condition of rural marketing in india

7/28/2019 Condition of Rural Marketing in India

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ArthPrabhand:AJournalofEconomicsandManagement

Vol.1Issue7,October2012,ISSN22780629

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THE CHANGING FACE OF RURAL MARKETING IN INDIANECONOMY

DR. PARTAP SINGH*; DR. ANSHUL SHARMA**

*Head & Assistant Professor,Department of Management studies,

S. D. Institute of Technology and Mgt. (SDITM),Israna, Panipat, Haryana.**Assistant Professor,

S.D. College of Management,Israna, Panipat, Haryana.

ABSTRACT

The Indian rural market with its vast size and demand base offers a huge opportunity thatcompanies cannot afford to ignore. We are a country with 1.12 billion people of which 70% livein rural areas which means more than 700 million people spread around 6,27,000 villages. India'srural population comprises of 12% of the world's population presenting a huge, untapped market.This paper critically examined the current status of Indian rural marketing in present economicscenario. It analyzed the problems prevail in the rural marketing. It does quest the opportunities,rural marketing strategies, problems along with challenges exists in rural marketing.

KEYWORDS: Rural markets, Disposable Income & Rural Consumers.______________________________________________________________________________

INTRODUCTION

India is an agro-based economy and the growth of most of the other sectors of economy is drivenby rural demand. Urban market is reaching towards the saturation point, thus bringing in andurgent need to focus on rural development. Moreover, more than 70% of India's population livesin villages and constitutions a big market for industry because of increasing disposal incomesand awareness level.

In comparison to just 5,161 towns in India there are 6, 38,365 villages in India. This in itself isan indicator where the real India resides. Companies are realizing slowly but surely that the keyto gain true market leadership lies in tapping the rural potential.


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Typical shop in rural India stocked with sachets, etc

Rural Markets are defined as those segments of overall market of any economy, which aredistinct from the other types of markets like stock market, commodity markets or Labor

economics. Rural Markets constitute an important segment of overall economy, for example, inthe USA, out of about 3000 countries, around 2000 counties are rural, that is, non-urbanized,with population of 55 million. Typically, a rural market will represent a community in a ruralarea with a population of 2500 to 30000

In recent years, rural markets have acquired significance in countries like China and India, as theoverall growth of the economy has resulted into substantial increase in the purchasing power ofthe rural communities. On account of the green revolution in India, the rural areas are consuminga large quantity of industrial and urban manufactured products. In this context, a specialmarketing strategy, namely, rural marketing has taken shape. Broadly rural marketingincorporates the marketing of agricultural products, rural industries products and services of

many kinds. The trade channels for different types of commodities available in rural areasprivate, cooperatives, processors, regulated markets and state agencies. In no sense, a socialcluster or village economy as at whole can be developed without effective and efficient ruralmarketing. Very little attention has been paid in the planning era towards the development ofrural marketing. In fact marketing is a dynamic state of affairs and is part and parcel of the wholeeconomy. Thus production and marketing are the two facets of a coin. Rural marketingconstitutes the nerve centre of rural development activities.

Some Vital Features of Indian Rural Markets:

LARGE AND SCATTERED MARKETThe rural market of India is large and scattered in the sense that it consists of over 63crore consumers from 6, 20,000 villages spread throughout the country.

MAJ OR INCOME FROM AGRICULTURENearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied withagricultural prosperity.

LOW STANDARD OF L IVINGThe consumer in the village area do have a low standard of living because of low literacy,

low per capita income, social backwardness, low savings, etc.

TRADITIONAL OUTLOOKThe rural consumer values old customs and tradition. They do not prefer changes.


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DIVERSE SOCIO-ECONOMIC BACKWARDNESSRural consumers have diverse socio-economic backwardness. This is different indifferent parts of the country.

INFRASTRUCTURE FACIL ITIESThe Infrastructure Facilities like roads, warehouses, communication system, and financialfacilities are inadequate in rural areas. Hence physical distribution becomes costly due toinadequate Infrastructure facilities.

The rural bazaar is booming beyond everyone's expectation. The Indian rural market with its vastsize and demand base offers a huge opportunity that companies cannot afford to ignore. We are acountry with 1.12 billion people of which 70% live in rural areas which means more than 700million people spread around 6,27,000 villages. India's rural population comprises of 12% of the

world's population presenting a huge, untapped market.

SOME MEANINGFUL MYTH IN RURAL MARKETING

MYTH 1: RURAL INDIA IS ALL ABOUT AGRICULTURE

REALITY: Rural India is way beyond agriculture

First, agricultures contribution to Indias GDP has steadily come down to just 17.5 per cent.Further, almost half of the rural Indian economy is non-agriculture-based and a third of thehouseholds around 50 million are engaged in non-agricultural activities people working

in manufacturing, or as traders, shopkeepers, providing services such as electricity generation,construction, mining and quarrying, transportation and haulage. About 40 per cent of ruralhouseholds are landless. Half of the remaining 60 per cent are marginal farmers (owning lessthan 2 hectares of land). Large farmers, owning more than 10 acres of land, form a tiny 4 percent of the rural population. In 2007, by NCAER estimates, the split was about 40:60 41 percent being farm income!

MYTH 2: DISPOSABLE INCOME IS LOW

REALITY: Number of middle class HHs (annual income Rs. 45,000 - 2, 15,000) for rural sectoris 27.4 million as compared to the figure of 29.5 million for urban sector. Rural incomes CAGR

was 10.95% compared to 10.74% in urban between 1970-71 and 1993-94.

MYTH 3: THAT RURAL MARKETS ARE HIGHLY PRICE-INELASTIC AND ONLYSUITED FOR 'VALUE-FOR MONEY' PRODUCTS AS AGAINST PREMIUMQUALITY PRODUCTS

THE REALITY : Despite lower incidence of premium product purchases, the rural consumersacross all income segments exhibit marked propensity to spend on premium high quality


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products which are backed by strong brand values, where they correspond to their ownaspirations and quality needs. The problem really lies in market not being able to offer apremium product in the specific context of rural demand.

MYTH 4: RURAL CONSUMERS LACK PURCHASING POWER

REALITY

According to NSSO report no. 527, there was little difference between rural and urbanhouseholds in the share of the budget allocated to fuel and light (10 per cent for rural, 9 per centfor urban) and clothing, including bedding and footwear (7 per cent for rural, 6 per cent forurban). While in 1998-99 over 83 per cent of rural households fell in the lower and lower-middleclasses, the number has fallen to 70 per cent in 2006-07; the comparative fall for urban India isfrom 53 per cent to 27 per cent (NCAER data). And if experts are to be believed, the number isset to fall at a rapid rate over the next 20 years...

MYTH5: GROWTH IN RURAL IS SLOW. INVESTMENTS GIVE LATE RESULTS

REALITY: It is much faster than we think. First, which market does not need a certain gestationperiod for growth and development? A FICCI survey indicated that consumer durables wouldsee 12 per cent growth in 2008. The rural market is growing faster than the urban market. Therural market, which accounts for nearly 70 per cent of the total number of households, saw 25per cent annual growth while the urban consumer durables market grew at 7 to 10 per cent...Seventy per cent of Indias population, 56 per cent of its income, 64 per cent of its expenditureand 33 per cent of its savings come from rural India. It is time we did better than just assumewhat these people desire, detest, appreciate and expect.

MAJ OR INITIATIVES OF SOME MARKET PLAYERS

* Hariyali Kisaan Bazaar , was set up by DCM Shriram Consolidated Ltd. to facilitate sale ofagri-inputs such as fertilizers, pesticides, farming equipment, seeds, animal feed, etc.

* ITC 's internet-enabled rural interface to help sale of agri outputs, e-Choupal, is presentlyoperational in 6 states and there are 5200 kiosks.

* TRIVENI KUSHALI Bazaar, a rural agri-inputs store run by Thriven Engineering IndustriesLtd. in the sugarcane belt of U.P., is also used to sell cement and FMCG products.

* HUL's Project SHAKTHI - Through the state governments and NGOs involved in micro-finance, women entrepreneurs in villages are identified to act as local distribution and sales pointfor HUL products.

WHAT MAKES RURAL MARKETS ATTRACTIVE?

Rural market has following attributes and the following facts substantiate this: -


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Urban market is flooded with low demand. With urban markets getting saturated forseveral categories of consumer goods and with rising rural incomes, marketing executivesare fanning out and discovering the strengths of the large rural markets as they try toenlarge their markets.

A survey by the National Council for Applied Economic Research(NCAER), India'spremier economic research entity, recently corned that rise in rural incomes is keepingpace with urban incomes. From 55 to 58 per cent of the average urban income in 1994-95, the average rural income has gone up to 63 to 64 per cent by 2001-02 and touchedalmost 66 per cent in 2004-05. The rural middle class is growing at 12 per cent againstthe 13 per cent growth of its urban counterpart. Even better, the upper income class thosewith household incomes of over Rs one million [$22,700] per annum is projected to goup to 21 million by 2009-10 from four million in 2001-02. It will have a 22 to 23 per centrural component. Higher rural incomes have meant larger markets. Already, the rural tiltis beginning to show.

Rural market witnesses a high demand It's the rural segment of market that contributesmore profit than its urban counterpart. Rural marketing broadly involves reachingcustomers, understanding their wants, supply of goods and services, and ultimatelysatisfying consumers, leading to more sales. The general impression is that onlyagricultural inputs like seeds, fertilizers, pesticides, cattle feed and agricultural machineryhave a potential for growth in the rural market. However, there is a growing market forconsumer goods now. It has been estimated the rural market is growing at the rate of fivetimes its urban counterpart.

* LARGE POPULATION: Approximately 75% of India's population resides in around

6,38,365 villages of India spread over 32 lakh square kilometer. 41% of India's middle classresides in rural areas.

* HIGHER PURCHASING CAPACITY: Purchasing power of rural people is on rise;

* MARKET GROWTH: Market is growing at a rate of 3-4% per annum.

In 2001-02, LIC sold 55% of its policies in rural India. Of two million BSNL mobile connections, 50% are in small towns / villages. Of the 6.0 lakh villages, 5.22 lakh have a Village Public Telephone (VPT). 41 million Kisan Credit Cards have been issued (against 22 million credit-plus-debit

cards in urban), with cumulative credit of Rs. 977 billion resulting in tremendousliquidity

Of the 20 million Rediffmail sign-ups, 60% are from small towns. 50% of transactionsfrom these towns are on Rediff online shopping site.


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42 million rural households (HHs) are availing banking services in comparison to 27million urban HHs.

Investment in formal savings instruments is 6.6 million HHs in rural and 6.7 million HHsin urban.

OPPORTUNITY

The above figures are a clear indication that the rural markets offer the great potential to help theIndia Inc which has reached the plateau of their business curve in urban India to bank upon thevolume-driven growth.

The Indian rural market with its vast size and demand base offers a huge opportunity that MNCscannot afford to ignore. With 128 million households, the rural population is nearly three timesthe urban.

The rural market accounts for half the total market for TV sets, fans, pressure cookers,bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural marketfor FMCG products is growing mu.

In 2008, the rural market has grown at an impressive rate of 25 per cent compared to the710 per cent growth rate of the urban consumer retail market. According to a McKinseysurvey conducted recently, rural India, with a population of 700 million, would becomebigger than the total consumer market in countries such as South Korea or Canada and itwould grow almost four times from its existing size in the next few years.

Infrastructure is improving rapidly -

In 50 years only, 40% villages have been connected by road, in next 10 years another30% would be connected.

More than 90% villages are electrified, though only 44% rural homes have electricconnections.

Rural telephone density has gone up by 300% in the last 10 years; every 1000+pop isconnected by STD.

Social indicators have improved a lot between 1981 and 2001 - Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses halved (41%

to 23%).

Percentage of BPL families declined from 46% to 27%. Rural literacy level improved from 36% to 59%.


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Low penetration rates in rural areas, so there are many marketing opportunities -Durables Urban Rural Total (% of Rural HH)

CTV 30.4 4.8 12.1

Refrigerator 33.5 3.5 12.0

FMCGs Urban Rural Total (% of Rural HH)

Shampoo 66.3 35.2 44.2

Toothpaste 82.2 44.9 55.6

Marketers can make effective use of the large available infrastructure -

Post Offices 1,38,000

Haats (periodic markets) 42,000

Melas (exhibitions) 25,000

Mandis (agri markets) 7,000

Public Distribution Shops 3,80,000

Bank Branches 32,000

PROBLEMS IN THE BOOMING RURAL MARKETING

The major problems faced are:

UNDERDEVELOPED PEOPLE AND UNDERDEVELOPED MARKETS

The number of people below poverty line has not decreased in any appreciable manner.Thus underdeveloped people and consequently underdeveloped market by and largecharacterize the rural markets. Vast majorities of the rural people are tradition bound,fatalistic and believe in old customs, traditions, habits, taboos and practices.


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LACK OF PROPER PHYSICAL COMMUNICATION FACILITI ESNearly fifty percent of the villages in the country do not have all weather roads. Physicalcommunication of these villages is highly expensive. Even today most villages in the

eastern parts of the country are inaccessible during the monsoon.

MANY LANGUAGES AND DIALECTSThe number of languages and dialects vary widely from state to state, region to regionand probably from district to district. The messages have to be delivered in the locallanguages and dialects. Even though the number of recognized languages are only 16, thedialects are estimated to be around 850.

DISPERSED MARKET

Rural areas are scattered and it is next to impossible to ensure the availability of a brandall over the country. Seven Indian states account for 76% of the country's rural retailoutlets, the total number of which is placed at around 3.7 million. Advertising in such ahighly heterogeneous market, which is widely spread, is very expensive.

LOW PER CAPITA INCOMEEven though about 33-35% of gross domestic product is generated in the rural areas it isshared by 74% of the population. Hence the per capita incomes are low compared to theurban areas.

LOW LEVELS OF LITERACY The literacy rate is low in rural areas as compared to urban areas. This again leads toproblem of communication for promotion purposes. Print medium becomes ineffectiveand to an extent irrelevant in rural areas since its reach is poor and so is the level ofliteracy.

PREVALENCE OF SPURIOUS BRANDS AND SEASONAL DEMANDFor any branded product there are a multitude of 'local variants', which are cheaper, and,therefore, more desirable to villagers.

DIFFERENT WAY OF THINKINGThere is a vast difference in the lifestyles of the people. The kind of choices of brandsthat an urban customer enjoys is different from the choices available to the ruralcustomer. The rural customer usually has 2 or 3 brands to choose from whereas the urbanone has multiple choices. The difference is also in the way of thinking. The ruralcustomer has a fairly simple thinking as compared to the urban counterpart.


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CHALLENGES FACED BY MARKETERS IN RURAL MARKET

* Traditional outlook of rural consumers due to which they are resistant to change. Their buyingdecision is low and delayed.

* Lack of infrastructure facilities. Many rural areas are not connected by rail transport. Kacharoads become unserviceable during the monsoon and interior villages get isolated.

* Problems related to distribution and channel management

The journey of markets to the rural markets has indeed been one of surmounting one hurdle afteranother; these include the 4 As - Availability, Affordability, and Acceptance & Awareness -adopting themselves to the rural atmosphere marketers. So, in the context of growth aspects ofthe Rural markets and their adoption and application by major MNCs and Indian companies, Iwant to take this Project as my Research Project so that I could go in to the in-depth study of the

rural markets- their future scope, challenges etc. in the context of India

'RURAL MARKETS ARE FUTURE BATTLEGROUNDS'

LOW LITERACY

There are not enough opportunities for education in rural areas. The literacy level is as low(36%) when compared to all- India average of 52%.

SEASONAL DEMAND

Agriculture to a large extent depends upon monsoon and, therefore, the demand or buyingcapacity is not stable or regular.

Many rural areas are not connected by rail transport. Kacha roads become unserviceable duringthe monsoon and interior villages get isolated.

COMMUNICATION PROBLEMS

Facilities such as telephone, fax and telegram are rather poor in rural areas.

TRADITIONAL L IFE

Life in rural areas is still governed by customs and traditions and people do not easily adapt newpractices. For example, even rich and educated class of farmers does not wear jeans or brandedshoes.


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BUYING DECISIONS

Rural consumers are cautious in buying and decisions are slow and delayed. They like to give atrial and only after being personally satisfied, do they buy the product.

MEDIA FOR PROMOTIONS

Television has made a great impact and large audience has been exposed to this medium. Radioreaches large population in rural areas at a relatively low cost. However, reach of formal media islow in rural households; therefore, the market has to undertake specific sales promotion activitiesin rural areas like participating in melas or fairs.

CULTURAL FACTORS

Culture is a system of shared values, beliefs and perceptions that influence the behavior of

consumers. There are different groups based on religion, caste, occupation, income, age,education and politics and each group exerts influence on the behavior of people in villages.

STRATEGIES FOR RURAL MARKET

A. PRODUCT STRATEGIES FOR RURAL MARKET AND RURAL CONSUMERS1. SMALL UNIT AND LOW PRICED PACKINGLarger pack sizes are out of reach for rural consumers because of their price and usage habits.This method has been tested by other products like shampoos, biscuits, pickles, vicks five gram

tins, etc.

In the strategy of keeping the low priced packed the objective is to keep the price low so that theentire rural community can try. This may not be possible in all types of products, but whereverthis can be resorted to, the market is bound to expand.

2. NEW PRODUCT DESIGNS

A close observation of rural household items indicates the importance of redesigning ormodifying the products. The manufacturing and marketing men can think in terms of newproduct designs specially meant for rural areas keeping their lifestyles in view.

3. STURDY PRODUCTS

Sturdiness of a product either in terms of weight or appearance is an important fact for ruralconsumers. The product meant for rural areas should be sturdy enough to stand rough handlingand storage. People in rural areas like bright flashy colours such as red, blue, green etc., and feelthat products with such colours are sturdy but they are more concerned with the utility of theitem also.


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4. BRAND NAME

The rural consumers are more concerned with the utility of the products. The brand nameawareness in the rural areas is fairly high. A brand name and/or logo is very essential for rural

consumers for it can be easily remembered.

B. PRICING STRATEGIES

Pricing strategies are very much linked to product strategies. Some of these strategies arementioned here.

1. LOW COST/CHEAP PRODUCTS

This is a common strategy being adopted widely by many manufacturing and marketing men.Price can be kept low by small unit packings.

2. AVOID SOPHISTICATED PACKING

Simple package can be adopted which can bring down the cost as it is presently being done in thecase of biscuits. Some innovation in packing technology is very necessary for rural markets.

3. REFILL PACKS/REUSABLE PACKAGING

Such measures have a significant impact on the rural market. By such technology also the pricecan be reduced. In addition the packaging material used should preferably lend itself for reuse inrural areas. An ideal example in this direction can be the packing of fertilizers. Now companieshave started packing fertilizers in LDPE or HDPE sacks, which are not only tamper proof but

also reusable.4. APPLICATION OF VALUE ENGINEERING

This is a technique which can be tried to evolve cheaper products by substituting the costly rawmaterial with the cheaper one, without sacrificing the quality or functional efficiency of theproduct, for example in food industry, 'soya protein is being used instead of milk protein. Milkprotein is expensive while soya protein is cheaper but the nutrition value is same. This techniqueyields itself for application in many engineering or product designed areas so that the price canbe kept at an affordable level. These areas have to be explored by manufacturing and marketingmen in the context of rural markets.

The pricing strategy for rural market will depend upon the scope for reducing the price of theproduct to suit the rural incomes and at the same time not compromising with the utility andsturdiness of the product.

C. DISTRIBUTION STRATEGIES

Most manufacturers and marketing men do have a distribution arrangement for village with apopulation of at least 5000 people. While it is -essential to formulate specific strategies for


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distribution in rural areas, the characteristics of the product, its shelf life and other factors have tobe kept in mind. The distribution strategies that are specifically designed for rural areas are:through co-operative societies, public distribution system, multi-purpose distribution centres,distribution up to feeder markets/mandi towns shanties/hat/jathras/melas, agricultural input

dealers etc.

Experience has shown that the cooperatives have played a useful role in improving the marketingservices in the regulated markets. The fact, however, remains that these societies command onlya small share of the total markets and do not present any challenge to the private trade at inmostplaces. The Gujarat Cotton Cooperative Marketing Societies set a good example of verticallyintegrated markets. The cooperative marketing institutions have to introduce scale economies intheir marketing operation and provide efficient and comparable services to the customers incompetition with the private trade. Cooperative institutions would do better if the state levelmarketing federations enter into multilevel activities to improve the turnover of their business.The non-govemmental organizations can anchor a key role in conscientizing the rural people to

form into cooperatives highlighting the possible benefits without being exploited.

D. PROMOTION STRATEGIES

Mass media is a powerful medium of communication. It could be television, cinema, print media,radio and so on. The other means of mass media available are hoardings/wall paintings,shanties/hats/melas, non-price competition, special campaigns etc. Besides these, other massmedia like hand bills and booklets, posters, stickers, banners of the schemes.

For disseminating the information, related to agricultural and other rural industries products, thegovernment should circulate pamphlets either to panchayati raj office or to schools where it canbe documented for the reference.

While making efforts to improve the marketing system within rural areas and the marketing ofrural produce to other areas, we should foresee the forces of globalization affecting the marketforces.

CONCLUSION

These issues gain added complexity under globalization, where markets are characterized byextreme competition and volatility. While rural products has been perceived traditionally ascatering to the local market, or at best, to a wider national market through limited formalchannels, the reality of globalization since the 1990s introduced a new dimension to the market

for such products. The issue of rural product generation through industrialization, therefore,needs to be viewed from a new angle and on far more scientific lines. The core of a scientificapproach is to understand the market opportunities for rural products along with the country'sdevelopment priorities and to chalk out a strategy where rural industries have an important roleto play. While rural products are forced to increasingly become part of global supply chains,these products need to adapt themselves, not only according to the changing tastes of the nationalmarket, but also according to changes in tastes in the international market. Therefore, a process isessential to explore the market linkages and capacity building for SHGs through a bottom up


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approach and continuous dialogue with stakeholders of rural enterprise. This process shouldensure the participation of rural people as consumers and producers in the globalizationmechanism, with better livelihoods and global access to markets. The real challenge of building asustainable market linkage starts here.

Thus, looking at the challenges and the opportunities, which rural markets offer to the marketers,it can be said that the future is very promising for those who can understand the dynamics ofrural markets and exploit them to their best advantage. A radical change in attitudes of marketerstowards the vibrant and burgeoning rural markets is called for, so they can successfully impresson the 230 million rural consumers spread over approximately six hundred thousand villages inrural India

REFERENCES

Sukhpal Singh- Rural Marketing Management A Developmental approach from Vikalpa(July-September 1985), a journal in English,

published by IIMA

K. L. K. Rao and Ramesh Tagat: Rural Marketing - a developmental approach Ch. Prasanth Reddy, dated 26/12/2001, Project Symphony:ITC team inspired by

Beethoven business line , internet edition.

http://agricoop.nic.in/stats.htm. Aarti Shetty & BV Mahalaxmi, dated 8/4/2002 Corporates Enter to Cash in on the

Potential The Financial Express.

Laxmikant Khanvilkar and Prashant Kothari, dated 28/3/2002, Generic Revolution TheFinancial Express.

11. Philip Evans, Thomas S Wurster, Blown to bits, Harvard Business School Press.1999.Rural Tourism

Rural Marketing, Ravindranath V. Badi and Naranyansa V. Badi, Himalaya Publishing,2004

The Hindu - Business Line www.deccanherald.com

www.indiantelevision.com

condition of rural marketing in india

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