ch_02_rural_marketing_environment

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Chapter 2



Evolution of Rural Marketingy P hase I (Before 60s)

y T raditional farming methodsy Focus on marketing of rural products in urban markets and

agricultural inputs in ruraly P hase II (1960s to Early 90s)

y T he Green and the White Revolutiony Demand for agricultural inputsy Domain of marketing of agricultural inputs added

y P hase III(Mid 90s to present)y Higherdevelopment in rural sectory Marketers realised the potential of the vast rural market

RMB 02 3



Rural Market Structurey Demographic Environment

y Share of rural population down from 80.1% in 1971 census to72.2% in 2001 census. T he number at 741.6 million indicatesan increase of over 15%

y Youth (20 to 34) 23.1% of rural populationy Rural literacy up from 36% in 1981 to 59% in 2001 censusy Rural households up by 26 million in last decadey Family size has gone down marginally due to migrationy Joint families now breaking apart with over 77% going nuclear

in ruraly Concept of individualised joint families staying in the same

house but having separate kitchens

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Some Comparisons

RMB 02 5

Education in India (2001)Education Level Rural Urban

Below Primary 31.7 18.0

Primary but below Middle 29.5 22.9

Middle but below Matric 16.9 16.3

Matric but below Graduate 18.4 29.6

Graduate and above 3.5 13.2

Distribution of Population by age groups (2001) Age Groups Rural Urban

0 4 11.5 8.95 14 25.7 21.815 19 9.5 10.620 34 23.1 26.8 35 54 19.7 22.5

55+ 10.5 9.4

Source : 2001 C ensus

Lower due tolack of

facilities

Lower due tomigration

factor



Some Comparisons

RMB 02 6

Family StructureT ype of Household Rural Urban

Joint 19.5% 15.2%

Nuclear without elders 60.2% 65.5%

Nuclear with elders 17.1% 15.4%

Others 3.2% 3.9%Total (million) 138 54

Household SizeSize of Household Rural Urban

1 2 members 11.1% 10.7%3 4 members 30.4% 38.8%

5 6 members 34.0% 32.8%

7 members and above 24.5% 17.7% Average Family Size 5.36 5.31

Source : IR S 2005

Joint Family System

rea down



Occupational Patterny Over 40% of rural population is in cultivation followed

by 35% wage earnersy 11% of the rural population are salary earners andnearly 5% petty shopkeepersy 3.4% are artisansy T he cultivator s disposable income is highly seasonal

being available at the time of harvesting

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Population Distribution - Rural

16%

21%

24%

22%

14% 3%

<200 200-500 501-1000 1001-2000 2001-5000 >5000

Population Number of Villages

Less than 200 92,541

200-500 127,054

501-1,000 144,817

1,001-2,000 129,662

2,001-5,000 80,313

More than 5,000 18,758

Total number of villages 593,145

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Source : MARTDo not include uninhabited. Total villages includingthese are 638,365

Hardly any shops in

these villages

account for 50%

of ruralpopulation &60% rural wealth



Distribution of Towns in India

Town Class Population Category Number of Towns

Literacy(%)

LPGpenetration(% of HHs)

Workingpopulation(% of pop)

Class I 1 lakh & above 423 82 47 32Class II 50,000 ± 99,999 498 79 44 31

Class III 20,000 ± 49,999 1,386 77 36 32

Class IV 10,000 ± 19,999 1,560 76 29 34

Class V 5,000 ± 9,999 1,057 76 27 35

Class VI Less than 5,000 237 80 37 34

All India 5,161 80 48 32

9

Source: Census 2001

*

10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354

90 % f¡

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Economic E nvironment

AnnualIncome 1995-96 2006-07

Above Rs 215,000 0.3 0.9

Rs 45,001- 215,000 13.5 25.0

Rs 22,001- 45,000 31.6 49.0

Rs 16,001 - 22,000 31.2 14.0

Rs 16,000 & Below 23.4 11.1

100.0 100.0

RMB 02 10

All figures in %

Projections Based on 7.2% GDP Growth

�Th e ric h a nd t h e very ric h ha ve doubled in t h e la st ten ye a rs�Th e a spirers a nd t h e destitute ha ve f a llen by 50%Incre a sing incomes a re a lso c ha nging expenditure p a tterns



Changing Rural Consumers Ex penditurePattern

Per Capita ConsumptionExpenditure

(Rs. Per month)

YEAR RURAL URBAN

1983 112 166

1991 281 458

2001 486 855Source: NSSO

Consumption Expenditure RuralPercentage

YEAR FOOD NON-FOOD

1983 66 34

1991 63 37

2001 59 41Source: NSSO

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Per capita consumption expenditure has grown 4 times in the last two decadesExpenditure on non-food items is increasing42 million rural households avail banking services in rural against 27 million in

urban



Social and Cultural E nvironmenty V ariations between regions and sub-regionsy Distinct socio-cultural regions cutting across political/

administrative boundaries existy In villages inward migration is insignificant while outwardmigration to urban and foreign is reasonably high

y T he settlement pattern is in clusters largely around castelines

y Houses are largely semi-pucca and kachay Land is the primary source of livelihoody Activities limited to smaller geographic areas resulting in

higher adherence to customs and traditionsRMB 02 12



V illage Communityy V illages are self-sufficient and autonomousy Each village has a council of elders (panchayat)y

P anchayats have the constitutional authority for exercisingself-governancey T he panchayat structure has undergone change with

elections and reservation for underprivileged familiesy

Shift from subsistence farming to commercial and mixedfarming has made the village dependent on external factors

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Caste Systemy T he rural society has a strong caste system:

y Brahminsy

Kshatriyas (Warriors)y V aishyas (Business Class and traders)y Shudras (involved in odd jobs) Untouchables

y T he settlements of the lower castes are normally on theoutskirts of the village

y Marketers have to be sensitive to the caste system especially in the area of communication

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Political E nvironmenty T he panchayats were dominated by upper castesy T he panchayati raj system has introduced an integrated

and inclusive approach to governance in the rural sectory V illages with 5000 population or a cluster of villages with a

combined population of 5000 form a panchayaty Gram Sabhas are to be organised once a quarter to bring in

transperancy, accountability and achievementy T he sarpanch represents the village at the tehsil/taluka/

block level

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Tecnological E nvironmenty T riggered by three major revolutions:

y Green Revolution (1967 to 1978) to bring about food self-sufficiency.Resulted in adoption of high yield seeds, fertilisers, pesticides, and

farm mechanisationsy White Revolution Milk production through producer cooperativesand moving processed milk to urban-demand centres. Milkproduction has gone up from 17 million tonnes in 1950-51 to over 100million tonnes in 2007-08

y T he NGO movement has created grassroot level assimilation of technological extensions in rural areas

y NGOs have also been instrumental in providing health, homes,hygiene, child care, education and other social developmentprogrammes

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Constitution of Rural Marketsy Consumers Market

y FMCGy Durables

y Institutional Market Food processing, poultry, fishery, animalhusbandry, cottage industries, health centres, schools

y Consumablesy Durables

y Services Market Banking, insurance credit cards, communication

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N ature of Rural Markety T he big question transactional or developmental

approach to the rural marketsy

Agri-input companies follow an extension servicesapproach to increase productivity y HP CL is promoting concept of community kitchens to

popularise cooking gasy HUL s P roject Shakti improves the income of rural

womeny T he rural marketing process needs to be evolutionary

and not revolutionary RMB 02 1 9



Marketing Management in N on-ProfitSectors

y NGOs have started partnering with corporatesy Corporates are facing saturation in the urban segment

and do not understand the rural environmenty T he potential for a marriage between the two to fulfill

each other s needs exists

RMB 02 20



- McKinsey Global Institute, May 2007

ch_02_rural_marketing_environment

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