consumption volumes (R1+R2+R3)
 Toothpaste 88% So this half of
 Toothpowder 79% the population
consumes over
 Shampoo 88% 75% of FMCG
volumes 34
 Challenges in the Future

 Reaching the product to remote rural locations

and entering more rural homes (penetration)

 Increasing rural incomes (market growth)

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 Challenges in the Future

 Making effective use of the large available

infrastructure
 Post offices 1,38,000
 Haats (periodic markets) 42,000
 Melas (exhibitions) 25,000
 Mandis (agri markets) 7,000
 Public distribution shops 3,80,000
 Bank branches 32,000

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 Challenges in the Future

 Using IT to transform markets

 ITCs e-choupal and other IT initiatives (EID
Parry, Amul dairy information system kiosk)

 STD revolution/ mobile connectivity

37
 Challenges in the Future

 Proliferation of large format rural retail

stores
 DSCL Haryali stores
 M & M Shubh Labh stores
 TATA/Rallis Kisan Kendras
 Escorts rural stores
 Warnabazaar, Maharashtra (annual sale Rs 120
crore)

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 An interesting Option - RURBAN
 Describes the clusters of migrants from rural to
urban geographies
 Rural psychography living in an Urban
demography
 Strong purchasing power because despite lower
incomes, low “wasteful” expenditures
 Become carriers and promoters of brands into
rural geographies on their annual trip back home

39
Rural Marketing Environment

 Demographic environment
 Physical environment
 Economic environment
 Social & Cultural environment
 Political environment
 Technological environment
Rural Marketing Environment

 Demographic environment

1971 1981 1991 2001

Total population 548.2 683.3 848.3 1026.9
Rural population 524 628.8 741.6
Rural proportion to total population 80.1 76.7 74.3 72.2
Decadal variation 19.8 16.7 15.2
(In million), Source: Census 2001
Distribution of population by age groups (2001)

Age group Rural Urban

0-4 11.5 8.9
5-14 25.7 21.8
15-19 9.5 10.6
20-34 23.1 26.8
35-54 19.7 22.5
55+ 10.5 9.4
total 100 100

(In million), Source: Census 2001

Education and the level of demand
Rural literacy 1981 1991 2001
% of litrate 36 45 59

Education level Rural Urban

Below primary 31.7 18
Primary but below middle 29.5 22.9
Middle but below matriculation 16.9 16.3
Below UG 18.4 29.6
graduate 3.5 13.2
Physical Environment

 Settlements
 Water and electricity
 Distance from the urban centres
 Haats and Mandis
Economic Environment

 Distribution of households from lower

income to higher income group
 Rural per capita income increasing
Social and Cultural Environment

 SCRs
 SCRs reflects degrees of homogenity
 Use SCRs as a yardstick for segmentation
and targeting.
Political Environment

 Panchayati Raj
 Gram Sabha
Technological Environment

 Green revolution
 White revolution
 NGO movements
Constraints in Rural Marketing

 Vastness and Uneven Growth

 Transportation infrastructure
 Communication Problems
 Warehousing Problems
 Many Languages and Dialects
 Market Organization & Staff
 Hierarchy of Market