comparative study of rural & urban consumer behavior

UNIVERSITY OF MUMBAI

SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS

BACHELOR OF MANAGEMENT STUDIES

2009-2010

SEMESTER V

TITLE OF THE PROJECT:

COMPARATIVE STUDY OF RURAL AND URBAN CONSUMER

BEHAVIOUR IN INDIA

SUBMITTED BY:

PRACHI KISHOR MORE

UNDER THE GUIDANCE OF:

PROF. R. KRISHNAMOORTHY

DECEMBER 2009

Comparative Study of Rural and Urban Consumer Behaviour1

DECLARATION

I, MS. PRACHI KISHOR MORE OF SYDENHAM COLLEGE OF

COMMERCE AND ECONOMICS, CHURCHGATE, MUMBAI OF T.Y.BMS

(SEM V) HAVE COMPLETED THE PROJECT ON “COMPARATIVE

STUDY OF RURAL AND URBAN CONSUMER BEHAVIOUR IN INDIA”

IN THE ACADEMIC YEAR 2009-2010 AS A PARTIAL COMPLETION OF

THE COURSE.

Date: Signature of the

Student

Place: Mumbai


CERTIFICATE

I, PROF. R. KRISHNAMOORTHY , HEREBY CERTIFY THAT MS.

PRACHI KISHOR MORE OF SYDENHAM COLLEGE OF COMMERCE AND

ECONOMICS, CHURCHGATE, MUMBAI OF T.Y.BMS (SEM V) HAS

COMPLETED THE PROJECT ON “COMPARATIVE STUDY OF RURAL

AND URBAN CONSUMER BEHAVIOUR IN INDIA” IN THE ACADEMIC

YEAR 2009-2010 AS A PARTIAL COMPLETION OF THE COURSE.

__________________SIGNATURE OF

PROJECT CO-ORDINATOR

__________________SIGNATURE OF

PRINCIPAL


ACKNOWLEDGEMENT

Words lack penetration while expressing other extreme though full of sentiments

but there is no second alternative to express one’s sentiments on paper.

This research study bears the imprint of many persons who in formal & informal way

made a significant contribution in its successful completion.

It is my profound privilege to express my deep sense of gratitude to my guide

Prof. R. Krishnamoorthy who helped me in completing my project. He continuously

motivated and encouraged me all the way during this project. This study is due to his

guidance. He is a great teacher and always ready for enlightening students with her vast

knowledge.

I extend my sincerest thanks to all the respondents who spends their valuable time

for filling up the questionnaire and feedback.

I am also thankful to our BMS co-ordinator Prof. K.L. Bhatia, Ms. Jharna Kalra

and the non-teaching staff of BMS office Mr.Sandeep and Mr.Sheikh who all have been a

great source of inspiration and vast source of knowledge in the entire project.

I am also very thankful to my family and friends for their help throughout the

project.


BACHELOR OF MANAGEMENT STUDIES 2009-2010

Project on:

COMPARATIVE STUDY OF RURAL AND URBAN

CONSUMER BEHAVIOUR IN INDIA

SUBMITTED BY:

PRACHI MORE

UNDER THE GUIDANCE OF:


PROF. R. KRISHNAMOORTHY

EXECUTIVE SUMMARY

The object of the study i.e., ”comparative study of rural and urban consumers” is to

understand the buying behavior or purchasing decision. The study gives a comparative

analysis of the consumption pattern of the consumer behavior of rural and urban

consumer.

The objective is to understand:

The Buying Behavior of the consumers both in urban and rural markets.

What attracts the consumers more in both the regions?

What are the promotional activities to be undertaken by various firms to promote their

products in the urban and rural markets?

What kind of pricing strategy to be undertaken in both the region?

What attracts them the most in the respective regions?

What are the most popular products in the urban and rural regions?

The growth in rural quarter and its counterparts

Challenges faced by the rural markets and its urban counterparts

The study suggests the difference between the rural and urban environment. The buying

decision of the urban and rural consumers.

Also a survey is done in order to understand the consumption pattern.


TABLE OF CONTENT

SR.

NO.

CONTENT PG. NO.

INTRODUCTION 9

CONSUMER BEHAVIOUR - MEANING 10

DETERMINANTS OF CONSUMER BEHAVIOR

CULTURAL

SOCIAL

PERSONAL

PSYCHOLOGICAL

11-12

MARKETING AND CONSUMER BEHAVIOR 13

CONSUMER SPENDING BEHAVIOUR 14-15

RURAL MARKET 16

RURAL CONSUMER BEHAVIOUR 16

PROFILE RURAL CONSUMER

RURAL CONSUMER

SIZE AND COMPOSITION OF RURAL

DEMAND

17-18

FEATURES / PROFILE OF RURAL MARKET 19

CONSTRAINTS IN TAPPING RURAL MARKET 20-26

FACTORS INFLUENCING RURAL CONSUMER

BEHAVIOUR

27-28

SEGMENTATION

DEMOGRAPHIC

GEOGRAPHIC

BEHAVIOURAL

29-31


MARKETING STRATEGY 32-36

MARKETING MIX

PRODUCT

PRICE

PROMOTION

PLACE

37-38

GROWTH IN RURAL MARKETS 39-41

URBAN MARKET 42

URBAN CONSUMER 42

URBAN CONSUMER BEHAVIOUR 43

PROFILE OF URBAN CONSUMER 44

CULTURAL ELEMENTS OF URBAN MARKETS 45

PROFILE OF URBAN MARKET 45-46

PROBLEMS FACED BY URBAN MARKETS 46

SEGMENTATION

ATTITUDINAL

BEHAVIOURAL

DEMOGRAPHIC

47

MARKETING MIX

PRODUCT

PRICE

PROMOTION

PLACE

48-49

GROWTH IN URBAN MARKETS 50-53

DISTINGUISH BETWEEN RURAL AND URBAN

CONSUMER

54

DISTINCTIVE FEATURES OF RURAL MARKETS Vs.

URBAN MARKETS

55-56

RESEARCH DESIGN OF THE STUDY 57-59

FINDINGS OF THE RESEARCH 60

CONCLUSION 61

ANNEXURE 62-64


MARKET SURVEY

COMPANY SURVEY

BIBLIOGRAPHY 65

1. INTRODUCTION

Consumer Behaviour implies study of behaviour of purchaser of all goods and

services whether purely consumer goods, intermediate goods or capital goods. In other

words it implies study of attitude of all consumers in disposing of their resources. Further

it is not confined to final users but also include study of attitudes, of all those who take

investment decisions whether they consume themselves or buy for others. It also includes

study of behaviour of those who are consultant, advisers and give their opinion to buy or

not to buy a particular thing and the study of factors which influence their advice/opinion.

Consumer behaviour is an art and a science, economics, psychology, sociology.

The study of consumer behaviour envelops all these and more. Be it a housewife buying a

tube of tooth paste, an executive buying a tie, a school kid buying a pen or a multi-

million dollar corporation buying heavy capital equipment, the process of buying is

complex and, at times, intriguing. The consumer buying process is influenced by the

consumer’s financial position, personality, tastes, preferences, reference groups, social

standing, and even the economic sentiment that is dictated by the status of the economy.

Consumer behavior is defined as "all psychological, social and physical behaviors

of potential customers as they become aware of evaluate, purchase, consume, and tell

others about product and services".


2. CONSUMER BEHAVIOUR

Meaning and definition

The study of consumer behaviour implies how and why a particular consumer or

group reacts to decisions of producers. Consumer behaviour could be defined as “those

actions directly involved in obtaining, consuming, and disposing of products and

services, including the decisions process that proceeds and follow the action.”

According to another author consumer behaviour is “the behaviour that consumer

display in scanning for purchasing, using, evaluating and disposing of products and

services that they expect will satisfy their needs. The study of consumer behaviour is the

study of how individuals make decisions to spend their available resources (time, money,

effort) on consumption related items. It includes the study of what to buy, when to buy,

why to buy, from where to buy, how often to buy, and how often they will use it.”

In a competitive environment, one cannot trust a product or a consumer. The

producer has to produce what is demanded or what can be demanded. Study of consumer

behaviour will help us to know what can be sold and what goods and services are likely

to get rejected.

In certain products like medicines one buys on the prescription of a physician

which is also a part of consumer behaviour. In case of capital goods that is plant,

equipment, machinery, buildings etc the decisions are often based on technical advice of

others. In case of industrial raw materials the decision is influenced by supplier of

equipment. Then there are purely consumer goods with short life and once they are used

they extinguish. They are called Fast Moving Consumer Goods (FMCG).


3. DETERMINANTS OF CONSUMER BEHAVIOR

A buyer's purchase decisions are highly influenced by buyer's culture, social, personal,

psychological factors.

3.1. CULTURAL FACTORS

Culture represents an overall social heritage, a distinctive form of environment or

adaptation by a whole society of people, it includes a set of learned beliefs, values,

attitudes, morals, customs, habits and forms of behavior that are shared by a society.

3.2. SOCIAL FACTORS

3.2.1. References group

Consumers accept information provided by their peer groups on the quality,

performance, style, etc. These groups influence the person's attitude, expose them to new

behaviors and' life style, and create a pressure on the individual.

3.2.2. Family

Most consumers belong to a family group. The family can exert considerable

influence in the shaping the patterns of consumption and indicating the decision making

roles.

3.2.3. Roles and Status

Roles are activities of the person in a group. Each role carries a status. People will

choose the products that will communicate their status to the society.

3.3. PERSONAL FACTORS


A buyer’s decision is also influenced by personal characteristics, notably the life

cycle stage, occupation, economic, circumstances, lifestyle and personality and self-

concept.

Personality is defined as the person's distinguishing psychological characteristics

that lead to relatively consistent and enduring responses to his or her environment.

Personality is described in terms of such trades as self-confidence, dominance, autonomy,

difference, sociability, defensiveness and adaptability.

3.4. PSYCHOLOGICAL FACTOR

Motivation acts as a driving force in the floor towards purchase action.

Motivation that is, set into motion to take action to fulfill the need or wants. A human

being is motivated by want when these needs are backed by purchasing power it becomes

a want. Motivation is mental phenomenal.

3.4.1. Perception

Perception is operationally critical. Perception causes the behavior in a certain

way. Perception gives the direction or part to be taken by the buyer. To perceive is to see,

to hear, to touch, to taste, to smell and to sense something or event or relation and to

organize, interpret and find the meaning in the experience.

3.4.2. Learning

Learning describes changes in an individual's behavior arising from experience.

Learning reference to change in the behavior brought about by practice or experience.

Almost everything one does or things his learned.

3.4.3. Beliefs

Believe is a descriptive though that a person holds about something. These beliefs

may be based on knowledge, opinion or faith.

3.4.4. Attitude


Attitude describes as a person's emotionalized inclination to respond positively or

negatively to an object or class of objects. Attitude affects both perception and behavior

to have an attitude means to be involved emotionally and ready for action.

4. MARKETING AND CONSUMER BEHAVIOR

The term consumer behavior refers to the behavior that consumers display in

searching for purchasing, clothing, evaluating and disposing of product and services that

may expects will satisfy their needs. Study of consumer behavior is the study of how

individual make decisions to spend their available (time, money, and efforts) on

consumption related items.

The Field of consumer behavior is rooted in the marketing concept, a marketing

strategy that involves in the late 1950. The marketing concept refers to the consumer

needs and wants that are to be given prime importance rather than more profit making.

The marketing concept is based on premises that a marketer should make what it can sell

instead of trying to sell what it has made.- While the selling concept focus on the needs

the seller, the marketing concept focus on the need of the buyer.

The primary purpose for studying the consumer behavior as a part of marketing

curriculum is to understand why and how consumers make their purchase decisions.

On the other hand and in depth understanding gives marketers and unfair

advantage over sensitive element like price, quality, etc.,

Finally Phillip Kotler and authority on marketing states, although it only takes a

semester to learn marketing it takes a lifetime to master it.

CUSTOMERS

C - Care for the customers

U - Understand the customers

S - Study the customers


T - Trust the customers

O - Oblige the customers

M - Meet the customers

E - Evaluate the customers

R - Response the customers

S - Sell and win the customers

5. CONSUMER SPENDING BEHAVIOUR

The Indian consumer spending has increased from US$ 133.60 in 1992-93 to US$

350.74 in 2002-03, a compound annual growth of 10.13 per cent at current prices.

The way Indian consumers are spending their money on various items has

changed in recent years. The share being spent on the basis (food and beverages) has

fallen from 54.07 per cent in 1992-93 to 44.8 per cent in 2002-03. Other items have

increased in importance, for example, medical and healthcare spending has increased

from 3.5 per cent to 8.5 per cent of total expenditure over the same period, a compound

growth rate of 19.71 per cent. Similarly spending on transport and communication has

grown at 13.2 per cent.

While the Compound Annual Growth Rate (CAGR) in total consumer spending

has been around 12 per cent a year over the past decade, there have been sharp ups and

downs. Consumer expenditure has been in tandem with the annual GDP growth.

For rural India, per capita 30 days' consumer expenditure of US$ 12.34 was split

up into US$ 6.78, on an average, for food, and US$ 5.56 for non-food. Food expenditure

included US$ 2.25 for cereals and cereal substitutes, and US$ 2.37 for milk, milk

products, vegetables, edible oil and US$ 2.16 on others. Non-food expenditure included

US$ 1.11 for fuel and light, and another US$1.00 for clothing, footwear and US$3.45 on

other non-food expenditure.

For the urban sector, average Monthly Per Capita Consumer Expenditure (MPCE)

of US$ 23.53 was split up into US$ 10.00 for food and US$ 13.53 for non-food. Of food

expenditure, US$ 2.37 went towards cereals and cereal substitutes while US$ 3.67 was

spent on milk, milk products, vegetables and edible oil and US$3.96 on other food items.


US$ 2.11 was spent per person per month on fuel and light, and US$ 1.65 on clothing and

footwear and US$9.77 on other non-food items.

Urban expenditure levels per capita exceeded rural levels for all the product groups,

except on cereals and cereal substitutes. The average monthly per capita expenditures on

cereals and cereal substitutes for rural and urban areas are very close to each other.

The gap between rural and urban averages of MPCE was of the order of US$

11.16. The item-groups viz. milk and milk products, beverages etc, fuel and light,

education, miscellaneous consumer goods & services, conveyance and rent contributed to

the gap significantly.

Non-food expenditure per person in the urban sector was more than double of that

for the rural sector, where it was about US$ 5.55.

In India, the higher income group (>US$2,465) spends more amount of their income on

luxury goods and trendy products than fact moving consumer products.

The middle income group (US$1,162 – US$1,190) spends more on consumer

expendables than the rich.

Combined the middle and the lower income group provide 60 per cent of the

value of the Indian market.

Urban-Rural divide in Spending (%)

Category Rural Urban

Entertainment 33 67

Consumer Services 44 56

Durables 50 50

Misc. Consumer goods 57 43

Clothing and Footwear 61 39

Food 64 36

Source: KPMG/Research


6. RURAL MARKETS

"Typically, from an Indian census point of view, rural has been defined with a

'deprivation' orientation, rural being a landmass without access to continuous electricity,

water, the stock market. There has been a correction in this view, however.

Marketers today define rural as people living a different lifestyle as opposed to

that of those who have settled in the bigger cities and towns. Rural is defined as pastoral

in nature and as a mass of people who relate their income closely to the lands they till or

use to raise their cattle and livestock.

"Definitions for rural India abound while the most convenient remains, 'anything

that is not urban',"

7. RURAL CONSUMER BEHAVIOUR

Consumer Buyer Behaviour refers to the buying behaviour of final consumers -

individuals and households who buy goods and services for personal consumption. All of

these final consumers combined make up the consumer market.

The consumer market in this case is Rural India. About 70% of India's population

lives in rural areas. There are more than 600,000 villages in the country as against about

300 cities and 4600 towns. Consumers in this huge segment have displayed vast

differences in their purchase decisions and the product use. Villagers react differently to

different products, colours, sizes, etc. in different parts of India. Thus utmost care in

terms of understanding consumer psyche needs to be taken while marketing products to

rural India.


Thus, it is important to study the thought process that goes into making a purchase

decision, so that marketers can reach this huge untapped segment.

8. PROFILE RURAL CONSUMER

8.1. RURAL CONSUMER :

8.1.1. Size of rural consumer population

1971 1981 1991

Rural population 80% 76.3% 76%

Urban Population 20% 23.7% 24%

Majority of the population of India still exist in the Rural Area itself. States like

Uttar Pradesh, Madhya Pradesh, Rajasthan and Kerala have > 80% of the population in

the Rural areas only. While, States like Bihar and Orissa still have > 90% in the Rural

area.

8.1.2. Consumer Characteristics:

Low purchasing power

Low standard of living

Low per capita income

Low literacy level

Low economic and social position

Tradition bound community

Religion, culture and even superstition

8.1.3. Location Pattern

Urban: Population concentrated in 3200 cities & towns


Rural: Population scattered over 576000 villages.

6300 villages have population more than 5000 persons

More than 55% villages have population of 500 or less people

More than 1.5 lakh or nearly 25% of the villages have population of 200 or less.

Inference: Rural demand is scattered over a large area.

8.1.4. Literacy level:

Rural India – 23% literacy as compared with 36% of whole country

In absolute numbers 11.5 crore of literate people are in Rural India compared with

12 crore in urban India.

Every year 60 lakh is getting added to the literate population of rural India.

8.1.5. Rural income:

Evidently, rural prosperity and the discretionary income with the rural consumer

are directly tied with agricultural prosperity because, nearly, 60% of rural income

is from Agriculture.

Inference: Rural Demand is Seasonal and Festival linked.

8.1.6. Rural savings:

The commercial and co-operative banks have been marketing the saving habit in

the rural areas for quite some years. 70% of rural households are saving and

majority of them belong to salary earners and self-employees non -farmers.

8.2. Size And Composition Of Rural Demand:

Size of Rural market in non-food consumption items has been increasing from Rs.

5000 crores in 1969-70 to Rs. 22000 crores in 1993-94 (Size of market at current

prices)

Composition of demand: Many new products have entered the consumption

basket of rural consumer.


Product categories like cooking utensils, packaged tea, ornament or jewellery,

bathing soaps, washing soaps, detergents, etc.

As per an IMRB study, more than 60% of the villages in India now have shops

stocking soaps, detergents, packaged tea and batteries.

There has also been a rapid growth in consumption of Agri-inputs

9. FEATURES / PROFILE OF RURAL MARKET

9.1. LARGE AND SCATTERED MARKET :

The rural market of India is very large, consisting of >600 million consumers,

scattered / spread over 5,76,000 villages.

In terms of business generated too, it is a big market; 22,000 crore rupees worth of

non-food consumer goods are being sold per year.

No. of consumers

Large is in terms of

Business

9.2. HETEROGENEOUS MARKET :

The relative status of the rural areas of different states differs. Parameters on

which they differ are Health and education facilities, nature of facilities, availability

of public transport, electricity, TV transmission, banks, post offices, water supply

etc. IMRB study reveals that an average village in India has 33 development index

points, Kerala’s average Is 88 and so.

9.3. DEMAND, SEASONAL AND AGRICULTURE DEPENDENT :

The basic occupation of people in Rural Indian is Agriculture and agriculture is

seasonal. Rural people have money only during the harvest period and most of the

harvest periods are celebrated as Festivals in India. Hence, Rural demand is not only

harvest linked but also festival linked.

9.4. CHARACTERISED BY GREAT DIVERSITY :


The rural consumers of India are vastly diverse in terms of religious, social, cultural

and linguistic factors.

9.5. STEADY GROWTH DESPITE INHIBITING FACTORS :

The market has grown not only in quantitative terms, but qualitatively also. Many

new products have made entry into rural consumer basket.

10. CONSTRAINTS IN TAPPING RURAL MARKET

While the rural market of India certainly offers a big attraction to marketers, it

would be totally naive to think that any firm can easily enter the market and walk

away with a sizeable share of it. A firm seeking a share of this market has to work

for it, as the market bristles away with a variety of problems. The enterprise has to

grapple with these problems and find innovative solutions to them. In fact, only

because a few pioneering firms correctly understand these problems and came up

with innovative solutions to them, that we now see a wonderful trend of growth in

rural markets.

What are these problems? How are they peculiar to the rural market? And how

does a firm solve them?

The existing problems in rural marketing are:

a. Physical Distance

b. Language/Culture

c. Accessibility

d. Money/Expensive

e. Lack of Human Resource

f. Competition

g. Technology

h. Rules & Regulation

i. Lack of Information

j. Size of the Market


k. Buying Power

l. Image

Major Problems in Tapping the Rural Markets and the possible solutions are as

follows:

10.1. MANAGING PHYSICAL DISTRIBUTION IN RURAL MARKETS

The main problems in physical distribution in the rural context relate to:

10.1.1. Transportation:

Inadequate railways

Bad or no roads

Immediate carriers or cargo operators

Eg. Accidents in India 1per day and 1 in 4 days complete loss to property and some

life

10.1.2. Warehousing Problems

No electricity (only 35% of India have electricity)

Unavailability of godowns

Marketing purposes

10.1.3. Communication Problems

Only 3% of India is connected by phones


Unreliable post and telegraph facility (1947 – 1 postman for 9000 people, 2000 – 1

postman for 47000 people)

Transportation problems

Transportation infrastructure is quite poor in rural India. Though India has the 4 th

largest railway system in the world, many parts of the rural India remain outside the

rail network. As regards road transport, nearly 50% of the 576000 villages in the

country are not connected by roads at all. Many parts in rural India have only kacha

roads and many parts of the rural interiors are totally unconnected by roads with any

mandi level town. As regards carriers, the most common mode is the animal drawn

cart. Because of these problems in accessibility, delivery of products and services

continues to be difficult in rural areas.

Warehousing problems

In warehousing too, there are special problems in the rural context. Business firms

find it quite difficult to get suitable godowns in many parts of rural India. And there

is no public warehousing agency in the interiors of rural India. The central

warehousing corporation (CWC) and the state warehousing corporation (SWC’s)

which constitute the top tier in public warehousing in India, do not extend their

network of warehouses to the rural parts. They go only upto the nodal points or

major market centers. The warehouses at the mundi level which constitute the

second tier in the warehousing chain are mostly owned by cooperatives. And the

same is the case with rural godwons, which form the third tier. None of these tiers

function as public warehousing agencies ; they provide the warehousing service only

to their members. As such, a business firm has to manage with the CWC/SWC

network which stops with the nodal points, or it has to establish its own depots or

stock points run by its stockists / distributors. Of course, in such cases, the

commercial advantages of operating through a public warehousing agency like

CWC/SWC are lost to the firm.

Communication problems


Communication infrastructure, consisting of posts and telegraph and telephones, is

quite inadequate in rural areas. Since communication is the first requirement of

efficient marketing, lack of proper communication infrastructure poses difficulties,

especially in physical distribution.

10.1.4. Cost-Service Dilemma Gets More Acute

The effect of these problems on the physical distribution front is certainly felt by

any business firm venturing into the rural market. They adversely affect the service

aspect as well as the cost aspect. Maintaining the required service level in the

delivery of the products at the retail level becomes very difficult. At the same time,

physical distribution costs get escalated with 80 per cent Of the total rural consumers

living in the 'less than 1,000 people' category of villages. The scattered nature of the

market and its distance from the urban based production points, compound the

difficulty arising from the constraints in transportation, warehousing and

communication. Larger pipeline stocks and bigger inventories in warehouses are the

natural outcomes of these constraints. It means higher costs of transportation, higher

inventory carrying costs and transit and storage losses. And as we will see in detail

in the next section, costs of distribution channels too are much higher in the rural

context. Consequently, the total distribution cost per unit is higher by as much as 50

per cent on an average in the rural market, as compared to the urban market. In fact,

the experiences of some companies operating in the 2rural market show that the cost

of distribution in rural areas is two and a half times that of urban areas.

10.2. CHANNEL MANAGEMENT IN RURAL MARKETS

Organizing an effective distribution channel is the second major task in rural

marketing. This task too is beset with many unique problems.

Problems in Channel Management

10.2.1. Multiple tiers, higher costs and administrative problems


In the first place, the distribution chain in the rural context require large no. of

tiers, compared with the urban context. The long distances to be covered from the

product points and the scattered locations of the consuming households cause this

situation. At the minimum, the distribution chain in the rural context needs the

village level shopkeeper, the mandi level distributor and the wholesaler/ stockists in

the wholesalers / stockists in the town. And on top of them, it involves the

manufacturer own warehouses/ branches office operations at selected centers in the

marketing territory. Such multiple tiers and scattered outfits push up costs and make

channel management a major problem area.

10.2.2. Scope for manufacturers own outlets limited; greater dependence

The scope for manufacturers direct outlets such as showrooms or depots is quite

limited in the rural market unlike in the urban context. It becomes expensive as well

as unmanageable. Dependence of the firm on the intermediaries is very much

enhanced in the rural context as direct outlets are often ruled out. But controlling

such a vast network of intermediaries is a difficult task. Control is almost indirect.

And because of these factors the firm has to be more careful while selecting the

channel members in the rural context.

10.2.3. Non availability of dealers

In addition, there is the problem of availability of dealers. Many firms find that

availability of suitable dealers is limited. Even if the firm is willing to start from

scratch and try out rank newcomers, the choice of candidates is really limited.

10.2.4. Poor viability of the retail outlets

Moreover, sales outlets in the rural market at the retail level suffer from poor

viability. A familiar paradox in rural distribution is that the manufacturers incurs

additional expenses on distribution and still the retail outlets find that the business is

not remunerative to them. The scattered nature of the market and the multiplicity of

the tiers in the chain use up the additional funds the manufacturer is prepared to part


with. And no additional remuneration accrues to any of the groups. Moreover, the

business volume is not adequate enough to sustain the profitability of all the groups

and the retail tier is the worst sufferer.

10.2.5. Inadequate bank facilities

Distribution in rural markets is also handicapped due to lack of adequate banking

and credit facilities. Rural outlets need banking support for the three important

purposes:

To facilitate remittances to principals and to get fast replenishments of stocks.

To receive supplies through bank

To facilitate securing credit from banks

As banking facilities are inadequate in the rural areas, the rural dealers are

handicapped in all these aspects. It is estimated that there is only one bank branch for

every fifty villages.

Analysis shows that many companies hesitate to venture into rural markets largely

because of the problems on the distribution front. They find it uneconomic to operate

outlets in rural areas as in their perception, cost of selling, cost of transportation, cost

of sub – distribution and cost of servicing the outlets are all very high in the rural

market.

CONSTRAINTS IN MARKETING COMMUNICATION IN THE RURAL CONTEXT

Marketing communication, and promotion too, poses problems in rural markets.

There are many constraints emanating from the profile of the audience and the

availability of media. The literacy rate among the rural consumers being low

Rural communication has to necessarily be in the local language and idiom. The

constraints of media further compound the difficulty. It has been estimated that all

organised media put together can reach only 30 per cent of the rural population of


India TV is an ideal medium for communicating with the rural masses. But its reach

in the rural areas is limited even today. As regards the print media, the various

publications reach only 18 per cent of the rural population. Even in areas reached,

the circulation is limited. And as already mentioned, the low literacy level of the

rural population acts as a further inhibitor in the use of the print media in rural

communication. Cinema is relatively more accessible. It has been estimated that 33

per cent of the total cinema earnings in the country come from rural India. Rural

communication has also become quite expensive. For rural communication to be

effective, repeat exposures is a must; and if the gap between exposures is long the

message loses its edge during period. These factors make rural communication more

expensive. Rural communication has to go through all the time consuming stages of

creating awareness, altering attitudes and changing behaviour. In addition, it also has

to work against deep-rooted behaviour patterns.

In short, the crux of marketing communication in the rural context is one of finding a

medium' that will deliver the required message in a cost effective manner to target an

audience that is predominantly illiterate.

10.3. PROBLEMS RELATED TO COMMUNICATION

10.3.1. Consumer/market composition related problems.

The literacy rate is low. Therefore usage of print media or for that matter any print

material is redundant. Moreover even the segment that can be serviced by printed

material is multi-lingual in nature.

There is social backwardness in rural areas. This implies that in most of the

consumer durable segment the user is seldom the buyer or the decision maker.

There is an indifferent attitude towards the purchase of certain goods such as

packed food, high price premium soaps, hair oils, toothpaste etc. because they are

used to the traditional way of consumption.

10.3.2. Media related problems.


About 30% of the rural masses can be reached through organized media such as

TV, radio, newspapers etc. Theoretically TV covers 25% of the rural population,

radio about 90% and the press around 20%. But in reality the %’s can be still lower.

11. FACTORS INFLUENCING RURAL CONSUMER

BEHAVIOUR

The various factors that effect buying behaviour of in rural India are:

11.1 . Environmental of the consumer - The environment or the surroundings,

within which the consumer lives, has a very strong influence on the buyer

behaviour, egs. Electrification, water supply affects demand for durables.

11.2. Geographic influences - The geographic location in which the rural consumer

is located also speaks about the thought process of the consumer. For instance,

villages in South India accept technology quicker than in other parts of India. Thus,

HMT sells more winding watches in the north while they sell more quartz watches

down south.

11.3. Influence of occupation – The land owners and service clan buy more of

Category II and Category III durables than agricultural laborers/farmers.

11.4. Place of purchase (60% prefer HAATS due to better quality, variety &

price) Companies need to assess the influence of retailers on both consumers at

village shops and at haats.

11.5. Creative use of product ex Godrej hair dye being used as a paint to colour

horns of oxen, Washing machine being used for churning lassi. The study of

product end provides indicators to the company on the need for education and

also for new product ideas.


11.6. Brand preference and loyalty (80% of sale is branded items in 16 product

categories)

11.7. CULTURAL FACTORS

Cultural factors exert the broadest and deepest influence on consumer behaviour.

The marketer needs to understand the role played by the buyer's culture. Culture is

the most basic element that shapes a person’s wants and behaviour.

11.7.1. Product (colour, size, design, shape): For example, the Tata Sumo, which was

launched in rural India in a white colour, was not well accepted. But however,

when the same Sumo was re-launched as Spacio (a different name) and in a bright

yellow colour, with a larger seating capacity and ability to transport good, the

acceptance was higher.

Another good example would be Philips audio systems. Urban India looks at

technology with the viewpoint of ‘the smaller the better’. However, in rural India,

the viewpoint is totally opposite. That is the main reason for the large acceptance of

big audio systems. Thus Philips makes audio systems, which are big in size and get

accepted in rural India by their sheer size.

11.7.2. Social practices : There are so many different cultures, and each culture exhibits

different social practices. For example, in a few villages they have common bath

areas. Villagers used to buy one Lifebuoy cake and cut it into smaller bars. This

helped lifebuoy to introduce smaller 75-gram soap bars, which could be used

individually.

11.7.3. Decision-making by male head : The male in Indian culture has always been given

the designation of key decision maker. For example, the Mukhiya’s opinion (Head of


the village), in most cases, is shared with the rest of the village. Even in a house the

male head is the final decision maker. In rural areas, this trend is very prominent.

11.7.4. Changes in saving and investment patterns From gold, land, to tractors, VCR’s,

LCV’s

12. SEGMENTATION :

THE SEGMENTATION PROCESS

- This process includes:

- Identification of the segmentation variable,

- Segmentation of the market, and,

- Development of the profile.

The different variables are:

12.1. GEOGRAPHIC : Segmentation on the basis of geography is done

depending on various factors such as

Region: North, South, East and West.

Village Size: < 500 people

501 – 2000 people

2001 – 5000 people

> 5000 people

Proximity to the feeder town

Density: The no. Of people per sq. km

Climate: Moderate, rain fed or dry with scanty rainfall.

Level of Irrigation: Whether good, moderate, scanty or none at all.

12.2. DEMOGRAPHIC: Segmentation based of demographics takes into

consideration factors such as Age, Income, Occupation, Literacy (Level of

Education) and Caste.


Rural Consumer – Occupation, income, Culture, Perception, Attitude

Benefits Product features

Packaging

Availability Retail Shops

Haats

Cost Price

Value

12.3. PSYCHOGRAPHICS/BEHAVIOURAL: Such segmentation is done

using variables such as Lifestyle of the people, (whether rigid, traditional,

changing or imitating urban), Occasion, (whether on a regular day or a

special occasion), Benefits sought from the product (such as Quality, Price

and Service), and Loyalty to brands, (whether Low, Medium or High.)

Rural Consumers majorly look into the value that the product offers. They

associate value with the Benefits that the product offers, its Availability, and its

Cost. When talking of Benefits, they look at the features of the product as well as

the Packaging and attractiveness, Availability, whether or not the products are

available at Retail Shops and Haats, Cost, whether or not the product is

reasonably priced.


Understanding Rural Consumer

1) TO develop a communication programme for the rural audience, you have

to take cognisance of the following characteristics of the rural consumer:

2) The rural consumer is very conscious about getting value for money.

3) He understands symbols and colours better, and looks for endorsement by

local leaders or icons.

4) He doesn't like to pay extra for frills he cannot use.

5) He has his daily routine, and there is no sense of urgency in his lifestyle.

6) He has a very high involvement in any product purchased, especially

when he decides to buy high-end products, which cost a few hundreds or

thousands of rupees.

7) Divisions based on caste, community and other hierarchical factors

continue to exist in rural areas. Perceptions, traditions and values vary from State

to State and, in some cases, from region to region within a State.

8) I remember the case of a well-known brand of shampoo. When it entered

the Rajasthan market some decades ago, with a theatre commercial that showed a

beautiful model featuring bouncing hair, the product bombed. Post-research

showed that it was considered indecent for a girl to show off her hair, and the

audience refused to connect with the brand.

9) Similarly, when I was working on a campaign for MRF bullock cart tyres,

I found glaring differences between Western UP and Eastern UP. While bullock

carts in Western UP were smaller vehicles with single buffalos, in Eastern UP,

they were bigger vehicles pulled by two bullocks. In Western UP, villagers spoke


Hindustani whereas in Eastern UP, they spoke Bhojpuri. When we developed the

communication package, we had to keep the above factors in mind.

13. MARKETING STRATEGIES FOR RURAL MARKET

13.1. 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-o_ between Quality a customer

perceives and a company wants to communicate. Thus, this positioning of

technology is very crucial. The perception of the Indian about the desired product is

changing. Now they know the difference between the products and the utilities

derived out of it. As a rural Indian customer always wanted value for money with the

changed perception, one can notice difference in current market scenario.

13.2. BY PROPER COMMUNICATION IN INDIAN 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. Their main focus is to change the Indian

customer outlook about quality. With their promotion, rural customer started asking

for value for money.

13.3. BY TARGET CHANGING PERCEPTION


If one go to villages they will see that villagers using Toothpaste, even

when they can use Neem or Babool sticks or Gudakhu, villagers are using soaps like

Nima rose, Breeze, Cinthol etc. even when they can use locally manufactured very

low priced soaps. Villagers are constantly looking forward for new branded

products. What can one infer from these incidents, is the paradigm changing and

customer no longer price sensitive? Indian customer was never price sensitive, but

they want value for money. They are ready to pay premium for the product if the

product is offering some extra utility for the premium.

13.4. BY UNDERSTANDING CULTURAL AND SOCIAL VALUES

Companies have recognized that social and cultural values have a very

strong hold on the people. Cultural values play major role in deciding what to buy.

Moreover, rural people are emotional and sensitive. Thus, to promote their brands,

they are exploiting social and cultural values.

13.5. BY PROVIDING WHAT CUSTOMER WANT

The customers want value for money. They do not see any value in frills

associated with the products. They aim for the basic functionality. However, if the

seller provide frills free of cost they are happy with that. They are happy with such a

high technology that can ful_ll their need. As "Motorola" has launched, seven

models of Cellular Phones of high technology but none took o_. On the other hand,

"Nokia" has launched a simple product, which has captured the market.

13.6. BY PROMOTING PRODUCTS WITH INDIAN MODELS AND

FACTORS

Companies are picking up Indian models, actors for advertisements as this

helps them to show themselves as an Indian company. Diana Hyden and Shahrukh


Khan are chosen as a brand ambassador for MNC quartz clock maker "OMEGA"

even though when they have models like Cindy Crawford.

13.7. 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

daytime makes their logo with Indian tri-color. Nokia has designed a new cellular

phone 5110, with the India tri-colour and a ringing tone of "Sare Jahan se achcha".

13.8. BY PROMOTING INDIAN SPORTS TEAM

Companies are promoting Indian sports teams so that they can associate

themselves with India. With this, they influence Indian mindset. LG has launched a

campaign "LG ki Dua, all the best". ITC is promoting Indian cricket team for years,

during world cup they have launched a campaign "Jeeta hai jitega apna Hindustan

India India India". Similarly, Whirlpool has also launched a campaign during world

cup.

13.9. BY TALKING ABOUT A NORMAL INDIAN

Companies are now talking about normal India. 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 companies

like Daewoo based their advertisements on a normal Indian family.

13.10. BY DEVELOPING RURAL-SPECIFIC PRODUCTS

Many companies are developing rural-specific products. Electrolux is

working on a made-for India fridge designed to serve basic purposes: chill drinking

water, keep cooked food fresh, and to withstand long power cuts.


13.11. BY GIVING INDIAN WORDS FOR BRANDS

Companies use Indian words for brands. Like LG has used India brand

name "Sampoorna" for its newly launched TV. The word is a part of the Bengali,

Hindi, Marathi and Tamil tongue. In the past one year, LG has sold one lakh 20-inch

Sampoorna TVs, all in towns with a population of around 10,000. By the end of

1999, roughly 12Thats Rs 114 crore worth of TV sets sold in the villages in a year.

13.12. BY ACQUIRING INDIAN BRANDS

As Indian brands are operating in India for a long time and they enjoy a

good reputation in India. MNCs have found that it is much easier for them to operate

in India if they acquire an Established Indian Brand. Electrolux has acquired two

Indian brands Kelvinator and Allwyn this has gave them the well-established

distribution channel. As well as trust of people, as people believe these brands.

Similarly Coke has acquired Thumps up, Gold Spot, Citra and Limca so that they

can kill these brands, but later on they realized that to survive in the market and to

compete with their competitor they have to rejuvenate these brands.

13.13. BY EFFECTIVE MEDIA COMMUNICATION

They can either go for the traditional media or the modern media. The

traditional media include melas, puppetry, folk theatre etc. while the modern media

includes TV, radio, e-chaupal. LIC uses puppets to educate rural masses about its

insurance policies. Govt of India uses puppetry in its campaigns to press ahead social

issues. Brook Bond Lipton India ltd used magicians effectively for launch of Kadak

Chap Tea in Etawah district. In between such a show, the lights are switched o_ and

a torch is ashed in the dark (EVEREADYs tact). ITC's e-chaupal (chaupal is the

common place where villagers gather) has been the most elaborate and extensive

venture in this field so far. Conceived by ITC's international business division and

launched in 2000, the e-chaupal project has since grown to around 2,700 chaupals

covering a population of around 1.2 million infive states {Madhya Pradesh,


Karnataka, Andhra Pradesh, Uttar Pradesh and Maharashtra. One has to have a

strategic view of the rural markets so as to know and understand the markets well.

13.14. BY ADOPTING LOCALISED WAY OF DISTRIBUTING

Proper distribution channels are recognized by companies. The

distribution channel could be a big scale Super market; they thought that a similar

system can be grown in India. However, they were wrong; soon they realized that to

succeed in India they have to reach the nook and the corner of the country. They

have to reach the "local Paan wala, Local Baniya" only they can succeed. MNC shoe

giants, Adidas, Reebok, Nike started with exclusive stores but soon they 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. They have to reach to local cities

with low priced products.

13.15. BY ASSOCIATING THEMSELVES WITH INDIAN CELEBRITIES

MNCs have realized that in India celebrities enjoyed a great popularity so

they now associate themselves with Indian celebrities. Recently Luxor Writing

Instruments Ltd. a JV of Gillette and Luxor has launched 500 "Gajgamini" range of

Parker Sonnet Hussain special edition fountain pens, priced at Rs. 5000. This pen is

signed by Mr. Makbul Fida Hussain a renowned painter who has created

"Gajgamini" range of paintings. Companies are promoting players like Bhaichung

Bhutia, who is promoted by Reebok, so that they can associate their name with

players like him and get popularity.

13.16. MELAS

Melas are places where villagers gather once in a while for shopping.

Companies take advantage of such events to market their products. Dabur uses these

events to sell products like JANAM GHUTI(Gripe water). NCAER estimates that


around half of items sold in these melas are FMCG products and consumer durables.

Escorts also displays its products like tractors and motorcycles in such melas.

13.17. PAINTINGS

A picture is worth thousand words. The message is simple and clean.

Rural people like the sight of bright colours. COKE, PEPSI and TATA traders

advertise their products through paintings.

14. MARKETING MIX

14.1. PRODUCT :

14.1.1. Small unit size and low priced.

This kind of packaging is widely used to attract the customers

Examples – Tiger Biscuit – Re.1, 20gm talcum powder(Ponds)

14.1.2. New product designs- sturdy products

Rural people think that heavier the product higher is the durability and power.

Examples – Bullet motor cycle, Ambassador car, Escort motorcycle

14.1.3. Branding

The marketers have to come out with some unique name that can be easily

remembered by consumers.

Examples – Tata Steel (corrugated sheets)– Tata Shakti, billiwali cell(eveready

batteries), lalsaboon(lifebouy), nirma girl, parle baby

14.1.4. Factors to be considered while designing the product:

Companies should come out with a product which will suit the condition of rural

markets.

Example – LG TV –Devnagari script, Voltas refrigerator


14.1.5. Habits of usage and purchase

It is also necessary to understand the likes, dislikes, habits, preferences of the

consumers

14.2. PRICING

14.2.1. Low price (Sasta hai toh acha hai)

Rural consumers are price sensitive. They want value for money.

Examples – lifebuoy soap, LPG Cylinders, Samandar Salt

14.2.2. No frill products

They need the general necessities of life. They do not expect more

than the daily requirements. This helps in cost cutting

Example – Maharaja Appliances

14.2.3. Refill

Example- bourvita, detergents

14.2.4. Credit facilities

What attracts the rural masses is the credit facilities provided to

them

14.2.5. Discounts & Promotional schemes

14.3. PLACE

This involves making available all the product in all the places where ever

need

Due to some constraints it is difficult to provide proper access to consumers

DISTRIBUTION

Direct sales

Manufacturer- retailer- consumer

Manufacturer-wholesaler-retailer-consumer

Manufacturer-co-company-depot-retailer-consumer

Manufacturer-company depot- c & F agent-wholesaler-retailer-consumer


14.4. PROMOTION

Newspaper

Radio

Audio vishul vans

Group meetings

Field Demonstrations

Jeep campaigns

Information centers

15. GROWTH IN RURAL MARKETS

For quite some time now, the lure of rural India has been the subject of animated

discussion in corporate suites. And there is a good reason too. With urban markets

getting saturated for several categories of consumer goods and with rising rural incomes,

marketing executives are fanning out and discovering the strengths of the large rural

markets as they try to enlarge their markets. Today, the idea has grown out of its infancy

and dominates discussions in any corporate boardroom strategy session. Adi Godrej,

chairman of the Godrej group that is in a range of businesses from real estate and

personal care to agri-foods, has no hesitation proclaiming, It is a myth that rural

consumers are not brand and quality conscious. A survey by the National Council for

Applied Economic Research(NCAER), India's premier economic research entity,

recently confirmed that rise in rural incomes is keeping pace with urban incomes. From

55 to 58 per cent of the average urban income in 1994-95, the average rural income has

gone up to 63 to 64 per cent by 2001-02 and touched almost 66 per cent in 2004-05. The

rural middle class is growing at 12 per cent against the 13 per cent growth of its urban

counterpart. Even better, the upper income class those with household incomes of over

Rs one million [$22,700] per annum is projected to go up to 21 million by 2009-10 from

four million in 2001-02.

A study by the Chennai-based Francis Kanoi Marketing Planning Services says that the

rural market for FMCG is worth $14.4 billion, far ahead of the market for tractors and


agri-inputs which is estimated at $10 billion. Rural India also accounts for sales of $1.7

billion for cars, scooters and bikes and over one billion dollars of durables. In total, that

represents a market worth a whopping $27 billion. It is no wonder that even MNCs have

cottoned on to the idea of a resurgent rural India waiting to happen.

Four years ago, Coke ventured into the hinterland. Now Coke's rural growth of 37 per

cent far outstrips its urban growth of 24 per cent. Coke is not the first MNC to have

cottoned on to the rural lure.

Its global rival Pepsico took a wider approach to the business when it was given

permission to set up shop in India in the late 1980s and investment in food processing

and farming was a pre-condition for entry. The company imported a state-of-the art

tomato processing plant from Italy to Punjab. In five years, productivity improved from

16 tonnes to 52 tonnes per hectare and there was a tomato glut in the state. Farmers

weren't complaining because even though prices fell, their incomes increased because of

the huge jump in productivity. Pepsi is now heralding a citrus plantation drive in the

state and other parts of the country for its brand of Tropicana fruit juices, to replace

imported fruit. Hindustan Lever Ltd, the $2.3 billion Indian subsidiary of Unilever, the

country's largest FMCG company, has also got on the bandwagon. It's Project Shakti

uses self-help groups across the country to push Lever products deeper into the

hinterland. Its four-pronged programme creates income-generating capabilities for

underprivileged rural women; improves rural quality of life by spreading awareness of

best practices in health and hygiene; empowers the rural community by creating access

to relevant information through community portals and it also works with NGOs to

spread literacy. There are currently over 15,000 Shakti entrepreneurs, most of them

women, in 61,400 villages across 12 states. By the end of 2010, Shakti aims to have

100,000 Shakti entrepreneurs covering 500,000 of India s 640,000 villages, touching the

lives of over 600 million people. With such an emphasis on rural marketing,

consumption patterns are changing and it signals a change in the regulatory

environment. Vertical integration of the food market from farm to farm to fork becomes

the best way to achieve efficiency and serve the interest of every stakeholder in the chain

the farmer, the processor, the retailer and the consumer.


Between the 8th (1992-97) and the 10th (2002-07) Five Year Plans, successive

governments have tripled the spending on rural development from $6.82 billion to $20.2

billion. All this potential has got India's big business houses rushing to enter and expand

rural businesses.

Telecom giant Sunil Mittal, chairman of the $24 billion mobile telephony major Bharti

Tele- Ventures, is another unabashed ag-bearer of the 'go rural' strategy. He is confident

that the next 'explosive' phase of demand for cellular connections is going to come from

the villages. In an interesting business diversification, he has tied up with the legendary

Rothschilds of Europe for a $51 million food processing venture and export of fruits and

vegetables. We can replicate our pre-eminence in IT agriculture and transform the

country into a global food basket, he points out.

Mittal's initial investments include an agriculture research centre and model farm in

Punjab. If the hinterland has caught the attention of Mittal, among the country's most

recent entrants to the ranks of big business, it has also not escaped the radar of the oldest

business house, the $17 billion Tata group, which has consolidated its rural operations.

The group's two companies, Tata Chemicals and Rallis India, ran separate rural

initiatives till 2003.

Tata Chemicals ran a chain called Tata Kisan Kendra, which offered farmers a host of

products and services ranging from agriinputs to financing to advisory services. Rallis,

on the other hand, was partnering ICICI Bank and Hindustan Lever in offering deals to

farmers that covered operations from the pre-harvest to post-harvest stage. In 2004, the

two operations were merged and Tata Kisan Sansar, a network of onestop shops

providing everything from inputs to know-how to loans, was launched.

Today, the Tata Kisan Sansar has 421 franchisee-run centres in three states and reaches

out to over 3.6 million farmers. Like the Tatas, the $2.6 billion Mahindra group has

successfully established a synergy between its current businesses and the planned rural

forays.

Mahindra & Mahindra Ltd is India's largest farm equipment company. Its subsidiary,

Mahindra Shubhlabh Services, has operations in 11 states, and leverages the strong

Mahindra brand, the 700,000-strong Mahindra tractor customer base and the 400-plus


dealer network, to provide a complete range of products and services to improve farm

productivity and establish market linkages to the commodity market chain. Its retailing

arm, Mahindra Krishi Vihar, has been instrumental in increasing the groundnut yield in

Rajasthan through a new seed sourced from the state of Maharashtra, and it has

alsointroduced a new variety of grapes in Maharashtra. The activities of Mahindra

Shubhlabh Services have attracted the attention of the International Finance

Corporation.

16. URBAN MARKET

"The Census of India defines urban India," says Gupta of TSMG. "Urban India

constitutes places,

a. with a population of more than 5,000,

b. a population density above 400 per square kilometer,

c. all statutory town , that is, all places with a municipal corporation, municipal

board, cantonment board, notified area council, etc.

d. 75% of the male working population engaged in non-agricultural employment

17. URBAN CONSUMER

Activity within the Urban Consumer Market is a rich area of focus, where each sub-

segment plays a key role in the trend making process

INNOVATORS… ARE URBAN

Consistently birth new, utility- and environment driven expressions of personal style

TRENDSETTERS… VALUE URBAN

Retrieve underground style elements – the first “above-ground” emergence of

“trends” as such

ADOPTERS… COMMERCIALIZE URBAN

Either reject trend or accept it into “cool” paradigm - help determine lifespan

MAINSTREAM YOUTH… CONSUMES URBAN


Absorb “cool” paradigm –and all trends included into popular mainstream

consciousness

Urban Consumers are an Added-Value population. Significant volume comes from

the fact that URBAN represents not only those within this segment, but also those

Urban-Influenced members of the Mainstream Market. When considering the

POWER of this segment, think in terms of:

BUYING POWER- Prolific spenders who over-index in particular categories

POWER OF INFLUENCE - Highly influential in trend adoption across mainstream

segments generally perceived as originators of trends

18. URBAN CONSUMER BEHAVIOUR

The urban consumer behavior is influenced b the following points:

18.1. FAMILY INFLUENCES

Family is an important influence on purchase decisions. Bonnet and Kassarjian say

“Attitudes towards personal hygiene, preferences for food items etc. are acquired from

parents.”

18.2. PEER GROUP INFLUENCES

Researchers say that peer groups are much more likely than advertising to influence

attitudes and purchasing behaviour.

18.3. PERSONALITY

Personality also affects consumer’s attitudes. Traits such as aggression, extroversion,

submissiveness or authoritarianism may influence attitudes toward brands and products.

18.4. INFORMATION AND EXPERIENCE

According to learning theory, consumers past experiences influence their brand attitude

and condition their future behaviour. It is seen that brand loyalty will quickly end if brand

does not perform well. Therefore, information and experience also determines attitude.


18.5. SITUATIONAL INFLUENCES

Purchase task - who are you buying for?

Social surroundings - who are you shopping with?

Physical surroundings - where are you shopping?

Temporal factors - how much time do you have to shop?

19. PROFILE OF URBAN CONSUMER

19.1. High literacy

The literacy rate in urban areas is higher than that of its rural counterparts. Education has

become a necessity in the urban quarters

19.2. High income

The purchasing power of urban consumer is high and is increasing day by day due to the

technological and economical developments in urban areas. Also industrialization has

lead to an overall growth of these areas.

19.3. High awareness

Due to high literacy rate the urban consumer are aware about the changes in the

surroundings. Also, they are aware about the various products in the market. The can take

their own decisions of purchase.

19.4. High standard of living

High literacy coupled with high income leads to the increase in the standardof living of

the urban people.

19.5. Brand conscious


Urban consumers are status seekers. they value brand name more than value for price. A

urban consumer is brand conscious

19.6. Buying decisions

The buying decisions of urban consumer are influenced by family influences, peer group

influences, personal interest, information and experience.

URBAN is a gumbo of CULTURAL ELEMENTS…

Grass Roots Sensibilities

Fast City Living

Fusion of Ethnic Cultures

Racial & Economic Diversity

“Keeping It REAL”

Street smarts

Aesthetics of Key Music

Subcultures

20. PROFILE OF URBAN MARKET

20.1. Concentrated markets

Unlike rural markets urban markets are not scattered, they are concentrated. This is due to

inadequacy of land and population explosion.

20.2. Diversified consumer base

The urban areas comprise of a gamut of religions and caste. There are diversified

consumers in the urban regions. People constitute of different likes,dislikes,tastes,

preferences and habits.


20.3. Media exposure

Media reach is high in urban areas. The urban consumers being knowledgeable are able

to access the media.

20.4. Transportation facilities

Transportation facilities are at a booming rate in the urban areas. An urban consumer has

access to all the regions very easily through use of various modes of transport such as

roadways, railways, airways and waterways.

20.5. Communication facilities

Telephones, mobiles, mails, e-banking, e-trading etc are some of the

communication facilities available in urban markets.

20.6. Warehousing facilities

There is proper warehousing facilities in urban areas. There are different type

of warehouse for different products.

20.7. Electrification

Proper supply of electricity is another positive feature of urban areas.

20.8. Medical facilities

People have become more health conscious thus increasing the need for

medical facilities.

21. PROBLEMS FACED BY URBAN MARKETS

21.1. steep rise in the population

21.2. inadequacy of land


21.3. lost open space and natural habitats

21.4. increased air pollution

21.5. more traffic

21.6. depleted natural resources

21.7. Increasing gap between rich and poor

22. SEGMENTATION

22.1 ATTITUDINAL SEGMENTATION

Are young-minded / young at heart

Have a "hustler" mentality (in a positive sense)

Are fiercely independent

Take pride in swimming upstream /defying convention

Value exploration and discovery

22.2 BEHAVIOURAL SEGMENTATION

Are active participants in passion areas vs. observers/bystanders

Are highly social

Highly mobile

Work tirelessly toward goal of making their passions, their livelihood


Indulge in more vices than their general market counterparts

22.3 DEMOGRAPHIC SEGMENTATION

Truly multi-cultural

Build "transcultural" personal identities

Live, work and/or "hang out" in highly metropolitan spaces… if not, they have a burning

desire

23. MARKETING MIX

23.1 PRODUCT STRATEGY :

Products Classification- Service Consumer good.

Product Differentiation- Form, Features, Performance, Reliability

Superior Technology

CSR Initiatives

Attractive Packaging

Catchy Tag-lines

Established as a brand itself.

23.2 PRICING STRATEGY :

Optional-Feature Pricing.

Product- Line Pricing.


Cost-plus pricing

Competitive pricing

Distribution pricing

23.3. PLACE:

In-store placement strategy

Already existing strong links in urban areas

Rural penetration

Develop marketing channels as strong and penetrated so that it would gain

access to remote areas

Strategic location of warehouses

Increase wholesale dealer in small towns who can cover the nearby villages

National coverage would be dealt with by increasing the company DEPOTS &

warehouses and creating C&F agents in the smaller cities

23.4. PROMOTION:

Media

Radio

Hoardings

Consumer promotion

Eco friendly PRODUCTS

Newspaper


Website promotion (www.naukri.com, www.shadi.com)

Various promotional offers

Sponsorship Programs

24. URBAN MARKETS: A DISCONTINUITY LED GROWTH

OPPORTUNITY

The emergence of urban India as the major consuming segment for products and

services should merit a strategy review by consumer facing companies, say Pankaj

Gupta, Practice Head - Consumer & Retail and Rajiv Subramanian of Tata Strategic

Management Group.

Between 2006 and 2016, India’s population is expected to increase from 1108 Mn to

1269 Mn. While the overall population is expected to grow to an annual rate of ~1.4%,

India’s urban population is expected to grow at ~2.3% in the same period to reach

~400 Mn. India’s projected economic prosperity is likely to be spearheaded by a real

GDP growth of 8-9% with a possible annual per capita income of ~Rs. 50,000 by

2012. This macro growth would entail significant sub-trends like a dip in low income

households and rapid increase in high income (super rich) households, led primarily by

urban India.

Emergence of Large, Distinct Consumer Income Segments


http://www.shadi.com/

http://www.naukri.com/

Between 2005-06 and 2013-14, the number of households with annual income greater

than Rs 12 Lakh (USD 30,000) will grow nearly four fold. Within this band, there are

3.4 Mn households with an income in excess of Rs 24 Lakh (~USD 60,000) at 2005-

06 prices. This segment is likely to include more than 15 Mn people, greater than the

population of Denmark, Finland and Ireland put together. By 2014, the middle-high

income band will consist of a substantial 11 Mn households. At a median income of

USD 22500, this segment represents a total income pool of nearly USD 250 Bn. With

spending patterns similar to the high income group; this segment represents a very

significant chunk of the consuming base. A positive trend is seen in the middle-low

band as well, where the number of households is likely to increase from ~14 Mn in

2006 to over 35 Mn in 2014. While low income households will remain the largest

segment, their numbers are expected to decrease by about 4 Mn (0.3% CAGR) in the

same period. While the trend of increasing number of higher income households is

true pan-India, urban India has always been the much larger contributor in the higher

income brackets and is expected to further increase the same in coming years.

Urbanization Trend


While public memory is constantly refreshed that India lives in villages, with

urbanization levels slated to cross 31% by 2016, the urban population will be ~400

Mn. Key markets like Tamil Nadu and Maharashtra with a population of 63 and 81

Mn respectively in 2001 are expected to cross the 50% urbanization mark in 2007 and

2020 respectively. While you would have agri-oriented states of Punjab and Haryana

making positive shifts in urbanization, surprises could also be thrown up in states like

Orissa and Chattisgarh. Urbanization trends across geographies indicate that states

with high urbanization have higher income levels and tend to urbanize faster than

others. Thus, current high income high urbanization states like Delhi, Tamil Nadu,

Karnataka, Punjab, Haryana, Maharashtra and Gujarat would assume greater

importance for marketers in future.

Dominance of Large Cities


By 2026, the number of million plus cities is expected to increase from a current 35 to

75 (Table 2). The contribution of these 75 cities to the total urban population is likely

to go up from 48% in 2001 to ~63% in 2026. Most likely their contribution to the total

urban spend would be much higher resulting in higher concentration of spending

power.

Increasing Relevance of the Urban Consumer


Incomes are slated to increase faster in urban India than in rural India. The ratio of per

capita incomes in urban to rural India is expected to go up from 3.3 in 2004-05 to 3.7

in 2010-11. Expectedly, share of urban India in the country’s net domestic product

would go up from 52% in 2000 to over 60% in 2011.

Implications

While basic products would target the consumers at the bottom of the pyramid, there

would be a shift towards value added products as we move higher up the income

pyramid. This demand shift is likely to be spearheaded by urban India with its faster

growing incomes and favourable consumer preferences. The expected concentration of

demand is likely to spring up newer routes-to-market, with companies finding more

efficient and effective ways of serving their target consumer. While marketers have

been taught that the key to growth lay in increasing rural penetration, greater

urbanization and faster increase in urban incomes has brought the urban consumer

back to centre stage. Consumer facing companies in sectors like food, financial

products, healthcare, consumer durables, personal care, household products and

apparel need to be aware of such discontinuities taking place in their consumer base. It

would be imperative for them to revisit their strategies to avoid being caught off guard.

25. DISTINGUISH BETWEEN RURAL AND URBAN

CONSUMER

Features Urban Rural

Consumer attitude Innovative Conservative

Cultural factors Follow new trends Values, beliefs, traditions

Buying decision VariesBuying decision by elderly

people

Occupation Non agricultural activitiesAgricultural or Agricultural

related activities

Price sensitive Less More


System of interaction Impersonal casual relations,

superficial, standardized

formality of relations

Fewer contacts with outside

world. Simplicity in relation.

Speaks through the heart

26. DISTINCTIVE FEATURES OF RURAL MARKETS Vs.

URBAN MARKETS

FEATURES RURAL URBAN

DEMAND PATTERN Seasonal Uniform

SPREAD Scattered Concentrated

LITERACY LEVEL Low High

PER CAPITA INCOME Low High

AWARENESS OF NEEDS| Not entirely known Known

INFRASTRUCTURE Poor Good

SOURCES OF

INFORMATION,

Word of mouth personal/

direct selling, TV, radio,

Advertisements, TV,

seminars, product launch


Ruralconsumer

Urbanconsumer

COMMUNICATION unconventional mediaand all formal and informal

media

SUPPLY Erratic, untimely Timely

PRODUCT GUIDANCE Needed Adequate

CONSUMER

PROTECTIONNo awareness Increasing awareness

DEMAND High Low

COMPETITIONAmong units in organized

sector

Mostly from unorganized

units

C ONSUMERS

LOCATIONConcentrated Widely Spread

LITERACY High LOW

INCOME High LOW

EXPENDITURE Planned, even Seasonal, variation

NEEDS High level low level

ADOPTION Faster Slow

PRODUCT AWARENESS High Low

POSITIONING Easy Difficult

QUALITY PREFERENCE Good Moderate

PRICE SENSITIVE Low High

DISTRIBUTION

CHANNELS

Wholesalers, stockists,

retailer, supermarket,

specialty stores, & authorised

showrooms

Village shops, “Haats”,

satellite distribution, star

distribution etc

TRANSPORT Good Average

PRODUCT

AVAILABILITYHigh Limited

PROMOTION/

ADVERTISING

Print, audio visual media,

outdoors, exhibitions etc. Few

languages

TV, radio, print media to

some extent. More

languages

SALES PROMOTION Contests, gifts, price discount Gifts, price discounts


PUBLICITY Good opportunities Less opportunities

27. RESEARCH DESIGN OF THE STUDY

This project is a descriptive research which seeks to find out "comparative study

of urban-rural consumer behaviour".

27.1 SAMPLING PLAN

Sampling plan can be classified into 3 sections as mentioned

below :

27.1.1. Sampling unit

Sampling unit referrs to who are the sample target. In this project study, the

sample units are the business class, executives, professionals, house wives, students and

the worker class.


27.1.2. Sample Size

This refers to the total number of people included in the sampling plan.

In this project study, sample size is 30consumers (rual-15 & urban-15) in Nerul.

27.1.3. Sampling procedure

This refers to the method incurred for choosing the samples. In this project study the

sampling procedure undertaken is the random sampling method.

i. Primary Data

Here first hand information is obtained by distributing printed questionnaires .

ii. Secondary Data

Here the information is obtained from the boards publication, report, journals, books,

magazines, and newspapers, management reviews.

iii. Sources Of Data

Mainly two sources of data have been used in the making of this project report.

iv. Sources Of Data

Primary Data Seconary Data

1) Questionnaries 1) Books

2) Journals

3) Boards Publications & Reports

4) Management Review


5) Newspapers

27.2. DATA COLLECTION INSTRUMENTS

In this study conducted the foremost data collection instrument that has been used

is the questionnaires. The questionnaire has been designed both open and closed ended

questions.

27.3. FIELD WORK

Questionnaire was distributed at office establishment, colleges, and houses,

colleges.

27.4. DATA PROCESSING AND ANALYSIS OF PLAN

Processing and analysis of data-has been done by means of printed questionnaires method

and many statistical techniques that include percentage analysis, pie chart, histograms,

which are followed by conclusion and recommendation.

27.5. PIE CHARTS

Pie charts represent a percentage of the collected or available data for analysis. It is a

circular format diagram showing the various splits.

Some of the pie charts are:


LITERACY INCOME STANDARD OF LIVING

0

20

40

60

80

100

120

140

160

LOW(RURAL)HIGH(URBAN)

28. FINDINGS OF THE RESEARCH

The research encompasses survey of total 30 consumer i.e. 15 urban and 15 rural from

vashi and nerul.


The questionnaire prepared gives the following results or outcome of the survey:

The product preference for rural consumer differs from that of urban consumers. If you

look at the Maslow’s Hierarchy Model, rural people need to fulfill the psychological

(basic needs) and safety and security needs. Whereas, the urban counterparts focus more

on esteem and self actualization needs.

Rural consumers prefer more of general necessity products. On the other hand urban

consumer prefer consumer durables

The buyer or the participant in buying process also differs in rural and urban markets.

This is because in rural areas buying decisions are taken by the elderly person or the

earner of the family. Whereas in cities, the purchasing is done by anybody. Frequency of

buying in rural areas is high as compared to urban areas

The mode of purchase made in rural areas can be through Barter System or cash or kind.

In case of urban markets is done through cash, credit cards, e-banking, e-shopping etc.

Rural consumers are price sensitive whereas urban consumers are status seekers or brand

conscious.

People in rural areas mainly purchase fron local Kirana Shops, grocery shops, Haats,

Melas etc. urban consumers purchase from supermarkets, malls, shopping centres etc.

These points and many other points like promotion, income, awareness, infrastructure etc

differentiate rural consumer behaviour from their urban counterparts to a great extent.

29. CONCLUSION

Marketing according to a leading management theories Peter Druker can be put in this

way " There will be always, one can assume, be need for some selling. But the aim of


marketing is to make selling superfluous. The aim of marketing is to know and

understand the customer so well that the product or service fits him and sell itself.

Ideally, marketing should result in a customer who is ready to buy. All that should be

needed then is to make the product or service available."

Thru this we feel that the gist of mktg. in rural & urban is the same. It is nothing but

teasing the minds of people, their desires, needs, expectations & playing with their

physiology. But the market for a product may vary in rural & urban area and the

marketing strategies to market the product is also different in urban and rural area.

In rural area we find more of a stereotype because of similar socio-economic background.

But in an urban area it is a multitude of people & personalities & variance in income,

background & lifestyle. We found that the movies, which were hit in cities, were doing as

well in the rural areas. (E.g. Lagaan, Gadar) But movies, which are hit in rural areas, may

not be successful in cities. (E.g. Mithun movies) We also found that people in cities

spend more on entertainment than people in rural areas.

As from the study we can see that the purchasing power of the people in a city like

Mumbai is more than a semi rural area like Ambernath and willingness of the people in

the rural area to spend towards movies or any other mode of entertainment is quite less

than that of the people residing in urban area.

As comparing the purchasing power and the willingness to spend, the marketing

strategies and the range of products differ between rural and urban area.

30. ANNEXURE

1) QUESTIONNAIRE


MARKET SURVEY

Your preferences and tastes do matter a lot. I would be glad if you could help me with the same by answering some of the question below relating to your day-to-day life.

Name :_____________________________________________________

Date: __________________

Place: _________________

1. Rank the below mentioned products according to the frequency of your purchase:

1) General necessities (Fruits, vegetables, grains)2) FMCG (Cosmetics, toothpastes, soaps)3) Consumer Durables4) Luxury Items

2. Who participates in the buying process?

3. How do you buy?

1) Bartar System 2) Cash 3) Credit cards 4)Anyother

-------------------

4. How frequently do you purchase?

1) Daily 2) Weekly 3) Monthly 4) Quarterly


5. From where do you buy?

1) Kirana Stores2) Local Grocery Markets3) Supermarkets4) Malls

6. Does price affect your buying decisions?

1) Yes 2) No

7. Does a Promotional Activity or Advertisements change your purchasing decisions?

1) Yes 2) No

8. What affects the buying behavior of a consumers? __________________________________________________________________________________________________________________

I really appreciate your time and consideration.

Thanks a lot.

As a part of this project I have

interviewed Mr. Vinay Khadye of MGK

Industries to study the consumption

pattern in urban and rural markets

1) Name of the company : MGK Industries


2) Name of the person interviewed: Mr. Vinay Khadye

3) Product Category: Food Products

4) Products manufactured: Biscuts, chips, beverages,

chochlates,etc

5) Products preferred in rural areas: Parle –G, Marie, Uncle

chips(Balaji), Zankar etc

6) Products preferred in urban areas: Cream

biscuits(bourborn), Lays, coco cola, Pepsi

etc

7) Promotional activities undertaken for rural areas :

regional newspapers, tree boards, jeep campaign, wall painting,

sample distribution etc

8) Promotional activities undertaken for urban areas: TV,

Banners, Posters, Hoardings, Internet advertisements, seminars of

product launchetc

9) Pricing strategy in Rural Markets: Penetration based pricing,

small unit packaging, credits, discount etc

10) Pricing strategy in urban market: Demand based pricing,

Competitive pricing, cost based pricing , skimming pricing etc

11) Distribution channel in rural markets: Satellite distribution,

Star Sellers, middlemen, stockists etc

12) Distribution channel in urban markets: Wholesaler, Retailer,

Dealers etc

BIBLIOGRAPHY

WEBSITES

www.wikipedia.com

www.hindubusinessline.com


http://WWW.HINDUBUSINESSLINE.COM/

http://WWW.WIKIPEDIA.COM/

www.economictimes.com

www.businessline.com

www.marketresearchanalyst.org

www.mgkindustries.com

MAGAZINES

Business standard

Frontline

REFERENCE BOOKS

Understanding Consumer Behaviour

by prof. Parasuraman

Rural Marketing

by Prof. R. Krishnamoorthy


http://WWW.MGKINDUSTRIES.COM/

http://WWW.MARKETRESEARCHANALYST.ORG/

http://WWW.BUSINESSLINE.COM/

http://WWW.ECONOMICTIMES.COM/

comparative study of rural & urban consumer behavior

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