Introduction to Rural Marketing Environment

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Session Objectives

1. Introduction to definition of ‘Rural’ 2. Introduction to significance of rural marketing 3. Introduction to myths and realities of rural marketing4. Introduction to rural consumer5. Introduction to evolution of rural marketing in India6. Introduction to socio-economic-politico-cultural

environment of rural India.7. Introduction to some success stories

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Rural! Whazzat?

1. Indian Census defines ‘RURAL’ as what is not ‘Urban’2. RBI defines it as locations with population <=10,000,

locations with popn, 10K-100K are termed semi-urban3. NABARD defines it as locations with popn. <=10K4. PLANCOM defines it as locations with popn. <=15K5. SAHARA defines it as locations with number of

shops/establishment <=1,0006. LG Electronics defines all locations other than 7 metros

as rural/semi-urban

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Rural India: Opportunities Galore!

• Nearly six lakh villages- 742 million rural consumers• Benevolent monsoon- 13 good years (barring 2002-2003)• FYP outlay for RD increased 600% from 8th to 10th plan• Institutional credit for agriculture up by 230% between 97-

98 & 2004-05 • 41 million KCC issued and cumu. credit of Rs. 97.7K

crores sanctioned• No. of consuming class households: rural=urban• 42,000 rural supermarkets (Haats)• 5.22 lakh VPTs out of 5.76 lakh villages

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Rural Consumer- Who is (s)he?

• Different from ‘urban’…how?• Geography determines lives and lifestyles of villagers• Households’ male stamp on purchase decisions• Community decision making is common• ‘Lumpy’ demand pattern• Informal credit drives consumption• Extensive opinion seeking• Local benchmarks and parameters for comparison• Conventional communication is a challenge

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What/who influences rural consumer?

• Global connectivity through media (especially television) and telecommunications

• Increased education• Sarpanch/Pradhan• Rural youth• Migrants to cities/towns• Persons living in the village but working in a regular white

collar job in nearby city/town• Retired people who have worked in cities/towns

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Fixing 4 Ps: What-so-grrreat?

• Product modification because of changed usage!• Importance of feeder towns (20,000 +) for ‘reaching’ out• ‘Out of village’ experience for ‘technically’ sophisticated

products• Feeder town wholesaler Rur. retailers in 2000+ villages • Face-to-Face, ‘below the line’, touch, feel and talk modes

at haats, melas and mandis• Importance of LUPs of popular brands• Proliferation of regional and local brands

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Rural Markets: The journey so far

• Phase I (before 1960s): Mktg of rural products in rural and urban areas and agricultural input in rural areas

• Phase II (1960s to 1990s): Green revolution changed the face of rural India. Marketing of agri-inputs emerged

• Phase III (1990s to the present): Growth is rural markets for household durables and consumables

• Transition has been caused by improvements in easier accessibility, enhanced purchasing power, better reach of media, etc.

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Rural Demography1971 1981 1991 2001

Total population (mill.) 548.2 683.3 848.3 1026.9

Rural Population (mill.) 524.0 628.8 741.6

RP to TP (%) 80.1 76.7 74.3 72.2

Decadal variation 19.8 16.7 15.2

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Rural Education

Education Level Rural Urban

Below Primary 29.2 18.4

Primary but below Middle 31.6 23.9

Middle but below Matriculation 21.0 20.8

Matriculation but below graduate 15.5 26.1

Graduate and above 2.7 10.8

Census 1991

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Rural Occupational PatternHead’s Occupation Urban Rural All

Cultivator 3.45 40.86 29.99Wage Earner 20.93 35.28 31.12Salary Earner 40.72 11.28 19.84Artisan 6.90 3.41 4.42Petty shopkeeper 16.05 4.97 8.19Businessman 3.68 0.46 1.40Professional 3.59 0.73 1.56Others 4.68 3.01 3.48

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Physical environment in a village• Villages are divided into abadi and cultivated land• Most houses are ‘owner occupied’ and ‘kuccha’• Caste plays an important role in deciding the habitat and

village layout• Villages in 2000+ population are increasing very rapidly• These villages have on n average 16 shops• These comprise 17 % of total villages but hold 50% of

rural population and 60 % of rural wealth• Many towns are overgrown villages..these are crucial as

feeder towns

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Rural Money Management

• Over last 10 years, the higher income class has grown by six times

• Middle and upper middle classes have also increased significantly

• Rural spending in non-food items is increasing and now approximately 40 % is spent on non-food items

• Banking services are availed by 42 million HH in villages while it is 27 million in urban areas

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Casting the Caste!

• Very specific to India- no equivalent elsewhere• Different from ‘Varna Vyavastha’• Ascription, rather than achievement is the basis of social

stratification• The settlements of dominant castes are towards the centre

of the village while that of lower castes are towards periphery

• Marketers have to be sensitive to the caste system and associated practices in rural areas

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Prying the PRI!• Prior to democratisation, it was the sarpanch/pradhan of

the dominant caste who represented the village• Villages with 5,000 popn. or a cluster of smaller villages

with 5,000 popn. form a panchayat• The villages are divided into wards, each ward is

represented by a member and they choose sarpanch• 73rd amendment introduced the 3-tier system with 5-yearly

elections and 33% reservation of seats for SC, ST and women

• Implementation of schemes for economic development and social justice in relation to 29 subjects

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The colourful revolutions in the countryside

1. Green Revolution: 1967 to 19782. White Revolution: 1965 to present3. Blue Revolution: 1980 to present4. Reinvention of NGOs as development

vehicles

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Sizing it all up!

• One very common estimate (Francis Kanoi 2002) of the size of rural market is Rs.123,000 crores

FMCG Rs. 65,000 croreDurables Rs. 5,000 croresAgri-inputs (incl. Tractors) Rs. 45,000 crores2/4 wheelers Rs. 8,000 crores

Total Rs. 1,23,000 croresFrancis Kanoi 2002

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HLL’s Project Shakti

• Objective is to create income generating capabilities for underprivileged rural women by providing a sustainable micro-enterprise opportunity

• Improve rural living standards through health and hygiene awareness

• Shaki Prachirini is a communicator appointed for a cluster of villages.

• She is trained on matters relating to personal and community health and hygiene

• Communication material is also provided to SP.

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ITC’s E-Choupal

• ITC has set up a virtual bazars through the agi portals to counter traders in mandi

• Soyabean, Coffee, Aquaculture products and wheat are procured by ITC

• 4000 choupals cover 20,000 villages in four states, providing a forum to buy, sell and seek advice

• ITC plans to spread it in many more states• ITC has now set up Choupal Sagar(s), the superstore

chains catering to rural consumers’ requirements • A whole bouquet of products and services are available

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Rural Markets: Looking Ahead

• Companies will have to focus on 4 As along with 4 Ps. These are Awareness, Acceptability, Affordability and Availability

• Traditional media will need to be used to create awareness in media dark markets

• Coinage pricing is here to stay and so is LUPs• Companies will have to create economic activity to create

customer pull for their brands/products• Number of poor HH is set to decline to half between 1997

and 2007 (NCAER).