RURAL MARKETING

– AN INSIGHT

1
Prof. Aparna Kanchan
 CONTENTS
 Introduction
 Evolution of rural market
 Characteristics of rural market
 Rural consumer
 Potential for rural market in India
 Challenges in rural marketing
 Strategies to capture rural market
 Some noteworthy success stories
2
 INTRODUCTION
 The term ‘rural marketing’ used to be
an umbrella term for the people who
dealt with rural people in one way or
other. It got a separate meaning and
importance after the economic
revaluation in India after 1990.
 Rural marketing is defined as managing all the activities
involved in assessing, stimulating and converting the
purchasing power of the rural consumers into effective
demand for specific products and services and moving them to
the people in rural areas to create satisfaction and a better
standard of living and thus achieving organizational
objectives. 3
 It is a two-way marketing process wherein:

• Urban to rural - Major part of rural marketing. Includes

transactions of urban marketers who sell their goods and
services in rural areas pesticides, fertilizers, FMCG products,
tractors, bicycles, consumer durables, etc.

• Rural to urban - Basically falls under agricultural

marketing. A rural producer seeks to sell his produce in urban
market like seeds, fruits and vegetables, forest produce, spices,
milk and related products, etc.

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• Rural to rural - Includes the activities that take place
between two villages in close proximity to each other like
agricultural tools, handicrafts, dress materials, bullock carts,
etc.

 It is more developmental than transactional as its nature is

more socio-cultural and economic as compared to the latter's
commercial nature.

 The word ‘rural’ is so much associated with agriculture and

farmers that rural marketing is often confused with agricultural
marketing but it should not be so as the latter is only a part of
rural marketing.

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 EVOLUTION
PHASE ORIGIN FUNCTION MAJOR SOURCE DESTINATION
PRODUCT MARKET MARKET
Phase I Before Agricultural Agricultural Rural Urban
mid1960(From marketing produce
independence
to Green
revolution)
Phase II Mid sixties Marketing of Agricultural Urban Rural
(Green agricultural inputs
revolution to inputs
Pre-
liberalization
period)
Phase III Mid Rural Consumables Urban and Rural
nineties(Post- marketing and durables rural
liberalization for
period in 20th consumption
century) and production
Phase IV 21st century Development All products Urban and Urban and rural
al marketing and services rural 6
 CHARACTERISTICS
 Large population
A/c to 2001 census, rural population constitutes about 73% of
the Indian population.

Year Rural Population

In 1901 89 per cent
In 1951 83 percent
In 1971 80 percent
In 1981 76 per cent
In 1991 74 per cent
In 2001 73 per cent
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 Occupation pattern
• Agriculture and related activities are the major source of
income for majority of the rural population.
• More than 60% of rural income is from agriculture.
• In the event of crop failure, the income of the rural masses is
directly affected.
 Large, diverse and scattered market
• Though large, the rural market is geographically scattered.
There may be less number of shops available to market
products.
• Diverse and heterogeneous market in terms of religious,
linguistic, social and cultural factors.
• About 700 million Indians live in 6 38 365 villages across
India.
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 Socio-economic position
• Majority of rural people have low purchasing power and per
capita income.
• More than 60% have income less than 25000 rupees.
• About 14% have income greater than 50000 rupees.
• Low disposable income.
 Low literacy level
It is estimated that rural India has a literacy level of 36% as
compared to 62% in the urban areas.
 Low standard of living
Low income, low purchasing power, overall social and
economic backwardness lead to low standard of living. In
general a rural consumer spends less on non-food items.
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 Inadequate infrastructure facilities
• Infrastructure facilities like cemented roads, warehouses, and
communication system are inadequate in rural areas.
• About 20% of the six lakh villages are without telephone
facility even today.
• About 50% of the markets are not connected by road. Most of
the roads are kachha and become unusable during rainy
season.
 Traditional outlook
• Villages develop slowly and have a traditional outlook.
• They accept changes gradually.
 Distance
• Villages nearer to towns have elements of the urban life.
Interior villages are more traditional.
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 Diverse socio-economic background
Due to dispersion of geographical areas and uneven land
fertility, rural people have diverse socio-economic
background.
 Conservative lifestyle
Lifestyle bounded by tradition, culture, religion and
community.
 Media reach
• The media reach in rural household is low.
• Statistics indicates that the reach of Print media is 10%,
followed by TV 31%, Radio 32% and Cinema 36%.
 Medical facilities
Medical facilities are quite inadequate and the villagers have
to travel long distances for getting medical treatment.
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 RURAL CONSUMER
 Classification
The rural consumers are classified into the following groups
based on their economic status:
The Affluent Group
• They are cash rich farmers.
• Very few in number.
• They have affordability but do not form a demand base large
enough for marketing firms to depend on.
• Wheat farmers in Punjab and rice merchants of Andhra
Pradesh fall in this category.

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The Middle Class
• One of the largest segments for manufactured goods.
• It is fast expanding.
• Farmers cultivating sugar cane in UP and Karnataka fall in
this category.
The Poor
• This constitutes a huge segment.
• Purchasing power is less, but strength
is more.
• They receive grants from the government
and reap the benefits of many such schemes and may move
towards the middle class.
• The farmers of Bihar and Orissa fall under this category.
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 Characteristics
• The rural consumer has a very high involvement in any
product purchased.
• He purchases products more often (mostly weekly), usually in
small quantities.
• He is very quality conscious but value
for money is of prime importance.
• He looks more for functionality of the
product rather than frills associated which
he cannot use but for which he will have
to pay extra.
• He is brand loyal. Once loyalty formed is difficult to dislodge.

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• He understands symbols and colours better, and looks for
endorsement by local leaders or icons.
• The source of information is critical for him, as he is
influenced by information received and opinion formed
through various resources in his
purchasing decisions.
• Purchasing decisions are usually taken
by the eldest member of the family.
• Brisk buying is done after the harvesting
period. Major purchasing is done during
the festivals.
• In many cases, the buyer is different from
the user.
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 Rural employment pattern(Male)

SECTOR % SHARE IN % SHARE IN

EMPLOYMENT EMPLOYMENT
(1987) (2004)

Agriculture 75 67

Transport and 2 8
communication

Trade and hotels 5 7

Construction 4 7

Manufacturing 7 8

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 POTENTIALITY
 Large population
• 742 million Indians consisting of 138 million households
reside in 6,38,365 villages (Census, 2001).
• It constitutes about 73% of the Indian population and 12% of
the world population.
• Despite the rural urban migration, the rural areas continue to
be the place of majority of Indians.
 Growth of market
• The market has been growing
at a rate of 3-4% annually adding
more than one million new
consumers every year.
17
• Growth rates of the FMCG market and the durable market are
higher in rural areas for many products.
• The Indian rural market today accounts for about Rs 8 billion
(53 per cent - FMCG sector, 59 per cent durables sale, 100 per
cent agricultural products) of the total of Rs 120 billion,
claiming 6.6 per cent of the total share.

Estimated annual size of the rural market -

 FMCG Rs. 65,000 Crore

 Durables Rs. 5,000 Crore
 Agri-Inputs Rs. 45,000 Crore
 2 / 4 Wheelers Rs. 8,000 Crore
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• Rural market accounts for close to 50% of volume
consumption of FMCG.
• For products like toilet soaps, talcum powder, cooking oil,
vanaspati ghee, tea, cigarettes and hair oil, the share of rural
market is more than 50%.
 Rising rural prosperity

INCOME INCOME(2001-02) (%) INCOME(2006-07) (%)

GROUPS
HIGH 27.7 23.6
MIDDLE 64.8 66.3
LOW 91.4 95.7
TOTAL 72.6 70.7

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 Infrastructure is improving rapidly
• In 50 years only, 40% villages have
been connected by road, in next 10
years another 30% would be connected.
• More than 90% villages are electrified,
though only 44% rural homes have
electric connections.
• Rural telephone density has gone up by 300% in the last 10
years.
 Increasing income and purchasing power
The agricultural development programs of the government
have helped to increase income in the agricultural sector by
increasing the productivity and better price for agricultural
products, thus enhancing the purchasing power in rural
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markets.
 Social indicators have improved a lot between
1981 and 2001
• Number of "pucca" houses doubled from 22% to 41% and
"kachha" houses halved(41% to 23%).
• Percentage of BPL families declined from 46% to 27%.
• Rural literacy level improved from 36% to 59%.
• Increase in literacy and educational
level and resultant inclination to
sophisticated lives by the rural folks.
• Standard of living is also growing in
rural areas.
• Increased contact of rural people with their urban counterparts
due to development of transport and wide communication
network.
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 Accessibility of markets
• The road network has facilitated a systemized product
distribution system to villages.
• An increasing number of companies are supplying village
markets directly.
• Increasing direct contacts to villages helps product promotion
and availability of the product in the village shop.

 Competition in urban markets

• Intensified competition in urban markets increases costs and
reduces market share. The rural markets are therefore
becoming increasingly attractive in relation to urban markets.

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• For instance, Rajdoot motorcycles, Bajaj scooters or
Ambassador Cars find ready acceptance in rural markets as
compared to urban markets where there is a proliferation of
brands.
 Saturation of urban market
The urban market is reaching towards saturation point bringing
in an urgent need to focus on rural market.
 New employment opportunities
• Government schemes like IRDP (Integrated Rural
Development Programme), JRY (Jawahar Rozgar Yojana) and
TRYSEM (Training Rural Youth for Self Employment) have
created new employment opportunities in rural India.

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 • Co-operative banks and Public sector banks are extending
loans to rural people thus creating job opportunities for them.
As a result very few rural people are now flocking to urban
centres.

Rural employment(in millions)

YEAR AGRICULTURE, INDUSTRY MANUFA CONSTRUC SERVICES

HUNTING, CTURIN TION
FORESTRY G
AN D FISHING
1999-00 218.3 32.6 21.2 9.4 35.5
2004-05 249.4 47.0 27.8 16.8 46.7
2009-10 229.0 58.6 24.2 31.7 49.5

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 Government initiatives
• Credit cards (Kisan credit card) to farmers from the public
sector banks which helped them to take short and medium
term loans to buy seeds, fertilizers, etc. This enabled them to
produce more thus increasing their income.

• Large inflow of investment for rural development programmes

from the government.

• Schemes like IRDP (Integrated Rural Development

Programme) and REP (Rural Electrification Programme) in the
1970’s gave a boost to the agrarian economy. This resulted in
changes in people’s habits and social life. REP gave impetus to
the development of consumer durable industry.
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 Rural marketing is not expensive
• Conventionally it looks that since rural consumers are
dispersed, reaching them is costly.
• But according to a research, it costs roughly Rs.1 Crore to
promote a consumer durable inside a state including the
expenses of advertising in vernacular newspapers, television
spots, in-cinema advertising, radio, and point of purchase
promotion.
• Campaigns like this, which can reach millions, costs twice as
much in urban areas.

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 Rising rural prosperity
INCOME 1994-95(%) 2000-01(%) 2006-07(%)
GROUP(Rs)
About 100000 1.6 3.8 5.6
77001-100000 2.7 4.7 5.8
50001-77000 8.3 13.0 22.4
25001-50000 26.0 41.1 44.6
25000 and below 61.4 37.4 20.2

 Media
• Mass Media has created increased demand for goods and
services in rural areas.

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• Smart marketers are employing the right mix of conventional
and non-conventional media to create increased demand for
products.
• Cable television has played a noteworthy role in bringing
about the change in rural people’s mindset and influencing
their lifestyles.
 Growth in consumption
• Consumption in rural India is growing faster than in urban
areas, a survey by ratings and research firm CRISIL revealed.

• Between 2009-10 and 2011-12, additional spending by rural

India was Rs. 3,750 billion, significantly higher than Rs. 2,994
billion by urbanites.

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 CHALLENGES
 Understanding the rural consumer
The biggest challenge is to understand the perceptions,
viewpoints and actual needs of the rural people, which is
dramatically different from urban people.

 Low per capita income

• India is the fourth largest economy in the world due to a strong
economic growth but still has a low per capita income of Rs.
53331.
• It results in low consumption pattern as compared to the
urban population.

29
 Low literacy levels
• There are not enough opportunities for education in rural
areas.
• The literacy level is as low (36%) when compared to all-India
average of 52%.
SEX 1971 1981 1991 2001 2011

Males 34 46 58 75 82
Females 13 18 31 54 65
All 24 30 45 65 74

 Seasonal Demand
Demand for goods in rural markets depend upon agricultural
situation, as agriculture is the main source of income.
Agriculture to a large extent depends upon monsoon and,
therefore, the demand or buying capacity is not stable or
regular. 30
 Lack of proper infrastructure and other physical
facilities
• Nearly 50 percent of the villages do not have all weather
roads. Physical communication to these villages is highly
expensive. Even today, most villages in eastern part of the
country are inaccessible during monsoon season.

• Many rural areas are not connected by rail transport. Kachha

roads become unserviceable during the monsoon and interior
villages get isolated. Facilities such as telephone, fax and
telegram are rather poor in rural areas.

• About 20% of the six lakh villages are without telephone

facility even today.
31
 Underdeveloped people and underdeveloped
markets
• Unfortunately, the impact of the
technology is not experienced uniformly
throughout the nation.
• Except some districts in Punjab, Haryana
and Western Uttar Pradesh, large areas and
groups of people have remained beyond
the technological breakthrough.
• In addition, the farmers with small agricultural land holdings
have also been unable to take advantage of the new
technology.
• Inadequate banking and credit facilities.

32
 Traditional outlook
• Due to the traditional outlook of rural consumers, they are
resistant to change.
• Life in rural areas is still governed by customs and traditions
and people do not easily adapt new practices.
• For example, even rich and educated class of farmers does not
wear jeans or branded shoes. There is a lack of desire of new
things and styles.
 Many language and Dialects
• The number of languages and dialects vary from state to state
and region to region.
• The Indian constitution recognizes 18 official languages.
• Hindi only has more than ten variations. Hindi spoken in
Rajasthan is different from Hindi spoken in Bihar or Hindi of
Himachal Pradesh. 33
 Barter system
• It means exchange of goods for goods.
• This system is practiced In the developing country like India,
even today.
• This is a major obstacle in the way of development of rural
marketing.

 Inadequate Media coverage for Promotions

• Television has made a great impact and large audience has
been exposed to this medium.
• Radio reaches large population in rural areas at a relatively
low cost.
• Reach of formal media is low in rural households.
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 Availability of duplicate and cheap brands.
Retailers pushing imitation or fake products in place of
branded ones for better commission.
 Slow purchasing decision
• Rural consumers are cautious in buying and decisions are slow
and delayed.
• They like to give a trial and only after being personally
satisfied, do they buy the product.
 Problems related to distribution and channel
management
• The presence of too many tiers in the distribution system
increases the cost of distribution.
• Non availability of dealers and poor viability of outlets add to
the challenges.
35
• Also there are inadequate banking and credit facilities.
 Cultural Factors
• Culture is a system of shared values, beliefs and perceptions
that influence the behavior of consumers.
• There are different groups based on religion, caste, occupation,
income, age, education and politics and each group exerts
influence on the behavior of people in villages.
 Vast and scattered market
• It is not easy to enter the market and take a sizeable share of
the market because of its size, variation and it being very
scattered.
• The markets are unorganized and dispersed.

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 STRATEGIES
 4 A’s Approach
1.Availability
Strive to reach at least 13 113 villages with a population
market penetration.
2.Affordability
Introduce small unit packs
3.Acceptability
• Offers products and services that suit the rural market
• Easy to understand
4.Awareness
• One on one contact programs are extremely efficient.
• Educate and try to induce trial. 37
• Melas are places where villagers gather once in a while for
shopping. Companies take advantage of such events to
• Demonstrate and market their products.
• Haats are a good place to create awareness. There are 42000
rural haats which get more than 4500 visitors per haat.
 Marketing strategy
• Marketers need to understand the psyche of the rural
consumers.
• Firms should refrain from designing products for the urban
markets and then pushing them in the rural areas.
• Utilizing various rural folk media to reach them in their own
language.

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 Distribution strategy
Using company delivery vans, melas,
haats, and mandis/ agri markets.

 Promotional strategy
• Rich traditional media forms like
puppetry, folk dances, audio visuals,
etc. should be used to convey the
right message to the rural folk.
• Forms with which the rural
consumers are highly comfortable with should be used.

39
 By communicating and changing quality
perception
• Companies are coming up with new technology and they are
properly communicating it to the customer.
• There is a trade-off between the quality a customer perceives
and a company wants to communicate.
• The perception of the rural Indian about the desired product is
changing.
 By proper communication in local language
• The companies have realized the importance of proper
communication in local language for promoting their products.
• They have started selling the concept of quality with proper
communication.

40
 By understanding cultural and social values
• Companies have recognized that social and cultural values
have a very strong hold on the people.
• It plays a major role in deciding what to buy.
• Moreover, rural people are emotional and sensitive.
 By providing what customer wants
• The customers want value for money. They aim for the basic
functionality of the product rather than the frills associated
which would not be of much use and will increase the price of
the product.
• However, if the seller provide frills free of cost they are happy
with that.

41
 By associating themselves with India
• MNCs are associating themselves with India by talking about
India, by explicitly saying that they are Indian.
• M-TV during Independence Day and Republic Day time make
their logo with Indian tri-color.
• In 1998, Nokia had launched cellular phone 5110, with the
India tricolor and a ringtone of ”Sare Jahan se achcha”.
• Companies are picking up Indian models and actors for
advertisements and promotions.

42
• It is a normal tendency of an Indian to try to associate
himself/herself with the product. If he/she can visualize
himself/herself with the product, he/she becomes loyal to it.
• That is why FMCG companies usually showcase their
products in around families in their advertisements.
 By giving Indian terms for brands
• Companies use Indian words for brands.
• Like LG has used India brand name
“Sampoorna” for its TV. The term is a
part of the Bengali, Hindi, Marathi and
Tamil tongue.

43
 By adopting localized way of distribution
• Proper distribution channels are recognized by companies.
• To succeed in India they have to reach the nook and the corner
of the country.
• MNC shoe giants, Adidas, Reebok,
Nike started with exclusive stores
but soon realized that they do not
enjoy much Brand Equity in India,
and to capture the market share in
India they have to go the local
market shoe sellers and with
low priced products.

44
 By effective media communication
• Companies can either go for the traditional media or the
modern media or an effective combination of both.
• The traditional media include melas, puppetry, folk theatre etc.
while the modern media includes TV, radio, and e chaupal.
• LIC uses puppets to educate rural masses about its insurance
policies.
• In between such shows, the lights are switched off and a torch
is flashed in the dark(Eveready’s tact).

45
SOME NOTEWORTHY SUCCESS
STORIES
 "Yaara da Tashan..." ads with Aamir Khan
created universal appeal for Coca Cola.
Coca-Cola India tapped the rural market
in a big way when it introduced bottles
priced at Rs 5 and backed it with the
Aamir Khan ads.
 In 2000, ITC took an initiative to develop
direct contact with farmers who lived in
far-flung villages in Madhya Pradesh.
ITC's E-chaupal was the result of this
initiative.
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 In 1998 HUL’s personal products unit initiated Project Bharat,
the first and largest rural home-to-home operation by a
company.
 The project covered 13 million rural households by the end of
1999.
 It had vans visiting villages across the country distributing
sample packs comprising a low-unit-price pack each of
shampoo, talcum powder, toothpaste and skin cream priced at
Rs. 15 to create awareness of the company’s product
categories and of the affordability of the products.
 Small unit products like a one rupee or a five rupee sachets of
shampoo for single use or the small Hamam helps in giving
the consumers a trial opportunity.

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 Of two million BSNL mobile connections, 50% are in
small towns / villages.
 Of the 6.0 lakh villages, 5.22 lakh have a Village Public
Telephone (VPT).
 41 million Kisan Credit Cards have
been issued (against 22 million
credit-plus-debit cards in urban), with
cumulative credit of Rs. 977 billion
resulting in tremendous liquidity.
 Of the 20 million Rediff mail sign-ups, 60% are from
small towns. 50% of transactions from these towns are
on Rediff online shopping site.
 42 million rural households (HHs) are availing banking
services in comparison to 27 million urban households.
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 HUL with its Project Shakti has already
has a reach of 1.7 lakh villages, and
aspires to reach 5 lakh villages by
2020.

 In 2001-02, LIC sold 55% of its

policies in rural India.

 Mahindra & Mahindra sells most of

its SUVs in the rural market.

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50