17342552-rural-consumer-behaviour1-

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For ManagementParadise.com

By ex-TYBMS students.

Rural Consumer Behaviour

Consumer Buyer Behaviour refers to the buying behaviour of final

consumers - individuals and households who buy goods and servicesfor personal consumption. All of these final consumers combined makeup the consumer market.

The consumer market in this case is Rural India. About 70% of India'spopulation lives in rural areas. There are more than 600,000 villages inthe country as against about 300 cities and 4600 towns. Consumers inthis huge segment have displayed vast differences in their purchasedecisions and the product use. Villagers react differently to differentproducts, colours, sizes, etc. in different parts of India. Thus utmostcare in terms of understanding consumer psyche needs to be takenwhile marketing products to rural India.

Thus, it is important to study the thought process that goes intomaking a purchase decision, so that marketers can reach this hugeuntapped segment.

Factors influencing buying behaviour

The various factors that effect buying behaviour of in rural India are:

1. Environmental of the consumer - The environment or thesurroundings, within which the consumer lives, has a very stronginfluence on the buyer behaviour, egs. Electrification, watersupply affects demand for durables.

2. Geographic influences- The geographic location in which therural consumer is located also speaks about the thought processof the consumer. For instance, villages in South India accepttechnology quicker than in other parts of India. Thus, HMT sellsmore winding watches in the north while they sell more quartzwatches down south.

3. Influence of occupation The land owners and service clan buymore of Category II and Category III durables than agriculturallaborers/farmers.

4. Place of purchase(60% prefer HAATS due to better quality,variety & price) Companies need to assess the influence ofretailers on both consumers at village shops and at haats.

5. Creative use of productex Godrej hair dye being used as a paint

to colour horns of oxen, Washing machine being used forchurning lassi. The study of product end provides indicators to

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the company on the need for education and also for new productideas.

6. Brand preference and loyalty(80% of sale is branded items in 16product categories)

Cultural factors influencing consumer behaviour

Cultural factors exert the broadest and deepest influence on consumerbehaviour. The marketer needs to understand the role played by thebuyer's culture. Culture is the most basic element that shapes apersons wants and behaviour.In India, there are so many different cultures, which only goes on tomake the marketer's job tougher. Some of the few cultural factors thatinfluence buyer behaviour are:

1. Product(colour, size, design, shape): There are many examplesthat support this point.

For example, the Tata Sumo, which was launched in rural India ina white colour, was not well accepted. But however, when thesame Sumo was re-launched as Spacio (a different name) and ina bright yellow colour, with a larger seating capacity and abilityto transport good, the acceptance was higher.

Another good example would be Philips audio systems. UrbanIndia looks at technology with the viewpoint of the smaller thebetter. However, in rural India, the viewpoint is totally opposite.That is the main reason for the large acceptance of big audiosystems. Thus Philips makes audio systems, which are big in sizeand get accepted in rural India by their sheer size.

2. Social practices: There are so many different cultures, and eachculture exhibits different social practices.

For example, in a few villages they have common bath areas.Villagers used to buy one Lifebuoy cake and cut it into smallerbars. This helped lifebuoy to introduce smaller 75-gram soapbars, which could be used individually.

3. Decision-making by male head: The male in Indian culture hasalways been given the designation of key decision maker.

For example, the Mukhiyas opinion (Head of the village), in mostcases, is shared with the rest of the village. Even in a house the

male head is the final decision maker. In rural areas, this trend isvery prominent.



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4. Changes in saving and investment patternsFrom gold, land, totractors, VCRs, LCVs

The Differences in Buyer behaviour

Rural Urban

Conservative Innovative

Values, aspirations, needs -traditional and based onculture, social customs, beliefs

Follow trends(including International)

Eldest Male Member KDM Varies

Collective Sanction Unheard of

Brand Protection in IndiaThis is the latest initiative by the consumer goods industry in India inassociation with Federation of Indian Chambers of Commerce andIndustry to fight a long standing menace - that of counterfeits andpass-off products.Be it Soap, shampoo, toothpaste or hair oil, biscuit, soft-drink orconfectionery, batteries or balm - go to any market in India and you willfind a plethora of products that are available in look alike packages

under slightly twisted names Fair & Lovelycould be Pure & Lovelyora Parachute could be Parashudh. The packaging, color and design ofthe pass-off product is so similar to the original, that it is impossible todistinguish between the two if you are not the sort who reads productnames before picking them up. Leave alone the vast uneducatedmasses that live in this country, hardly any of the educated informedconsumer would also be in a habit of verifying the accuracy of theproduct name or manufacturer before buying goods at the local kiranashop. A recent study conducted by AC Neilson reveals that 80% ofconsumers realize they have brought a counterfeit or fake product onlyafter they have consumed it. And there may be a large number of

those who never realize the same even after consumption!While the problem of fakes is witnessed all across the country, it ismore severe in the North. Counterfeiting is rampant in the states ofDelhi, Punjab, Haryana and UP. Procter & Gamble, which has embarkedon a major drive against counterfeits of its popular Vicks Action 500brand, found through a study that 54 strips in every 100 strips ofAction 500 being sold in the market were counterfeits. The companyssales growth in this sector has been stated to have been affected by10% due to this menace of counterfeits. Counterfeits and pass-offproducts are reportedly affecting sales of several brands to the extentof 20-30%. It is estimated that the counterfeit products contribute toabout Rs17bn worth of sales of the Rs60bn FMCG market. Government



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would be losing almost Rs6bn in revenues that would have beengenerated on excise, octroi, sales and income taxes that would havebeen paid on these sales. For companies, besides loss of revenues, an

even greater loss would be through damage to brand reputation or lossof customer loyalty caused by the poor quality of these look alikebrands. And the customer unwittingly is using products that maysometimes cause bodily harm or even danger to life.The problem of counterfeits is not confined to India alone. It isestimated that counterfeits account for Rs200bn i.e. about 5-7% oftotal world trade.

The consumer goods industry in India has therefore come together tolaunch on offensive against these unscrupulous players. A BrandProtection Committee has been formed under the aegis of theFederation of Indian Chambers of Commerce and Industry(FICCI). The Mission of the Committee is to stem the sale counterfeits and fakes in India. Directors of leading consumer non-durable companies such as P&G, HLL, Marico, Smithkline Consumer,Britannia, Indian Shaving and research agencies such as A C Neilsonand CERC are members of the Brand Protection Committee. Thecommittee aims to work in close conjunction with industry, consumerassociations, trade associations and regulatory authorities to eliminatecounterfeit and pass-off sales in the country. The Committee proposesto focus on enforcement of applicable laws, measure and publicize

negative economic impact of counterfeits and create consumerawareness, and take action against errant manufacturers, wholesalers,distributors and retailers with the help of regulatory authorities. This isa concerted effort on part of the FMCG industry to stem the loss thataccrues to the companies, the Government and the consumers.

The problem of fakes is more rampant in rural areas due to low literacylevels and consumers reliance on product identification throughpneumonics. Companies are trying to educate customers to look forcertain packaging identification marks before purchase.



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A brief summary of a study conducted by ORG-MARG is givenbelow.

Aug 2000 Jul 2001

BRANDS

No. of

look alike

Brands

Volume

No. of

Dealers

(Lacs)

Major States

Dabur Vatika 2 148 K.L 1 Pun/Har, Assam

Clinic All Clear 38 1099 K.L 1Del, Assam, Bihar,

M.P.

Surf Nw Exl Act

Oxg5 1837 11

Bihar, W.B., Guj, M.P.,

Maha

Horlicks 2 1276 - Assam, Karnataka

Colgate Dental

Cream9 2190 T 20 W.B., Bihar, M.P.

Colgate Tooth

Powder6 1009 28 Assam, Bihar, Maha

Dabur Amla 34 9893 K.L 14 Raj, U.P. Pun / Har

Panteen Pro-V

New7 733 K.L 4 U.P., Bihar, Guj, M.P.

Ariel Power

Compact4 200 9 Assam

Iodex 26 755 9 U.P., Guj, M.P.

Product Strategy: This is a strategy which companies apply totheir product according to the market needs and the target group. It isa strategy which best suits the company and also targets the consumerof that particular region. Some product strategies are such that theyencapsulate the whole of rural India.e.g.: Coca-Cola targeted the whole Indian rural market with thepositioning of Thanda Matlab Coca-Cola advertisements because



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most of the villagers say when wanting a drink refer to it as Thandaso Coca-cola used that word.

Product Market Selection: While launching product variants fordifferent markets, a company has to consider two things:-

- Reach: the company must ensure that the rural area they aretargeting should be easily reachable by road and should also bewell connected with a major town nearby. This is importantbecause regular supplies have to be transported to the villagefrom the major town.

- Cost-effectiveness: in order to supply to the village area, acompany must assess their costs and other charges so as tomaximize returns. Only if cost-effective, must the market be

selected and product variants (if any) be launched.

Product Features: this is the most important factor in reinforcingpositioning because rural folk will purchase products only if they havefunctional benefits and features that appeal.

- The consumer should experience the product benefits. Theyshould be able to use, touch and feel the product, and benefitfrom the it, only then will they buy it again.

- Demonstration: an example of this would be Colgate showingvideo films wrestler with a weak tooth; highlighting theimportance of oral hygiene; and other examples would includefree shampoo washes, etc. and companies can get veryinnovative with their demonstrations.

- Product Education: companies need to educate the ruralconsumers about their products and their advantages. E.g.Colgate Palmolive shows video films on oral hygiene to the ruralmasses.

Most of the companies build their strategy linking consumerperceptions and their product features.- Size: sizes are altered or increased in accordance with the

consumer perceptions which can be found out by surveys and by

in depth interviews with the rural consumer. E.g. torches andaudio systems, Tata Spacio was a bigger rural version of the TataSumo.

- Shape: companies have changed product features like widebodied cookers with handles on both the sides for chulhacooking.

- Colour: an example would be that mostly all hair oils are green incolour. Tata launched the Spacio in a bright yellow colour.

- Consistency: Cadbury came out with harder chocolates so as todelay the melting process.

- Taste: the villagers tastes and preferences should be

incorporated in food items.



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- Technology: companies came out with better technology toenable their products to perform better under the tough ruralcircumstances. E.g. Philips eye-fi (to improve satellite reception),

LML scooters with stronger suspension, electronic instruments towithstand voltage fluctuations and Philips also came out withpower free radios.

Packaging: (Sachets, bubble packs) Packaging of the productlargely depends on these factors:- Affordability: companies should consider the fact that rural

consumers largely depend on daily wage. A product should bepackaged by keeping this in mind. E.g. Videocon came out with awasher priced at Rs. 3000.

- Perceptions: social and cultural perceptions should be taken careof while packaging the product. Eg. Tata Spacio came out in abright yellow colour and not in the traditional white colourbecause the rural people in some parts of India perceive white asa symbol of death.

- Ability to read: the product should be packaged so that the ruralconsumer should identify it. since literacy levels are low symbols,logos and visuals are important associating it with a symbol. E.g.lightning picture of Rin.

Pricing: pricing should be kept in accordance with the financialstrength of the villagers or the people one aims to target. One

should remember that a major part of the rural consumer base earna daily wage, so their savings are minimal. A company should notemphasize on price but on value. It should provide value to the ruralconsumer for the least possible price.The Consumption Basket of the villagers is allocated amongdifferent needs among the villagers and they prioritize and spendtheir meager earnings.Examples of good pricing strategies are Philips 14 TV for Rs. 8000which provides good value for the price and Videocon washer for Rs.3000.



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THE MARKETING PROCESS

The markets for different products vary largely in size in rural areas.

The sizes of the markets for the different sectors in rural markets areshown below:

FMCG Rs. 50,000 Crore.

Durables Rs. 5,000 Crore.

Agricultural Inputs Rs. 45,000 Crore.

Automobiles Rs. 8,000 Crore.

The automobile sector is growing at a rate of 25 30 %.The following table shows the extent of rural sales by selecompanies.

HLL 50 %COLGATE 50 %GODREJ 30 %MARICO 25 %CADBURY 25 %GSK 25 %HEINZ 20 %CIPLA 18 %HERO HONDA 40 %KINETIC 30 %

THE SEGMENTATION PROCESS

- This process includes:- Identification of the segmentation variable,- Segmentation of the market, and,- Development of the profile.

The different variables are:

1. GEOGRAPHIC: Segmentation on the basis of geography is done

depending on various factors such as

Region: North, South, East and West.



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Village Size: < 500 people

501 2000 people

2001 5000 people> 5000 people

Proximity to the feeder town

Density: The no. Of people per sq. km

Climate: Moderate, rain fed or dry with scanty rainfall.

Level of Irrigation: Whether good, moderate, scanty or none at

all.

2. DEMOGRAPHIC: Segmentation based of demographics takes intoconsideration factors such as Age, Income, Occupation, Literacy

(Level of Education) and Caste.

3. PSYCHOGRAPHICS/BEHAVIOURAL: Such segmentation is done

using variables such as Lifestyle of the people, (whether rigid,

traditional, changing or imitating urban), Occasion, (whether on a

regular day or a special occasion), Benefits sought from the

product (such as Quality, Price and Service), and Loyalty to brands,(whether Low, Medium or High.)

Rural Consumers majorly look into the value that the product offers.

They associate value with the Benefits that the product offers, its

Availability, and its Cost. When talking ofBenefits, they look at the

features of the product as well as the Packaging and attractiveness,

Availability, whether or not the products are available at Retail Shopsand Haats, Cost, whether or not the product is reasonably priced.



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Rural Consumer Occupation,

income, Culture, Perception, Attitude

Benefits

Product features

Packaging

Availability

Retail Shops

Haats

Cost

Price

Value


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Rural BrandingIt is the process of creating and disseminating the brand name so thatit is instantly understood by the customer. It is different from branding

in rural areas as there people dont understand English names ofbrands. They rather associate the product with the picture on thepackage. E.g. Laal sabun or red soap for lifebuoy.Creating an Identity under this process an identity is created in theminds of the customer. E.g. TATA Namak Desh Ka Namak here whatTATA has done is they have given the salt a national image. They haveassociated it with the country and as a result rural consumers tend toconnect with it and trust it more & they also remember it well.

Enhance Recognition The brand should be recognizable to theconsumer and create top of the mind (TOM) consumer recall. E.g.Fevicol majboot jod.

Building a brand Image The brand should have a personality of itsown. E.g. Mahindra & Mahindra has built its brand image in the tractorsector. Bhumiputra series of tractors, Sarpanch series have done verywell in the rural areas. Brand name has connected well with villagers.

Marketing Tips

- Target consumers on unmet needs vis--vis price, products, and

features.- Develop the market through a unique positioning.- Product and packaging should be creatively used for delivering

VALUE and influencing perception.- Product features can be communicated effectively to create a

favorable attitude.- Distinct colours, designs, symbols help illiterate consumers to

identify the brand.- Leverage strengths e.g. distribution (e.g. Wheel) or costs (Nirma) to

deliver the value offering.- For high-priced durables, the market can be enlarged through hire-

purchased schemes.

Researching the Rural Markets

- Marketer has limited understanding of the rural consumer.E.g. The consumer research people in the rural areas of the south findresearching very difficult as the people do not answer in Hindi. As aresult the marketer should make note of such points in order to markethis product well.



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- Consumer responses to variables in urban markets may need to beunlearned. The rural consumer must be handled differently due tothe vast psychographic difference.

Essentials (points to remember)

Sceptism of villagers the villagers do not trust a person from a bigcompany. Some people do not even answer an official well. Thus whenmarketing, promoting or advertising a product, one should take carethat it is done in the regional language. This makes the customerwilling to listen or see.

Informal (Dress, Greeting) Dressing at the first meet should be veryinformal in order for them to receive u well. Informal greeting helpsgenerally researchers to get information out of rural consumers.

Be a good listener and always explain the objective of the research atthe outset.

Dont write down too much as it again creates doubts in the minds ofthe consumer.

Never refuse their hospitality. It feels like an insult to them whensomeone does so.

Locations for Conducting Research

- Retail shops, STD boothso Women one can have a direct one to one conversation

with women at retail shops as they are generally there forshopping.

o One stop shop generally such stores provide almost allrequirements of a villager.

o Retailer is usually well informed about the village

- Tea stallo Middle age people generally sit around such places and

chato At such places there are many conversations and one can

indulge into one or create one.

- Play ground



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o Youth (morning/evening) one finds young people playingat the ground or exercising.

o Watchers

- Chaupalso Evenings: middle aged and old people meet together at a

certain spot in the village and discuss things about thevillage. This is a rather informal meeting of the villagers.

o One can easily find influencers and opinion leaders fromamongst people who are talking.


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