Rural Marketing (MMS & PGDM 2010-12)

- Alka Purohit.

 The rise of rural markets has been the most important phenomenon of the 1990s, providing volume growth to all leading companies. Many Challenges how to make the product affordable, how to penetrate the villages connectivity Language barriers Local brands Rural mindset etc. Marketers & manufacturers are aware of the vast purchasing power, vast size, demand. Efforts now being made to understand rural tastes, walk their talk, marketing mix to be tailored as per their lifestyle.

Introduction & Evolution

 Govt agencies like IRDA( Insurance Regulatory & Devlopment Authourity ) & NCAER ( National Council for Applied Economic Research) defines rural asvillages with a population less than 5,00 and 75% male population engaged in agriculture. So, 2/3rd of the countrys population lives in rural areas & almost 26% of national income is generated there. India is divided into 597 districts, 638,667 villages of which 32% can be reached by pucca roads. However 68% is still untapped. Overall rural market has been growing at 3-4 % per annum adding more than 1 million consumers everyday. Thus,Rural market is becoming very prominent part of the marketing strategy of all FMCG, electronics, other industries, both National & Multinational.

Cont..

Definition & Scope of Rural Marketing 1. Census : Village - Basic unit for rural areas is the revenue village, might comprise several hamlets (Small areas)demarcated by physical boundaries. (Limitation) Term Rural does not specify the population strata. Town- Rural area but should satisfy the following criteria. Population density>= 400/ sq. km. Min population>= 5,000 75% of the male population engaged in non-agri activity (Limitation) Term Rural does not rule out 5,000+ population villages.

2. RBI Locations with population up to 10,000 to be considered as rural & 10,000 1000,000 as semiurban. (Limitation) Up to 10,000+ has not been considered. 3. NABARD All locations irrespective of villages or town , up to 10,000 population will be considered as rural. (Limitation)- Village & town characteristics are not defined. 4. Planning Commission- Towns with population up to 15,000 population are considered as rural. (Limitation) Town characteristics are not defined. 5. Sahara India- Locations having shops/commercial establishments up to 10,000 considered as rural. (Limitation) Population criteria & other characteristics are not taken into consideration. 6. LG Electronics The rural & semi urban area is defined as all other cities other than seven metros.

 In terms of Marketing, Rural India can be defined in terms of absolute numbers: For Consumer expendables / FMCG The rural market can be defined as all locations having population up to 20,000 irrespective of their status as village or towns. For Consumer Durables The rural market can be defined as all locations having population up to 50,000.

 Defining Rural Marketing Acc. To National Commission on Agriculture: Rural marketing is a process which starts with a decision to produce a saleable farm commodity and it involves all the aspects of market structure or system , both functional & institutional , based on technical and economic considerations and includes pre & post harvest operations, assembling, grading, storage, transportation and distribution. Acc to Corporate Rural Marketing: Rural marketing can be defined as a function that manages all activities involved in assessing, stimulating, and converting the purchasing power of rural consumers into an effective demand for specific products, thereby moving these products and services to the people in rural areas to create satisfaction and a better standard of living thereby achieving organizational goals.

 Thus rural marketing is a two way process that includes the flow of goods and services from urban areas to rural areas and vice versa as well as flow of goods and services within rural areas.

Scope of Rural Marketing

1. Rural India-Promising Market Place: 1. Liberalization of Indian economy-beginning of 1990s had far reaching consequences which continued into the new millennium - arrival of many well known MNCs came up which are famous brand in the international markets. 2.Intense competition & saturation of urban markets 3. Growth & Govt Plans- 5 yr plan outlay for rural dev prog., from 8th to 10th plan ,230 % increase in the flow of institutional credit for agriculture, between 1997-98 & 2004-05 & 41 million KCC issued, all helped in the growth of rural economy.
4. Improvement in Indian Agriculture - at macro level showed marked improvement in terms of area covered, usage of fertilizers, quality seeds, use of latest equipments etc. The agriculture sector has become a much comfortable place with rising income levels. 5.Rise in Rural Income- Acc to NCEAR. Indian demographics report, annual household income between, 45,001 and 215,000 in rural India equals urban India. The rural income tends to become much higher since urban counterparts 60-70% is spent more on necessities.

2. Understanding Rural Consumer Fundamentally different due to different rural geographies, heterogeneity, social structure, literacy levels, community decision making etc. 3. New Influencers- Liberalization, global connectivity, information technology etc have led to changes in the roles played by traditional influencers in rural India. Sarpanch, Pradhan & other leaders have been taken over by the new youth studying & residing in urban areas, exposed to the latest brands, products & services. Migration of people is again another influencer. 4. Products- Modification of products for rural areas e.g. cooking gas, pressure cookers etc. to suit the rural home maker. New designing of electrical gadgets e.g. washing machine to suit hard water. Introduction of smaller economic packs of products by all companies.

5. Rural DistributionSound distribution system ensures effective business. In the absence of malls, shopping complexes etc. marketers need to find out the means, ways & places for selling their goods. Direct Supply Company Representatives Around the corner supply Dealers network 6. Rural Communication Strong need to reduce communication gaps & to build reassurance & trust about product quality , service support & company credentials in the mind of rural consumers. E.g. touch, feel, face-to-face interaction, selling at haat , mandis, melas etc. 7. Rural Markets- The way ahead Access & Availability of products, Jo dikhta hai who bikta hai

 Affordability Small packs Adaptation of 4 Ps ( product, price, place, promotion ) to the 4 As (awareness, acceptability, availability, affordability). Companies should not fight for limited rural pie rather join hands with the govt to increase the size of the rural pie through, micro enterprises, publicpvt partnerships, resulting in greater purchasing power in our villages leading to greater demand of our products.

Classification of Rural Markets

1. Urban to Rural (U to R ) Major part of rural marketing falls in this category. Includes transaction of urban goods to rural areas. E.g. fertilisers, seeds, pesticides, FMCG products etc. 2. Rural to Urban ( R to U ) Transactions under this category falls under agricultural marketing where, a rural producer ( farmer ) sells his produce in urban market. An agent or middleman plays an important role in this marketing process. Eg. Milk, fruits, vegetables, spices, cotton, honey etc. 3. Rural to Rural This includes activities that take place between two villages in close proximity to each other. The transactions involve areas of expertise a particular village has. Eg. Handicrafts, leather items, dress material,

Classification of Rural Markets

Urban v/s Rural :
Urban 1. Size & Characteristics: City has a large population size growing at a fast rate due to immigration from rural areas for education & employment. The population density is high. Towns are smaller urban units. Rural Village is a human settlement with a small administrative unit. It comprises few hundred households and the population growth due to immigration is insignificant. Migration from village to city/town is to get better education & employment.

2. Settlement Pattern: a. The city settlement is compact though a. Village has land for human settlement and spread over a larger area. Land use is for cultivation . The settlements are residential, commercial , industrial ,roads & predominantly clustered but in some streets ,institutional & community facilities. households settle on respective cultivable land etc. holdings. b. Structure of houses is permanent & often b. Houses are largely semi-pucca or kuccha. rises to more than one storey. Housing on They are owner occupied. rental is highly prevalent. c. Clustering pattern in cities is more on basis c. Houses in village are clustered according to of class . In the initial phases of kinship, caste, or religious groups. Some

Urban d. Primary resource base is production & distribution of industrial goods & services.

3. Occupation Occupations are diverse, ranging from professionals, semi-skilled to unskilled workers. Occupational specialization I achieved with higher education and training to build skills. 3/4ths are salary earners shopkeepers etc. 4. Realms of Activities Interaction and mobility is spread over large geographical , social, and economic area. Relationship is more complex with differential in personal and professional life. There is erosion of role of custom, tradition & religion. Formal mechanisms of social control are needed in absence of community influence.

Rural d. Land is the primary resource of livelihoods. Other forms of resources are water bodies, forests and mountains. Cows, buffaloes, poultry are kept for household need for milk, eggs, meat. Predominant occupations are cultivation & agriculture labor. People continue to practice traditional occupations. Skill up gradation with technology has been limited. 2/3ths are cultivators & daily wage earners.

Restricted to smaller geographical, social, and economic areas. Individuals are recognized or referred to on the basis of family, caste, village etc. Individual behavior is governed by custom, tradition and religion. Conformance & compliance to mechanisms of social control is through family, kinship and community.

1. Demographic Environment a.Population Pattern: Though the population has come down moderately over the years , there has been a considerable increase in total n Growing population does not mean , growing markets until the people over there have sufficient purchasing power. If the companies analyze their markets, right opportunities can be taken up. With the increased working population the purchasing power of rural populace has gone up by 40% in 1991 to 42% in 2001. Usually the largest age group shapes the marketing environment. Incase of rural, its school-going children, young adults(20-35 yrs) who define the consumption pattern.

Rural Marketing Environment / Structure

Source: Census 2001

1971 Total Population(million)
Rural Population(million) Rural proportion (%) Decadal Variation

1981 683.3
524.0 76.7 19.8

1991 848.3
628.8 74.3 16.7

2001 1026.9
741.6 72.2 15.2

548.2
80.1 -

b. Occupational Pattern The demographic profile of people in a segment naturally affects their buying behavior also. The wage-earner & salaried person will behave in a different manner. A daily wage earner has to account for variation in income, where as a salaried person will have assured fixed amount and can plan expenses accordingly. 3/4ths of rural households are either cultivators(farmers) or daily wage earners. The farmers income is variable & seasonal, depends upon the harvesting season. Its that time when he is more inclined to make purchases, like durables, high involvement products etc.

Source- NCAER 2002

Heads Occupation Distribution of Households(%) Urban Housewife Cultivator Wage Earner Salary Earner Professional 0.84 3.45 20.93 40.72 3.59 Rural 1.01 40.86 35.28 11.28 0.73 All 0.96 29.99 31.12 19.84 1.56

Artisan
Petty Shopkeeper Businessman Others Total

6.90
16.05 3.68 3.85 100.00

3.41
4.97 0.46 1.98 100.00

4.42
8.19 1.40 2.52 100.00

Physical Environment
Settlements (scattered & clustered) Villages comprise homestead land(aabadi) & cultivated land(farms). The settlement pattern is either in a cluster in the aabadi or in individualized land holdings. Houses are owner occupied and the structure is kuccha. Its quite common in village to find houses according to kinship, caste, or religious groups. Sometimes entire village is classified according to the basis of some predominant characteristic or caste etc. Villages of less than 500 population generally do not have any shop, but the no. of such villages has decreased by 5% over the last 10 yrs. 25,000 villages in less than 500 pop category have upgraded to the 500+ category. Villages in the 2,000 + pop strata are the most prosperous. The no. Of such villages is increasing very rapidly. Over the last almost 23,000 villages have upgraded to 2,000+ category. These villages have around 16 shops.

 As per 2001 census these 17% villages in 2000+ popu. Category account for 50% of the rural population & 60% of rural wealth. A marketer going rural should target this category first. Certain big villages are classified as towns since they have municipalities still retain rural characteristic such as folk entertainment & weekly haat & mandis. Social interaction is a mix of urban & rural, the economy though being connected to rural, is not agriculture based rather a mix of trade, salaried employees etc. Such towns are of primary importance to the marketers sp for durables & services.

Village Community & Caste System: Historically villages have been self sufficient & autonomous. Agricultural surplus have continued to sustain the economic infrastructure, caste based occupations & trades have contributed to self sufficiency. Poor communications only reinforced these features, and panchayat decided disputes among villagers. Post independence village underwent changes, the close link of rural produce with market & industry, gradual shift from traditional farming to commercial & mixed farming and the dependence on goods & services from outside plus the increased role of media has made village dependent on external factors. Migration of rural poor to towns & cities for regular employment. Changes in the panchayat structure under reforms from constitution, ensured democratic structuring & reservation for ST & ST tribes & Women.

 All villagers above 18 yrs are eligible to vote and the state administration is in a 3 tier panchayati raj structure, district, block & village level & are endowed with financial powers as well. Traditionally, Indian society has a definite scheme of social gradation, with Brahmins as Heads, followed by Kshatriyas, Vaishyas, shudras. All the dimensions have sub castes, cults etc claiming supremacy. The developments post independence have initiated changes in the traditional systems but the caste complications still prevail in certain villages. The abolition of Zamindari have brought certain changes to empower the deprived.

 Marketers need to be sensitive to the caste system, practices in rural areas, while developing ads, communication & promotion plans to ensure relevance of characters & message. ****************************************

The changes in the rural technological environment were triggered off by three major revolutionsGreen Revolution ( agri sector), White Revolution(milk sector), Non govt organizations( NGO)in development sector. Green Revolution The period from 1967 to 1978 heralded technological thrust into rural areas aimed at improving food grain production. Production of high yield varieties with the use of fertilizers , pesticides, fungicides, etc. Farm equipments like, tractors, diesel pumps etc introduced mechanization into the farm sector. Introduction of mechanized processing, spurring, growth of manufacturing sector. Modernization & mechanization boosted productivity, industrial growth, created jobs, initiated a change in the quality of village life.

Technological Environment

White Revolution Initiated by the govt to increase milk productivity. The project of the Govt Dairy Development policy to produce milk through cooperatives & moving processed milk to urban demand sectors. Gave a big boost to the dairy development & initiated the process of establishing the much needed linkages between rural producers-urban consumers. Formation of producers cooperatives played a significant role in institutionalizing milk production & processing. Socio, economic, urbanization, changing lifestyles, food habits etc. reinforced growth & demand for the dairy industry. Milk production has increased from 17 million tonnes in 1950 to 84.6 million in 2001. The most successful states under the same being, Gujarat, Andhra Pradesh, Punjab, Haryana, western UP. Etc.

The NGO Movement Role of NGOs & voluntary agencies in India has been important in providing assistance at the grass root level for creating awareness, improving technology, building skills & development. Govt programs implemented through NABARD, CAPART, KVIC etc have contributed towards the same. Leather processing, food processing, weaving machinery, technology for natural resource management etc have brought about change in the village life. They have been active in providing basic Health care, Women & child health care programs, running homes for destitute & distressed, providing training & education opportunities have increased rural exposure.

 NGOs confined to their own worlds are realizing the importance of tying up with corporate, expanding their activities. The corporate too are experiencing saturation & competition eroding margins are realizing the need for rural territory. The innovative approach to business-social partnership is emerging as a win-win solution in achieving objectives. E.g. SEWA, Gujarat based NGO with ITC provides direct access to the vast network of farmers, covering 14 districts bypassing a chain of middlemen. In return, SEWA farmers are getting an assured market with better prices for their produce.

 In 2003, ITC purchased 250 tonnes of sesame seed from SEWA which procured it from 1,450 small & marginal farmers. Farmers got much better price in comparison. Other commodities like, groundnuts, wheat, cumin seed etc. were also taken up. ************************************

 Marketers need a mix of developmental & transactional approach. Rural Marketing process needs to be evolutionary and not revolutionary. To be considered as an investment for a better tomorrow. Companies should focus on nurturing the markets as a long term perspective than short term achievement. Many companies suffered huge losses as they looked up to short term gains rather than spending time in evolving their marketing mix & distribution, following the success of project Shakti by HUL. Create avenues & opportunities ,mutually beneficial for target population & the company.

Nature of Rural Market & Marketing Approach