Contents

Introduction Present Market Scenario Reason to choose rural market 4 As Approach Challenges Some remarkable initiatives by companies Conclusion References

Rural marketing defined:Rural marketing is defined as any marketing activity in which one dominant participant is from rural area. This implies that rural marketing consists of marketing of products and services to the rural as well as marketing of output from the rural markets to other geographical areas.

Introduction:The Indian rural markets have gained significance in the recent times as the overall economic
growth of the country has led to an improvement in the living standards of the rural people. The

boon of the Green Revolution combined with government initiatives such as subsidies, loan waivers, and minimum support prices (MSP) and employment schemes (MGREGS) have caused an increase in purchasing power. The real income of rural households is projected to rise from 2.8% in the past two decades to 3.6% in the next two. Higher incomes and exposure to urban lifestyles have also raised the aspirations of the rural populace, as they strive to improve their quality of life by gaining access to new technologies, products and services. Rural India consists of 638596 villages that house 742,490,639 people. This figure represents around 70% of the total population of India and 12% of the globes population. In fact, as per Mckinsey, despite rising urbanization, 63% of Indias population will continue to live in the rural areas even in 2025. Further, the number of consumers earning over $5 a day is projected to grow from 50 million today to 150 million by 2020. Cut throat competition in urban areas has compelled many companies to look for new, unexploited markets. Rural India has emerged as an answer, owing to lack of strong presence by brands in most sectors as well as a high growth potential. Further, improvement in infrastructure prompted by government initiatives seems to have lowered entry barriers for many companies. Also, rural India is insulated against global economic downturns, which adds to its attractiveness. For companies looking to tap this market, the 4Ps of the Marketing mix have given way to the 4 As of Rural Market Mix: Affordability, Awareness, Availability and Acceptability

Present Market Scenario: 1. FMCG

FMCG companies have realized a significant proportion of their sales from rural markets. They account for 70% of toilet soap and 50% of TV, fans, bicycles, tea and wrist watch consumption. At present rural India accounts for 34% in FMCG consumption. HUL has launched special initiatives to push its rural sales through Project Shakti and Shakti Amma television channel. Successful FMCG products have typically been low priced and available in small-unit packages. This is in line with the rural psychology of high aspiration and high price consciousness. Examples are Parle-G priced at Rs. 2, Chik Shampoos sold in sachets priced at 50 paisa and 500gm packs of Godrej soaps priced at Rs 5.

2. TELECOM:
RNCOS, a research agency, states that as penetration in the urban region has saturated, operators are eyeing for rural India and estimates that the subscribers base in rural markets will grow at a CAGR of 35% during 2011-12 to 2013-14. Mobile device manufacturers are also tailoring their products to this market. Mobile companies are providing special tariff plans and mobile manufacturing companies adding feature of torch. Nokia in December 2008, it went one step further with the launch of Nokia Life Tools, which is a range of agriculture, education and entertainment services designed especially for the consumers in rural areas. Reliance Communications in a JV with Handygo Tech Pvt. Ltd. has introduced a Value Added Service, Behtar Zindagi, providing the people with weather reports, livestock information, mandi prices, fisheries, and finance and wealth scheme advisories.

3. RETAIL:
The rural retail market is currently estimated at US$ 112 billion, or around 40 per cent of the Indian retail market. Traditionally, people in rural areas purchase products in haats, mandis and melas, which represent the unorganized retail industry. Today many companies are entering the rural markets with a model for organized retail. Examples include: Hariyali Kissan Bazar, promoted by DCM Sriram caters to the requirements of farmers for farm equipments and other agricultural inputs.

ITCs Choupal Sagar is another initiative that not only sells personal care and household utility items, but also buys farm produce Large format retail stores called Adhaar also have been set up by Godrej Agro vet

4. AUTOMOBILES
Rural areas have traditionally been major markets for automobiles such as tractors and cars. But rising incomes and peoples aspirations have led to an increased demand for cars as well. Market leader in the small car segment, Maruti Suzuki India Limited, has registered almost a fifth of its sales from the non-metro areas across the country. Also, Mahindra & Mahindra is now selling more Scorpios in rural and semi-urban markets. The successes of these firms have encouraged others to venture into these markets. Bajaj Auto, the countrys second largest two-wheeler seller, is planning to offer a 150cc engine motorcycle to the rural areas. Another entrant is Toyota Kirloskar Motor, which is planning to sell 40% of its cars in rural markets in India.

5. CONSUMER DURABLES:
Many companies are committed to modify their products to explicitly suit rural demands. For example, lighting solutions company BPL Techno Vision has launched its rechargeable light emitting diode (LED) lantern 'BPL Chirag' for the domestic rural market. Chirag needs only four hours of charging for five hours of light. This product addresses the problems of frequent power losses and fluctuating voltages in rural India.

4As Approach Availability

The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system, which helps its brands reach the interiors of the rural market. To service remote village, stockiest use auto-rickshaws, bullock-carts and even boats in the backwaters of Kerala. Coca-Cola, which considers rural India as a future growth

driver, has evolved a hub and spoke distribution model to reach the villages. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market.

Affordability
The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of who are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4 & 5.

Acceptability
The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. One company, which has reaped rich dividends by doing so, is LG Electronics. In 1998, it developed a customized TV for the rural market. Some insurance companies also doing well in this part like LIC, HDFC etc.

Awareness
Mass media is able to reach only to 57% of the rural population. Creating awareness then, means utilizing targeted, unconventional media including ambient media .For generating awareness, events like fairs and festivals etc. are used as occasions for brand communication. Cinema vans, shop-fronts, walls and wells are other media vehicles that have been utilized to increase brand and pack visibility. Innovative media used by personal wash like Lux and Lifebuoy and fabric wash items like Rin and Wheel. Idea was to advertise not only at the point of purchase but also.

There are three most important things that attract rural markets more than urban ones: Rural market growth: Rural markets have grown rapidly than the traditional urban market.
Main areas of growth include improvement in education, Infrastructure and information and

communication technology. The rural markets seeks the 4 As rather than branding and luxurious items. The 4 As are affordability, availability, acceptability and awareness.

Purchasing power of rural consumers: Better facilities like irrigation, fertilizers, and
credits have enhanced the rural consumers to equip themselves to buy more. Hence they are looking to improvise on their standard of living.

Saturation of Urban Markets: The intense competition in urban areas gave malls, retail
stores, factory outlets and forcing the market to operate at marginal profits. Thus marketers will have to find a new fresh, less-competitive and more resourceful market to conquer new heights. Another thing to keep in mind is the agricultural source of income for a rural marketing. In fact, earlier the rural marketing ran only around the agricultural markets to feed itself but it has change past the 2001 era where game changers like Kisan Credit Cards, Micro Finance and Pardhan Mantri Gramodyog Yojna came to rural customers enabling them more to earn and more to spend than earlier. Now, the most important thing that marketers cant afford to miss out is the marketing strategy. Remembering basic characteristics as low spending on capital income, lack of formal retail and distribution and conservative mentality for buying, marketers first need understand segmentation of rural market. It can be done as: Geographic: Dividing markets into sections having similar regions for better distribution network. This helps in channelizing products as per the geographical features. Typically, the success soaring for Chik shampoo having a USP of Amla, Shikakai and Neem as its chief ingredients in all villages not growing such products. Demographic: Division of market with basis of income, education, lifestyle, gender and religion. Rural population insists to buy Rin Shakti or Ghadi detergent than the Daag ache hai international brand- surf excel. Psychological: Interestingly, rural population is typical investor behind every penny. But it is interesting to see them flex their financial machine when competing in the main field- Agriculture. As seen in North Gujarat, farmers prefer a 50 horse power tractors

rather than required 25 to 30 hp just because they want to keep up with neighbors when it comes agriculture. Its about making a right mix of strategy to identify and launch products accordingly. The strategy still consists of the 4 Ps to work in rural marketing:

1) Product: The tapping of the traditional culture that rural women groomed hair seriously was
done perfectly right by HUL and launched shampoos with a view to sell shampoos because knowing that rural women compromise in ornaments and clothes but not in hair. But they were cautious enough to know that rural families used only soaps for hair and body both. These women, having family oriented buying behavior, will not buy only shampoo just for hairs sake. Hence they launched a 2-in -1 soap that can be used for hair and body both. It later on, after seeing Chik shampoos success started selling shampoos in single served sachets priced at Re. 1, and the sales of shampoos of HUL have increased to the extent of 30%. 'Operation Bharat', initiative by HUL tap the rural markets. Under this operation, it passed out low-priced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to million households. ITC is setting up e-Choupals, which offers the farmers all the information, products and services they need to enhance farm productivity, improve farm-gate price realization and cut transaction costs.

2) Price: The most important P of all because the marketers will face a challenge to tap each
segment of their impending customer base. Looking at the table gives a novel idea to tap first two groups (done by FMCG) to introduce products focused on them. Household category share Low income (59%) Lower middle income (25%) Middle income (10%) Upper-middle income (4%) Annual income (rs) Up to Rs. 22, 500 22,500 to 45,000 45,000 to 62,000 62,000 to 96,000 Population size 590 million 250 million 100 million 40 million

High income (2%)

Above Rs. 96,000

20 million

Source: National center for Applied Economic Research (NCAER) in India. The most apt conclusion said by C.K. Prahlad on rural marketing that is derived is to Focus on volume, not margins holds true in this case. In early 90s Kelloggs had launched breakfast cereals which had huge profit margin targeting last two groups of table and lost the plot but HUL, by introducing products in sachets sells its products in 8 lakhs to 12 lakh villages. Another example of Nirma where they went to focus on first two groups giving soaps to these categories and today its success is a living proof of Prahlads most vital rule.

3) Place: The concept of distributed network, retailing and storage for goods is totally absent in
most villages and towns in India. The innovation marketers use IDC (indirect coverage) methods for tackling above problems. Godrej used company vans to deliver its items in rural India and used mobile traders which were people travelling on cycles or tractors from villages to towns. Coke even provided cheap cold storages for storing coca cola bottles in them.

4) Promotion: The most challenging P for marketers because when it comes to rural markets,
two out of five are connected by TV, press, Radio and Cinema put together. So the only way possible are innovation promotions using channels where the rural populations are attracted to like melas, haats and puppet shows. Few years ago, the Kumbh mela at Ganges witnessed 30 million customers where FMCGs equipped salesmen launched Touch and feel demonstrations, gave away samples and take aways. Even, Colgate distributed herbal toothpastes, Lifebuoy and Brooke bond by HUL and Nupur Kali Mehndi by Godrej. The quote goes saying When you cant predict, create it and it goes true in the rural market as well. It goes to those who create the buying power for it like the HUL did in 1998 by targeting villages with population less than 3000. It trained the poorest income groups from it (15 to 20 people) to sell HUL products amongst other villagers with better profit margins creating awareness of HUL.

Challenges:
Although rural India seems to be a huge unexploited market, there are certain deterrents that slow down firms undertaking ventures to tap rural markets. The biggest mistake is to consider the entry into rural markets a natural expansion of the existing urban markets. The requirement of the rural people is significantly different from that of the urban areas, owing to varied demographic, social, economic and psychological environments. Thus the market offerings have to be suitably modified to meet the exact requirements of the rural consumers. Villages in India are spread over large geographical areas, and sometimes have very low densities of population. About 68% of the market remains untapped due to inaccessibility. This makes the distribution of products and their ready availability challenging. In fact, sales in rural India are influenced more by product availability than by advertisement. Added to this is the wide prevalence of fake brands, which flourish mainly due to illiteracy and lack of awareness. Local companies often copy the logo and color schemes of established brands, while slightly modifying the product name in an attempt to fool customers into believing their fake products for the genuine ones. The disposable income of the rural people is relatively low as compared to urban areas, seasonal, unstable and affected by uncontrollable factors like floods and droughts. This makes purchase of bulk consumer products rare. Hence people prefer goods that are low priced, or offer a good value for money. Small-unit packets are readily accepted as they represent convenience and affordability. Purchases in rural India are meant for consumption by the entire family as opposed to individual preferences. In this scenario, it is essential that products are developed such that they are fit for general purpose by all the members. This results in loss of opportunities for firms that gain by customization. On the whole, purchase decisions are influenced by deeply rooted social and cultural norms. The Joint family system is still common, and reference groups have a major impact on buying behavior. Thoughtful consideration to all these factors is essential to make a mark on the rural audience. Marketers are often unable to obtain a true picture of the needs and wants of the rural people due to difficulties in conducting market research. Wide geographical spread and vast variation in languages increase the time and costs involved. Moreover, a conservative outlook often restricts women from taking the surveys. Advertisements and other forms of communication also have to be modified suitably to suit the tastes of the rural people. For example, it has been

observed that people respond positively to bold fonts and bright colors such as red, green and yellow. The messages on advertisements should be written keeping in mind the sensitivities of the people and not offend anyone. Advertising in rural areas tend to be expensive as messages need to be translated in several local dialects to create optimum impact. Today companies are realizing the potential of the Indian rural markets and gradually expanding their steps in this direction. They still have a long way to go, but it is clear that the companies will eventually have to harness the rural markets for growth and opportunity.

Some remarkable initiatives by companies:Calvin Care- This company first come out with the concept of sachets and it revolutionize the
whole market, making the Chic shampoo the 2nd largest selling shampoo in India. This was followed with flood of products in small packaging ranging from toothpaste, face creams, soaps, hair oil etc.

Nirma- this company introduced the innovative technique of using video vans for marketing
Nirma products. This provided opportunity to cover wider markets and personal interaction.

Coca cola- coca cola increased number of outlets to increase market penetration from 13 to
28%. Used annual haats and fairs for promotion with huge investment for distribution and marketing. It brought down average price of products from Rs10 to Rs 5, thereby bridging the gap between soft drinks and other local options like tea, buttermilk or lemon water. It doubled the spending on doordarshan as it was the only TV channel available in rural India.

I.T.C e-chaupal- ITCs initiative is a novel idea which by passes the brokers between
company and farmers. This provided huge rural distribution infrastructure enhancing companys market reach.

Hindustan lever- HUL in late 2000 started project Shakti. It was basically a women self help
group program which provided opportunity to Indian women for growth and making commercial opportunities for HUL.

Conclusion
To conclude, rural market is extremely lucrative for market growth but also the most complex to reach into. These conservative, miserly spending, resistant mindset people can be won over by offering most value for money products. Only a smart marketer will understand the golden rule of focusing on volumes and not on margins in rural markets.

References
Mithileswar Jha, IIMA (1988), Rural Marketing: Some Conceptual Issues, Economic and Political Weekly, Feb 27th 1988. http://www.mbaskool.com/business-articles/marketing/2329-indian-rural-market-the-next-bigthing.html http://www.mbaskool.com/business-articles/marketing/4127-rural-marketing-are-companiesfinally-taking-rural-customers-seriously.html