RURAL MARKETING

Session 16

Learning Objectives
1. Define rural India and rural markets.
2. Review the changes in demographics and socio-

cultural in rural India.

3. Basics of MR and STP in rural India
4. Introduction to 4 As of rural marketing.

Rural Marketing

Flow of Products/Services

SIMILAR
TO
NORMAL

AREA
OF INTEREST

Urban

From

Rural

BARTER

EXCLUDED

To
Rural

Urban

Definition of Rural
Organization

Census

IRDA
RBI

Definition of Rural

Limitation

o Several hamlets demarcated by physical

boundaries
o Towns are urban areas that satisfy:
o Minimum population 5,000
o Population density > 400 per sq. Km.
o 75% of the male population engaged in nonagricultural activities

The term rural is not

defined, nor is the
upper limit of
population for villages

o Similar to Census except that the percentage for

male population in towns is 25% and not 75%

Widening of definition
allows a larger market
to be considered as
rural

Rural: All locations with a population of up to 10,000

Distinction defined only
Semi-urban: All locations with a population between
by population
10,000 and 100,000
3

Some basic facts

Census 2011

Rural

Urban

Total

Population

833.09

377.11

1210.20

69%

31%

Decadal Growth
Rate

12.18%

31.80%

17.64%

Literacy(%)

68.91

84.98

74.04

Sex Ratio

947

926

940

Decadal growth rate in rural down from

17% to 12% primarily due to reclassification of a number of villages as
urban units
Literacy has gone up from 50% in 2001
to 69% in 2011 in rural
5

Small and Middle Level Towns

Share of total
disposable income %

Town

Nos.

Pop. in mns

5 million plus

85.19

22.6

One million plus

38

64.69

17.2

One million plus

46

149.88

39.8

5 lakhs to 1 million

45

36.04

9.6

2 lakhs to 5 lakhs

139

49.77

13.2

1 lakh to 2 lakhs

267

40.96

10.9

Middle level towns

451

136.77

33.7

26%

Less than 1 Lakh

7438

100.46

26.6

21%

TOTAL - URBAN

7935

377.11

100.0

TOTAL - RURAL

640,870

833.46

100.0

53%

Source : Census 2011

Towns with population of less than 2 lakh treated as

peri-urban since they are

closer to the rural psyche.

Rural consumers buy 90% of the durables from towns with population of
50,000 to 2,00,00.

Small and Middle Level Towns

FMCG Sales (Rs. Billion)
2002

2010

Multiple
Increase

Metro and Mini Metro

110 (25%)

412 (29%)

3.8

Middle India

83 (19%)

287 (20%)

3.5

Peri-Urban

98 (22%)

245 (17%)

2.5

Rural

151 (34%)

480 (34%)

3.2

TOTAL

442

1425

3.2

Source : Nielsen Middle India Report

Share of metros and mini-metros goes up at the expense of peri-urban

Rural Population by Village Size

Population

Number of Villages
Thousands
%

Population
Millions
%

10,000 plus

5.00

0.78%

72.31

8.68%

5,000 to 9,999

20.00

3.12%

123.80

14.86%

2,000 to 4,999

103.37

16.13%

288.50

34.63%

1,000 to 1,999

149.26

23.29%

197.44

23.70%

500-999

152.08

23.73%

103.22

12.39%

Less than 500

211.17

32.95%

47.82

5.74%

640.87

100.00%

833.09

100.00%

TOTAL
Source : Census 2011

o 20% of the villages contribute to over 66% of rural expenditure

8

Top Seven States Rural Population

State

Population % of total

Rural:Urban

Uttar Pradesh

155.32

18.6%

77.7%

Bihar

92.34

11.1%

88.7%

West Bengal

62.18

7.5%

68.1%

Maharashtra

61.56

7.4%

54.8%

Andhra Pradesh

56.36

6.8%

66.6%

Madhya Pradesh

52.56

6.3%

72.4%

Rajasthan

51.50

6.2%

75.1%

Source : Census 2011

o Top 7 states contribute to over 65% of rural population.

o States of Himachal Pradesh has the highest rural to urban ratio at 90% followed
by Bihar, Assam, Odisha, Meghalaya, Uttar Pradesh, Arunachal Pradesh,
Chhatisgarh, Jharkhand.
9

Household Distribution - India

Urban

Rural

Total

Number
per HH

Millions

Millions

Millions

2.85

3.6

6.19

3.7

9.04

3.7

7.53

9.5

16.45

9.8

23.98

9.7

12.55

15.9

21.11

12.6

33.66

13.6

20.80

26.4

35.18

21.0

55.98

22.7

14.59

18.5

31.68

18.9

46.26

18.8

6-8

16.25

20.6

45.15

26.9

61.40

24.9

9+

4.30

5.4

12.06

7.2

16.36

6.6

TOTAL

78.87

100.0

167.83

100.0

246.69

100.0

Source : Census 2011

o Average per household 5 in rural against 4.7 in urban

o Number of joint families around 18% all India
o Joint family structure in rural giving way to individualised joint families with
separate kitchens in same house.
10

Landholding Pattern in Rural India

Holding

Number - Millions (%)

Area Million hectares (%)

2000-01

2005-06

2010-11

2000-01

2005-06

2010-11

Marginal(Below 1 ha)

75 (62%)

84 (64%)

92.4 (67%)

30 (19%)

32 (20%)

35.4 (22%)

Small (1 to 2 ha)

23 (20%)

24 (18%)

24.7 (18%)

32 (20)

33 (21%)

35.1 (22%)

Small Medium (42 to 4 ha)

14 (12%)

14 (11%)

13.8 (10%)

38 (24)

38 (24%)

37.5 (24%)

Medium (4 to 10 ha)

7 (6%)

6 (5%)

5.9 (4%)

38 (24)

37 (23%)

33.7(21%)

Large (10 ha and above)

1 (1%)

1 (1%)

1 (1%)

21 (13)

19 (12%)

17.4 (11%)

TOTAL

120

129

138

159

159

159

Source : Census 2011

o Land fragmentation increasing in rural India

o Gross Cropped Area is around 46% with 23% forest, 23% not available for cultivation
and 8% fallow land.
11

The Transition of the Rural Economy

Food grain crops
On land activities
Farm activities
Non food grain crops
Cash crops
Off-land allied activities
(Livestock, fisheries etc.)
Non-farm activities
(Services, manufacturing, etc.)

Transition has occurred at three

levels:
o Food grain crops
o On-land activities
o Farm activities

Transition linked to high

opportunity for value addition

resulting in high rural incomes.
Farm sector now contributes only
40% of the rural income with nonfarm activity contributing to 60%.

12

Income and Expenditures

Rural 52.9%

Urban 42.6%

Share of fuel and light

Rural 8.0%

Urban 6.7%

Share of clothing and

footwear

Rural 7.0%

Urban 6.4%

Share of Medical

Rural 6.7%

Urban 5.5%

Share of Education

Rural 3.5%

Urban 6.9%

Share of Conveyance

Rural 4.2%

Urban 6.5%

Share of durable goods

Rural 4.5%

Urban 5.3%

Share of Food:

13

SEC Classification
Education

Pucca

Type of House
Semi Pucca

Kucha

Illiterate

R4A

R4A

R4B

Below SSC

R3A

R3B

R4A

SSC/HSC

R2

R3A

R3B

Some College Not Graduate

R1

R2

R3B

Graduate/PG (General)

R1

R2

R3A

Graduate/PG (Professional)

R1

R2

R3A

Old classification up to mid-2011

14

New SEC Classification

15

Comparison of SEC Classifications

16

Durable Goods Ownership - % HH

RURAL

URBAN

1999-00

2004-05

2009-10

2011-12

1999-00

2004-05

2009-10

2011-12

Bicycle

40.5

47.1

54.9

57.1

39.0

41.7

41.1

38.6

Radio

30.4

26.3

26.5

18.7

35.1

33.6

23.3

17.4

Sewing Machine

7.4

9.5

10.9

13.0

20.3

23.8

21.7

22.3

Motor Cycle/Scooter

4.5

7.7

13.9

18.4

18.4

26.0

33.0

37.8

Television

18.7

25.6

41.7

49.6

59.5

66.1

75.8

80.4

Electric Fan

26.3

38.4

55.2

63.5

68.5

81.8

90.6

92.7

Motor Car/jeep

0.4

0.8

1.4

2.0

2.7

4.6

6.5

8.0

Refrigerator

2.7

4.4

7.1

9.4

22.9

31.9

39.0

43.8

Air Cooler

1.7

2.9

5.0

5.9

10.9

18.2

21.4

23.5

Source: NSSO 68th Round Report

17

Rural India: The Exploding Middle Class

164 million households accounting for 56% of Indias total

income, 64% of expenditure and 33% of savings

67% road connectivity, 44% tele-density, 95% electrification
377.73 million mobile users contributing 39% of total.
17 million DTH subscribers
100 million Kisan Credit Cards
Kotak Mahindra Bank shows share of rural in retail portfolio up
from 15% in 2008 to 40% in 2013.
RBI has mandated that banks to open at least 25% of their
branches in villages with population of less than 10,000.

18

CHALLENGES IN RURAL MARKETING

Low product discrimination

on quality

Low literacy levels

13 major languages and 1300

dialects
Diversity in traditions and cultures
Lack of distribution channels
Poor reach of mass media
Poor understanding of rural customers

19

Heterogeneity in Rural Markets

Socio-cultural differences
Population size and density
Level of infrastructure development
Media exposure levels
Variations in literacy levels

Differences in income levels and income flow

Family structure
20

SOCIOCULTURAL REGIONS
89 socio-cultural regions.
Each region has its own

identity in terms of
language, dress, culture.
This has been maintained in
rural.
Media penetration and
durables ownership may
also vary across regions.

21

Demographic Segmentation
Age and Lifecycle
Family structure

Children, teens, young adults, elders, seniors

joint family, invidualized joint family, nuclear family

Gender

Male, female

Income

Deprived, aspirers, seekers, strivers, global

Land ownership

Landless, marginal, small and large

Education

Illiterates, semi-literates, literates

House type:

Pucca, semi-pucca, kuccha

Occupation

Self-employed farmers, daily wage labourers, salaried, traders

Religion
Caste

Hindu, Muslim, Christian, Sikh

Upper caste, lower caste
22

Occasions

Family occasions
Religious
occasions
Haat days

23

Positioning

Identifying the
positioning concept
Product
differentiation
Service
differentiation
People
differentiation
Image
differentiation

Selecting the
positioning concept

Attractive
Distinctive
Pre-emptive
Affordable
Communicable

Developing the
concept

Communicating the
concept

Concept
development
Select appropriate
media

How many ideas

/differences to
promote?
Which positioning
to promote?

24

Special Tools used in Rural

Marketing Research
Participatory Rural
Appraisal
Market Access or
Mobility Map
Daily Activity Clock
Chapati Diagram
Process Map
Wealth Map

Scaling tools for

Quantitative Research
Satisfaction Scale
Agreement Scale
Ranking Ladder

25

Differences Between PRA and FGD

PRA

FGD

Large and heterogeneous in nature,

ensuring participation from all walks of life

Typically small and homogenous groups

As expression is both verbal and nonverbal, even the less assertive people can
express their views

A verbal channel outspoken individuals

often dominate the discussion

Moderators role is limited, hence the flow

of information flow is natural

Moderators intervention can be high in

evolving a response from all sectors

Attitude and behaviour change oriented

Action oriented

On-the spot analysis by participants

Analysis done by moderators

Cross-checking and validation of data can

be done on site by involving the members
of the group

Findings need to be validated with more

FGD till a consensus is reached

26

Some Dos and Donts in Rural Research

LO 3

Wear simple clothes and greet in the local language

Be familiar with the local dialect
Explain the purpose and benefits of the research at the outset
Let the respondent lead the interview
Minimal physical contact with no contact with the opposite gender
Be ready for crowds and slowly guide respondent to secluded place
Always carry food, water and first aid kit to avoid health problems
27

The Evolution of Rural Marketing

Phase I
(Prior to the 60s)

Phase II
(60s to 80s)

Phase III
(90s)

Phase IV
(2000 to present)

Marketing of rural products in rural and urban markets and

agricultural inputs to rural markets.
A totally unorganised market

Green revolution ushered in scientific farming practices resulting in

exponential growth in agricultural production
White revolution gave a fillip to cooperative movement
Establishment of distribution networks by FMCG companies

Increased rural thrust and strengthening of local governance resulted

in socio-economic progress.
Growth in consumables and durables

Going rural becomes the mantra even for high value products and
services
Government initiatives of rural loan waiver, employment and rural
infrastructure development provide further acceleration
28

Rural Marketing Mix

The 4 Ps of marketing price, product, place and

promotion replaced by 4 As in rural markets

Affordability

Availability

Awareness

Acceptability

29

Rural Marketing Mix

Acceptability

Rural consumers look for productive assets

Specific needs should be looked into while designing products
for rural consumers

Affordability

Rural consumers are driven by value proposition and not by cost

Availability

Single largest challenge for marketers in rural markets

Paucity of data for villages and small towns is a hindrance

Awareness

Media reach is increasing

Need for specific messages aimed at the rural psyche
Use of alternative rural means of communication

30

Acceptability
The first and central decision in the marketing mix
Confirms acceptability
Points for taking products to rural markets:
o Appropriate for the rural environment
o Simple to operate
o Visually identifiable
o Affordable
TATA Ace, LG Sampoorna, Washing Machine, Philips

Free Wave Radio.

31

Fast Moving Consumer Goods

YEAR

METRO

Middle
India

RURBAN

RURAL

TOTAL

2010

410

290

245

480

1425

2011

485

345

295

575

1700

2012

560

400

350

690

2000

2013

605

430

380

775

2190

Source: Nielsen Unit : Rs. Billion

Urban: 2 lakhs plus towns

Overall growth slows down from 17.6% to 9.5% with rural growth slowing down to 12.5%

Major players in rural are HUL, Dabur, Marico, Colgate

Palmolive, Nirma, CavinKare and Godrej.

32

Fast Moving Consumer Goods

Category

Penetration (%)

Edible oil

96

Washing powder/liquid

90

Tea

89

Washing cakes/bars

85

Biscuits

76

Hair oil

70

Toothbrushes

56

Toothpaste

51

Vanaspati

42

Toothpowder

29

Ghee/Desi ghee

18

Utensil cleaner

18

Toilet cleaner

Coffee

Source Q 1 IRS 2010

33

Consumer Durables Penetration

Urban
100.0%
90.0% 82.0%
80.0%

Rural

89.0%
80.0%

76.7%

70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%

56.0%

54.3%
48.0%
38.0%

46.2%
42.0%

46.0%
35.2%

33.4%
19.0%

25.4%
17.3% 18.6%

14.4%
8.0%

5.1%

9.8%
2.3%

0.0%

Major players in rural are Usha, Bajaj, Philips, Titan, Godrej, Videocon, LG, Samsung, Hero ,
Mahindra & Mahindra, Maruti and Tata

34

Brand Loyalty versus Stickiness

Rural consumers

are more brand sticky rather than

brand loyal due to lower literacy and awareness.
Brand stickiness since rural consumers still
discovering core benefits.
Brand stickiness higher amongst older people.
Brand dominance also because word of mouth is
strong
Entry of new brands is therefore difficult in rural.
Brands will also have to customise for local tastes.
35

In rural India
AFFORDABILITY and
AVAILABILITY are the most
important determinants of
consumption

36

Affordability
Exchange value for a product or service.
Affordability a major issue in rural.
The role of sachets and price points in rural.
Growing purchasing power raising aspiration levels
Premium brands

making inroads into rural markets.

37

Pricing in Rural India

How do companies price?
o Rural consumers look at value for money
o Target pricing approach
o Launch of Gillette Guard at Rs 15 for rural
Consumer psychology and pricing
o Good quality at cheap price
o Fancy features not appreciated
o Compare prices to a reference price.

38

Rural Specific Pricing Strategies

Low cost packaging which is durable and aesthetic.
Refillable/reusable packs
Highlight value not price
Coinage pricing for convenience of consumers

and

retailers.
Product-sharing services HPCL Rasoi Ghar

39

Availability: The Challenges and the

Dilemma
Reaching 4.5 million retail outlets across 640,000

villages.
80% of the villages have a population of less than
2,000 population.
Poor road connectivity
Multiple tiers of distribution leading to higher costs.
Low density of shops per village and high variation in
their concentration.
Poor availability of suitable dealers.
40

Availability: The Challenges and the

Dilemma
Inadequate bank and credit facilities to rural retail

outlets.
Poor storage systems leading to inadequate stocking.
Highly credit driven market.
Poor visibility of products on rural shelves.
Poor communication of offers and schemes due to
poor reach of media.
Inadequate power supply leading to spoilage of
goods which need refrigeration.
41

The Evolution of Rural Distribution Channels

LEVEL

Channel Partners

Market Place

Company Depots/CFAs, Super stockists

National/State

CFAs/Redistribution stockists
Retailers/Modern/Traditional

Cluster of districts
District Headquarters

Redistribution stockists
Semi-wholesalers/Retailers

Sub-district (Tehsil/Block)
Feeder town

Semi-wholesalers/Retailers
Mobile traders in haats/vans

Feeder town
Periodic market

Retailers/Vans/Barefoot agents (Shakti

dealers)/Cooperative societies/
Government agencies (Fair price shops)

Large and small villages

42

Rural Centric Distribution Models

Haats/Shandies
Melas
Modern Distribution

Models

Vans
The Public Distribution

System

Cooperative Societies
Petrol Pumps

and Extension Counters

Non-government Organisations
Rural Mobile Traders
43

In rural India AWARENESS is

the most difficult
determinant of
consumption

44

Challenges in Rural Communication

Heterogeneity and Spread
o Widely dispersed villages
Low literacy and varying

comprehension abilities
Different media reach and habits
o Television reach in single digits in

Madhya Pradesh
o Radio reach in single digits in
Andhra Pradesh

National Languages
English and Hindi

Scheduled
Languages
17
Languages with
widespread use
47 in primary education
98 in print media
71 in radio; 13 in films

Local Vernaculars
114 recognised varieties

45

Designing the Communication Strategy

Advertising

Mass media primarily broadcast, print, wall paintings and point of

purchase.

Sales Promotion

Coupons, contests, discounts, demonstrations and sampling

Mostly done through sampling and demonstrations at haats and retail
outlets

Direct Marketing

Most popular in village is mailers and SMS

Public Relations

Image building through activities reported in the press or broadcast

medium

Personal Selling

Normally conducted by insurance companies

46

Rural Media
Conventional
Media
Mass Media
Outdoor Media
Personalised
Media

LO 5

Rural Centric
Video Van/Rath
Haats
Melas
Mandis
Folk Media
47

Folk Media
Folk Theatre
Folk songs

Folk dances
Magic shows

Puppet shows
Interactive games
48

Successful Mantra for Entering Rural

Markets

Think like a businessman with

feelings of a social worker