Rural and Agricultural Marketing

Module 1,2,3,4,5 – Rural marketingModule 6,7 – Agricultural Marketing

Total – 7 modules, 40 session, each session of 60 min

References: 1)Pradeep Kashyap and Siddhartha, 2008

edition, The rural marketing book 2) C.S.G. Krishnamacharyulu and Lalitha

Ramakrishna, 2009 edition, Rural

Rural Marketing

Have a look at rural India….

Have a look at rural India….

Kuccha house in rural India

Pucca house in rural India

`

Camel cart

Bullock cart

Boats being used in Kerala

Cycle rickshaw

Snapshot of Rural IndiaPopulation ( 2001 census) M- 380 mn, F- 362 mn Urban/rural – 28%

/ 72%

No. of villages 638,365

Total No. of Inhabited villages 593,145

Rural literacy 59%

Avg population per village 1,161

% of working rural population 42

Cultivators % 40

Agricultural laborers % 33

Household Industry workers % 4

Other workers % 23

Rural India a Promising market place….

• 1990 – decision to liberalize?????• Consequence ----- Arrival of many MNC’s Proliferation of brands Intense competition Saturation of urban market All the above lead to search for green pastures

Some MNC’s which have forayed in rural India are

HUL, Coca-Cola, LG Electronics, Britannia, HDFC Standard Life, Philips, Colgate Palmolive and the telecom companies.

Taxonomy of rural Market

• Consumer market• Industrial market• Service Markets

Interesting Case: Hindustan Unilever launches ‘Brooke Bond Sehatmand’, a Tea

with Vitamins - An innovation for the masses, with guaranteed vitamins in each cup, to help every family live a healthier life and help address micro nutrient deficiency

–- this abhiyaan seeks to bring together NGOs, gram panchayats and various governmental and non-governmental bodies to educate people on the importance and sources of nutrition, health and vitamins across villages.

• Promising potential market of 742 mn Indian rural consumers

• Yet to taste the fruits of modernity

• Explosion in the buying capacity

• Fuelled by good growth registered in 1990s as result of 13 consecutive good monsoons (barring 2002 and 2003).

• 600% increase in the Five year plan outlay for rural development programme from 8th to 10th

• 41 mn KCC issued and cumulative credit card amounting to Rs. 97,700 cr were sanctioned (Kisan Credit Card Scheme (KCC) aims at providing adequate and timely support from the banking system to the farmers for their short-term credit needs for cultivation of crops. This mainly helps farmer for purchase of inputs etc.,during the cropping season. Credit card scheme proposed to introduce flexibility to the system and improve cost efficiency)

• National Council for Applied Economic Research (NCAER ) 1998 reports that the consuming class households ( annual income between 45k to 215K ) in rural India equals the number in urban India.

• It is a well known fact that disposable income in rural areas is much higher because food, shelter, primary education and health are virtually free, whereas in urban India 60 to 70% is spent on these necessities.

• HUL declared that half its annual sales of Rs 11,700 cr come from rural India. This situation is similar for companies manufacturing dry cells, wrist watches, cassette recorders, soaps, tea and many other product categories.

Impressive facts

• 42,000 rural supermarkets ( haats)

• In 2001-02, LIC sold 55% of its policies in rural India.

• Of the 20lac BSNL mobile phone connection, 50% are in small towns and villages

• 5.22 lac had a village public telephone as of march 2004

• The billing per cell in small towns in AP is higher than the billing in the Hyderabad city.

• Of the 2 cr signed for rediffmail, 60% are from small towns. Of the one lac who have transacted on rediff online shopping, 50% are from small towns.

• Internet access in semi-urban and rural India has increased through sanchar dhabas of bsnl, operating in 3,617 out of 6,332 blocks in the country.

Defining Rural Markets

• Out of 6.4 lac villages, only 20, 000 villages have population more than 5000.

• FMCG companies define rural as any place with a population upto 20, 000

• Durable and agri-input companies would consider town with a population below 50,000 as rural.

Understanding rural consumers• A farmer in rural Punjab is much more progressive than his

counter part in Bihar• A farmer in Karnataka is far more educated than one in

Rajasthan• In urban family, husband, wife and children are involved in

buying process• But in village, men make the purchase decision. Women lack

mobility and have little contact with market• Urban individual is free to take independent purchase

decision, in a village because of strong social structures, including caste consideration and low literacy levels, community decision making is quite common.

New influencers

• Sarpanch/pradhan• School teacher • Rural Youths

Products• Rural cooking is done on ground, pressure cookers to

have handles on both sides• Electrical gadgets - withstand wide voltage

fluctuation – kerosene run refrigerators • Demand for detergents that are capable of

generating sufficient lather even in hard water• Washing machine able to operate without the facility

of running water• Freshness drive the need to buy small pack sizes so

that even higher unit prizes for small packs are perceived as value for money.

Pressure cooker with handles on both sides

Kerosene run refrigerator

Detergent powder which can be used in hard water

Rural Distribution

• As per IMRB study, 90 percent of durables are purchased from 20,000 + population towns..

• Each distributor would have a supply network of 100 + outlets in 50 odd locations which can cover all villages upto 2000 + population category.

Rural communication

• There is a strong need to build reassurance and trust about product quality, service support and company credentials. This is done trough face- to – face, touch, feel and talk modes at Haats, melas and mandis.

• AICDA model

Developing rural market through IT

• 4000 choupals of ITC cover 20,000 villages in 4 states

• Same kiosk is been used for reverse trading• STD revolution has changed the stocking

pattern of village shops. Earlier, shop keeper send order on a post card.

Agri-Portal

E-choupal

Rural markets : The way ahead

• Companies need to adapt 4 A’s – awareness, acceptability, availability and affordability.( Jo Dikhta hai, wohi bikta hai)

• Anything that has a value in exchange• Affordability - Small packs - Re 1, 2, 3• Upward push – taking rural people from

poverty to prosperity will lead to greatly increased purchasing power.

New approaches to rural communication

• Ad campaign by Coca-cola ‘ Thanda Matalab Coca-Cola’• HLL – ‘Project Shakti’• ITC’s – ‘e-choupal’• AIDA model• Attention – Puppet shows, drama, message on moving objects,

Giant cutouts• Interest – Wall paintings, direct mail• Desire – Tableau(Philips used parades of people dressed up as

electric bulbs or batteries in rural areas), audio visual vans, POP, Demos, contests

• Action – Haats and Melas

Project ShaktiSHAKTI - Changing Lives in Rural

India

HUL: Project Shakti business model overview

• Due to the recent government measures like waiver of loans, national rural employment guarantee scheme and increasing minimum support price, disposable income in rural India has been rapidly increasing. However, rural markets present their own sets of problems. These include poor infrastructure, dispersed settlements, lack of education and a virtually nonexistent medium for communication. Furthermore, retailers cannot be present in all the centres as many of them are so small that it makes them economically unfeasible.

• Hindustan Unilever Limited (HUL) to tap this market conceived of Project Shakti. This project was started in 2001 with the aim of increasing the company’s rural distribution reach as well as providing rural women with income-generating opportunities. This is a case where the social goals are helping achieve business goals.

• The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying the uncovered village. The representative of the company meets the panchayat and the village head and identify the woman who they believe will be suitable as a SA. After training she is asked to put up Rs 20,000 as investment which is used to buy products for selling. The products are then sold door-to-door or through petty shops at home. On an average a Shakti Amma makes a 10% margin on the products she sells.

• An initiative which helps support Project Shakti is the Shakti Vani programme. Under this programme, trained communicators visit schools and village congregations to drive messages on sanitation, good hygiene practices and women empowerment. This serves as a rural communication vehicle and helps the SA in their sales.

• The main advantage of the Shakti programme for HUL is having more feet on the ground. Shakti Ammas are able to reach far flung areas, which were economically unviable for the company to tap on its own, besides being a brand ambassador for the company. Moreover, the company has ready consumers in the SAs who become users of the products besides selling them.

• Although the company has been successful in the initiative and has been scaling up, it faces problems from time to time for which it comes up with innovative solutions. For example, a problem faced by HUL was that the SAs were more inclined to stay at home and sell rather than going from door to door since there is a stigma attached to direct selling. Moreover, men were not liable to go to a woman’s house and buy products. The company countered this problem by hosting Shakti Days. Here an artificial market place was created with music and promotion and the ladies were able to sell their products in a few hours without encountering any stigma or bias.

• OTHER ACTIVITIES:To improve the business skills of the SHG women, extensive training programmes are being held. Such workshops have already covered a large number of Shakti Entrepreneurs in Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Uttar Pradesh, Tamilnadu, Chattisgarh and Orissa

•As part of their training programme, all HUL Management Trainees spend about 4 weeks on Project Shakti in rural areas with NGOs or SHGs. Assignments include business process consulting for nascent enterprises engaged in the manufacture of products such as spices and hosiery items.

• This model has been the growth driver for HUL and presently about half of HUL’s FMCG sales come from rural markets. The Shakti network at the end of 2008 was 45,000 Ammas covering 100,000+ villages across 15 states reaching 3 m homes. The long term aim of the company is to have 100,000 Ammas covering 500,000 villages and reaching 600 m people. We feel that with this initiative, HUL has been successful in maintaining its distribution reach advantage over its competitors. This programme will help provide HUL with a growing customer base which will benefit the company for years to come.

Participated States• Andhra Pradesh• Karnataka• Madhya Gujarat• Chhattisgarh• Maharashtra• Orissa• Punjab• Rajasthan• Tamilnadu• Uttar Pradesh• West Bengal• Bihar• Haryana• Jharkha

Strategies… • HLL – Lifebuoy and wheel – wall paintings. This concept is also used by

sellers of cement and asbestos.

• BASF – puppet shows – awareness about its fertilizers

• HLL – Giant cutouts – lifebuoy – during boat race in Kerala which is held as a part of Onam

• Castrol – rural West Bengal – painted both the sides of motor which used to ferry people

• Khaitan fans – shades of bullock and horse carts to advt their products

• HLL – Vim bar challenge – demonstrated how efficient Vim bar is in cleaning utensils

• Colgate palmolive – audio visual vans – promote colgate toothpaste

• FMCG companies – utilized melas and haats to reach out rural consumers

Colgate Palmolive India limited

Creating demand in rural areasIn order to create new demand for oral care products,CPIL has increased their reach in rural areas. It is

converting non-users to users through various salespromotion measures such as small volume low pricedsachets, distribution of free toothbrushes, Rural VanProgrammes, among other things, especially in ruralareas. Rural areas contribute to 35 per cent ofColgate’s sales.

Rural Initiatives by different corporate….

• Airtel has tied up with Indian Farmers Fertiliser Cooperative Limited (IFFCO) to reach farmers directly. Farmers will receive free voice messages twice daily on farming techniques, weather forecasts, dairy farming, rural health initiatives, fertilizer availability, loan information and market rates. Additionally, farmers can also call a dedicated helpline, manned by experts from various fields, to get answers to their queries.

• Reliance Communications has introduced low tariff initiative like the Grameen Programme for rural subscribers.

• SREI Sahaj e-Village Ltd will set up 25,000 IT kiosks to be known as common service centres (CSC) across West Bengal, Bihar, Orissa, Assam, Uttar Pradesh and Tamil Nadu, by 2010.

• ITC's e-Chapual has been a great developmental initiative which has also added value to its own agricultural products. It comprises improving the lives of farmers and villagers.

• HDFC has started a 'village adoption' scheme to improve the investment climate in Indian villages.

• Mahindra Shubhlabh, the agricultural business arm of Mahindra & Mahindra, aims to use especially cultured seeds to improve contract-farming productivity.

• DCM Shriram provides information services through its chain of Krishi Vikas Kendras, which have now evolved into Hariyali Kisan Bazaars.

• Hindustan Petroleum has started community kitchen programmes in some Indian villages.

• ICICI Bank has launched an ambitious rural banking and agribusiness initiative.

• The Byrraju Foundation's GramIT programme has generated a rural BPO model. It aims to employ rural people in the ITES (IT-enabled services) industry, and to create profit for the entrepreneurs or cooperatives running the BPOs.

Goals of MarketingEnterprise Marketing

Profitability Sales revenue maximizationCost minimization

Growth Sales growth maximizationProduct developmentMarket penetrationMarket developmentDiversification

Market standing InnovationMarket leadershipConsumer satisfaction

Image Brand imageCompany image

Evolution of rural marketingPhase Origin Function Major

productsSource market

Destination market

I Since Independence

Agricultural marketing

Agricultural produce

Rural Urban

II Mid sixties Marketing of agricultural inputs

Agricultural inputs

Urban Rural

III Mid- Nineties

Rural marketing

Consumables and durables for consumption and production

UrbanRural

Rural

Rural marketing before 1960sFrom/To Rural Urban

Urban Agricultural inputs – consumables

Not relevant

Rural Artisan services and products

Agricultural produces

Agricultural inputs included fertilizers, seeds and pesticideLocal marketing included bamboo baskets, ropes, window and door frames, household earthen and small agricultural tools like ploughs by sellers like black smith, carpenters, cobblers and pot makersAgricultural produces like food grains and industrial inputs like cotton, oil seeds, sugarcane etc

Rural marketing in phase II (1960s -1990s)

From/To Rural Urban

Urban Agricultural inputs Not relevant

Rural Artisan services and products

Agricultural produce

Formation of agencies gained momentum - KVIC, Gujarat Cooperative societies and APCO fabrics ( Andhra Pradesh state handloom weavers cooperative societies

Village industries flourished and products like handicrafts, handloom textiles, soaps, safety matches, crackers etc hit the urban market on a large scale.

Rural market in Phase III (1990s to the present)

From/To Rural

Urban Occupational inputs: Consumables and durablesHousehold goods:: Consumables and durables

Rural Artisan services and products

Durables included tractors, harvesters, power tillers, pump sets, oil engines, electric motors

Rural marketing can be defined as a function which manages all those activities involved in assessing, stimulating and converting the purchasing power into an effective demand for specific products and services, and moving them to the people in rural area to create satisfaction and a standard of living to them and thereby achieves the goals of the organization

Nature of rural marketTransactional Vs Development marketing

Sl. No Aspect Transactional Development

1 Concept Consumer orientation, marketing concept

Society orientation, societal concept

2 Role Stimulating and conventional marketing

Catalytic and transformation agent

3 Focus Product-market fit

Social change

4 Key task Product innovations and communications

Social innovation and communication

Transactional Vs Development marketing

Sl No. Aspect Transactional Development

5 Nature of activity Commercial Socio-cultural, economic

6 Participants Corporate enterprise, sellers

Government, voluntary agencies, corporate enterprises, benefactors

7 Offer Products and services

Development projects/schemes/programmes

8 Target group Buyers Beneficiaries and buyers

9 Communication Functional Developmental

Transactional Vs Development marketing

Sl No. Aspect Transactional Development

10 Goal ProfitsCustomer satisfaction

Market developmentCorporate image

11 Time-frame Short-medium Medium-long

12 Motivation Profit motiveBusiness policy

Service-motiveIdeological or Public policy

Taxonomy of Rural Market

a) Consumer marketConstituents : Individuals and householdsProducts : Consumables: Food products,

toiletries, cosmetics, textiles and garments, foot wear etc

Durables: Watches, bicycles, Radio, TV, Kitchen appliances, furniture, sewing machines, two wheelers etc

Taxonomy of Rural Market

b) Industrial marketConstituents : Agricultural and allied activities, food

processing, poultry farming, fishing, animal husbandry, cottage industries, health center, school, cooperatives, NGO’s, etc.

Products: Consumable: Seeds, fertilizers, pesticides, animal feed, fishnets, medicines, petrol/diesel, engine oil etc

Durables: Tillers, Threshers, tractors, pump sets, generators, harvesters, boats etc

Grape harvester

Taxonomy of Rural Market

c) Service marketConstituents : Individual, households, offices

and production firmsServices : Repairs, transport, banking, credit,

insurance, healthcare, education, communication, power etc.

Attractiveness of rural market

• Large population• Raising prosperity• Growth in consumption• Life style changes• Life cycle advantages• Market growth rates higher than urban• Rural marketing is not expensive• Remoteness is no longer a problem

Large populationAspect males females total

Population 367,240 344,640 711,880

Work force 27,370 121,820 393,190

Rising rural prosperity

Income groups 2006-07 (%)

Above 1,00,000 5.6

Rs 77,001-10,000 5.8

Rs 50,00-77,000 22.4

Rs 25,00-50,000 44.6

Rs 25,000 and below 20.2

Rural Consumption….

• 6% of the soft drinks sales happen in the rural areas. • Rural India accounts for 49% of motorcycle sales. • Rural India accounts for 59% of Cigarettes sales. • 53% of FMCG sales happen at Rural India. • Talcum powder is used by more than 25% of rural

India. • Lipsticks are used by more than 11% of the rural

women and less than 22% of the urban women. • Close to 10% of Maruti Suzuki’s sales come from the

rural market.

• Hero Honda, on its part, had 50% of its sales coming from rural market in FY’09.

• Rural India has a large consuming class with 41% of India’s middle-class and 58% of the total disposable income accounting for consumption.

• By 2010 rural India will consume 60% of the goods produced in the country.

• In 20 years, rural Indian Market will be larger than the total consumer markets in countries such as South Korea or Canada today, & almost 4 times the size of today’s urban Indian market.

Life style changes

Category Penetration (%) Brand with higher penetration

Toilet soap 91 Lifebuoy

Washing cakes/bars 88 Wheel

Edible oil 84 Double herian mustard

tea 77 Lipton tata

Washing powder/liquid 70 Nirma

salt 64 Tata salt

biscuits 61 Parle g

Org-Marg, June 1999

Life cycle advantage

Product urban Market growth rate (%)

rural Market growth rate (%)

Popular soaps Maturity 2 Growth 40

Premium soaps Late growth 11 Early growth 67

Washing powders

Late growth 6 Early growth 60

Skin creams Maturity 1.1 Early growth 9.9

Talcum powder Maturity 4 Growth 3.1

Market growth rate higher than urban

Category Growth (%) Rural market share (2006)

Toilet soap 13.4 62.4

Body talcum powder 23.65 54.

Toothpaste 23.5 45.1

Cooking medium (oil) 10.91 73.4

tea 10.97 61.9

Health beverages 28.54 39.8

Electric bulbs 9.4 31.7

Electric tubes 10.15 38.7

Cigarettes 13.09 65.6

Packaged biscuits 6.79 46.2

Hair oil/cream 30.85 59.7

Rural marketing is not expensive

• Case of Dabur Historically dabur used wall paintings and mobile vans

to sell labels like lal dantamanjun, chywanprash and hajmola. In july and august 2000, it decided to do something novel to promote chywanprash. It selected a cluster of 300 villages in banda district and sent in three mobile bowling alleys. The bowling pins represented the various germs that chywanprash protects against. The exercise cost around rs 2 lacs. It drew a 2 lac crowd- roughly 667 individual per village- at contract cost of rs 1 per individual.

It also distributed Hanumanchalisa and calendars along with ayurvedic products to build the association with brand.

Amitabh – brand ambassador – quality, consistency and traditional yet contemporary.

Remoteness is no longer a problem

• Remoteness is a problem but not insurmountable – the rural distribution is not developed for the following reasons

• Lack of proper infrastructure• Lack of marketers imagination and initiative• Ex: Selling points for electric fan in urban

areas are close to 18,000 whereas the number of outlets for diesel/electric pump sets, primarily a rural farm product is less than 3000

• Marketers have failed in exploiting Indian’s traditional selling system – haats and melas

• Ex: IDE ( international development enterprise) india has used haats and melas as the main instrument for promotion, demonstration of the treaddle pump, a minor irrigation device. Sales went up from less 10,000 in 1996 to about 1,00,000 in 1999.

Salient Features of 3. 5 inch Surface Treadle Pump (STP)

Sales potential of haats and melas

Number of haats 47,000

Average per day sales in haats Rs. 2,23,000

Average outlet per haat 314

Average visitors to a haat 4,580 (covers 5 villages)

Average sales per outlet in a haat Rs. 874

Number of commercial melas 5000

Sales per day in a mela Rs. 25 lakh

Size of rural marketsEstimated annual size: Rural market

FMCG Rs. 60,000 cr

Durables Rs. 5000 cr

Agri-inputs (incl tractors) Rs. 45, 000 cr

2/4 wheelers Rs. 8000 cr

Total Rs. 1,23,000 cr

Source: Francis kanoi 2002

Rural Challenges….

Though rural markets are a huge attraction to marketers, it is not easy to enter the market and take a sizeable share of the market, in the short time due to the following reasons.

• Low Literacy• 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%.

• Seasonal Demand• Demand for goods in rural markets depends 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.

• Transportation• Many rural areas are not connected by rail transport. Kacha

roads become unserviceable during the monsoon and interior villages get isolated.

• Distribution• An effective distribution system requires village-level

shopkeeper, Mandal/ Taluka- level wholesaler or preferred dealer, distributor or stockiest at district level and company-owned depot or consignment distribution at state level. The presence of too many tiers in the distribution system increases the cost of distribution.

• Communication Problems• Facilities such as telephone, fax and telegram are rather poor

in rural areas.• Traditional Life• 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.

• Buying Decisions• 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.

• Media 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. However, reach of formal media is low in rural households; therefore, the market has to undertake specific sales promotion activities in rural areas like participating in melas or fairs.

• Career in Rural Market• While rural marketing offers a challenging career, a rural sales

person should require certain qualifications and specialized talent.

• 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.

• There is a belief among rural people that experience is more important than formal education and they respect salespersons who can offer practical solutions to their problems. Therefore, it is desirable that sales persons, especially those who have been brought up in cities are given a thorough training consisting of both theory and practical aspects of village life. The training will help these sales persons to align themselves with the market realities and settle down smoothly in their jobs.

• Rural market has a tremendous potential that is yet to be tapped. A small increase in rural income, results in an exponential increase in buying power.