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Rural Marketing

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Focusing on the poor represents an

opportunity rather than a problem.

C K Prahalad

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There's incredible potential in rural markets. That's

where the growth will come from.

Sharat Dhall

Diretor HUL

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What is Rural

Any habitation with a population density of lessthan 400 sq. km., where at least 75% of the malepopulation is engaged in agriculture and wherethere exists no municipality or board (Census

2001).

The rural and semi urban area is defined as allother cities other than the 7 Metros (LG India).

Locations having shops or commercialestablishments with up to 10,000 people aretreated as rural (Sahara, ITC, HUL)

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1.3 Statistical Approach to Rural Marketing:Government agencies like IRDA(Insurance Regulatory and

Development Authority) and NCAER(National Council for

Applied Economic Research) define rural as

villages with a population of less than 5,000, with 75% of the

male population engaged in agriculture, etc.

Two-thirds of the countrys consumers live in rural areas,which are around 800 million people, and almost 26% of the

Nationalincome is generated there.

10 consecutive monsoons have led to 26% of GDP as returnsfrom agriculture. This has increased their purchasing power.

India is divided into 597 districts, and has 6,38,667 villages,

of which 32% can be reached as they are connected by pucca

roads.

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Rural India

India is a country where 2/3 of its population

is still residing in rural area.

In India more than 800 million people are

scattered in more than 6.4 lacks villages.

In all there are more than 3.8 million retail

outlets in rural India, averaging 5.8 shops per

village

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Rural India

Liberalization and globalization is one major factor

which changed the income level, life style of this

population, and put them equally with their urban

counterparts. The rural market has been growing at 3-4% per

annum, adding more than 1 million new consumers

every year.

It now accounts for close to 50% of the volume of

consumption of fast-moving consumer goods in

India.

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RURAL MAHARASHTRA

According to Census 2011, population of the state is 11 croreplus, which is roughly 9.29% of the total population.

many cities like Nashik, Aurangabad, Nagpur and many more

cities are developed rapidly in last two decades. According to Census Maharashtras Rural Population is 6

crore, which 54 percent of total population.

States per capita income is Rs.95, 351/- where as on national

level it is Rs.60349/- . Litreacy rate in state have increased from 77 to 83 percent

over a decade.

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Evolution Of Rural Marketing

Phase 1 (Before 1960s)

Phase 2 (1960s-1990s)

Phase 3 (1990s to present)

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The Glorious Past

In 1949, Asian Paints was the first company to enterrural markets.

In 1960 HLL saw rural markets as an opportunity andentered with lifebuoy soap.

Today HUL dominates rural markets and have itspresence in more than 1 lakh villages. Major players

like Colgate and Dabur followed in. in 80s companieslike Nirma, Cavinkare, and Marico entered ruralmarkets

. MNCs in rural markets like P&G (Proctor & Gamble)also found potential in rural markets

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The Pulse of the Present

Around 70% of the population lives in rural India,which is almost 700 million in number. A 1% increase intheir purchasing power can lead to an increase

of Rs.10,000 crores in the government revenues.

Cos. are launching a range of products

to cater to the changing lifestyles in rural India. MNCslike LG, Samsung, Revlon and insurance biggies likeBirla Sun life, Max New York Life and Prulife areentering rural markets in a big way. But till today thesehave altogether tapped only 1-lakh villages out of the6-lakh odd villages

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Size of the Rural Market

The total size of the rural market is estimated at Rs. 1,23,000 crore,which includes FMCGs, Durables, Agri products and 2/4 wheelers.

Estimated Annual Size : Rural Market

FMCG Rs.65000 crore

Durables Rs.5000 crore

Agri-Inputs Rs.45000 crore

2/4 Wheelers Rs.8000 croreTotal Rs.123000 crore

Source: Francis Kanoi

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Rural customer. Understand them

Illiterate but not fools

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The Reasons to Prefer Rural Areas

Presently, companies operating in India are left with only two options,

I .e. either to go Global or to go Rural. The cost of going global is very high

and also its tough to penetrate markets in other countries. Rural India is

emerging as a large market

for a number of goods and services. So, its better to target the rural

market. Marketers find a similarity between the criticality of rural as well

as urban markets. Some reasons for the same are listed below:

A)Saturation of urban markets:There is cutthroat competition in urbanmarkets. Due to the wide variety of choices of products, it becomes

difficult for existing companies to maintain their market share. Compared

to urban markets, the rural markets provide better opportunities.

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One very fine example can be quoted of Escorts

where they focused on deeper penetration .In

September-98 they established rural marketingsales. They did not rely on T.V or press

advertisements rather concentrated on focused

approach depending on geographical and market

parameters like fares, melas etc. Looking at the'kuchha' roads of village they positioned their

mobike as tough vehicle. Their advertisements

showed Dharmendra riding Escort with the

punchline 'Jandar Sawari, Shandar Sawari'. Thus,

they achieved whopping sales of 95000 vehicles

annually

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B) A huge untapped market:With a rural population of more than

800 million, it has a huge potential and market areas as only

around 1-lakh villages are tapped out of the 6-lakh odd villages.

C) Rising disposable incomes: Good monsoons during the past 10

years have raised farmers incomes. Non-farm sectors now account

for almost 50% of the total rural incomes. It is a market that

corporatists cannot afford to ignore. Another reason for the risingdisposable incomes of the villages is that Agricultural income is

non-taxable.

D) Remittances from abroad:Many households in rural India have

one of their family members abroad, mostly in Gulf countries.

People working there send their savings to their families in India,

which is an additional source of income

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E) Impact of the media:The growing reach of the

electronic media has created a huge change in the

lifestyles of rural consumers because of TV programmes. Rural people are spending more on lifestyle products

these days . Modi, Revlon, for instance sells more

lipsticks in the rural market than in urban areas. Last

year rural sales were Rs.25 crores; only Rs.12 crores

came from the urban market

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MYTHS ABOUT RURAL MARKET

All villages are equally populated.

Rural consumers are are a homogenous lot.

Being illetrate, rural consumers are not bale todiscriminate between prducts and brands.

Only low priced products will sell in rural

India.

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Characteristics of Rural

Marketing:

India is a bigcountry and its

rural markets

have varied

characteristicsthat change from

people to people,

region to region.

Some of the main

features of Indias

rural markets are:

-

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1) Diverse Nature: There are 6,38,667 Indian villages in all.Out of these 50% share a very small population of less than 500

and a limited purchasing power. Many of these villages donteven have a single shop.

In the second category there are 2,50,000 villages with a

population between 500-2000. There are at least 5 shops per

village

Lastly there are 60,000 villages with a population of more than

2000.Companies should try and focus on the last two categories

more as they have high potential.Regional disparities heavily influence economic development,

social interaction patterns, mobility patterns and awareness

levels.

.

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2) Urban Market Saturation

There is a cut-throat competition in urban

markets, which have reached a stage of

saturation

As a result, marketers are shifting focus to

greener pastures in rural markets, as there is

equal number of households in rural areas as

in urban areas.

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3) Rising Disposable Income of Rural

Customers

New tax structures, good monsoons, the green revolution and

the Administered Pricing Mechanism (APM) have raised

disposable incomes in rural areas

It is ironic that rural people spend so lavishly on weddings,

ceremonies and festivals amidst deficiency.

Today the rural consumer shop for value. It is this incomethat the companies are going to tap in the near future.

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4) Rising Literacy Levels

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4) Rising Literacy Levels

Nearly 45% of rural Indians are literate out of which 59% aremen and 31% are women.

Every year produces 60 lakh literate people.

Farmers are remarkably well informed about the changing

world around them.

The increased enrolment in schools has also generated a waveof rural demand for lifestyles and aspiration products.

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5) Spread of Cable Television

The growth of satellite TV channels has had a major impact on

villagers.

It has led to a change in lifestyle and consumption patterns

Television has high capacity to raise interest levels as it hasgreater accessibility compared to other media.

Rural consumers now aspire to buy brands rather than to just

purchase commodities.

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Rural employment pattern(Male)

SECTOR % SHARE INEMPLOYMENT

(1987)

% SHARE INEMPLOYMENT

(2004)

Agriculture 75 67

Transport and

communication

4 10

Trade and hotels 6 8

Construction 8 7

Manufacturing 7 8

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Classification of Rural Marketing:

URBAN ---------- RURAL

RURAL ------------ URBAN

RURAL------------- RURAL

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Characteristics of

Rural Consumer

Perception

&

Brand belief

Age &

Stages of

Lifestyle

Economic

Circumstances

Personality

&

Self-concept

Occupation

&

Income

Lifestyle

Personality &Psychological

Factors

UNDERSTAND RURAL CUSTOMER

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BELOW 12 YRS URBANRURAL

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13-19 Yrs URBANRURAL

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20-40 YrsURBANRURAL

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40-60 Yrs URBANRURAL

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AGELIFE-CYCLE

STAGERURAL URBAN

Below 12 Child Toys, ice candy, daliya

Video games,

chocolates,beverages/health

drinks

13-19 TeenageBicycle, television,

cinema

Cell phones,

motorcycle, internet

20-40 Young

Motorcycle, telephone,LPG,

Tailored/unbranded

clothes, local liquor,

haat

Car, PC, branded

clothing, alcohol,

stores/malls

40-60 Middle Aged

Tractor, kisan-credit

card, postal savings,

mela

Luxury car, credit

cards, house, health

insurance, holiday trips

Above 60 OldChaupal, playing

cards, pilgrimageClubs, theatre, parks

CONSUMPTION BY AGE & STAGES OF LIFE CYCLE

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Personality

Sum total of unique individual characteristics that determine

how a person responds to the environment.

Tendency to buy the products which suit our personality.

Self image is the way we perceive ourselves in a society.

In the rural market, purchase depends on situation and

person.eg. Pan Masala in rural, Popcorn in urban

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The rural customer is content to satisfy basic

needs.

Persuasion necessary to convince a customer.

Peer pressure not very relevant

High esteem but content with everyday life.

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Perception and Brands

Perception plays a major role in purchase

behavior for the rural consumer.

Quality and price influence the perception of the

consumer.

Barrier to level of trial and acceptance of products

Rural customer trusts government services

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. A year back HUL started 'Operation Bharat' to

tap the rural markets. Under this operation it

passed out lowpriced sample packets of itstoothpaste, fairness cream, Clinic plus shampoo,

and Ponds cream to twenty million households.

Thus looking at the challenges and the

opportunities which rural markets offer to themarketers it can be said that the future is very

promising for those who can understand the

dynamics of rural markets and exploit them to

their best advantage.

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Project Shakti/Operation Bharat

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(HUL) and its constituent companies have been in India since 1931.

Over these decades, while HUL has benefited from the developments in

the country, it has contributed equally to these developments.

HUL has consciously woven India's imperatives with the company's

strategies and operations.

The companys main contributions include developing and using relevant

technologies, stimulating industrialization, boosting exports, adding valueto agriculture and generating productive employment and income

opportunities.

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HUL has been proactively engaged in rural development

since 1976 with the initiation of the Integrated Rural

Development Programme in the Etah district of Uttar

Pradesh, in tandem with the companys dairy operations.

This Programme now covers 500 villages in the country.

Subsequently, the factories that HUL continued

establishing in less-developed regions of the country have

been engaged in similar programmes in adjacent villages

.These factory- centered activities mainly focus on training

farmers, animal husbandry, generating alternative income,

health, hygiene and infrastructure development

. The company has acquired a wealth of experience and

learning from these activities

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The principal issue in rural development is to create

income-generating opportunities for the rural population.

Such initiatives are successful and sustainable when linkedwith the companys core business and is mutually

beneficial to both the population for whom the programme

is intended and for the company.

Based on these insights, HLL launched Project Shakti in

the Year 2001, in keeping with the purpose of integrating

business interests with National interests.

In 2002 2003 LIC sold 50 percent of its policies

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In 2002 2003, LIC sold 50 percent of its policies

in rural India by doing street plays

3 As of rural marketing Coca Cola

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3 A s of rural marketing- Coca Cola

AffordabilityAcceptability

Availability.

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the traditional village..

where life stands still

waiting..