impact of rural marketing on indian economy.pdf

8/21/2019 Impact of Rural Marketing on Indian Economy.pdf

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Impact of Rural Marketing on Indian Economy

Lakshmi priya1

, Vandana Bajpai2

Student , Kanpur Institute of Technology, Kanpur

Email [email protected], P.No- 9721417807

ABSTRACT

It will be right start to develop Indian economy that if Indian corporate look forward for

developing Indian rural market and consumer. The Indian rural market has a huge demand base

and offers great opportunities to marketers. Two-thirds of Indian people as well prospect

consumers live in rural areas , approx 30% GNP generated from rural business . If we cast a

glance over demographically at global perspective that Indian rural population contribute approx

12.2% of total global population which is a huge and unorganized market.

Rural management encompasses all sectors of rural life. In its widest sense, it implies

development of every aspect of rural life. The basic objectives of rural management is to

organize, develop and utilize the available at optimal level to proper utilization and productivity

of resources, in such a manner that the entire rural population may be benefited by it and

increase the production and consumption to increase Indian economy. Rural management also

helps to enhance living standard rural people. Since independence, the Government has initiated

certain plans for the betterment of rural people. Upgrading rural market is one way to improve

access to marketing opportunities.

Early to pre-independent, Indian rural people played very important role in Indian independent

movement and make India free from British regime, but rural people did not get much attention

from Indian govt. and other business organization, to understand them and fulfill their needs andwants.

Although India is an agriculture based country and Indian economy is totally based upon

agriculture and villagers, even they have being ignored. Since 1990 the wave of L.P.G.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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(Liberalization, Privatization and Globalization) has changed the face of Indian rural markets and

still is in its transition period, due cut throat competition in urban markets, more market

saturation and negative demands.

Key Words:-Rural Marketing ,Indian corporate , Rural population, Indian economy , Agriculture

Introduction:

742 million Indians constituting 138 million households reside in 6, 38,365 villages. The size of rural

market itself speaks of its potential. The current marketing environment and economic scenario have

brought the corporate under contemporary roofs of modern India, which is challenging the current

standards of segmenting, targeting and reaching the customers. Realistically, India as a nation has come along way from the place where only urban population which constitutes 20 per cent of customer base for

companies are responsible for 80 per cent of their profits. The companies are looking for new

opportunities and avenues, as they are witnessing a decline in their growth rates in urban markets due to

market saturation and they do have a huge, untouched and untapped rural Indian market. The driving

force for this is rural youth who are educated, have access to technology and have openness to change.

Also rural markets have acquired significance, as the overall growth of economy has resulted into

substantial increase in the purchasing power of the rural communities. A survey by India's premier

economic research entity, National Council for Applied Economic Research (NCAER) indicates that risein rural incomes is keeping pace with the rise in urban incomes. The rural middle class is growing at 12

per cent, close to the urban middle class which is growing at 13 percent.

Indian economy post independence:

The Indian economy at the time of independence showed all the signs of stagnation. About 47% of the

population was below thepoverty line in 1951.This figure went up in 1964-65, came down and again

went up in 1977-78. Presently the WorldBank estimates that a third of the globalpoor reside inIndia.At

the time of independence 72% of the work force was employed in agriculture and it contributed to nearly

50% of the national income. Industrialization was at a very low level with only 2% of the work force

employed in industries. In addition to this there was hardly any investment in industries. The only

industries which existed were cotton and jute industries. They also suffered a major setback, as at the time

of partition major jute producing areas went to Pakistan and as a result there was a shortage of raw
http://theviewspaper.net/what-a-10-year-old-nri-taught-me-about-poverty-in-india/http://theviewspaper.net/bigpage/banking-sector-in-india/http://theviewspaper.net/what-a-10-year-old-nri-taught-me-about-poverty-in-india/http://theviewspaper.net/a-case-for-the-democracy-in-india/http://theviewspaper.net/a-case-for-the-democracy-in-india/http://theviewspaper.net/what-a-10-year-old-nri-taught-me-about-poverty-in-india/http://theviewspaper.net/bigpage/banking-sector-in-india/http://theviewspaper.net/what-a-10-year-old-nri-taught-me-about-poverty-in-india/


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material. Thus, at the time of Independence, low agriculture output, little industrialization, low figure of

national income, high poverty andunemployment,slow economic progress were the features of Indias

economy.

After India got independence from colonial rule in 1947, the process of rebuilding the economy started.

For this various policies and schemes were formulated. First five year plan for the development of Indian

economy came into implementation in 1952. These Five Year Plans, started by Indian government,

focused on the needs of the Indian economy.

If on one hand agriculture received the immediate attention on the other hand the industrial sector was

developed at a fast pace to provide employment opportunities to the growing population and to keep pace

with the developments in the world. Since then the Indian economy has come a long way.

The GDP growth rate for the 2008-09 period has been 6.7%. Despite improvement in many areas it is true

that poverty, unemployment andilliteracy are major stumbling blocks to the nations development.

Before competing with China to become the biggest and most powerful economy, we have to realize that

there are many problems within the country which need to be tackled first. Benefits of economic reforms

seem limited to urban centers while the condition in rural areas is going from bad to worse. It is

imperative that the villages of India be made self-sufficient as they once were. More initiatives like

Grameen Bank which provide micro credit to the poor need to be encouraged. On their part, the

government should make sure the funds allocated for rural development are utilized efficiently. The

Indian youth which is madly running after MNCs and 6 digit salaries needs to stop and think about the

rest of the country, how some people dont get even 2 square meals a day and play an active role in the

developmental process. This is our country, every citizen is a stakeholder in the nations interest and

therefore its problems will also have to be solved jointly and in cooperation with one another The Gross

Domestic Product (GDP) at factor cost, which was 2.3 % in 1951-52 reached 6.5 in the financial year

2011-2012

Trade liberalization, financial liberalization, tax reforms and opening up to foreign investments were

some of the important steps, which helped Indian economy to gain momentum. The Economic

Liberalization introduced by Man Mohan Singh in 1991, then Finance Minister in the government of P VNarsimha Rao, proved to be the stepping-stone for Indian economic reform movements.
http://theviewspaper.net/unemployment-in-india/http://theviewspaper.net/illiteracy-in-india/http://theviewspaper.net/illiteracy-in-india/http://theviewspaper.net/unemployment-in-india/


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Financial yearGDP of India at factor cost (in

percent)1951-52 2.3

1956-57 5.7

1961-62 3.1

1966-67 1

1971-72 1

1976-77 1.2

1981-82 6

1986-87 4.3

1991-92 1.3

1996-97 7.8

2001-02 5.8

2006-07 9.2

2010-11 9.6

2011-12 6.9

(SOURCE: mapsofindia.com/india-economy)

What is rural?

Low population number, low median income, poor infrastructure [roads, electricity, communications],

and agrarian rather than industrial activity. Such rural areas are within the sphere of influence of

neighbouring cities and metros.

Rural consumer insight

Rural India buys:

Products more often (mostly weekly)

Buys small packs, low unit price more important than economy

In rural India, brands rarely fight with each other; they just have to be present at the right place.

India's GDP rate since 1951-51:


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Many brands are building strong rural base without much advertising support

Chik shampoo, second largest shampoo brand

Ghadi detergent, third largest brand

Fewer brand choices in rural: number of FMCG brand in rural is half that of urban.

Buy value for money, not cheap products

Salient features of rural india

Some common characteristics that do exist amongst most of the rural markets in India are as follows:

A.

Population:83.3 per cent of the villages have a population of less than 2000

B. Levels of education: Although the percentage of literates has increased, there is still

approximately 60 per cent of the rural population who lies below the middle education bracket.

C.

Occupational pattern: Almost 76 per cent of the rural population depends on cultivation or

wages for their living.

D.

Characteristics:in terms of occupation, consumption and buying behaviour change prominently

from urban to rural in locations with population more than 10000.

E.

Income level: Though rural incomeshave grown manifold in the last one decade, still an

average rural consumer has a much lower income than his or her urban counterpart. Still

a large part of his income goes to provide the basic necessities, leaving smaller income to

be spent on other consumer goods. This makes the rural consumer more price

sensitive than the urban consumer.


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Rural consumer

It is widely acclaimed that India is one of the largest consumer market in the world. But the consumer in

India shows wide variation in size and potential of various consumer market segments. These differences

Can be seen in terms of geographical difference, urbanrural consume age and family life cycle, income

level, education level, linguistic and religion diversity, food habit; festival etc. revolution in

communication technology are forcing marketer to look beyond time tested concept such as brand loyalty

and mass marketing. Marketer are trying to determine the underlying need and motive of consumer as

well as various factor which influence the formation of these need and satisfaction of these. Marketer are

also trying to understand the learning Process adopted by buyer and consumer.

The Learning process can also be linked to other cognitive structure such as attitude and beliefs. Buying

behavior is also influenced by other psychological concept such as personality, motivation and

perception. Knowing the impact of these concept on buying behavior will help marketer in the generation

of new product ideas and adopted customization for core product; some additional feature and by offering

of additional services, all done with the intention to add the customer delight.

Identify Customer

Need

Offer

Individualized

product

Induce Customer

Trial

Proper Distributionand Sales

Through

Advertisement and

Communication

Customer

Want

Result

in

Customer

Experience With

the Product


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Rural marketingconcept:

In recent years, rural markets have acquired significance, as the overall growth of the economy has

resulted into substantial increase in the purchasing power of the rural communities. On account of green

revolution, the rural areas are consuming a large quantity of industrial and urban manufactured products.In this context, a special marketing strategy, namely, rural marketing has emerged. But often, rural

marketing is confused with agricultural marketing the latter denotes marketing of produce of the rural

areas to the urban consumers or industrial consumers, whereas rural marketing involves delivering

manufactured or processed inputs or services to rural producers or consumers.

Factors responsible for the rural market boom to come into existence:

1. Increase in population and hence increase in demand.

2. A marked increase in the rural income due to agrarian prosperity.

3. Standard of living is also increasing in rural areas.

4. Large inflow of investment for rural development programmes from government and other

sources.

5. Increased contact of rural people with their urban counterparts due to development of transport

and wide communication network.

6. Increase in literacy and educational level and resultant inclination to sophisticated lives by the

rural folks.

7. Inflow of foreign remittances and foreign made goods into rural areas.

8. Change in the land tenure systems causing a structural change in the ownership patterns and

consequent changes in the buying behaviour.

9.

Rural markets are laggards in picking up new products. This will help the companies to phase

their marketing efforts. This will also help to sell inventories of products out dated in urban

markets.


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Glimpse about rural market attractiveness:

Rural market has following arrived and the following facts substantiate this:

742 million people

Estimated annual size of the rural market

FMCG Rs 65,000 Crore

Durables Rs 5,000 Crore

Agri-inputs (incl. tractors) Rs 45,000 Crore

2 / 4 wheelers Rs 8,000 Crore

LIC sold 55 % of its policies in rural India.

Of two million BSNL mobile connections, 50% in small towns/villages

Of the six lakh villages, 5.22 lakh have a Village Public Telephone(VPT)

41 million Kisan Credit Cards issued with cumulative credit of Rs 977 billion resulting in tremendous

liquidity.

Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from these towns on

Rediff online shopping site.

42 million rural availing banking services in comparison to 27 million urban HHs.

Investment in formal savings instruments: 6.6 million in rural and 6.7 million in urban

Rural market is big chunk for marketers:

1) Infrastructure is improving rapidly.

2) In 50 years only 40% villages connected by road, in next 10 years another 30%.

3)

More than 90 % villages electrified, though only 44% rural homes have electric connections.

4) Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected

by STD.

5) Social Indicators have improved a lot between 1981 and 2001


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6) Number of pucca houses doubled from 22% to 41% and kuccha houses halved (41%to 23%)

7) Percentage of BPL families declined from 46% to 27%

8) Rural Literacy level improved from 36% to 59%

9)

Low penetration rates in rural so there are many marketing opportunities.

Rural marketing in modern India:

Rural Marketing is defined as a function that manages all activities involved in assessing, stimulating

and converting the purchasing power of rural consumers into an effective demand for specific products &

services and moving these products & services to the people in rural areas to create satisfaction and a

better standard of living and thereby achieving organizational goals The process should be able to

straddle the attitudinal and socio-economic disparity between the urban and rural customers.

Urban to Rural (U 2 R): A major part of rural marketing falls into this category. It includes the

transactions of urban marketers who sell their goods and services in rural areas, like pesticides, fertilizers,

seeds, FMCG products, tractors, bicycles, consumer durables, etc.

Rural to Urban (R 2 U):Transactions in this category basically fall under agricultural marketing where a

rural producer seeks to sell his produce in an urban market, like seeds, fruits and vegetables, milk and

related products, forest produce, spices, etc.

URBAN

RURAL

RURAL

RURAL

URBAN

RURAL


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Rural to Rural (R 2 R): This includes the activities that take place between two villages in close

proximity to each other, like agricultural tools, handicrafts and bullock carts, dress materials, etc.

TABLE 1: RURAL POPULATION STATISTICS

Population Number of Villages Percentage of total villages

Less than 200 114267 17.9

200-499 155123 24.3

500-999 159400 25

1000-1999 125758 19.7

2000-4999 69135 10.8

5000-9999 11618 1.8

10000 & above 3064 0.5

Total 638365 100

Attracting attributes of rural markets

TABLE 2: ESTIMATED ANNUAL SIZE: RURAL MARKET

FMCG INR 65000 crore

Durables INR 5000 crore

Agri-inputs (including tractors) INR 45000 crore

Two / Four Wheelers INR 8000 crore

TOTAL INR 123000 crore

The immense potential of the rural market can be realized if the marketers understand this market. The

huge untapped needs of the rural mass, the growing rural economy and the increasing media penetration

and brand awareness make this market extremely attractive to marketers (Goswami, 2009). A look at the

estimated annual size of the rural market would make us understand the true potential of this untapped

market. The growth statistics for FMCG and Consumer Durables sector suggests huge potential for the

Indian Rural markets


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Understanding the potential of rural market:

1. Large population:742 million Indians constituting 138 million households reside in 6,38,365

villages. The size of rural market itself speaks of its potential

2.

Growth in market: The market has been growing at 3-4% per annum adding more than one

million new consumers every year.

3.

IT penetration in rural india: Today's rural children and youth will grow up in an environment

where they have 'information access' to education opportunities, exam results, career counselling,

job opportunities, government schemes and services, health and legal advice and services,

worldwide news and information, land records, mandi prices, weather forecasts, bank loans,

livelihood options. If television could change the language of brand communication in rural India,

affordable Web connectivity through various types of communication hubs will surely impact thecurrency of information exchange. As the electronic ethos and IT culture moves into rural India,

the possibilities of change are becoming visible.

4.

Impact of globalization: Globalization will have its impact on target groups like farmers, youth

and women. Farmers, today 'keep in touch' with the latest information and maximize both ends.

On youth its impact is on knowledge and information and while on women it still depends on the

socio-economic aspect. The marketers who understand the rural consumer and fine tune their

strategy are sure to reap benefits.

5.

Increasing income and purchasing power: The agricultural development programs of the

government have helped to increase income in the agricultural sector. These in turn have created

greater purchasing power in rural markets.

6.

Accessibility of markets: The attraction of a market depends not only on its potential but also on

its accessibility. The road network has facilitated a systemized product distribution system to

villages. An increasing number of companies are supplying village markets directly. Increasing

direct contacts to villages helps product promotion and availability of the product in the village

shop.

7.

Consumer behaviour changes: Increased literacy and greater awareness in rural markets create

new demands and discriminating buyers. This is observed more in the younger generation. In

villages today, this segment of buyers consumes a large variety of products, both durables and


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non-durables. There is a visible increase in the consumption and use of a variety of products,

which is easily observed.

8.

New employment opportunities: Government schemes like IRDP (Integrated Rural

Development Programme), JRY (Jawahar Rozgar Yojana) and TRYSEM (Training Rural Youth

for Self Employment) have created new employment opportunities in Rural India. Co-operative

banks and Public sector banks are extending loans to rural people, thereby creating job

opportunities for them.

9.

Green revolution:The vision of Dr. Swami Nathan, the father of the green revolution to achieve

self-sufficiency in food grain production in 1995, gave a major breakthrough in food grain

production by the use of scientific methods in agriculture. At present, Rural India generates 299

million tons annually.

10.Various government policies: The government stress on self-sufficiency resulted in various

schemes like Operation Flood (White Revolution), Blue Revolution, Yellow Revolution, etc.

resulted in the production of 15 million tons of milk per annum.

11.

Better credit facilities through banks: With co-operative banks taking the lead in the rural

areas, every village has access to short, medium, long-term loans from these banks. The credit

facilities extended by public sector banks through Kisan Credit Cards help the farmers to but

seeds, fertilizers and every consumer goods on installments.

12.

Green card / credit card for farmers: The government initiated credit cards for farmers through

public sector banks. The farmer had a choice to take short or medium term loans through these

credit cards to buy seeds, fertilizers, etc. This enabled him to produce more and thereby increase

his income.

13.Improved exports due to export policy:The new Export Policy 2000 paves the way for open

market status for agriculture. WTO Policy for agro-exports has increased exports of Indian

agricultural produce thereby increasing incomes of the rural population.

14.

Remittances from indians working abroad: These remittances are a sizeable contribution to

growing rural income & purchasing power.

15.

Media:Mass Media has created increased demand for goods and services in rural areas. Smart

marketers are employing the right mix of conventional and non-conventional media to create


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increased demand for products. The role cable television has been noteworthy in bringing about

the change in rural peoples mindset and influencing their lifestyles.

Challenges in Rural Marketing:

Though rural markets are a huge attraction to marketers, it is not easy to enter the market and take a

sizeable share of the market, in the short time due to the following reasons.

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: Demand for goods in rural markets depends upon agricultural situation, as

agriculture is the main source of income. Agriculture to a large extent depends upon monsoon

and, therefore, the demand or buying capacity is not stable or regular.

Transportation: Many rural areas are not connected by rail transport. Kacha roads become

unserviceable during the monsoon and interior villages get isolated.

Distribution: An effective distribution system requires village-level shopkeeper, wholesaler or

preferred dealer, distributor or stockiest at district level and company-owned depot or

consignment distribution at state level. The presence of too many tiers in the distribution system

increases the cost of distribution.

Communication Problems: Facilities such as telephone, fax and telegram are rather poor in rural

areas.

Traditional Life:Life in rural areas is still governed by customs and traditions and people do not

easily adapt new practices.

Buying Decisions:Rural consumers are cautious in buying and decisions are slow and delayed.

They like to give a trial and only after being personally satisfied, do they buy the product.

Media for Promotions:Reach of formal media is low in rural households; therefore, the market

has to undertake specific sales promotion activities in rural areas like participating in melas or

fairs.


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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.

Future Trends:Markets which are not able to face the stiff competition posed by MNCs, canrestore their profits in the rural sector. The market share of urban market when compared to the

rural market is low, hence if Indian industries concentrate on rural markets their sales will

increase. If rural markets are brought into the limelight of development, they pave way to

prosperity. Prosperity of India lies in the prosperity of every Indian, hence no rural segment

should be left untapped.

Rural marketing involve a number of strategies, which include:

1. Client and Location specific promotioninvolves a strategy designed to be suitable to the

location and the client.

2. Joint or co-operative promotionstrategy involves participation between the marketing agencies

and the client.

3. 'Bundling of inputs'denote a marketing strategy, in which several related items are sold to the

target client, including arrangements of credit, after-sale service, and so on.

4.

Developmental marketing refer to taking up marketing programmes keeping the development

objective in mind and using various managerial and other inputs of marketing to achieve these

objectives.

5. Media, both traditional as well as the modern media, is used as a marketing strategy.

6. Unique Selling Propositions (USP) involves presenting a theme with the product to attract the

client to buy that particular product.

7.

Extension Servicesdenote, in short, a system of attending to the missing links and providing the

required know-how.

8. Ethics in Business form, as usual, an important plank for rural markets and rural marketing.


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9. Partnership for sustainability involves laying and building a foundation for continuous and

long lasting relationship.

The 4A Approach:

The Indian rural market contributes 50% in the total sales of durable and nondurable products. The rural

consumer is not unlike his urban counterpart in many ways. the Indian rural market is growing faster than

the urban market. The four As of rural marketing is similar to marketing mix. The four As of rural

marketing are as follows:

i) Affordability:Refers to the ability of customers to pay for the product. The price of products should be

set to match the income level of rural customers. Affordability does not mean that the marketer should

provide cheaper products but the product should be brought into the range of ability to pay. The income

of rural population is less than urban population so they cannot invest a large sum on a single product.

Therefore, rural population prefers to buy small quantity of products, which are affordable for them.

ii) Availability: Refers to the reach of a distribution channel in the rural market. Distribution is the

biggest problem of the rural market due to lack of transportation facilities. In rural areas, retailers

maintain good relationships with customers; therefore, it takes less time to sell a new product. An

organization should adopt the best distribution channel to reach the rural market with minimum cost

possible.

iii) Awareness:Refers to promotional activities to provide information to customers. The best media to

reach the rural market are TV and radio. The organization should conduct awareness programs in local

languages to convey the message.

iv) Acceptability:Implies that a product should be readily acceptable by rural customers. Marketing mix

should be properly designed to suit the rural customers.

Emerging trends in markets:

Online rural market (internet, nicnet): Rural people can use the two-way communication through

online service for crop information, purchases of Agri-inputs, consumer durable and sale of rural

produce online at reasonable price. Farm information online marketing easily accessible in rural areas

because of spread of telecommunication facilities all over India. Agricultural information can get

through the Internet if each village has small information office.


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Information through local agriculture input dealers: Most of the dealers have direct touch with

the local farmers; these farmers need awareness about pests, decease, fertilizers, seeds, technology

and recent developments. For this information, farmers mostly depend on local dealers. For

development of rural farmers the government may consider effective channel and keep information at

dealers, for farmer education hang notice board and also train the dealer recent changes and

developments in agriculture.

Cost benefit analysis: Cost benefit can be achieved through development of information technology

at the doorsteps of villagers; most of the rural farmers need price information of agri-produce and

inputs. If the information is available farmers can take quick decision where to sell their produce, if

the price matches with local market farmer no need to go near by the city and waste of money & time

it means farmers can enrich their financial strength.

Need based production: Supply plays major role in price of the rural produce, most of the farmers

grow crops in particular seasons not throughout the year, it causes oversupply in the market and

drastic price cut in the agricultural produce. Now the information technology has been improving if

the rural people enable to access the rural communication, farmers awareness can be created about

crops and forecasting of future demand, market taste. Farmers can equates their produce to demand

and supply, they can create farmers driven market rather than supply driven market. If the need based

production system developed not only prices but also storage cost can be saved. It is possible now a

days the concept of global village.

Market driven extension: Agricultural extension is continuously going through renewal process

where the focus includes a whole range of dimensions varying from institutional arrangements,

privatization, decentralization, partnership, efficiency and participation. The most important change

that influences the extension system is market forces. There is a need for the present extension system

to think of the market driven approach, which would cater the demands of farmers.

Processing industry: India is the second largest producer of fruits and vegetables in the world withan annual production of more than 110 million tones of fruit and vegetable only 1.3 percent of the

output is processed by the organized sector commercially, the reason higher consumption in fresh

form. However, as the packaging, transportation and processing capacities increase, the market for


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processed fruits and vegetables is projected to grow at the rate of about 20 % per annum. 100 %

export oriented units (EOU) and Joint venture units required improving the processing industry.

Apana mandi / kisan mandi / rythubazaar: There is a need to promote direct agricultural

marketing model through retail outlets of farmer's co-operatives in urban areas. The direct link

between producers and consumers would work in two ways: one, by enabling farmers to take

advantage of the high price and secondly, by putting downward pressure on the retail prices.

Rural agri- export: Rural produce, raw fruits and vegetable, processing goods, have the potential

market in Asian, Europe and western countries. Particularly soudhy countries have commendable

potential for Indian rural produce.

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