RURAL MARKETING

Issues, Opportunities & Challenges

Submitted by:
•Deep Shikha(08)
•Siddharth Iyer(10)
•Jaimin Patwa(19)
•Jharna Tinani(26)
 Rural

MACRO SCENARIO
 Rural Market Has Arrived
 742 million people
 Rural is bigger than urban
 FMCGs 53%
 Durables 59%
 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, 2002

 Rural Market Has Arrived
 Some impressive facts about the rural
sector.
In 2001-02, LIC sold 55 % of its policies in
rural India.

Of two million BSNL mobile connections, 50

% in small towns/villages.
 Rural Market Has Arrived
41 million Kisan Credit Cards (KCC) issued
(against 22 million credit-plus-debit cards in
urban) resulting in tremendous liquidity.

Of 20 million Rediffmail signups, 60 % are

from small towns. 50% transactions from
these towns on Rediff online shopping site.
 Rural Income Dispersal
Projection
Consumer Annual
1995-96 2006-07
Class Income
Very Rich Above Rs 215,000 1.6 5.6

Consuming
Rs 45,001- 215,000 2.7 5.8
Class

Climbers Rs 22,001- 45,000 8.3 22.4

Aspirants Rs 16,001 – 22,000 26.0 44.6

Destitutes Rs 16,000 & Below 61.4 20.2

Total 100.0 100.0

Projections Based on 7.2% GDP Growth

 Rural Housing Pattern

(percentage)

House
1981 1991 2001
Type
Pucca 22 31 41

Semi- pucca 37 36 36

Kuccha 41 33 23
 Infrastructure Improving
Rapidly
 In 50 years only 40% villages connected by
road, in next 10 years another 30%.

 > 90 % villages electrified, though only 44%

rural homes have electric connections.
 Infrastructure Improving
Rapidly
 Rural telephone density has gone up by
300% in the last 10 years, every 500+ pop
is connected by STD.
 Levels of literacy are up. Source: census
2001

Division 1991 2001 % Change

Rural 45% 59% +31%
Urban 73% 80% +10%
Total 52% 65% +25%
 Infrastructure Improving
Rapidly
 70% of R1,R2, R3 can be reached through
mass media.
70

53

41

26
21
14

Satellite Radio Press Cinema TV All Media

TV
Issues

IN RURAL
 Issues In Rural
 Distribution
 Understanding the rural consumer
 Communication
 Poor infrastructure
 Distribution of Villages Hardly any
shops in these
Population No of villages % of total villages2.3 lac villages

Less than 200 96,855 15.7

200-500 1,36,454 21.4 17% of

villages
501-1000 1,56,737 24.6 account for
50% of rural
1001-2000 1,40,751 22.0 population &
60% rural
2001-5000 87,206 13.7 wealth

5001-1000 20,363 3.2

Total no of villages 6,38,365 100.0

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
Class IV 10,000- 19,999 1560 30.2 people are
from these
Class V 5,000- 9,999 1057 20.5 1900 towns

Class VI less than 5000 237 4.6

Total no of 5161 100.0

towns

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

The Rural Consumer

 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.
 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, the second largest
shampoo brand.
Ghadi detergent, third largest brand
 Rural Consumer Insights
 Brand recognition not through name but.
Color.
Numeric.
Visual.

 Buy value for money not cheap products.

 Rural Consumer Insights
 Fewer brand choices in rural
 Category Average no. of brands per dealer
Rural Urban
Toothpaste 3 7
Toothbrush 3 6
Biscuits 3 9
Hair oils 3 7
Source ORG, 2002
 Rural Consumer Insights
Rural Urban
 Average monthly sale/store 3,000 12,500
 Average SKU’s / store 62 154

Source ORG, 2002

 MYTH 1: Rural Market Is a
Homogeneous Mass
REALITY
 Heterogeneous population Big
Landlords

Traders,Small Farmers

Marginal Farmers

Laborers, Artisans

 16 languages
 State wise variations in rural demographics
Literacy (Kerala 90%, Bihar 44%)
Population below poverty line (Orissa 48%,
Punjab 6%) 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 15.6 million
Urban 16.4 million

 Per Capita Annual Income

Rural Rs 9,481
Urban Rs 19,407
Total Rs 12,128
Source: NCAER
 MYTH 3: Reaching 6 Lac +
Villages Is a Distribution
Nightmare
REALITY
 Consumption is in villages but purchase is
often from towns
Durables: 90% bought from 20k+ towns (1900
nos)
FMCG: average investment in a village shop
is a mere Rs 5000 not allowing for multiple
brand or SKU choice.
Purchase mostly from the larger 5000+ pop
villages or small kasba town shops/haats
MYTH 4: 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

 MYTH 5: Sales promotion
schemes are equally effective
in rural
REALITY

 Retailer ‘sells’ free gifts as rural people

are less educated/ less aware

 Difficulty in communicating scheme due

to lack of print media availability
Opportunity &
Challenges
 Marketing Opportunities
 Low penetration rates in rural (per 1000 HHs)
Durables Urban Rural Total
 Motor cycle 77 28 42
 CTV 304 48 121
 Pressure cooker 635 178 309
 Refrigerator 335 35 120

FMCGs Urban Rural Total

 Shampoo 663 352
442
 Toothpaste 822 449
556
 Health beverage 324 67 140
 Packaged biscuits 579 315 (44%) 390
 Face Cream 429 Source: NCAER 2002
185
 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
the population
 Toothpowder 79% consumes over
 Shampoo 75% of FMCG
88% volumes
 Impact of Monsoon on
Rural Demand
 Contribution of Agriculture to rural income is only
50%. Remaining 50% income comes from the
non farm sector

 Cropped area, yield and production is up 50%

compared with 1987-88, the last major drought
year
 % HHs Owning the Product
Developed Developing
Category
rural* rural
Size (million HHs) 43 90
% of rural population 32 68
Two-wheeler 10 5
Refrigerator 8 2
Color TV 12 3
Telephone 9 3
Toothpaste 45 27
Branded tea/ coffee 11 1
Press reach 34 19
TV reach 57 34
Developed rural includes Punjab, Haryana, Gujrat, Maharashtra, Karnatak, Kerala.
ource : IRS 2002/ HRG Analysis
 Challenges in the Future
 Reaching the product to remote rural
locations and entering more rural homes
(penetration)

 Increasing rural incomes (market growth)

 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
 Challenges in the Future

Using IT to transform markets

ITC’s e-choupal and other IT initiatives (EID
parry, Amul dairy information system kiosk)

STD revolution/ mobile connectivity

 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
40 crore)
 Rural Quotes
– The future lies with those companies who see the poor
as their customers.
CK Prahalad to Indian CEO’s, Jan 2000.

– To get rich, sell to the poor.

Pradeep Kashyap.