COVER PAGE

EmblemUniversity centre address and code No:

PC TRAINING INSTITUTE LTD

S-54, GOLE MARKET, MAHANAGAR LUCK NOWPH- 0522-2387397, 2386893

CENTRE CODE: 0999

Title of project report

A STUDY ON CONSUMER BEHAVIOR AND MARKETING STRATEGY FOR RURAL INDIA

By

(SHARAD KHARE)

A project report submitted in partial fulfillment of the requirements for Master of Business Administration

Of Sikkim Manipal university, INDIA

Sikkim-Manipal university of Distance Education WingSyndicate house

Manipal -576 104

STUDENT DECLARATION

I here by declare that the project report entitled

A STUDY ON CONSUMER BEHAVIOR AND MARKETING STRATEGY FOR RURAL INDIA

Submitted in partial fulfillment of the requirements for the degree of

Masters of Business Administration

To Sikkim-Manipal University, India, is my original work and

not submitted for the award of any other degree, diploma,

fellowship, or any other similar title or prizes

Place: (SHARAD KHARE)

Date: Reg. NO: 520619579

ii

Examiner’s certification

The project report of

(SHARAD KHARE)

A STUDY ON CONSUMER BEHAVIOR AND MARKETING STRATEGY FOR RURAL INDIA

Is approved and is acceptable is acceptable in quality and from

Internal examiner External examiners

(Name, qualification and designation) (Name, qualification)

iii

university study centre certificate

This is to certify that the project report entitled

A STUDY ON CONSUMER BEHAVIOR AND MARKETING STRATEGY FOR RURAL INDIA

Submitted in partial fulfillment of the requirements for the degree of

Masters of Business Administration

Sikkim-Manipal university

(SHARAD KHARE)

has worked under my supervision and guidance and that no part of this reports has been submitted for the award of any

other degree, Diploma, Fellowship or other similar titles or prize and that the work has not been published in any journal

or Magazine.

( Reg. No. -520619579)

Certified

(Guide’s Name and Qualification)

iv

ACKNOWLEDGEMENTACKNOWLEDGEMENT

I wish to express my heartiest appreciation to Shri

Naresh Gandhi (City Lead) Reliance Infocomm,Gorakhpur,

for providing me the opportunity to probe an erstwhile

unknown area. I also thank Shri Nikhil Upadhyay (Market

Research Executive) & Shri Sanjay Upadhyay (Head of

Customer Care) Reliance Infocomm Gorakhpur, for his help

and cooperation extended to me during the course of study. I

honestly believe that this has been an appreciable value

addition to me and would go a long way in helping me achieve

my final career objectives.

This project would not have taken its current shape without

all of these.

It is my esteemed pleasure to present this project report and

whole heartedly thank each and every one who helped me in

this task. I thank my guide, who immensely helped and

v

rendered his valuable advise, precious time, knowledge and

relevant information regarding the collection of material and

whose suggestion and guidance has enlighten me on this

subject.

(SHARAD KHARE)

vi

PREFACE PREFACE

Before gamboling into issues like where the Indian rural

market stands and the opportunities for corporate to explore

there, let's look at the definition of urban and rural India. The

Census defined Urban India as - "All the places falling within

the administrative limits of a municipal corporation,

municipality, and cantonment board etc or have a population

of at least 5,000 and have at least 75 per cent male working

population in outside the primary sector and have a

population density of at least 400 per square kilometer. Rural

India, on the other hand, is the area not covered in above

definition.”

India ranks among the top five economies of the world in

terms of purchasing power parity, while its GDP ranks

eleventh in absolute terms. Combined with the fact that India

has the second largest population in the world with over a

billion people, this makes India one of the most exciting

marketplaces for any consumer products or services

industry.

The present study aims at exploring the rural market place

and studying the consumer behavior in rural markets. The

study also emphasizes the advertising strategies to be

adopted to suit the consumer behavior.

vii

CONTENTSCONTENTS

STUDENT DECLARATION........................................................IIEXAMINER’S CERTIFICATION..................................................IIIUNIVERSITY STUDY CENTRE CERTIFICATE............................IVACKNOWLEDGEMENT............................................................VPREFACE.........................................................................VII

CONTENTS.........................................................................VIII

PART I EXCUTIVE SUMMARY............................................1

1.0 INTRODUCTION............................................................12.0 OBJECTIVE..................................................................43.0 METHODOLOGY...........................................................44.0 ANALYSIS....................................................................65.0 CONCLUSION AND RECOMMENDATIONS........................8

PART II LITERATURE REVIEW.........................................12

1.0 INTRODUCTION..........................................................122.0 DEFINITION OF RURAL MARKETING.............................133.0 CHARACTERISTICS OF RURAL MARKETS......................154.0 HIERARCHY OF MARKETS...........................................185.0 RURAL MARKET ENVIRONMENT..................................206.0 UNIQUE FEATURES OF RURAL MARKETING IN INDIA.. . .297.0 THE MARKETING MIX.................................................358.0 CORE PROBLEM........................................................499.0 RURAL MARKETING STRATEGIES................................5110.0 ADVERTISING SPEND...............................................5511.0 BROAD STRATEGIES OF RURAL ADVERTISING...........5912.0 EFFECTIVE COMMUNICATION...................................60

PART III PROJECT OVERVIEW.........................................64

1.0 INTRODUCTION..........................................................642.0 OBJECTIVE................................................................653.0 RESEARCH METHODOLOGY........................................674.0 LIMITATIONS..............................................................695.0 ANALYSING THE SYSTEM............................................696.0 CONCLUSION AND RECOMMENDATIONS......................77

PART IV APPENDICES......................................................82

1.0 CLASSIFICATION OF RURAL/ COTTAGE INDUSRTY........822.0 STRANGE FACT: AMAZING INNOVATOR........................833.0 THOMPSON RURAL MARKET INDEX.............................83

viii

4.0 PRODUCT REDESIGN OR MODIFICATION NEEDS..........895.0 TYPES OF COOPERATIVE ORGANISATIONS..................906.0 SHARE OF COOPERATIVES IN NATIONAL ECONOMY.....927.0 IMPACT OF COOPERATIVES ON RURAL MARKETING.....93Bibliography......................................................................98

ix

PART I EXCUTIVE SUMMARY

1.0 INTRODUCTION

"India's way is not Europe's. India is not Calcutta and

Bombay. India lives in her seven hundred thousand villages."

--Mahatma Gandhi, 1926

Marketing in developing countries like India have often been

borrowed from the western world. Concepts like Brand

identity, Customer relationship management, 4 P's of the

marketing mix, Consumer behavior process; Segmentation,

targeting and positioning etc. have often been lifted straight

from the marketing intelligentsia abroad and adopted in

Indian conditions, often with minimal success. Reason lies

not in the fault of such concepts, but their integration with the

Indian ethos and culture.

The rural India offers a tremendous market potential. Nearly

two-thirds of all middle income households in the country are

in rural India and represents half of India's buying potential.

Despite, the strong potential the rural markets are by and

large less exploited.

1

Consider the market; out of five lakh villages in India only

one lakh have been tapped so far. According to us if the rural

market has to be adequately tapped, there has to be a

change in the way marketing concepts learnt in B-schools

with adequate adoption according to scenarios prevalent in

rural India.

From time immemorial there has been regular trade between

rural and urban areas. With increasing disposable income

the rural population also aspires to improve its lifestyle. Thus,

the urban manufacturing and service sectors have entered

the rural scene with consumables, durables and services,

though traditionally very few companies like those marketing

tea, cigarettes and match boxes were operating there.

Now it is not uncommon to find well-known brands of

cigarettes, tea sachets, toilet soaps and detergents in remote

villages. There are hamlets where sophisticated products like

television sets, transistor radios, mopeads, table and ceiling-

fans can also be bought. Marketers of these products

recognized the potential offered by rural markets and have

entered them in a big way. At many nodal villages, block

headquarters or tehsil towns, banks, schools, primary health

2

centers etc., are also functioning. Many development

programs initiated by the Central and state governments

have, bringing about all-round development, also opened up

the rural market for the manufactured products. For example,

the demand for electrical goods like bulbs, radios, table and

ceiling-fans has increased appreciably in villages where rural

electrification has taken place. Mostly, it has been observed

that these goods and services have penetrated the rural

market as spillover from urban areas without much

conscious effort by the marketers. But today, most

manufacturers faced with stiff competition and near

saturation levels reaches in urban areas, are consciously

focusing their marketing energies on the hitherto neglected

rural areas. Not only have they come to the stage of

recognizing rural areas as offering great potential but also as

a fast growing market. According to some rough estimates,

the rural market is growing at the rate of Rs. 350 to 400 crore

per annum.

Rural marketing is thus a two-way marketing process. Its

content now encompasses inflow of products into rural areas

3

for production or consumption purposes, and also outflow of

products to urban areas.

2.0 OBJECTIVE

The object of the research “A Study on Consumer

Behavior and Marketing Strategy for Rural India” is to

study:

o The changing profile of rural consumers;

o Importance of Rural Media and Distribution system- its

problems and opportunities;

o Knowing about latest advertisement and Message in

the advertisement;

o Effect of advertisements in the buying pattern (Product

adaptation); and

o Interpreting the information collected and

recommending the ways for effective marketing

strategies.

3.0 METHODOLOGY

The project was completed in following stages as detailed in

the Report. Firstly the detailed information about the working

4

style, lifestyle, buying and consumption pattern in rural areas

were collected from literatures and elaborated. This provides

a better picture of the nature of work to be done.

The objectives, as briefed earlier, were set and sampling,

methodology was determined along with the expert guidance

of the project guide.

Villages, Kirana Shops, Chaupaals, etc were visited for end

consumers and data was collected about the changing

profile of rural consumers; importance of Rural Media and

Distribution system- its problems and opportunities; is

advertisement changing their life style?

Analysis was done and data was interpreted and inferences

were drawn and transformed to meaningful information to

help management to get a vivid picture and to make accurate

decision thereafter.

A descriptive approach has been adopted in the study. The

data has been generated through extensive survey method.

Sufficient time was given at each village for extracting the

desired information.

5

4.0 ANALYSIS

Data collected were analyzed and converted into meaningful

information. It is a fact that:

o About 74% of the population resides in Rural India.

o 50% of the national income comes from rural areas.

o 60%of agriculture income share comes from rural

India.

o Metros and other principal cities, overwhelmed by the

competition, are getting saturated.

o Necessity to penetrate the semi urban and rural

markets.

o These have financially grown better and carry great

potential.

o Mainly joint families consisting of 8 to 20 members

characterize lifestyle.

o Main source of income is agriculture.

o Haats are main markets that are held twice or thrice a

week. Mandis are stationery markets held daily.

6

Due to the increase in literacy rates and the penetration of

conventional media, the perception and attitude of the rural

consumer is changing, moving towards proper consumerism.

Not only this, attitude and consumption habits of rural

consumers are also changing and becoming more modern in

an urban sense.

Following problems and limitations were observed from the

study regarding advertising and marketing in Rural India:

o Unknown rural boundaries with potential markets

o Unknown customer profile

o Unknown effectiveness of media tools

o Lack of infrastructure

o High cost inputs

o Non acceptability of rural audience in campaigns

o Lack of trust on the implementer

o Lack of structured monitoring and feedback

mechanism.

o Reading patterns are local in nature. National

newspapers have negligible circulation. Literate people

7

like school teachers, Gram Pramukh or Sarpanch are

opinion leaders.

o Electronic media is less effective due to Lack of power

supply and lack of connectivity

5.0 CONCLUSION AND RECOMMENDATIONS

The paper presents the modified version of Philip Kotler's

famous marketing mix consisting of 4P's. The focus is on its

modification and subsequent customization to Indian rural

market's perspective. The 4P's have to be modified to

include 1 P i.e. Packaging and 1 R i.e. Retailer as special

focus areas.

Further to ensure the sustainability of the marketing mix two

E's i.e. Education and Empowerment have to be at the core

as they help in generating widespread participation from the

rural clientele by enhancing their standard of living.

The Products in the rural market should essentially operate

at the basic and expected level of product classification.

They should essentially meet the basic needs of the

consumer and should be a no-frill product, as the consumer

8

would not be valuing much any further addition to the product

concept.

Companies also face a daunting task in communicating

about their products to the consumer due to lack of literacy

and failure of traditional media to penetrate in the rural

households.

Hence, the advertising mix has to be more towards non-

conventional yet effective medium like Puppetry, Folk

Theater & Song, Wall Painting, Demonstration, Posters,

Agricultural Games, NGO's network, etc.

Thus overall either the product or communication or

preferably both need to be customized to target the rural

customer. In terms of physical distribution due to lack of

infrastructure the costs are very exorbitant to reach the rural

customer.

Thus, mediums like rural marketing vehicles and meals and

haats provide better opportunities to meet customer needs.

Also the existing distribution would need a transformation to

achieve the required penetration levels as success of Project

Streamline of HLL has shown.

9

Since, the value for money concept is more important rural

customers, there has to be an approach of treating customer

as budget seeking consumer. Here, fitting the consumer

needs into an affordable price point is pursued first and then

other features of product are fitted in. Similarly, packaging

has to meet customer needs of better brand recall and

introducing favorable price points.

At the same time the importance of retailer has to be

recognized where he is one of the most major influencer is

customer's decision-making process. He acts as the friend

and guide in this process and hence, needs to be managed

effectively through promotion programs and incentives to

promote the brand of a company.

In order to bridge the gap between Philip Kotler and

countryside Indian what is needed the appreciation of unique

features of rural India and thus, responding to them by

making adequate improvements in the application of the

marketing concepts learnt in the class.

For achieving the desired results of capturing the rural

customer a comprehensive approach to the traditional

marketing concepts has to be taken. This marketing mix has

10

to be responsive to customer's needs and fit into his life as a

tool of self-enhancement.

To be successful the concept of marketing has to be taken in

conjunction with its economic, psychological and social

implications. As per NCAER projections, the number of

middle and high-income households in rural India is

expected to grow from 80 million to 111 million by 2007.

In urban India, the same is expected to grow from 46 million

to 59 million. Thus, the absolute size of rural India is

expected to be double that of urban India. The study on

ownership of goods indicates the same trend. It segments

durables under three groups - (1) necessary products -

Transistors, wristwatch and bicycle, (2) Emerging products -

B&W TV and cassette recorder, (3) Lifestyle products - CTV

and refrigerators. Marketers have to depend on rural India for

the first two categories for growth and size. Even in lifestyle

products, rural India will be significant over next five years.

11

PART II LITERATURE REVIEW

1.0 INTRODUCTION

There are various reasons why every industry is taking a

very serious look at rural markets:

About 285 million live in urban India whereas 742

million reside in rural areas, constituting 72% of India's

population resides in its 6, 00,000 villages.

The number of middle income and high income

households in rural India is expected to grow from 80

million to 111 million by 2007 while urban India is

expected to grow from 46 million to 59 million.

Size of rural market is estimated to be 42 million

households and rural market has been growing at five

times the pace of the urban market

More government rural development initiatives.

Increasing agricultural productivity leading to growth of

rural disposable Income.

Lowering of difference between taste of urban and rural

customers.

Many companies like Colgate-Palmolive, HLL, Godrej

12

etc have already made forays into rural households but

still capturing the markets is a distant dream. Most

marketers still lack in depth knowledge to analyze the

complex rural market.

2.0 DEFINITION OF RURAL MARKETING

The urban to rural flow covers goods and services of all

agricultural inputs like fertilizers, pesticides, seeds, tractors,

power tillers, etc., consumable like bath and washing soaps,

detergents, cosmetics, cigarettes, beverages etc., and

consumer durable like bicycles, mopeds, television sets,

radios, clocks, electrical goods, etc.

The rural to rural flow limits production and consumption

within the rural area itself. Examples of such products are

bamboo baskets, ropes, small agricultural tools like plough

shares, hand how and other items like window and door

frames, padlocks, household earthen and aluminum utensils

and the like. Mainly it is the artisans like blacksmiths,

carpenters and cobblers who cater to the professional and

household needs of the rural people.

The rural to urban flow deals with a wide gamut of products.

Agricultural products like food grains, oilseeds, cotton,

13

sugarcane and others are consumed by urbanites after due

processing. Many of these products are basic raw materials

for industry, like cotton for textiles, tobacco for cigarettes and

beedies, oilseeds for edible oil, sugarcane for crystal sugar

and so on. It is estimated that about 40 to 45 percent of the

raw materials required by such industries flow from rural

areas even today. These apart, there are goods produced by

rural industry and rural artesian and craftsmen, which also

find a market in urban areas. Examples of such items would

be lacquer-coated wooden toys, brassware, handloom

textiles, cottage industry products like safety matches, toilet

soaps, washing soaps, etc. In fact, there are many

organizations engaged in encouraging rural artisans and

craftsman like Co-optex, All India Handicrafts Development

Corporation, State Handicrafts Development Corporation,

State Handicrafts Development and Promotion Corporations,

Khadi and Village Industries Commission, Khadi and Village

Industries Boards of various states and others. Thus, there is

a considerable amount of goods flow from rural to urban

sector in terms of agricultural produce, and products of rural

artisans and craftsmen. The domain of rural marketing is

depicted in following table:

14

Definition of Rural Marketing

To Rural To Urban

From Urban

Consumable and durable agricultural inputs.

Consumables. Consumer durables.

Outside the scope of this project.

From Rural

Rural artisans services and products

Agricultural and allied production.

Rural artisans and rural industry products.

Villagers are not uniform size in terms of population, area

under cultivation, types of crops cultivated, economic

prosperity, etc. In other words, at first glance each village

appears unique and begs a tailor made marketing strategy.

Hence, it becomes important for marketers to know the

potential available in different villages so that village can be

suitably indexed and appropriate marketing strategies can be

evolved for each category.

3.0 CHARACTERISTICS OF RURAL MARKETS

There are certain characteristics of rural India, which every

prospective marketer needs to be aware of before

unleashing his product:

15

Low income influenced by seasonal fluctuations

Low literacy

Diverse customs, languages and social structures

Resistant to change

Price sensitive

High brand loyalty

Influenced by traditions

Moderate aspiration levels

Quality Conscious

Low to moderate risk taking ability

These typical characteristics of the rural market make it

evident that there are huge challenges, which an advertiser

will face. These challenges need to be tackled using

appropriate strategies and proper planning. The major

obstacles can be classified as follows:

Poor infrastructure facilities, which hamper the

effective distribution of products and make the

task of reaching the target consumer difficult.

Traditional media is ineffective due to illiteracy

and non availability.

There is insufficient past research to provide

16

some insight about consumer behavior.

Disposable income is highly dependent on good

monsoons and a rich harvest.

Varying linguistic and socio-cultural norms

compel the marketer to vary his marketing

message for different parts of the same country.

Role of women in buying process is still not

independent of family constraints.

Inadequate credit availability hampers the ability

of rural retailers to carry stocks.

Understanding the psyche of the rural consumer and

gauging the complexity of the rural market has to be given

utmost priority by marketer. Creative marketing Solutions

need to be devised to combat these barriers.

This apart, rural people also recognize different market

places for purchase of different products and services. In

short, this can be termed as hierarchy of markets for a rural

consumer. Rural consumers have identified places for

specific items of purchase. Following table broadly indicates

the hierarchy of markets for a rural consumer.

17

4.0 HIERARCHY OF MARKETS

A typical rural consumer has a clear identification of market

places for different requirements. The first point of contact is

the 'village shop', which stocks very essential manufactured

goods like tea, beedi, cigarettes, salt, kerosene, matches,

edible oils, etc.

The next level of market in the hierarchy for a rural consumer

is the weekly shandy or haat. These shandies or haats

assemble in a particular village at a particular spot on a fixed

day in a week. There are a number of such weekly markets

in every state in the country. These shandies attract rural

people from a radius of about 20 to 25 kms. For a rural

consumer the shandy or haat is like a mini super bazaar.

18

Hierarchy of Markets for Rural Consumers

The next market place in the hierarchy is the Primary

Wholesale Assembling markets. This is where a rural person

goes to sell the agricultural produce soon after harvest.

Sometimes these may be called as Secondary Wholesale

Assembling markets or Terminal markets, depending upon

the place of their location. These are also popularly called

"Mandi" towns. In these places, there is a well-established

market for selling and buying agricultural produce with a

number of market functionaries. While the farmer sells his

agricultural produce in these markets, he also purchases

State Capitals

Metros and Cities

Terminal Market

Secondary Wholesale Assembling Markets

Primary Wholesale Assembling Markets

Shandies, Haats Jathras and Melas

Village ShopsMatchboxes, Cigarettes, Tea,

Kerosene, Salt, Edible Oils, etc

Cloth, Cosmetics, Soaps, Services, Kitchen Equipments, Agricultural

Tools, Bamboo Baskets etc

Legal Matters and Casual Visits

Fertilisers, Pesticides, Seeds, Durables, like Cycles, Mopeds, Sewing machines, Jewellery, Dry Battery Cells, Radios,

Transistor Radios, Television, Watches, Electrical goods, Agricultural Finance, etc.

19

items like fertilizers, pesticides, seeds, etc. and consumer

durables like watches, radios, clocks, etc.

A rural consumer may also make an occasional visit to state

head quarters or bit cities for any legal matter.

5.0 RURAL MARKET ENVIRONMENT

The rural market in India is much larger than the urban

market in terms of population and number of households.

The rural market consists of more than 100 million

households with a total population of about 740 million.

In spite of being larger in size, rural areas are characterized

by low per capita income, low literacy, average agricultural

productivity, and low level of industrialization. These

characteristics of rural India have resulted in limited capacity

for consumption of goods and services when compared to

consumption levels in any advanced country.

To successfully exploit potential offered by the rural market,

there is a need to understand the market not just in terms of

households and population, but in terms of their occupation

pattern, income generation, marketing arrangements for

agricultural produce, the process of rural and cottage

20

industrialization, communication facilities, infrastructure

development, rural buyer behavior, attitude and belief of rural

people and their changing values and aspirations.

5.1 POPULATION

About 70 percent of Indians reside in rural areas. In other

words, for every consumer in the urban area, there are three

of them in rural areas.

Rural population forms a major portion of the Indian

population as seen from the following table.

Population in India - Proportion of Rural Vs. Urban

Yea

r

Ru

ral

p

op

ula

tio

n

in m

illio

n

Pro

po

rtio

n

to

tota

l

po

pu

lati

on

(%

)

Urb

an P

op

ula

tio

n

in m

illio

n

Pro

po

rtio

n

to

tota

l p

op

ula

tio

n (

%)

To

tal

p

op

ula

tio

n

in m

illio

n

1951 295.0 82.6 62.0 17.4 357.0

1961 360.0 82.0 79.0 18.0 439.0

1971 439.0 80.1 109.0 19.9 548.0

1781 508.0 76.0 160.0 24.0 668.0

1991 621.0 74.3 215.0 25.7 836.0

2001 741.0 72.2 285.0 27.8 1027.0

21

5.2 OCCUPATIONAL PATTERN

The main occupation for a vast majority of rural population is

agriculture and allied activities. Following table gives the

distribution of rural population as per their occupation

pattern.

Sl. No. Occupation Proportion to Total Rural Population (%)

1. Agriculture 50

2. Agricultural labour 27

3. Business 10

4. Non-agricultural labour 9

5. Salary earners 2

6. Not gainfully employed 2

Total Rural Population 100

22

5.3 INCOME GENERATION

The occupation patter dictates the pattern of income generation also. The

proportion of income generated in rural areas, source-wise, is presented in

following table:

Sl. No. Occupation Proportion to Total Rural Population (%)

1. Agriculture 59

2. Agricultural wages 16

3. Business and craft 9

4. Non-agricultural wages 7

5. Salaries 3

6. Current transfers 2

7. Others 4

Total Rural Income 100

5.4 LITERACY LEVEL

The following table shows the literacy level of rural and urban

areas for males and female respectively.

23

Sl.No. Sex

Literacy levels

1971 1981 1991 2001

R U R U R U R U

1. Male 34 61 41 66 58 81 71 87

2. Female 13 42 18 48 31 64 47 73

Total 24 52 30 57 45 73 59 80

The high literacy rate implies that communication should not

prove a hurdle with the rural population, provided appropriate

means are chosen. Today, television has proved to be an

effective mass medium for communication with the rural

masses. The television network in the country today covers

nearly 100 per cent of the population offering a greater reach

when compared to any other mass medium.

5.5 INFRASTRUCTURAL FACILITIES

Infrastructural facilities like road and communications

network, rural electrification, public distribution system,

cinema, television coverage, and the like have also received

considerable attention in rural areas.

A. Rural Electrification

Rural electrification has been going on a big way. Statistic

indicate tat 5,09,620 villages - which is about 88 percent-

24

now have electricity connection. The rest are in the process

of being electrified.

B. Rural Communication

i) Road Network:

The road network of over three million kilometers in India is

the largest in the world. By 2007, it can be expected that all

the villages with at least 500 persons will be accessible by

all-weather roads, which will facilitate the distribution and

marketing of products across regional boundaries.

ii) Rail Network:

The railway network runs through rural areas connecting at

least a few thousands of villages. It is estimated that by

2003-04, the total rail length would be 63,122 kilometers.

The increase in rail length has also not been very significant

and hence possibility of all the villages being networked by

rail is currently remote.

iii) Television:

Telecast by Doordarshan covers almost the whole country

including the entire rural population. In fact, the rural

population covered by any television transmitter is more than

25

the urban population, since a pre-requisite for television is

availability of electricity and electricity is now available in 88

percent of the villages. In addition to Doordarshan, there are

satellite channels catering to regional interests which also

reach some of the villages.

C. Rural Credit Institutions

For a long time, cooperative societies were the only

organized agency for disbursing credit in rural areas, apart

from a host of private sources like money lenders, traders,

commission agents and others. After banks were

nationalized, in 1969, a number of branches in rural areas

have been opened for providing credit to agricultural

operations. These agencies have enabled farmers to obtain

credit at affordable interest rates for purchase of all

agricultural inputs. In fact, nearly 90 percent of tractor

purchases in rural areas are out of the loans provided by

State Agricultural and Rural Development Banks and

nationalized and non-nationalized commercial banks.

D. Rural Retail Outlets

It is estimated that there are about 20 lakhs private retail

outlets in rural areas. This is in addition to cooperative

26

outlets. Nearly 5 percent of the outlets are fair price shops

functioning under the public distribution system for supply of

essential commodities like sugar, edible oils, food grains, etc.

The above figures boil down to the fact that on an average

there are about 4 to 5 shops per village. In other words, there

is a rural retail outlet for every 350 to 400 persons. Thus,

there is a place available for the marketers to store and

exhibit their stocks.

E. Print Media in Rural Areas

The reach of print media in rural areas appears to be very

poor except in certain pockets of the country. It is estimated

that hardly 5 to 10 percent of newspaper reach rural areas.

F. Rural Areas Requirements

The requirements of rural areas can be classified under the

following heads:

i) Household Consumables

More and better food

More and better clothing

Medicines

Toiletries and cosmetics

27

Educational supplies

Wines and spirits

Beverages

Cigarettes, beedies, etc.

ii) Household Durables

Furniture

Cooking utensils

Electrical appliances

Radio and television sets

Clocks and wristwatches

Sewing machines

Ornaments and jewellery

iii) Construction Materials

For residences

For infrastructure facilities

For rural and cottage industries

For business establishments

For society/community institutions

iv) Consumable Agricultural Inputs

Manure and fertilisers

Seeds

Insecticides/pesticides and other agro-chemicals

Tools and implements

Petrol, diesel, oil and lubricants

Electricity

v) Capital Agricultural Inputs

28

Tractors and implements

Trailers

Harvesters, winnowers, threshers

Pump sets - oil engine and electrically operated

pipes and fittings for irrigation and drainage.

vi) Transportation Equipments

Bullock carts

Bicycles, motor cycles and mopeds

Jeep/Car

Light commercial vehicles

vii) Services

Banking

Health

Education

Transport and communication

Electricity

6.0 UNIQUE FEATURES OF RURAL MARKETING IN INDIA

Marketing according to a leading management theorist Peter

Drucker can be put in this way "The aim of marketing is to

know and understand the customer so well that the

product or service fits him and sell itself."

We feel that the above quote is the gist of marketing, be it in

rural areas or urban areas, western world or developing

29

world. Marketing in nothing but creating customers and thus

its concepts remain the same.

But, due to the differences in the needs, buying behavior,

values and aspirations of the customers the marketing

concepts have to be modified to be successful.

The unique features of rural India, which call for special

attention and thus, subsequent changes in the application of

marketing concepts, are as follows:

6.1 TRADITIONAL OUTLOOK:

The rural consumer values old customs d tradition. Basic

cultural values have not yet faded in rural India. Buying

decisions are highly influenced by social customs, traditions

and beliefs in the rural markets.

6.2 LEVELS OF LITERACY:

The literacy rate is low in rural areas as compared to urban

areas. This comes in way of the marketer in promoting the

product. Advertising is very expensive making it difficult to

communicate with the target audience.

30

6.3 LACK OF PROPER COMMUNICATION AND

INFRASTRUCTURE FACILITIES:

Nearly fifty percent of the villages in the country do not have

all weather roads. The Infrastructure Facilities like roads,

warehouses, and communication system, financial facilities

are inadequate in rural areas making physical distribution

becomes costly.

6.4 MANY LANGUAGES AND DIALECTS:

The number of languages and dialects vary widely from

state to state region to region and probably from district to

district. Even though the numbers of recognized languages

are only 16, the dialects are estimated to be around 850.

6.5 LOW PER CAPITA INCOME:

Even though about 33-35% of gross domestic product is

generated in the rural areas it is shared by 74% of the

population. Hence the per capita incomes are low compared

to the urban areas. Normally the rural consumers spent their

income in basic necessities, which makes them very price

sensitive.

31

6.6 UNDERDEVELOPED PEOPLE AND UNDERDEVELOPED

MARKET

Rural markets, by and large, are characterized by under

developed people and consequently under developed

market. A vast majority of the rural people is tradition bound,

fatalistic, are mired in age-old customs, traditions, habits,

taboos and practices, and are nor financially stable.

6.7 MEDIA FOR RURAL COMMUNICATION

Amongst the mass media, radio was considered to be a

potential medium for communication to the rural people in

the late 50s or early 60s. A large number of rural families in

prosperous areas owned radios and there were also

community radio sets. Radio programs are being extensively

used to diffuse agricultural technology to rural areas.

The advent and expansion of television network, appears to

be offering another potential medium for easy

communication with rural masses.

32

6.8 VASTNESS AND UNEVEN SPREAD

The number of villages in India is more than 5 lakh. Again,

the villages are not uniform in size. Nearly 67 percent of the

villages have only a population of less than 500 persons,

which account for 26 percent of the rural population. About

half of the rural population lives in villages with a population

size ranging from 1,000 to 5,000 persons, such villages

being considered as 'medium-sized'. Only 18 percent of the

population live in villages with populations of 5,00 persons

and above.

6.9 LOGISTICS, STORAGE, HANDLING AND TRANSPORT

Because of the widespread nature and varying size of

villages, organising a distribution set-up poses a number of

questions. Are there good storage facilities available in rural

areas? It has already been seen that the transport facility in

general is poor in rural areas. A leading company, which

distributes its consumable products in rural areas, had even

uses bullock carts and camel backs for physical

transportation of goods to inaccessible areas. In some

33

villages there may not be even a shop from where the

products can be made available to a rural consumer.

6.10 PRODUCT POSITIONING

In a highly heterogeneous market, product positioning

becomes very difficult. Alternatively, the product range

should be very large.

6.11 HIERARCHY OF MARKETS

As seen earlier, rural consumers have identified market

places for different items of their requirements. So there

cannot be uniform distribution policy for all products. It has

been seen that 90 percent of the farmers visit the nearest

town, where an agricultural-produce-assembling market is

situated, at least once a quarter for either selling their

produce or for purchasing their requirements. So towns/

mandi centers with large hinterland villages become the focal

point. Thus, depending upon the purchase habits of rural

people, distribution network for different commodities needs

to be different.

34

6.12 SEASONAL DEMAND

The distribution of any product in the rural areas - either

agricultural inputs, consumables or durables should

necessarily follow a seasonal pattern. Since 75 percent of

rural income is generated through agricultural operation

which is seasonal, the demand pattern is also seasonal. The

demand for consumables and durables will be during the

peak crop harvesting and marketing seasons. This is the

time at which the rural people have substantial cash inflows.

Hence, the distribution should be fairly intensive during peak

crop harvesting and marketing seasons. This arrangement

would result in adequate sales realizations.

7.0 THE MARKETING MIX

The above points indicate the need for subsequent adoption

of 'Marketing principles' as propounded by Kotler and other

management thinkers, with requisite changes suiting the

Indian Market. The marketing mix in the case of Indian rural

markets consists of 4P's i.e. Product, Price, Promotion, Place

combined with 1 P that is Packaging and one R i.e. Retailer

as special focus areas. However, at the base of this

marketing mix will be 2 E's of Education and Empowerment.

35

The traditional marketing hypothesis tends to ignore the

requirement of a developing country's rural needs. The

concept of marketing has to be taken in conjunction with

economic, psychological and social implications.

Hence, the concept of Mega-Marketing where all such

factors are taken into consideration while developing the

Marketing Mix is more relevant to succeed and build

enduring brands. In rural India's case the two most important

considerations are Education and Empowerment

opportunities which traditional approaches of marketing fail

Retailer

Packaging

Product, Place, Price and Promotion

36

to acknowledge. Then only the opportunity provided by the

rural market can be fully tapped.

7.1 PRODUCT:

"Authentic marketing is the art of identifying and

understanding customer needs and creating solutions that

deliver satisfaction to the customers, profits to the producers

and benefits for the stakeholders." …….Philip Kotler

The product offerings have to be not only customized but

also at a different plane altogether in case of rural markets.

The various product levels as outlined by Philips Kotler,

namely Core Benefit, Basic Product, Expected product,

augmented product and Potential Product should be

adequately taken into consideration and the product offerings

should be henceforth customized according to the needs.

37

Most of the times in the urban market the product is offered

at the augmented product level where the objective of the

product offering is to exceed the customer expectation.

But in the rural markets of India, which have been till date

characterized by the absence of the choice, substandard

products and cheap clones of their urban counterparts; the

immediate level to be operated is the Expected product

where his expectations are met. Also, due to the low level of

incomes and literacy levels, it is imperative that the basic

needs of the consumer are met.

For e.g. today in India, 70 percent-of the shampoo market is

Core Benifit

Basic Product

Expected Product

Augmented Product

Potential Product

38

in sachets. Forty percent of rural workers are daily wage

earners and have a daily purchase habit and could do so

because of low unit price packs. In real terms because of

these packs, shampoos cost less than 14 years ago. Here

the product is meeting the basic level of need and providing

the benefit of convenience and economy without enthralling

or overtly exceeding his expectation.

In case of durable goods the rural customers essentially look

for a product that is frill free, sturdy and long lasting and in

case of consumer goods he looks for products that operate

at the basic level and can provide additional benefits in

synchronization with their habits and lifestyle.

For e.g. success of HLL in the soap category indicate the

need to new product development after listening to

customer's needs and not blindly applying the urban

solutions to rural problems.

Following table represents the contribution of rural market to

All-India Market. The packaged products have been

classified into six categories.

39

Contribution of Rural Market to all-India Market

Sl.

No.

Product

Category

Name of Products Contribution in

Percentage

1. Washing and

Cleaning

Material

Detergents 45.5

Soap Cakes/Bars 68.0

Washing Powders 55.0

2. Toiletries Premium Soaps 26.0

Popular Soaps 50.5

Tooth Pastes 39.0

Tooth Powders 24.5

Shampoos 6.5

Safety Razor Blades 50.0

Shaving Rounds 31.0

Shaving Creams 5.0

3. Cosmetics Talcum Powders 43.0

Hair Oils 22.0

Acne Preparations 23.0

4. Food/Beverages Packaged Tea 40.5

Coffee 15.0

Milk Foods 20.0

Weaning Foods 18.0

Beverages 8.0

5. OTC Products

(Over the

Glucose Powders 42.0

Rubefacients 38.0

40

counter) Cold/Analgesics 45.0

6. Miscellaneous Batteries 56.0

Torches 33.0

7.2 PROMOTION:

A. Effective Communication

"If you're trying to persuade people to do something, or buy

something, it seems to me you should use their language,

the language in which they think." ……David Ogilvy

Companies cannot rely on conventional advertising

techniques in India's rural areas where only one in every

three households owns a television set and more than half of

all villagers are illiterate. Instead, companies need to turn to

more innovative methods of advertising to reach their

potential customer base.

Also what appeals to the urban customer may not appeal to

the rural customer due to varying lifestyles. So again, even if

the media reaches him, there might not be an impact as it

may fail to attract him as fails to connect to it due to the

lifestyles being different. Few of the available options in the

traditional media are:

41

o Puppetry,

o Folk Theater & Song,

o Wall Painting,

o Demonstration,

o Posters,

o Agricultural Games,

o NGO's network

o Elephant March

o Rural Van

The need for innovative means of communication in rural

area can be appreciated by the case study where

advertisement on hand pumps and ponds helped in selling

more soaps to rural customers.

B. Customization:

Combining the above two points we would like to stress the

need to concentrate on both product development and

communication in order to win the mind space of the average

rural Indian. Again a concept touted by the marketing gurus

regarding product and promotion strategies in International

42

markets (analogy extendable to domestic companies moving

from urban to rural areas as well) can be used.

Product

Do not change Product

Adapt Product

Develop new

Product

Promotion

Do not change

promotion

Straight Extension Product

AdaptationProduct

InventionAdapt Promotion

Communication Adaptation

Dual Adaptation

In order to achieve Success Company should avoid straight

extension. Rather some form of adaptation be it in preferably

product or communication or both. In case of deep pockets,

product inventions suited for Indian conditions would be able

to generate more returns rather then a simple copied

strategy from abroad or urban markets.

7.3 PLACE: PHYSICAL DISTRIBUTION AND CHANNEL

MANAGEMENT

For most companies wanting to enter the rural markets,

distribution poses a serious problem. Distribution costs and

non-availability of retail outlets are major problems faced by

the marketers. The various options in distribution in the

43

rural markets, which will be out of the ambit proposed

traditionally by the marketing gurus, would be: -

a.) Rural Marketing Vehicle (RMV) Marketers need to

make more on- ground contact with their target

audience as well as make demonstration of products

as consumers in rural markets rely on the 'touch and

feel' experience. One of the ways could be using

company delivery vans which can serve both the

purposes

b.) Melas and Haats:- According to the Indian Market

Research Bureau, around 8000 melas are held in rural

India every year and annual sales at melas amount to

RS.3,500 crore. Besides these melas, rural markets

have the practice of fixing specific days in a week as

Market Days when exchange of goods and services

are carried out. Also, one satellite town where people

prefer to go to buy their durable commodities generally

serves every region consisting of several villages.

Marketing managers can use these feeder towns they

will easily be able to cover a large section of the rural

population.

44

The need for innovative distribution techniques to reengineer

the existing distribution processes can be appreciated by

studying the Project streamline as used by HLL in increasing

its reach by adding sub-stockists in its existing distribution.

7.4 PRICING THE PRODUCT:

A significant portion of the rural population is paid in daily

wages.

Daily wage earners tend to have little stock of money, and

therefore tend to make purchases only to meet their daily

needs. The implication is that pack sizes and price points are

critical to sales, and importantly, that rural consumers view

the purchase-tradeoff dilemma across a much wider range of

product categories.

As a result, the nature of competition is much greater; a

beverage manufacturer is not only competing with other

manufacturers in its category, but also other products that

consumers may consider one-off luxury purchases such as

shampoo. So marketer will have to examine method by

which he can make the product more affordable.

45

In the case of consumer durable one way is to work through

rural bank and offer higher purchase terms to consumer. In

short, the Value for money is the most Important concept that

will differentiate the successful brand from the rest.

As explained above in the diagram, a budget-seeking

consumer in the rural India takes into consideration first of all

the budget available to him and then warranty and after sales

service before settling on the brand name and model. Thus,

the concept of the product fitting into one's budget is most

important consideration while making a purchase decision.

Model

Technology

Image

Budget

Brand Name

Warranty

After Sales

Brand Name

Model

Budget

Status – seeking Consumer

Budget - conscious Consumer

46

7.5 THE 5TH 'P' OF MARKETING- I.E. PACKAGING

The reason for putting packaging out of the product as a

special focus area is that due to low literacy levels the

importance Of symbols and packaging become more

important in having a high brand recall. Thus, after the 4 p of

marketing, it is 5th P, which is packaging going to playa key

role in rural markets. Also since the rural customers are

usually daily wage earners and they don't have monthly

incomes like the ones in the urban areas have. So the

packaging is in smaller units and lesser-priced packs that

they can afford given their kind of income streams.

7.6 RETAILER: THE COG IN THE WHEEL

Personal & Environmental Factors

Psychological

Personal Social Cultural

Problem Recognition

Information Seeking

Evaluation of Alternatives

Purchase Decision

Post Purchase Evaluation

Retailer

Marketing Factors

Product Pricing Promotion Place

47

Data on rural consumer buying behavior indicates that the

rural retailer influences 35% of purchase occasions.

Therefore, sheer product availability can determine brand

choice, volumes and market share. So, role of retailer is also

very important in rural markets, because he would be one

who provides information regarding quantity of pack,

promotional schemes, influences of advertisement,

consumer feedback etc to company. So the retailer plays a

very big role here. The rural customer goes to the same shop

always to buy his things. And there is a very strong bonding

in terms of trust between the two. The buying behavior is

also such that the customer doesn't ask for the things by

brand but like -"paanch rupey waali chaye dena. Now it is

on the retailer to push whatever brand he wants to push as

they can influence the buyer very easily and very strongly on

the preferences. Hence, there is the need to get his support

through proper trade promotion activities to get more retail

shelf and convincing on his side to make the customer buy

the brand.

48

8.0 CORE PROBLEM

The two biggest problems that the rural India faces are

Illiteracy and Unemployment. To integrate them in one's

Marketing mix ensures that the product or service offered

ensures wider participation and better chances of success.

Hence, it gives the rise to the concept of two E's: Education

and Empowerment at the core of our improved Marketing

Mix. This concept presents an opportunity to improve the life

of rural Indians and thus, ensure that they actively patronize

the company's products.

A. Education:

Since vast majority of rural India lacks even basic education

levels and modern outlook, it is important that the company

introducing a new product should look at building category

and not just selling products. It is important to consistently

drive home the point that the customer's life is going to be

enhanced because of product's consumption.

B. Empowerment:

Because of huge disguised unemployment levels in

agriculture and lack of employment opportunities in other

sectors, any concept which uses any scope for income

49

generation would be favored more than the traditional

marketing mix concepts. For eg HLL runs the program of

Self-Help Groups (SHG), which operate like direct-to-home

distributors. The model consists of groups of (1520) villagers

below the poverty line (Rs.750 per month) taking microcredit

from banks, and using that to buy HLL products, which they

will then directly sell to consumers. Similarly ITC aims to help

improve farmers' incomes and then help it's own business.

Case: E-Choupals ITC has started up to over 2,000 e-

choupals across India at a cost of about Rs 1.5 lakh (USD

3,400) each in villages. It is now adding 5 a day, with plans

to cover 100,000 Indian villages in 5 years (India has a total

of 600,000 villages). It is improving Incomes of farmers by:

Wiring rural communities with computer access to its e-

trading platform

Offering better on-line prices than auctions for produce

Providing quality seeds and on-line agricultural advice.

Next, it aims to help its own business by:

Growing its commodities business overseas

Gaining access to rural consumers

50

Selling goods and services back to the farmers

Thus, it is able to break the vicious circle of Low production,

income investment and subsequently low production into

high-high scenario as thus increasing consumption for its

products.

9.0 RURAL MARKETING STRATEGIES

Like urban markets, it is possible to segment the rural

market also on the basis of demographic profile, socio-

economic characteristics, exposure to modernization, and

Low Production

Low Investment in Farm

Low Income

Low Consumption

High Production

High Investment in Farm

High Income

High Consumption

51

income levels. Given the rural occupation pattern, there are

certain specific characteristics, which have to be taken into

account. Some of the typical characteristics, include

o Landholding pattern (size of holding)

o Irrigation facilities (irrigated/un-irrigated)

o Progressiveness of the farmers (progressive/ semi-

progressive/traditional)

o Cropping pattern (predominantly commercial

crops/food crops)

o Mix of enterprises (mono culture/diversified)

o Education levels (educated/literate/illiterate)

o Proximity to cities/towns (population in villages near

cities/towns and mandi centers/ remote villages)

o Sociological factors (landlord/ small farmers/tenants)

o Occupation categories (farmers craftsmen and

artisans/ salaried employees)

Since income is the deciding factors of the level of

consumption, an income-based segmentation will be very

appropriate in the case of rural market also. Where nearly 75

52

percent of the income-generation is from land in rural areas,

land holding pattern or size of holdings can be used in proxy

as a basis for segmentation.

The classification of farmers based on size of land holding is

easily available from published sources and is generally

adopted. The land-holding based segmentation is as follows

o Marginal farmers holding up to one hectare.

o Small farmers holding from 1 to 2 hectares.

o Semi-medium farmers holding 2 to 4 hectares.

o Medium farmers holding from 4 to 10 hectares.

o Large farmers holding above 10 hectares.

The landless consumers, like agricultural laborers and rural

craftsmen and artisans, can be treated as one segment.

Even though this method of segmentation is simple, it suffers

from a few defects. These are:

o Data pertains only to land owned and does not reflect

the area operated, since there is a trend of leasing in or

leasing out of land in rural areas.

o Data does not say anything about the nature of land

(whether irrigated or un-irrigated).

53

o Does not indicate the cropping pattern, like the area

devoted to commercial crops and food crops.

o Segmentation does not mention the subsidiary

enterprises on the farm like sericulture, dairy animals,

sheep and goats.

o Data also does not indicate the location of the land

(situated in arid zones or in high rainfall areas).

These factors can cause considerable different in income for

a given size of holding. Yet, in the absence of data on these

factors, segmentation based on land holding appears to be

the best proxy for income.

Gaikwad adopted a sociological basis to study the rural

market by dividing it into six segments. These are

o Proprietors of land - which includes feudal tribute

gatherers like zamindars, rich money lenders and

traders who acquired large tracts of land, and

companies or persons who own large plantations.

o Rich farmers who belong to the dominant caste of the

area.

54

o Small peasants or marginal farmers owning

uneconomic land holdings.

o Tenant farmers operating on rented lands belonging to

the large landholders and working on small,

uneconomic land holdings.

o Agricultural laborers who work on the lands of

landlords and rich farmers.

o Artisans and others including the unemployed.

10.0 ADVERTISING SPEND

As per industry estimates, the total advertising spend in India

in 2004 was approximately INR 118 billion, a growth of 13.4

percent over the last year. However, India continues to have

a low 'advertising spend to GDP' ratio compared to other

economies, underscoring the untapped potential.

Relative advertising spend for various countries (USD billion)

GDP TOTAL AD

SPEND

AD SPENT

TO GDP

Australia 412 4 1.0%

China 904 6 0.6%

Hong Kong 164 4 2.1%

55

India 485 2 0.5%

Malaysia 88 1 1.0%

Singapore 86 1 0.9%

South Korea 477 4 0.8%

USA 10,384 134 1.3%

France 132 1 0.8%

Germany 1,984 16 0.8%

United

Kingdom

1560 14 0.9%

In 2004, the advertising spends for India stood at 0.50

percent of the GDP, up from 0.48 percent the previous year.

This is expected to increase significantly due to rising

consumerism and growing interest from global brands

attracted by this huge and expanding market.

56

Total advertising spend and GDP (In %)

Given the increasing number of media channels that

consumers are exposed to, brands will have to advertise

more frequently and across more channels to generate

brand recall.

As television channels have multiplied and the content

available has become more diverse in the last decade, their

viewer ship has increased, niche channels have emerged

targeting specific demographic segments and the cost of

advertising on television has reduced.

57

3906 39734496 4774

68307875 8041 7673

8994

10914

12759

14516

Number of brands advertised on television

While the broadcasters can dwell on this shared optimism,

they must also recognize that advertising budgets are very

sensitive to economic downturns. Advertising budgets are

not only easily brought down, but the productivity of such

expenses is also challenged.

Companies are increasingly demanding their advertising

agencies to link their fees to performance indicators such as

sales increments. With increasing access to state-of-the-art

technologies, addressability issues are being put to test,

thereby exposing the limitations of current media research

findings and measuring the true efficacy of media.

58

11.0 BROAD STRATEGIES OF RURAL ADVERTISING

The prevalent ways of advertising in rural areas through

different existing media and all the alternative and innovative

media broadly revolve around three strategies, namely,

o Influencer strategy

o Participatory strategy

o Show-and-tell strategy

11.1 INFLUENCER STRATEGY:

The role of the influencer or influencing communication

cannot be ignored as far as rural India is concerned. The

advertisements that revolve around this very strategy

actually depend on the influence of different influential

people and/or events in the villages to put across the

message powerfully with more effect and purchase intention.

An example of this kind of advertisement may be brand

endorsement by any influential person in the village like the

'Mukhiya' or the 'school master'.

59

11.2 PARTICIPATORY STRATEGY:

Events like different festivals and different games and sports

competitions actually have a high participation level in the

rural India as other sources of entertainment are very less in

those areas. So, these events and shows offer great

opportunity to reach rural India cost effectively.

Different brands sponsor different events and shows in rural

villages which is actually a cost-effective way to advertise

with the participatory strategy.

11.3 SHOW-N-TELL STRATEGY:

Many brands are venturing into different ways to educate

their rural consumers about their brands and their usage

through different shows and events. This kind of initiatives

actually creates huge awareness about the brand among the

interested people in the rural India. Different health related

advertisements like Polio awareness and AIDS awareness

programs involve a 'show-n-tell' strategy of advertising.

12.0 EFFECTIVE COMMUNICATION

An important tool to reach out to the rural audience is

through effective communication. "A rural consumer is brand

60

loyal and understands symbols better. This also makes it

easy to sell look-alike", says Mr. R.V Rajan, CMD, Anugrah

Madison Advertising.

The rural audience has matured enough to understand the

communication developed for the urban markets, especially

with reference to FMCG products. Television has been a

major effective communication system for rural mass and, as

a result, companies should identify themselves with their

advertisements.

Advertisements touching the emotions of the rural folks, it is

argued, could drive a quantum jump in sales. There is a

need to differentiate the brand according to regional

disparities. The differentiation may not necessarily be in

terms of product content. It may also be in terms of

packaging, communication or association with the brand.

The brand has to be made relevant by understanding local

needs. Even offering the same product in different regions

with different brand names could be adopted as a strategy.

At times it is difficult to pass on an innovation over an

existing product to the rural consumer unlike his urban

61

counterpart - like increased calcium or herbal content or a

germ-control formula in toothpaste.

According to Mr. Shivakumar, HLL, the four factors which

influence demand in rural India are - access, attitude,

awareness and Affluence. HLL has successfully used this to

influence the rural market for its shampoos in sachets.

The sachet strategy has proved so successful that,

according to an ORG - MARG data, 95 per cent of total

shampoo sales in rural India is by sachets. The company

had developed a direct access to markets through wholesale

channel and created awareness through media,

demonstration and on ground contact.

This changed the attitude of the 28 villagers. Today, the

young and the educated in the villages are already large in

number. And this number is increasing. Already, ~O per cent

of all those graduating from colleges are rural youth. They

are the decision makers and are not very different in

education, exposure, attitudes and aspirations from their

counterparts at least in smaller cities and towns.

Companies cannot rely on conventional advertising

techniques in India's rural areas where only one in every

62

three households owns a television set and more than half of

all villagers are illiterate.

Instead, companies need to turn to more innovative methods

of advertising to reach their potential customer base. Also

what appeals to the urban customer may not appeal to the

rural customer due to varying lifestyles. So again, even if the

media reaches him, there might not be an impact as it may

fail to attract him as fails to connect to it due to the lifestyles

being different.

Few of the available options in the traditional media are

o Puppetry,

o Folk Theater & Song,

o Wall Painting,

o Demonstration, Posters,

o Agricultural Games,

o NGO's network 29

63

PART III PROJECT OVERVIEW

1.0 INTRODUCTION

Rural and cottage industries and rural artisans are very

significant to the rural economy. They have proved to be a

source of employment and income-generation for the

landless population who possesses certain skills and talents

acquired over generations. Most states have specialized in

products like lacquerware, bidriware, rosewood inlay and

ivory items of Karnataka; metal craft and brassware of Uttar

Pradesh; bandhani and jewellery of Rajasthan; carpets,

tapestry and shawls of Kashmir; bell-metal lamps of Kerala;

and bronze idols of Tamil Nadu and so on. Most of these

skills are family oriented and passed on from generation to

generation. Such products have aesthetic value, are priced

higher and have a good export market.

The significance of rural/cottage industries and rural artisan

products can be enumerated as follows.

o Provides a subsidiary occupation to the rural

population.

64

o Enables the rural population to supplement their

slender incomes.

o Provides employment during off-season, droughts and

famines.

o Develops the rural talents, helps uphold our culture.

o Reduces evils of urban industrialization.

o Suits a country like India very well.

There is tremendous scope for developing such rural, village

and cottage industries to augment the employment and

income of the people in rural areas.

2.0 OBJECTIVE

The Products in the rural market should essentially operate

at the basic and expected level of product classification.

They should essentially meet the basic needs of the

consumer and should be a no-frill product, as the consumer

would not be valuing much any further addition to the product

concept. Companies also face a daunting task in

communicating about their products to the consumer due to

lack of literacy and failure of traditional media to penetrate in

the rural households.

65

Hence, the advertising mix has to be more towards non--

conventional yet effective medium like Puppetry, Folk

Theater & Song, Wall Painting, Demonstration, Posters,

Agricultural Games, NGO's network, etc. Thus overall, either

the product or communication or preferably both need to be

customized to target the rural customer.

The object of the research “A Study on Consumer

Behavior and Marketing Strategy for Rural India” is to

study:

o The changing profile of rural consumers;

o Importance of Rural Media and Distribution system- its

problems and opportunities;

o Knowing about latest advertisement and Message in

the advertisement;

o Effect of advertisements in the buying pattern (Product

adaptation); and

o Interpreting the information collected and

recommending the ways for effective marketing

strategies.

66

3.0 RESEARCH METHODOLOGY

The project was completed in the following stages:

A. Stage 1: Understanding the project:

Firstly the detailed information about the working style,

lifestyle, buying and consumption pattern in rural areas were

collected from literatures and elaborated. This provides a

better picture of the nature of work to be done.

B. Stage 2: Problem definition and research design:

The objectives, as briefed earlier, were set and sampling,

methodology was determined along with the expert guidance

of the project guide.

C. Stage 3: Data collection:

Villages, Kirana Shops, Chaupaals, etc were visited for end

consumers and data was collected about:

1. The changing profile of rural consumers;

2. Importance of Rural Media and Distribution system- its

problems and opportunities;

3. Knowing about latest advertisement;

4. Message in the advertisement;

67

5. Knowing about the media where they saw latest

advertisements;

6. Effect of advertisements in the buying pattern (Product

adaptation);

7. Is advertisement changing their life style?

The respondent's were found to be extremely happy with

their daily work at most of the places. However, it was indeed

very thoughtful and cooperative of a few of them who gave

adequate information to accomplish the project mission.

D. Stage 4: Data analysis:

Data until analyzed is of no good. Analysis was done and

data was interpreted and inferences were drawn and

transformed to meaningful information to help management

to get a vivid picture and to make accurate decision

thereafter.

A descriptive approach has been adopted in the study. The

data has been generated through extensive survey method.

Sufficient time was given at each village for extracting the

desired information.

68

4.0 LIMITATIONS

Sample size is very small. Accuracy of findings depends

upon extent consumers disclose the information required. It

is obvious that while interpreting the responses researcher

may deviate and hence biasness would have occurred.

5.0 ANALYSING THE SYSTEM

5.1 METHODS FOLLOWED TRADITIONALLY

Traditional methods of rural marketing make an interesting

study and they ought to be analyzed carefully to draw

relevant conclusions. Conventionally marketers have used

the following tools to make rural inroads:

Use of few select rural distributors and retailers to

stock their goods but no direct interaction with

prospective consumer.

Use of print media or radio but no alternate form of

advertising for promoting their brands

More focus on price of product but less attention

devoted to quality or durability

Same product features for urban and rural setting with

no customization for rural areas despite differences in

69

the market environment.

Low frequency of marketing campaigns.

Little uses of village congregations like haats and

me/as to sell the products.

More focus on men as decision makers and buyers.

5.2 CHANGING ATTITUDE OF THE RURAL CONSUMERS:

RURAL CONSUMERISM

Due to the increase in literacy rates and the penetration of

conventional media, the perception and attitude of the rural

consumer is changing, moving towards proper consumerism.

Not only this, attitude and consumption habits of rural

consumers are also changing and becoming more modern in

an urban sense.

Changing Attitude

Past Present

Simple living and high

thinking

Consume While it lasts

Poverty stricken chokes Urbane choices

Collectivity Individuality

Simplicity Status driven

Security Risk taking

Achievement Achievement with

70

accumulation

Patience Expediency, convenience

Restrain Indulgence

Durability Durability with aesthetic

5.3 WHAT IS NEED OF ADVERTISING IN RURAL INDIA?

o About 74% of the population resides in Rural India.

o 50% of the national income comes from rural areas.

o 60%of agriculture income share comes from rural

India.

o Metros and other principal cities, overwhelmed by the

competition, are Getting saturated.

o Necessity to penetrate the semi urban and rural

markets.

o These have financially grown better and carry great

potential.

71

5.4 PROBLEMS/LIMITATIONS IN ADVERTISING AND

MARKETING IN RURAL INDIA

A. Problems at strategic level:

o Unknown rural boundaries with potential markets -

This is due to the lack of systematic data and mapping

problems

o Unknown customer profile -Non familiarity with the

customer's psyche, life style, dialect differences etc.

creates problems in right messaging.

o Unknown effectiveness of media tools -due to lack

of information on the effectiveness of print, electronic

and outdoor media, problems come in deciding the

right media mix

o Even if these problems are addressed by the conduct

of local survey, marketers face problems at the

implementation level.

B. Problems at the implementation level:

o Lack of infrastructure -Poor conditions of roads and

limited means of transport or other connectivity related

problems.

72

o High cost inputs -due to non availability of route

maps.

o Non acceptability of rural audience in campaigns

because of huge gap in the profile of the implementer

and the target audience

o Lack of trust on the implementer because of absence

of local references

o Lack of structured monitoring and feedback

mechanism: As per 2001 census there are 6, 38,365

villages in India.

5.5 LIFESTYLE OF RURAL AREAS:

o Mainly mainly joint families consisting of 8 to 20

members characterize lifestyle.

o Their main source of income is agriculture. During the

harvesting season they are cash rich and do most of

the shopping at haats and mandies.

o Haats are main markets that are held twice or thrice a

week, covering villages under 10 to 20km of radius.

73

o Mandis are stationery markets held daily. It is where

buying and selling of day-to-day commodities takes

place.

5.6 MEDIA EFFECTIVENESS

A. Print media

o Reading patterns are local in nature.

o National newspapers have negligible circulation.

o Literate people like school teachers, gram pramukh or

Sarpanch are opinion leaders.

B. Electronic media:

It is less effective due to

Lack of power supply

Lack of connectivity

C. Outdoor media

o Executed at the point of presence of the target

audience

o Static - Helps in long term brand recall. This includes

tasveers, tin plates, posters and tiles etc.

74

o Interactive - has a long lasting emotional appeal.

o helps in understanding of the needs and expectations

of the masses

o This includes road shows, skits and other

entertainment oriented activities.

5.7 SOME FACTS ABOUT THE RURAL MARKET

70 % of India's population lives in 627000 villages in rural

areas. 90 % of the rural population is concentrated in villages

with a population of less than 2000. According to the NCAER

projections, the number of middle and high-income

households in rural India is expected to grow from 80 million

to 111 million by 2007. In urban India, the same is expected

to grow from 46 million to 59 million.

Packaged consumer products: More than Rs. 2000 crores

Market for Non-food items: Rs. 20000 crores growing at

2.5% p.a.

Consumption of pesticides: 68,000 tonnes, growing at

12%p.a.

75

5.8 SHARE OF RURAL MARKET IN OVERALL CONSUMPTION

Toiletries Safety Razor Blades 48%

Premium Soaps 24%

Tooth Paste 20% Hair Oil 20%

OTC products

Medicated dress 25% Cold Analgesic 42%

Antiseptic Creams 28%

Miscellaneous

Batteries 52%

Torches 30%

5.9 PRODUCT ADOPTION

Hair products were introduced to rural India in an attempt to

capitalize on a culture where hair grooming is taken

extremely seriously by women. While rural women may wear

faded saris and little jewelry, few step out without ensuring

that their hair is in place.

Consumer goods companies introduced a transplanted

product from developed markets, the 2-in-1

shampoo/conditioner. Companies thought that women would

be attracted to this product because it was cost-effective;

however, initial sales were dismal.

76

What companies failed to recognize is that most rural

consumers had previously never used shampoo and did not

value or understand the full benefits of conditioner. However,

several years back, Hindustan Lever focused on product

development strategies for rural consumers who still did not

use shampoo in India.

Their research indicated that a prevailing consumer habit in

rural India was to use soap for hair and body care. Rather

than try to change instilled consumer behavior, product

developers focused on creating an opportunity. Consumers

wanted a product that was convenient and low-cost. The

result was a new 2-in-1 soap, a product that cleans the hair

and body, and is targeted towards consumers in rural areas.

6.0 CONCLUSION AND RECOMMENDATIONS

The paper presents the modified version of Philip Kotler's

famous marketing mix consisting of 4P's. The focus is on its

modification and subsequent customization to Indian rural

market's perspective. The 4P's have to be modified to

include 1 P i.e. Packaging and 1 R i.e. Retailer as special

focus areas.

77

Further to ensure the sustainability of the marketing mix two

E's i.e. Education and Empowerment have to be at the core

as they help in generating widespread participation from the

rural clientele by enhancing their standard of living.

The Products in the rural market should essentially operate

at the basic and expected level of product classification.

They should essentially meet the basic needs of the

consumer and should be a no-frill product, as the consumer

would not be valuing much any further addition to the product

concept.

Companies also face a daunting task in communicating

about their products to the consumer due to lack of literacy

and failure of traditional media to penetrate in the rural

households.

Hence, the advertising mix has to be more towards non-

conventional yet effective medium like Puppetry, Folk

Theater & Song, Wall Painting, Demonstration, Posters,

Agricultural Games, NGO's network, etc.

Thus overall either the product or communication or

preferably both need to be customized to target the rural

customer. In terms of physical distribution due to lack of

78

infrastructure the costs are very exorbitant to reach the rural

customer.

Thus, mediums like rural marketing vehicles and meals and

haats provide better opportunities to meet customer needs.

Also the existing distribution would need a transformation to

achieve the required penetration levels as success of Project

Streamline of HLL has shown.

Since, the value for money concept is more important rural

customers, there has to be an approach of treating customer

as budget seeking consumer. Here, fitting the consumer

needs into an affordable price point is pursued first and then

other features of product are fitted in. Similarly, packaging

has to meet customer needs of better brand recall and

introducing favorable price points.

At the same time the importance of retailer has to be

recognized where he is one of the most major influencer is

customer's decision-making process. He acts as the friend

and guide in this process and hence, needs to be managed

effectively through promotion programs and incentives to

promote the brand of a company.

79

In order to bridge the gap between Philip Kotler and

countryside Indian what is needed the appreciation of unique

features of rural India and thus, responding to them by

making adequate improvements in the application of the

marketing concepts learnt in the class.

For achieving the desired results of capturing the rural

customer a comprehensive approach to the traditional

marketing concepts has to be taken. This marketing mix has

to be responsive to customer's needs and fit into his life as a

tool of self-enhancement.

To be successful the concept of marketing has to be taken in

conjunction with its economic, psychological and social

implications. As per NCAER projections, the number of

middle and high-income households in rural India is

expected to grow from 80 million to 111 million by 2007.

In urban India, the same is expected to grow from 46 million

to 59 million. Thus, the absolute size of rural India is

expected to be double that of urban India. The study on

ownership of goods indicates the same trend. It segments

durables under three groups - (1) necessary products -

Transistors, wristwatch and bicycle, (2) Emerging products -

80

B&W TV and cassette recorder, (3) Lifestyle products - CTV

and refrigerators. Marketers have to depend on rural India for

the first two categories for growth and size. Even in lifestyle

products, rural India will be significant over next five years.

Thus, according to us it is the application of the marketing

concepts and not the concepts themselves that need to be

looked at. Often, in the rural marketplace it is the application

of these concepts, which differs the winning companies from

the rest of the pack. They are in a position to view their

marketing mix in the form of 4+1 P and 1 R, and thereby

customize their offerings to the rural market. Further, to

ensure a wider participation the Marketing mix at its base

should have Education and Empowerment as its core. In

order to bridge the gap between Philip Kotler and

countryside Indian what is needed the appreciation of

unique features of rural India and thus, responding to them

by adequate improvements in the application of the

marketing concepts learnt in the class.

81

PART IV APPENDICES

1.0 CLASSIFICATION OF RURAL/ COTTAGE INDUSRTY

Broadly the rural/cottage industries can be classified under

the following heads:

a) Agro-based Ghani oil, processing of cereals and pulses, cane gur and Khandsari, palm gur, bee-keeping, coir, fruit processing and preservation and sericulture.

b) Textiles Handlooms, polyvastra and Khadi.

c) Wood related Match industry, carpentry, bamboo and cane work and handmade paper.

d) Metal wares Aluminium vessels, brassware, black smithy and agricultural tools.

e) Leather Leather processing.

f) Pottery and ceramic

g) Chemicals Inks and dyes

h) Fishing Dried fish

i) Miscellaneous Non-edible oil soaps, lime, gobar Gas, minor forest produces, shellac, gums and resins.

82

2.0 STRANGE FACT: AMAZING INNOVATOR

With a queer psychology of purchase and usage, Indian rural

market is still a puzzle to marketers. In many a case, it

stretches its imagination to find surprisingly different uses of

some of the products. And the red-faced marketers admit

that they actually sell their products in areas they would

otherwise find difficult, simply because there are other uses

for them. For instance.

Buffaloes displayed at the haats for sale are dyed an

immaculate black with Godrej hair dye.

Horlicks is used as a health beverage to fatten up

cattle in Bihar.

In villages of Punjab, washing machines are being

used to make frothy lassi in bulk.

Iodex is rubbed into the skins of animals after a hard

day's work to relieve Muscular pain.

3.0 THOMPSON RURAL MARKET INDEX

A successful attempt in the direction assessing the potential

of rural markets has been made by Hindustan Thompson

Associates Limited. They have developed the 'Thompson

Rural Market Index' as a guide to rural marketers. They

83

made the first attempt in the year 1972. Since most of the

data were available to district level, they collected these data

for 334 districts. Then they identified 11 factors to assess the

potential. This was not considered to be a very satisfactory

approach, hence another attempt was made in the year

1986. During the second attempt, they considered 26 factors

for constructing the rural market index. This has been

published under the name 'Thompson Rural Market Index' in

1986. Herein they have considered 383 of the 412 districts in

the country, since data was available for only these districts.

Ultimately, Rural Market Index was worked out for 335

districts. The districts not taken into account either did not

constitute rural areas or had a very small rural population.

The data on the following indicators was taken for

constructing the Rural Market Index.

A. Indicators Considered for Rural Market Index

1. Area of the district in sq.km.

B. Demographics

2. Population : Rural No.

3. Males : No.

4. Females :

84

5. Density per sq. km.

6. Percentage distribution of population by population

strata

7. Number of Villages

8. Percentage distribution of villages by population

strata

9. Literate : Rural No.

10. Percent of literacy

11. Literate : Males

12. Literate : Females

C. Occupation Pattern

13. Cultivators No.

14. Agricultural laborers

15. Non-agricultural laborers

D. Agricultural Related Data

16. Gross cropped areas in hectares

17. Gross irrigated area in hectares

18. Area under non-food crops in hectares

19. Average size of operational holdings in hectares

E. Agricultural Inputs Data

20. Pump sets and tube wells No.

85

21. Fertilizer consumption in metric tones

22. No. o tractors

F. Rural Electrification Data

23. Percentage of villages electrified

G. Commercial Banks Data

24. No. of rural branches

25. Deposits in Rs. lakh

26. Advances in Rs. lakh

Since the major occupation in rural areas is agriculture, they

also collected the value of agricultural output for each district

from the Centre for Monitoring Indian Economy, which was

the overall indicator of rural market potential. To validate the

assumption that value of agricultural output is a holistic

indicator of rural market potential, a statistical correlation

analysis was conducted with 10 selected variables related to

agriculture production. The selected ten agriculture variables

were

o Agricultural laborers

o Gross cropped area

o Gross irrigated area

86

o Area under non-food crops

o Pump sets

o Fertilizer consumption

o Tractors

o Rural credit

o Rural deposits and

o Villages electrified.

It was found that these ten variables had a very high

correlation with the value of agricultural output ranging from

0.52 to 0.79. Thompson rural market index book also

presents the data for each district on the 26 variables

chosen. What is needed now is to update the data chosen to

know the current potential.

Based on the index number, districts have been classified as

A, B, C, D and E class markets. The following table

summarizes the classification of districts and the proportion

of rural market they account for.

It is significant to not that the index relies on the ten factors

related to agriculture, which have been chosen for the

87

correlation analysis. Any change happening in these

variables like, increases in irrigated area or increase in area

under commercial crops will have a positive impact on the

potential. In other words, any change in these factors on the

positive side will increase the value of agricultural output,

there by increasing the income of the rural people.

Classification of rural markets

Class of Markets

Index RangeNo. of

DistrictsPercentage of

market

A 60.00 to 100.00 22 17.8

B 40.00 to 59.99 39 20.5

C 30.00 to 39.99 54 20.4

D 20.00 29.99 86 23.0

E Below 20.00 154 18.0

TOTAL 355 100.0

The index can be easily updated with current data and can

be used for evolving marketing strategies. One can probably

add other factors like road length per sq.km. in the district,

railway lines per sq.km. number of post offices, number of

television sets, number of two wheelers, etc. to have further

validation of the potential given by the index.

To summarize, rural demand has peculiar characteristics in

terms of its spread, literacy rate, hierarchy of markets, per

88

capita income, etc., which differentiate it from urban demand.

Since nearly 70 to 75% of income generation in rural areas is

through agriculture and agriculture-related activities, the

variables related to agriculture can be safely assumed to be

the indicators of the potential of rural market. The Rural

Market Index prepared by Hindustan Thompson Associates

has proved to be a very useful guide for evaluating the

potential of the rural market.

4.0 PRODUCT REDESIGN OR MODIFICATION NEEDS

There are a number of suggestions with regard to designing

or modification of products for rural consumers. These

suggestions need serious consideration if the rural market's

potential has to be exploited. For example a suggestion with

regard to pressure cookers suggests provision of two long

handles on both sides taking into consideration the cooking

habits of rural women. It is estimated by Hawkins pressure

cooker manufacturers that nearly 43 percent of their

pressure cookers are used in rural areas even though they

were purchased in urban areas. Most urban households use

LPG gas stove or kerosene stoves for cooking. When the

89

cooker has to be removed from fire the flam can be

controlled to avoid the hands getting burnt. This is not

possible in rural households, since most of them use

firewood or charcoal. This creates a risk of getting the hands

burnt while removing the cooker. Hence the suggestion of

having two long handles on both sides. Similarly no

manufacturer has so far thought of a common soap for

bathing and washing. Given the incomes of the rural people

this may be a good idea. Even to get such ideas one has to

observe and understand the habits, customs, traditions,

beliefs and taboos followed by rural consumers. In use

sophisticated washing machines as butter churners. Similarly

many farmers in Uttar Pradesh used black hair dye to apply

on the buffaloes before sale, to give them a healthy look.

5.0 TYPES OF COOPERATIVE ORGANISATIONS

Statistics indicate that there are about 5,03,9652

cooperatives at all levels and of this, 5,00,997 are primary or

village level societies. This amounts to approximately a

society of some type of other in every village. Of these, the

Primary Agricultural Credit Societies (PACS) are

90

predominant, accounting for 1,39,512 societies. The rest are

non-credit societies, engaged in milk collection, marketing of

agricultural produce, agro processing and other activities.

Other types of societies include:

o Primary agricultural credit societies

o Cooperative marketing societies

o Cooperative processing societies.

o Multi-purpose cooperative societies

o Arts and craftsmen cooperative societies

o Rural industrial cooperative societies.

o Consumers cooperative societies

o Cooperative fair price shops

o Cooperative weaver societies

o Cooperative cotton Procurement, ginning and baling

societies

o Farmers' service cooperative societies.

The activities of the societies include:

o Providing credit to farmers, artisans and crafts people

91

o Supplying agricultural inputs like fertilizers, pesticides

etc.

o Marketing of agricultural produce

o Processing and marketing of agricultural produce

o Supply of essential commodities like sugar, edible oils,

kerosene, etc.

o Supply of raw materials to artisans, craftspeople and

rural industries.

o Marketing of rural industrial products

o Serving as retail outlets for consumables and durables.

6.0 SHARE OF COOPERATIVES IN NATIONAL ECONOMY

Since Cooperative organizations exist in every village in

some form or another, their share in the national economy is

high. As per the statistics maintained by National

Cooperative Union of India, the apex body of all Indian

cooperatives, 100 percent of the rural network has been

covered, and 67 percent of all rural households are members

of one cooperative society or the other. In other words, over

92

50 percent of rural adults are members of cooperative

societies.

Since the cooperative organizations deal with several

aspects, it is only pertinent to study the role played by them

in the national economy.

It can be seen from the table that in some sectors of

economic activity, cooperatives have a commanding share

as and processing, cotton procurement, ginning and baling

and storage facility at village-level. For all the activities under

the cooperative aegis, there is adequate support by the

central and state governments. This apart, the loan

availability to this sector is appreciable from NABARD and

NCDC.

7.0 IMPACT OF COOPERATIVES ON RURAL MARKETING

Cooperatives play a significant role in the rural economy.

The strength of cooperatives should be understood and the

already existing network of distributions had to be used in

coverage and extension of rural market. The advantage

offered by the cooperative organizations is in distribution and

93

collection logistics because of their widespread nature. The

points in favor of cooperative are:

o They are widespread throughout the country and cover

cent percent of villages, with nearly five lakh societies

operating at the village or tehsil levels.

o The membership extends to about 67 percent of the

rural families and to more than 50 percent of rural

adults. This in a way ensures loyalty to their societies.

Share of cooperatives in National

Sl.No.

Activity Proportion

Covered

1.Rural network in terms of villages covered

100.00%

2. Agricultural credit disbursed 46.31%

3. Share in fertiliser distribution 36.60%

4.Share of nitrogenous fertilisers produced

14.80%

5.Share in phosphoric fertilisers produced

23.50%

6. Share in sugar production 54.95%

7.Capacity utilisation in cooperative sugar factories

85.70%

8. Share in wheat procurement 27.80%

9. Share in jute procurement 21.50%

10.Cooperative share of retail fair price shops

28.00%

11.Share of milk produced tot total production

6.70%

12. Share of edible oil-seeds procured 51.00%

94

and edible oils sold

13.Share of spindleage in cooperative spinning and weaving mills

10.00%

14.Share of cotton produced and marketed

67.30%

15.Share of cotton procured and marketed

55.00%

16. Share of fish handled 21.00%

17. Village-level storage facility 62.50%

18. Share of soyabean production 7.50%

19. Proportion of salt manufactured 7.40%

Due to the three-tier structure of operations there is a

dependable inter-linkage among the organisations at

different levels.

The apex body in the three-tier structure at state level, takes

the responsibility of procurement, distribution, marketing and

collection of dues. So, for a company which takes

cooperatives into confidence, collection of orders, supply and

realisation becomes easy. The contact is restricted to one

central places instead of contacting several hundreds of

societies.

Even though the objective of the cooperatives is to help its

members, they are also business organisations with a profit

motive for further investment and growth. So, inducing the

95

societies to deal in, and sell, consumables and durables

should not pose any problem. The margins earned will only

augment the financial position of the societies. The whole

cooperative movement has the blessing and encouragement

of the central and state governments.

For organisations which depend upon rural areas for inputs

procurement and output sales cooperatives offer an excellent

opportunity.

Cooperatives represent existing distribution channels with

efficient networks. Since cooperatives are considered as

organisations owned and run by the members, it may be

easy to build brand loyalty.

At the rural level, cooperatives command about 63 percent of

the storage capacity.

There could be a collective guarantee for any credit

extended to the cooperative organisations in addition to the

state government's.

The benefits of dealing with cooperatives can be better

understood from the proceeding paragraphs. But the critics

of the cooperative movement also have valid arguments

about their way of functioning. Since the initiative to promote

96

the cooperatives comes from the governments, the

bureaucratic approach is inbuilt and there is political

interference or control, which makes the organization

inefficient and ineffective.

However, with all these limitations, there are some

successful cooperative organizations operating in country

like AMUL, IFFCO, KRIBHCO and others. The development

and growth of cooperatives depend upon the leadership

qualities of the members and the board. It may not be out of

place to mention the name of Dr. V. Kurien of Amul fame,

who single-handedly elevated the dairy industry to what it is

today. In fact, his organization has adequate strength to take

on multinationals in various consumables like ice-cream,

chocolates and of late, even pizzas?

It is pertinent to not that cooperatives play an extremely

important role in collection and distribution in the rural market

and such organizations offer a viable solution for boosting

the rural economy. The above facts clearly indicate the role

the cooperative organizations play in rural areas in collection

and distribution, as well as the potential for future growth.

97

BIBLIOGRAPHYBIBLIOGRAPHY

Books and Publications

1. Mathew M. O., et. al., “Consumer Motivation with

reference to Rural Industries Products”.

2. Gopalswamy T. P., Rural Marketing: Environment,

Problems and Strategies”.

3. Mahendra Mohan, “Marketing in Rural India”.

4. Mathur V. B. L., “Serving the Rural Consumer”.

5. Monga J. S., “Rural Marketing Planning and Strategy”.

6. Kapoor M. C., “Profile of a Rural Consumer”.

7. Doshi H. N., “Promotion and Advertising in Rural

Marketing”.

8. Ganguly A. S., “The Growing Rural Markets in India”.

Websites

GoogleEarth.com

98