Everything you need to know about rural marketing in India. The rural marketing structure is not uniform in all parts of the country.
The type of structure prevalent in a particular State or Region depends on various factors like the state of development of agriculture, condition of transport and communication facilities, purchasing power of population, etc.
Rural marketing is a type of marketing in which activities are planned according to the needs and requirements of the people living in the rural areas.
Marketing is the process of identifying the needs and wants of the consumers, then prepare that particular product or service in order to satisfy them, keeping in consideration the benefits of the organization. This concept applies to every type of marketing, whereas when we talk of rural marketing the emphasis is to be given on the rural areas.
1. Definitions of Rural Marketing in India 2. Nature of Rural Marketing in India 3. Types 4. Significance 5. Approaches
6. Assumptions 7. Reasons for Increase in Importance 8. Factors Contributing 9. Marketing Mix for Rural Markets 10. Role of Risk
11. Difference between Rural and Urban Marketing 12. Rural Marketing Research 13. Current Scenario.
Rural Marketing in India: Definitions, Nature, Types, Significance, Approaches, Assumptions, Factors
- Introduction to Rural Marketing in India
- Definitions of Rural Marketing in India
- Nature of Rural Marketing in India
- Types of Rural Markets in India
- Significance of Rural Markets in India
- Approaches to Rural Marketing in India
- Assumptions of Rural Marketing in India
- Reasons for Increase in the Importance of Rural Markets
- Factors Contributing to the Change in the Rural Markets in India
- Marketing Mix for the Rural Markets in India
- Role of Risk in Rural Marketing in India
- Difference between Rural and Urban Marketing in India
- Rural Marketing Research in India
- Current Scenario of Rural Market in India
Rural Marketing in India – Introduction
Rural marketing is a type of marketing in which activities are planned according to the needs and requirements of the people living in the rural areas. Marketing is the process of identifying the needs and wants of the consumers, then prepare that particular product or service in order to satisfy them, keeping in consideration the benefits of the organization. This concept applies to every type of marketing, whereas when we talk of rural marketing the emphasis is to be given on the rural areas.
The focus remains on the people who are living in the remote areas, and the marketing activities should be planned accordingly. Seeing this, now-a-days many companies are turning towards the rural market to expand their scope, and to overcome competition or to restart or give new shape to competition. A lot of focus is required to be given on the rural markets because rural markets are the “tomorrow’s markets”.
In order to understand the term “Rural Marketing” we have to first understand the term ‘Rural’. There is much confusion associated with the word rural as there is no accepted definition of the term. However there are different perceptions of the term and some of them are- To some, rural means a place with less than one lakh population; others consider the income level of the population to determine the rural segment.
If the income levels are less than Rs.11,000/- per annum then the segment is a rural segment. Yet to some others the term rural means smaller towns and mofussil areas having population of less than 10,000 persons.
Even the corporate sector faces this confusion about the term rural. In the absence of any clear concept of the rural area, there will not be a proper understanding of the rural problems and hence the marketing considerations and strategies might tend to go wrong.
In the absence of any standard definition of the term rural, let us understand it by studying the definition of the term ‘Urban’. The Census Department of India defines the term ‘Urban’ as (a) All places with Municipality, Corporation, Cantonment Board or Notified town area committee, (b) All the places with a minimum population of 5,000 persons, with at least 75% of the male working population engaged in non-agricultural activity and with a population of at least 400 persons per square kilometre or 1000 persons per square mile. If we exclude the areas that come under the above definition, the remaining areas can be considered to be the rural areas.
When marketing activities are carried out in the rural markets it is known as ‘Rural Marketing’.
Rural Marketing in India – Definitions Provided by National Commission on Agriculture
In the process of defining rural market, for the purpose of clarity, it has been attempted to firstly, deal these two terms ‘market’ and ‘rural’ separately and then combine them into one, later.
The term, ‘market’ is used in many contexts. For example, the urban market, the rural market, the agriculture market, the commodity market etc. Thus, market as a concept is most confusing. According to economist’s view, market is a physical place where buyers and sellers get together, and a transfer of title takes place as goods are exchanged.
Thus, markets include the people who sell the goods and services and also those who purchase them. Another view is that market refers to the people with buying power and willingness to buy. In the present study, both the views have been taken into account.
With regard to the term ‘rural area’ also there is no unanimity among the authorities. A few authorities defined a geographical place as a rural area with a population of 10,000 while few others defined – place with a population of 20,000 as rural area. But, for the present study, the criterion adopted by the census of India, 1981 for defining an urban area has been taken as the basis for defining the rural area.
Accordingly, rural area is defined as a place with human habitation of 5000 and below with agriculture as the main economic activity and with a density of population less than 400 sq. km. Some areas with a population more than 5000 are also classified as rural area in view of the agriculture being the main economic activity of a vast majority of population in that area.
On the basis of the definitions of the above two terms, the rural market may be defined as any market that exists in the rural area with a population less than 10,000 where the areal density of population at any population nucleation is low without any significant infrastructure.
In other words, total market of India excluding the urban markets can be called as rural market. These rural markets are mostly unintegrated, very small in size and rudimentary in nature.
According to the 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 and institutional, based on technical and economic considerations, and includes pre and post-harvest operations, assembling, grading, storage, transportation and distribution.”
According to Thomsen – “The study of Rural Marketing comprises of all the operations, and the agencies conducting them, involved in the movement of farm produced food, raw materials and their derivatives, such as textiles, from the farms to the final consumers, and the effects of such operations on producers, middlemen and consumers.”
The above two definitions reflects only one side of the coin and are narrow in explanation, i.e., it explains only the movement of goods from rural to urban areas, whereas, the rural markets also need agricultural inputs like seeds, fertilizers, pesticides, cattle feed and agricultural machinery, as well as the rural population needs consumables, consumer durables and services also. That’s why the urban manufacturers have entered the rural markets with consumables, consumer durables and services.
Rural Marketing in India – Nature
The rural market is quite different from urban markets. Agriculture is the chief economic activity in rural areas, the entire village population is associated directly or indirectly to agriculture. In the process of development of civilisation agriculture and pastoral life along river banks are the first form of settled life.
In the Bronze Age, major civilisation evolved. Archaeological evidence reveals that bronze industry supplied tools and implements to agriculture. Textiles, paper, iron and furniture making developed to lid man in his economic activities.
Agriculture supplies inputs for fabrication into manufactures cotton, oil seeds spices etc. All food items had a marl origin. Villages were self-contained units, which traded their produce for gold, arm and precious stones. The rural society has high status persons and the poor ones.
The distribution of land was made by state, which belonged to the state- The British rule for more than three centuries was the worst blow to the rural society. The worst blow was to cottage and small scale industries, cultivation of indigo, tea and jute, development of timber trade and denudation of forests.
The terms of trade were not favourable to Indian farmers. In these circumstances farmers were forced to live in deprivation and poverty. British India was with the princely states under the administration of Rajas and Nawabs; the big states had all the powers except defence and foreign affairs.
Agriculture and industries based on raw-materials and local skills are identified for the development of the rural economy. An integrated approach was evolved to take care of projects ranging from milk and milk-products to horticultural products like fruits, vegetables, flowers, herbs, etc.
The processing of these is not widespread in rural areas. Modern technology is too accessible to enterprises there. It is beyond the financial capacity of an average entrepreneur. The low cost and labour based technologies have been the common mode of village industry. As a result, the rural products do not enjoy competitiveness in a wider market. Most of the products are consumed locally.
Rural Marketing in India – Types of Rural Markets: Periodic Markets, Mobile Traders and Permanent Retail Shops
The rural marketing structure is not uniform in all parts of the country. The type of structure prevalent in a particular State or Region depends on various factors like the state of development of agriculture, condition of transport and communication facilities, purchasing power of population, etc.
In the North-Eastern region and far-flung areas of the country where the ‘agricultural production and levels of income are low and communication and transport facilities are not available the marketing structure comprises predominantly. Primary markets like hats and shandies which have sprung-up at convenient places to cater to the needs of the local population.
At the other end are areas in North-West like Punjab and Haryana where the agriculture and other facilities are developed. The market structure comprises a larger number of organised markets.
However, rural markets of India can be broadly categorised into three types.
Type # 1. Periodic Markets:
Periodic markets are the important characteristic feature of the rural marketing in India. In spite of urbanisation and development of retail stores, periodic markets are also playing an important role in rural economy as well as in social life of the rural masses. The periodic marketing function is performed by two institutions, viz., fairs, and weekly markets.
A fair denotes a gathering of people who assemble at regular intervals in certain fixed places—generally around shrines or other religious institutions. Although, by far the largest number of fairs have a religious background, there are some which owe then origin to purely economic considerations.
A general concept regarding Inn is that they are simply an occasion for the recreation of rural folk. These fairs provide an opportunity for rural people for yearly and half-yearly, sometimes be-biennial or once in 12 years like that of Kumbha-Mela, Godavari Pushkarmas, etc.
The purchase and sale of goods, etc. The important fairs draw people not only from surrounding tracts, but also from very distant places. There are about 1700 fairs organised in different parts of the country involving produce and also livestock. There are a few fairs which are attended by a few lakhs of population and there are others which are attended by a few thousands.
On an average, the attendance per fair works out at about 16,000. The periodicity of fair varies from one fair in one state with that of another in other States also from one region to another within the State. The time schedule of a fair may vary between 1 day to 7 days.
The various types of fairs include:
i. On the basis of Primary Purpose:
(a) Religious fair,
(b) Commercial fair,
(c) Commodity fair,
(d) Cattle fair,
(e) Exhibition fair, and
(f) Mixed fair.
ii. On the basis of the periodicity:
(a) One-day fair,
(b) Short- duration fair, and
(c) Long-duration fair.
iii. On the basis of their importance or area of influence:
(a) Local fair,
(b) Regional fair,
(c) Inter-regional fair or national fairs
Now-a-days international fairs are also organised by the Governments. Festivals of India, organised by the Government of India in important cities of several countries like USA, France and Germany, etc., belong to this category. However, with the change in rural economy, the pattern of shopping in fairs has also been changed.
The development of permanent shops in rural areas and easy contact with towns have also changed the shopping practice of the rural people. But the importance of fairs is still the same, due to behavioural pattern of rural people who always wait for the purchase of many items. The State Governments are also helping in popularizing the fairs.
Paintings, hats, shandies, bazaars are different names employed in various parts of the country to designate periodical markets held usually once or twice a week and in some cases even often. They are commonly known as weekly markets. However, there is slight distinction between these terms.
For example, the term paints, is used in united province to denote a periodical market dealing more in agricultural produce than in livestock, whereas in a hat the reverse is the case.
As the goods and services of daily market or permanent shops are not available in remote rural areas, most of the villages are not connected with all-weather roads. Added to this, the state of agriculture is subsistence, peasants have to dispose their meagre surpluses on one hand and have to purchase limited manufactured goods on the other.
Created out of this situation in rural areas are weekly markets, and to purchase their daily consumption goods. A periodic market is a public gathering of buyers and sellers of commodities meeting an appointed or customary location at regular intervals. Though the time varies between different regions, in most of the cases these meet once in a week.
The number of hats or weekly markets held in various parts of the country are estimated around 22,000. These markets are found in greater numbers (80%) in the eastern and north eastern regions of the country comprising Assam, Bengal, Bihar, United Provinces and Central Province.
Out of the States, Hyderabad State occupies the first position with as many as 1,000 hats. Gwalior, Travancore, Mysore and Bhopal followed with 300,225, and 200 hats respectively.
Most of the weekly markets serve an area within a radius of 8 to 16 kms. In some States like Maharashtra and Tamil Nadu, these markets serve a larger area while in northeastern states these serve a smaller area. Transactions are mostly on cash basis though the barter system is still in practice.
The volume of produce traded, commodities traded, number of villages and the population served by the weekly markets differ considerably from State to State and from market to market within the same State. For example, the number of villages served varies from 27 in the case of markets in Andhra Pradesh to 277 in case of markets in Bihar.
In terms of the population served, the variation is 40,000 in respect of a market in Andhra Pradesh to 1,83,000 in the case of market in Gujarat.
However, the weekly markets at the village level are generally devoid of most of the market facilities. The consumers are subjected so many malpractices indulged in by the traders both in purchasing farms produce from the rural masses and also in selling their required consumer goods to them.
In spite of this, these markets serve as an important marketing institution in rural areas. Most of the agricultural labour who get their wages once in a week visit these markets and purchase their consumption goods.
Type # 2. Mobile Traders:
There is another important agency known as mobile traders to fulfill the limited needs like vegetables, fruits, clothes, utensils, cosmetics, spices, toiletries etc. of rural consumers. The practice of mobile trading is not a new one, but even in ancient India this phenomenon was common.
The mobile traders are those merchants who move from one place to another, from one house to another in order to sell those commodities which are often required by rural masses. As it is rightly observed by Stine, important reason for the existence of mobile trader is that when the maximum range is smaller than the threshold requirement of the firm, the firm either ceases to function or else it becomes mobile.
Even in those villages where there are permanent shops and weekly markets, there is a phase for mobile traders because of behavioural pattern of rural masses. Mobile traders move from one village to another on foot or bicycle or buses, bullock carts, etc. They visit the villages once or twice in a week. Sometimes, they visit those villages which are on the way of weekly markets in return direction after attending these weekly markets.
While moving from one house to another within the village they loudly announce the name of the commodity which they sell such as chadar, (bed sheet), pandlu (fruits), gajulu (Bangles), palu, perugu (milk and curd), etc. There will be too such haggling in price fixation. The payment is made either in cash or in kind in the form of foodgrains. Sometimes these traders extend credit upto periods harvests.
Mobile traders move in groups or 3 to 5 persons carrying different types or similar types of articles. They move only in those parts of the village, they have decided at the time of the entry. Female mobile traders are also found significantly dealing in cosmetics, utensils, toiletries, plastic goods, spices, etc.
During harvesting season, the frequency of visits by mobile traders is more. Most of these traders belong to certain castes like Poosala in Andhra Pradesh. These mobile traders are an integral part of the rural marketing system.
Type # 3. Permanent Retail Shops:
Permanent retail shops are developed as the population of villages increased, their incomes improved, the demand for goods and that too on daily basis increased. The traditional fairs, weekly markets or peddlers were not able to meet the situation and this led to the emergence and growth of permanent shops.
Permanent shops were set up as a result of the demand of the rural inhabitants primarily of the same village. The number of shops, their various forms largely depends upon the size of the population of the village, their incomes, purchasing power, their preferences, etc.
In the Indian context, the most sophisticated types of retail outlets comparable to that of western countries are found in metropolitan cities, while in rural areas (with population less than 10,000), only the traditional independent general stores or small-scale retailing are prevailing.
In rural areas, only traditional methods of distribution, i.e., wholesaler and retailers are working as usual. The modern methods of distribution, such as chain stores, super markets and franchise shops are not existing in rural areas because of small size of villages and lower income of rural folk.
Rural Marketing in India – Significance of Rural Markets
Every sales executives today if asked which market he would prefer to serve, the immediate answer would be. “Rural Markets”. A number of factors have been recognised as responsible for the rural market boom.
Some of them are:
1. Population Increase- Increase in population, and hence increase in demand. The rural population in 1971 was 43.80 crore, which increased to 52.50 crore in 1981, and 72 crore in 1994 and it is about 78 crore in 2000.
2. Addition in the Rural Increases- A marked increase in the rural income due to agrarian property.
3. Development of Villages- Large inflow of investment for rural development, programmes from government and other sources.
4. Development of Educational Facilities- Increase in literacy and educational level among rural folks, and the resultant inclination to lead sophisticated lives.
5. Increasing Contract- Increased contract of rural people with their urban counterparts due to development of transport and a wide communication network.
6. Role of Foreign Goods- Inflow of foreign remittances and foreign made goods into rural areas.
7. Prosperity- The general rise in the level of prosperity appears to have resulted in two dominant shifts in the rural consuming systems. One is conspicuous consumption of consumer durables by almost all segment of rural consumers, and the second, the obvious preference for branded goods as compared to non-branded goods of rural origin.
8. Change in Buying Behaviour- Changes in the laud tenure system causing a structural change in the ownership pattern and consequent, changes in the buying behaviour.
Rural Marketing in India – Approaches: Availability, Affordability, Awareness and Acceptance
The rural market may seem very attractive because of its vast size and largely untapped markets. C.K. Prahalad, the renowned management guru had talked about the huge market potential offered by the world’s poor in his book the fortune at the bottom of the pyramid. According to him, commercial success can be successfully combined with societal development if multinational companies targeted the population of the developing world in a way that would fulfill the needs of both.
But entering the rural market is not so easy. There are some problems specific to this kind of market. The 4 a’s approach is a consumer-oriented model that explains the uniqueness of rural markets.
The 4 a’s are:
Approach # 1. Availability:
The biggest challenge is to ensure availability of goods and services in the markets. Rural markets do not have a proper physical distribution system like those in urban markets. India’s 6,38,000 villages are scattered all over the country and each village would have particular distribution problems. Village areas do not even have a well-developed roadways system.
Many of the roads are not even pucca, and are rendered useless during the monsoons. The mountainous villages become inaccessible during landslides and snow storms. Therefore it is a big challenge to ensure availability of products at far flung areas. To counter such problems, big companies like the global giant unilever’s Indian subsidiary Hindustan unsilver have built a strong distribution system to reach the remotest of the villages.
More traditional forms of transport like bullock carts, auto rickshaws and even boats in some parts of Kerala are used in the rural distribution system. Coca cola has developed a special distribution system to deliver its products to the village areas. Some companies even open up factories and offices in such areas to penetrate the market.
Approach # 2. Affordability:
Key to successful rural marketing lies in selling goods and services that can be afforded by villagers. Most of the rural population depends upon agriculture for livelihood and as such their income is irregular. Also the per capita income of the rural areas is lower.
It is estimated that more than two-thirds of Indian villagers belong to low income group, and thus they are very much price-sensitive. A villager will purchase a particular product only if he feels that he is getting enough value for it.
Rural population normally does not indulge in conspicuous spending. In order to sell to the village markets, many organizations developed low priced options specifically suited to the rural customer’s pockets. Britannia’s tiger biscuit is a low priced snack which is popular among village kids.
In the year 1998, Lg electronics introduced its sampoorna television range targeted at rural buyers. Procter and gamble brought out tide naturals, a comparatively cheaper detergent powder. Most brands of shampoo are available in sachets priced at Rs. 2-3.
Approach # 3. Awareness:
It is significant to create awareness about the product in the minds of the customers. The mass media for reaching rural people should be chosen carefully. It should be kept in mind that even today the media reach is lower in villages.
Television ownership is very low in villages and viewership is limited to doordarshan channels even for those who watch television. Print media will be ineffective because of low literacy rates.
Among electronic media, radio and cinema have a comparatively wider coverage in villages. Advertisements in regional languages broadcast on local radio stations will influence consumer thinking.
Outdoor advertising options like banners, billboards, wall paintings, posters, etc. can be used successfully in rural areas. Advertisements should be in local languages so that people can easily understand them. Hindustan unsilver makes use of street performers like magicians, singers and dancers to promote its products.
Approach # 4. Acceptance:
The most important issue in rural marketing is to make the customers accept the product. Villagers are more likely to resist change and are slower in adopting newer products. So it is vital to assure them about the benefits and value they can get by purchasing a particular product. Since rural people would not spend their precious money on wasteful products, producers should offer goods that suit the villagers’ needs.
People in a rural Chinese province used washing machines to wash not just clothes, but also vegetables. Chinese appliance maker Haier group leveraged this opportunity and modified their washing machine to enable washing farm produce safely. The villagers happily purchased this machine, giving Haier group a competitive advantage over rivals.
Marketers should facilitate the process of product acceptance—coca cola provides low cost ice boxes to its rural distributors who do not have electricity or refrigerators. The customers should feel that a product is worth the efforts they are making to get it.
Rural people are more price-sensitive and believe in getting the maximum value out of whatever they buy. Many models of Nokia mobile phones are equipped to handle SMS facilities in regional Indian languages making it user friendly for non-English speaking groups.
Rural Marketing in India – Assumptions
1. Many assumption prevail about rural marketing. For instance, one assumption is that the rural buyer is not very discriminating. Once he is persuaded to buy a particular product, he develops a strong affinity for it, and if satisfied, becomes brand loyal.
As a result, Indian manufacturers are generally known to prefer selling fewer items at higher prices than selling more items at lower prices. A contrary view is that the rural buyer, being suspicious of the marketer’s hard-sell techniques, is quite discriminating, and is not easily persuaded.
2. Yet another assumption is that the rural buyer is not particularly been about quality and packaging.
3. Some other assumption can be quoted. But all these need deep probing for assuring at valid and reliable conclusions. Consumer’ research, thus, is indispensable for entering the rural segment of the market. The pace of urbanisation has brought into existence new markets for pronumerous consumer goods.
The rural market consists of two segments, viz.-
i. The market for consumption goods including consumer durables, and
ii. The market for investment goods, including agricultural inputs. Rural consumers in both these segments are far less homogeneous than their urban counterparts, and also differ from region to region. A number of research studies have been made on the behaviour of rural consumers towards agricultural inputs like fertilizers, pesticides, sprayers and food-grains.
The rural markets are green pastures for any marketer, provided his marketing plan are attuned to the specialities of rural markets. The rural market is estimated to be growing faster, compared to urban market. Being a new market, it could be easily manipulated, provided the manufacturers develop an insight into the behavioural patterns of rural consumers.
The potential of rural markets is said to be like that of a woken up sleeping giant. This is substantiated in a study of market growth conducted by the Operations Research Group (ORG) during a six year period (1983-89). The study revealed that the offtake of rural markets for packaged consumer products accounted for Rs. 2,083 crores in 1989.
The growth works out to 184 per cent, compared to the figure for 1984. Against this, the increase in urban market off take was from Rs. 1,855 crore in 1984 to Rs. 3,628 crore in 1989, working out to a 96 per cent crawl.
Rural Marketing in India – Reasons for Increase in the Importance of Rural Markets
1. Cut Throat Competition in Urban Markets:
Now-a-days people say that there is lot of competition in the market. Actually it is not only lot of competition but cut throat competition, especially in the urban areas. Companies are playing on the basis of price. Every big company is trying to swallow the small and new companies. Prices are going down steeply just because of the tough competition.
Apart from the price factor, companies have started increasing product features and added value to their products to compete in the market, without increasing the prices. The concept is increase the utility and value and decreases the prices. Irrespective of the above facts, there are certain products which have already achieved the maturity level or have reached the saturation level. Demand is not increasing in these sectors so the best strategy is to explore new markets for the products.
So rural marketing is turning out to be a market for the packaged products with a minimum or no competition. Firms can generate demand and increase profits.
2. Socioeconomic Changes:
Today a revolution has come in the rural areas which in turn have brought a change in the socio-economic conditions. This is basically in terms of increase in the productivity of the agriculture. Most of the income of people residing in rural areas comes from agriculture. Due to the adoption of the latest technology the yield per acre or animal has increased considerably.
One of the major reasons behind these changes is the Government Policies to uplift the agriculture and remote areas, and the opening of the cooperatives in some major belts of India. Because of adoption of latest technology, production has increased which has resulted in the increase in income of farmers. Due to increase in income the rural customer also wants to be in the same frame as the urban customer.
Urge for increasing income and better standard of living by the rural customers has motivated the companies to go and spread their business activities in these areas. Some fertilizer companies have started adopting villages for increase in their production. Some companies have taken it as a social cause for the upliftment of remote areas. Integrated rural development programs encompass health, education, latest technology farming products sales, development of industry etc.
Another reason for this change is the media which has reached in the rural areas. Specially Television has brought a revolution in this area. Today we have so many regional channels. Customer can be made aware of the latest products, their utility, new brands, etc. With the increased income and aspiration for standard of living, with this kind of awareness provided by the media, the companies are motivated to go and take charge of the rural areas.
3. Scope and Size of Rural Market:
Today the size and scope of rural market is increasing at a very fast pace. A major part of Indian population lives in the rural areas which are now turning as a new market. Now the rural market is not limited to the sale of fertilizers and pesticides but it is going beyond that with the increase in the income and the aspiration level.
Urge for good standard of living has opened the rural market as an opportunity for the companies to come and grab the market. Now in rural areas also there is a demand for TV, Cars, Shampoo, packaged goods etc.
Most of the rural customers are engaged in farming, trading, poultry work, plumbing, electric works, dairy, etc. We have different varieties of the occupation in the rural areas. In rural areas also big farmers usually possess almost everything like TV, fridge, furniture, and other home appliances etc. of the major brand. Small farmers have scarcity of resources and funds etc. so there is no question of possessing almost any branded products, specially costly products.
5. Reference Groups:
In rural areas there are totally different reference groups. Any person who is having a say in their area, a respect in the society and a place in the hearts of the residents form a reference group. Higher the profile and requirement of these people in the society, higher will be their influence on them. They are basically health workers, doctors, teachers, panchayat members, local bodies, samiti members, bank managers etc.
6. Media Types:
Now-a-days televisions, presentations, display, radio etc. has taken the place of old traditional folk programmes like ‘Nautanki’. Because of the literacy rate being so low, print media is not so effective.
Rural Marketing in India – Factors Contributing to the Change in the Rural Markets
While a variety of factors, acting in concert, have brought about this change, three factors deserve special mention.
1. Concerted Efforts at Rural Developments:
As a part for planned economic development, the government has been making concerted efforts towards rural development. Plan after plan, it has been committing large outlays to sectors like agriculture, animal husbandry, irrigation, flood control, and khadi and village industries. They have generated new employment, new income and new purchasing power among the rural people.
2. The Green Revolution:
The green revolution has been the next major factor. A technological breakthrough took place in Indian agriculture. Rural India derived considerable benefit from the green revolution. Today, rural India generates 170 millions tonnes of food grains per year and an equally substantial output of various other agricultural products.
It produces 14 billion eggs, 80 millions broilers and 40 million tonnes of milk per annum obviously, rural India is acquiring a new power.
3. The Expectation Revolution:
The expectation revolution among the rural folks completed the process. More than the green revolution, the revolution of ‘rising expectations’ of the rural people influenced the marketing environment of rural India. While the expectation revolution did not in itself result in any additional purchasing power, it brought about a powerful change in the environmental dynamics.
It enlarged the awareness of the marl people; it kindled their hopes; it strengthened their motivation to work, earn and consume. Political and social changes taking place in the country strengthened this phenomenon. The rise in income resulting from the new farming strategy has added meaning and substance to the growing aspirations of the rural people.
Rural Marketing in India – Marketing Mix for the Rural Markets
1. Product Decisions:
The product for rural market must be little bit different from the product for urban market. The product should be easy to use, simple, easily serviceable, and easily maintainable. Take the example of tube wells which are very easy to use and maintain in the fields as compared to electrical motor systems. The product literature should be easily understandable, it should be simple and in simple or local language.
Packaging should be given due weightage i.e. product should be available in small pack sizes (100 gm, 200 gm, 500 gm etc.) because rural consumer prefers to buy one unit as compared to urban buyers who purchases in bulk quantities. Focus can be on providing products in small sachets packs like in the case of shampoo, pan masala etc.
2. Pricing Decision:
Law of demand says ‘Higher the price of the products, lower will be the demand of the product and lower the price of the product, higher will be demand for that product’. This law is totally applicable in the rural markets. Because of the relatively lower income, the rural consumer is more sensitive towards price. Marketers have to plan their activities in order to bring down the cost of production. They have to bring down the price in order to attract the customers e.g. Nirma Washing Powder.
3. Promotion Decisions:
Television, Radio, Presentation, Displays can be used to promote the marketing activities of the company. Programmes like folk dances, rural fairs, nautankis, local contests can be taken into consideration to promote the company’s products. Personal selling can also play an important role in this respect. ‘Brand’ can be established through visible logos etc.
4. Distribution Decision:
In order to send the products of the company to the rural customers the company should provide its products to local retailers or distributors. Company cannot wait for the customers to come to the city and purchase the products. The company may arrange for mobile vans to send their products in the rural areas or focus on weekly markets of the rural areas.
Rural Marketing in India – Role, Types and Minimization of Risk in Rural Marketing
Risk plays a vivid role in the profitability and successful functioning of rural marketing or any marketing system. There are number of theories’ of profits like uncertainty, contingencies theory, risk bearing theory, M.P. theory.
The theory which is acceptable to most of the economist is the risk bearing theory- Hardy has defined Risk as uncertainty which may give you ample of benefits or it may ruin badly.
At one place, he points out that no risk no profit, more risk more profits. He has defined the risk theory as, “Profit is the reward of uncertainty and Risk Bearing”. Risk is inherent in all marketing transactions. There is the risk of the destruction of the produce by fire, rodents or other elements, quality deterioration, price fall, change in tastes, habits or fashion, and the risk of placing the commodity in the wrong hands or area.
There is a time lag between the production and consumption of arm products. The longer the time lag, the greater the risk. The risk associated with marketing cannot be dispensed with for this risk contributes to profit. Someone has to bear the risk in the marketing process.
But most of the risk is taken by market middlemen, for they have the capacity to bear it. Whenever risks are greater and varied, the margin taken by the risk bearers is higher, and vice versa. One who holds the commodity in the process is the bearer of the risk, because of which lie may be better off or worse off.
Types of Risk:
1. Physical Risk:
This includes a loss in the quantity and quality of the product during the marketing process. It may be due to fire, flood, earthquake, rodents, insects, pests, fungus, excessive moisture or temperature, careless handling and unscientific storage, improper packing, looting or arson.
These together account for a large part of the loss of the produce at the individual as well as at the macro level. Such losses are a loss to society, too, and must be averted to the extent possible.
2. Price Risk:
The prices of rural products fluctuate not only from year to year, but during the year from month to month, day to day and even on the same day. The changes in prices may be upward or downward. Price variation cannot be ruled out, for the factors affecting the demand for, and the supply of, rural products are continually changing.
A price fall may cause a loss to the trader or farmer who stocks the produce. Sometimes, the risks are so great that they may result in a total failure of the business, and the person who owns it may become bankrupt.
3. Institutional Risks:
These risks include the risks arising out of a change in the government’s budget policy, in tariffs and tax laws, in the movement restrictions, statutory price controls and the imposition of levies.
Minimization of Risks:
The agencies engaged in marketing activities worry about the risks associated at every stage; and they continually try to minimize the effects of these risks. A risk cannot be eliminated because it also carries profit. The agencies which do not take risks hardly earn profit.
The risk management by the adoption of some of the measures listed below may minimize the risks:
a. Reduction in Physical Loss:
The physical loss of a product (quantity and quality both) may be reduced by the adoption of the following measures:
(i) Use of fire-proof materials in the storage structures to prevent accidents due to fire;
(ii) Use of improved storage structures and giving necessary pre-storage treatment to the product to prevent losses in quality and quantity arising out of excessive moisture, temperature, attacks by insects and pests, fungus and rodents;
(iii) Use of better and quicker transportation methods and proper handling during transit; and
(iv) Use of proper packaging material.
b. Transfer of Physical Losses to Insurance Companies:
The burden of physical risk may be minimized by shifting it is insurance companies. There are specialised professional agencies to bear such risks. They collect some premium and provide full compensation to the party in case of loss due to the reasons for which the products are insured. In this way, the company insures a number of farmers against losses.
c. Minimisation of Price Risk:
The risk associated with the variation in prices may be minimized by the adoption of the following measures:
(i) Fixation of minimum and maximum prices of commodities by the government and allowing movements in prices only within the defined range;
(ii) Making arrangements for the dissemination of accurate and scientific price information to all sections of society over space and time- This should include information on market demand, average under a particular crop, estimates of market supply and of the import and export of commodities.
(iii) An effective system of advertising may reduce price uncertainty and create a favourable atmosphere for the commodity;
(iv) Operation of speculation and heading. The price risk associated with the commodities for which the facility of forward trading is available may be transferred to professional speculators through the operation of hedging. A detailed exposition of speculation and hedging follows.
Rural Marketing in India – Difference between Rural and Urban Marketing
It may be of relevance to present the salient features of rural market and the difference between rural and urban markets. The urban markets are a large contiguous settlement of towns or urban agglomerations whereas the rural markets are small contagious settlement units of villages far from cities.
The rural consumers are far less homogeneous than their urban counterparts and differ and that has go important implications for the marketers. To begin with the “rural-urban” construct (rural being defined as “not urban”, says the Census) is born out of convenience and the availability of data, words, it is not vigorously characterised.
Second, even if we were to work with this definition, the rural setting is fundamentally different from the urban. From the marketing angle, clear distinction between urban and rural centers can be made taking the attributes. The contrast between the rural and urban consumers can be made clearer by the factors such as sociological, economic; psychological and exposure factors.
These factors contributing in their own way to the awareness of rural people by putting them to greater exposure and providing them with information about the happenings in the world outside. The rural consumer, unlike his counterpart, is frugal and does not consider the daily chores of life a physical exertion. Things of utility are more likely to attract his attention.
A rural consumer, as a rule, wants to be very sure of the quality of the product and expects the product to spell out its use at the outset. He will purchase only that product which would give him the satisfaction of having got his money’s worth. Upon buying the product, he should feel that his has been a wise choice and that he has not been taken for a ride by a fast talking city salesman.
The urban and rural consumers differ with regard to brand loyalty too. The urban consumer, being discriminative, generally has a try at any new product or the same product with a novel feature or plus attraction. In that sense, we could call an urban buyer flexible and dynamic.
Not so the rural consumer, once the rural buyer is induced to buy and use a particular product and once he is satisfied with it, he becomes a staunch supporter and loyal user of that brand and may even make efforts to get the whole village to use it.
Rural Marketing in India – Rural Marketing Research
Rural market research has traditionally existed much longer and has had a structure even before the urban markets developed fully. This is quite ironical but it is true, as most research which have pertained to health, literacy, family planning or infrastructure related projects have their base always in the suburban or rural areas to start with.
However, research related to marketing and its problems have started to take shape more recently when companies like HLL, Dabur, Colgate-Palmolive, Richardson Hindustan Ltd. (now P&G) started to make headway into the rural markets and found that they had very little or no information regarding the markets.
Data existed pertaining to socioeconomic classifications, more specifically on occupation profiles, education profile or ownership profile, but data on income, its allocation and buying preferences was not available. Hence, it became difficult to segment the markets. Most organisations wanting to enter rural markets either relied on the existing published sources or commissioned studies.
However, commissioning a study was time consuming and involved huge financial resources. Besides, the heterogeneity of the market meant that data from one region could not be adopted elsewhere. It was difficult to assess the market size and the potential. After having spent considerable amount of time and investments in research today companies like HLL have strong rural presence.
But, issues like infrastructure and geographic reach of the places still continue to bother companies. The situation regarding rural marketing research is however slowly changing with our knowledge base on rural marketing growing on the basis of both higher experiential data available as well as deeper penetration of rural markets.
The Prevailing Scenario of Rural Market Research:
Organisations like NCAER, ORG-MARG, PSI, National Institute of Family Health and Welfare (NIFHW), Statistical Institutes of India, GOI’s Census Study Organisation, etc. have for quite some time now been involved in rural research. Organisations like NCAER are involved directly in primary research pertaining to demographic study for both urban and rural markets besides handling a portfolio of other products under research.
ORG-MARG’s retail audit is one of the most accomplished and largest research processes involving brand tracking for companies at retail level. The number of regions covered is geographically expansive and therefore, the retail audit of ORG-MARG is respected in the trade circles. Agencies like PSI, TERI, and NIFHW are involved in research of the completely different kinds in rural India.
Their research is focused more on Health, Sanitation, Family Planning, Literacy and other related social issues. Unfortunately, a large part of our rural India still cannot access basic health facilities and primary education. Pregnancy related deaths are still the highest in India and even basic amenities are not provided because of which such deaths are common. Low literacy levels, absence of a local Health Centre are reasons for such mishaps too, so research in these areas is imperative.
The government has been taking several initiatives in this regard and several government- funded institutions are involved in related projects. For instance on the AIDS awareness drive alone close to Rs.1000 crores is supported by grants from external and internal sources. Several NGO’s are also involved in researches in rural areas either for an eradication or awareness programme. The Pulse Polio Campaign and the Balbir Pasha AIDS campaign are a few instances where the government focus and drive is more intended towards the semi-rural and rural areas.
The changing competition in the market research industry has also influenced the foray into quasi- consultancy. Though the number of research agencies in the country has not increased considerably from the 30-odd agencies that were around 10 years back, mergers and tie ups over the past three years or so have changed the structure of the business. In the 1980’s, the two agencies, IMRB and ORG-MARG dominated the Indian market research scene, followed by Mode.
In the mid-nineties, Bangalore based Research and Consultancy Group (RCG) tied up with MBL and was eventually taken over by the inter public group’s $450-million market research company, NGO World group. Around the same time, AC Nielsen entered and bought a stake in MRAS while TNS bought a stake in Mode. Dutch giant VNU bought a stake in ORG-MARG in 1996.
Several new outfits have also stepped in by this time. For example, Blackstone, a small outfit from the US, set up shop and teamed up with a large American agency, Market Facts, in India. Market Probe, a boutique U.S. company, set base in 1999. Then MBA, a small Mumbai-based outfit, tied up with Gallup. Barring the WPP Group’s Research International, which has been here since 1992, most global players came to India in the last three years.
If the newer players ushered in change through branded techniques, then the pre-reform players like ORG-MARG and IMRB had vast databases, could over two decades or more that could be used to better effect. The nature of the market is changing too with the advent of Internet and Information technology era. The Telecom and Financial Market reforms also opened up the market and newer avenues like consultancy research opened up.
Today, as rural markets are considered as high potential markets, marketers are trying to take full advantage of the current boom, for which they need to know more about the markets they are entering. A large number of research organisations have begun to make their advent with newer tools and techniques into the rural markets.
However, the critical point for the marketers will be the implementation techniques in the rural markets. They cannot use the same ways and means they have been using in the urban markets. For instance, while watching television, the images absorbed by the rural and urban audience will be very different. Take the case of the Pepsodent GI Joe offer and its effect on the urban child and the rural child.
The imagery as perceived is likely to be very different. Obviously, media planning has to ensure that the right audience will view your commercials. Tattoos, another huge product pusher might have strong pull in the urban markets but with little relevance in the rural markets. In light of this backdrop and the changing face of competition, marketers will have to work out a new game plan for rural market research.
Games can be used as effective marketing research tools, which involve collective participation of the tribe. Typical 5-point, 7-point or 10-point scales used in the urban market are not effective in the rural context because they involve complex understanding on the part of the rural consumer.
The rural consumer is not spatially well equipped. Pictorial scales may be used in their place. Scales can also be simplified to three-pointers, which involve less complex processing of information required. TAT (Thematic Apperception Test) can be used very effectively for such researches.
A photograph/painting is highly visual and supplies more information than that can be processed by the rural consumer. Instead, cartoons or caricatures, which lack information, are effective and provide for participatory role of all the five senses. Another trend is the increasing use of participant observation methods. Typically used in cultural anthropology, these methods indicate an important lesson for marketing research tool.
The researcher participates in the rituals and activities along with the tribe so as to understand the shared meanings, not as passive and objective observer but as an active participant. Such socio participatory roles played by the researcher in the village may lead to important insights, which may be overlooked otherwise by objective means of measurements.
Studying rural consumers in their natural environments is a better research technique that may be employed instead of using CLTs (central location tests), which are non-indicative of their natural surroundings. Care needs to be taken so as to respect the hierarchical, rigid, social class structure of the rural village owing to their time and tradition rooted culture. This fact has been stressed on time and again by market research agencies.
Till the 1980s, market research was restricted to the data delivery function alone. As competition grew, predicting consumer behaviour came to the forefront of client demand. So research agencies started adding value by defining what kind of information should be collected rather, than merely sticking to the client’s brief.
For example, a soft drink player today would also look at competition from a category like bottled water. Similarly, a moisturizer would also compete not only with other moisturizers but also with skin lotions and homemade products like malai and so on.
Marketers also agree that the needs are evolving. For example, the new area that HLL has added to its research requirements is the concept of consumer windows. HLL has two consumer windows-one is the traditional view of consumers through market research and the second is direct customer contact. For the latter, a website was set up, where HLL managers across the country can log in and request for an interface with any type of consumer across India.
The request is then processed by the research agency, which organises meetings between the managers and the consumers. HLL claims that after this window was set-up, every day, roughly nine managers contact consumers in 20 locations and interface with five consumer groups.
For instance, when sales of Lifebuoy, one of HLL’s designated ‘power’ brands, were tapering, the consumer window sessions, especially in rural areas, helped the company change the product composition from carbolic to non-carbolic and reposition the soap from a male market to a family product.
Marketing Research techniques and tools always have to be adapted to the target group. Rural marketing research is undergoing a major transition as the scope of the research is expanding with the rising size and potential of the rural market. The mostly quantitative approach followed so far is giving way to behavioural and qualitative studies. In view of the illiteracy and lower exposure of rural consumers, however, tools are required to be specifically adapted or designed.
Rural Marketing in India – Current Scenario of Rural Market
With growing progress in rural India, more and more companies belonging to FMCG, telecom, automobiles, insurance, banking and financial services sectors as well as advertising companies and organization engaged in selling agricultural products are expanding their marketing and sales activities in rural India. This is a significant trend since the opening of mass markets in the rural sector is vital to the country’s growth and development.
Expanding sales to the rural sector will increase production of different industries and more importantly, it will help to channelize the savings of farmers in the right direction. Prior to their entry in the rural market, companies should fully understand the distinctive features that make the people and markets in rural India unique. Research must be made for properly understanding mindset of rural market and people and guide its marketing department to work out marketing mix accordingly.
Some myths have entered in the minds of corporate marketing managers regarding rural markets. Rural markets are not meant for luxurious commodities or rural market is not proper for smart phones or consumer durables etc. Such myths must be destroyed if company wants to boost sale in rural market.
So such false beliefs need to be dispelled to enable marketers to gain acceptability of their products by rural consumers. Clearly, they need to recognize the existing reality which is that rural market is large, dispersed and highly heterogeneous. Also, there is growing preference among rural youth for branded products as against cheap and sub-standard products.
Basically, rural consumers are fundamentally different from their urban counterparts in that they speak different languages and dialect, have low level of literacy and limited purchasing power. Further, there are regional variations in their tastes, habits and customs and they have limited access to modern media of communication. All this calls for new approach to rural marketing with focus on the 4 A’s, namely Acceptability, Affordability, Awareness and Accessibility. These are posing major challenges to marketers targeting rural markets.
For marketing success, it is necessary that the product or service is made acceptable to rural buyers. This requires adapting, packaging, branding and servicing requirements to suit the preferences of rural consumers. Another complex task is that of making products and services affordable for rural consumers, considering their low income which accounts for their being extremely price-sensitive, while at the same time ensuring high quality standard.
In a bid to address this problem, companies have adopted various promotion strategies such as offering smaller packs at low prices and without the frills that are normally provided along with the products. Besides addressing the problems involved in marking products and services acceptable and affordable in the rural markets, there is the issue of generating awareness about them, which necessitates the adoption of the right communication strategy aimed at creating the desired awareness among people.
In communicating with rural India, both traditional and modern media have to be taken into account. While influence of modern media is growing non-conventional media seems to be particularly effective in creating both awareness of products and services available and favourable disposition towards them in the minds of rural consumers.
Finally, another daunting challenge facing marketing firms is that of reaching their products and services to India’s 604 lakh villages scattered over a vast area marked by considerable geophysical diversity. To address this task, firms have devised several innovative methods of distribution, including direct selling with the assistance of self-help groups.
All in all, there is no doubt whatsoever that for those who understand the dynamics of rural markets, there is huge opportunity for marketing a wide variety of products and services waiting to be grabbed.
Villages are the heart of India:
i. 75% of population lives in 6,38,365 villages.
ii. 90% is concentrated in the village having population less than 2000.
iii. Rural segment comprises 13.5 crore households which constitute 72% of total households in India.
iv. But the rural market is not homogeneous across the country.
v. The consumer willingness to accept innovation also varies among the rural market.
vi. India is a predominantly agrarian society.
vii. Western Marketing has no experience to manage it.
viii. Urban markets are saturating in India.
ix. There are immense opportunities at the bottom of the pyramid.
x. Rural Marketing can change rural business.
Rural Market is the prominent area for progress and growth and must not be neglected in the future.