Rural Marketing

Defining Rural India Organisation Definition Limitations

NSSO ( Census) Population density < 400 / Sq Km 75 percent of the male working population is engaged in agriculture No Municipal corporation / board

rural not defined

Planning Commission

Towns upto 15,000 population are considered rural

Town characteristics not defined

LG Electronics All places other than the 7 metros

Only clarifies what are the cities

NABARD All locations with a population upto 10, 000 considered “ rural”

Village & town characteristics not defined

Sahara Commercial establishments located in areas servicing less than 1000 population

Population characteristics unknown

Source: The Rural Marketing Book- Text & Practice, Kashyap. P and Raut. S ( 2007)

Scope of Rural Marketing

• Keenly debated topic

• Definitions based on organisational/ institutional vision,

mission & goals

• Need for a comprehensive and modular understanding

• Rural Marketing is a “ work in progress”

• Multi – disciplinary approach is necessary for sharper

understanding

Transitions In Rural India

• Food Grain Crops

• On land activities

• Farm Activities

•Non –food, cash crops

•Livestock & fisheries

•Manufacturing & services

Rural Employment Patterns( Male)

Sector Year – 1987 ( % share in employment) Year -2004 ( % share in employment)

Agriculture 75 67

Transport & Communication

2 8

Trade & Hotels 5 7

Construction 4 7

Manufacturing 7 8

Source: NSSO data, Mckinsey Global Institute Study, 2004-05

Rural India – Population Trends

1981 1991 2001

Total Population (in million)

683.3 848.3 1026.9

Rural Population (in million)

524.0 628.8 741.6

As a proportion of total population

76.7 74.3 72.2

Decadal Variation 19.8 16.7 15.2

Source: Census 2001

• The joint family system is being replaced by the nuclear family

system

• The occupational pattern shows a predominance of cultivators

and wage earners

• Cultivators( 40.86 %) and Wage Earners( 35.28 %) according to

NCAER studies (2002)

Rural Income Trends Annual Income ( at

1998-99 prices)Income Class 1989-90( %

Households) 1998-99 ( %

Households) <= 35,000 Low 67.3 47.9

35,001- 70,000 Low Middle 23.9 34.8

70,001 – 1,05,000 Middle 7.1 10.4

1,05,001- 1,40,000 Upper Middle 1.2 3.9

> 1,40,000 High 0.5 3.0

Source: National Council for Applied Economic Research, 2000

Introduction to Rural Marketing

“The first five years of the new millennium will belong neither to the urban markets which have reached saturation and where margins are under pressure not to the export markets, which suffer from inadequate infrastructure back home, and uncompetitive prices overseas. It will belong to rural marketing.”

RURAL MARKETING

In the India context, the word ‘RURAL’ is so much associated with agriculture and farmers that rural marketing tends to be seen as a marketing of inputs or outputs related to agriculture.

What is Rural Marketing?

Rural marketing is a function which manages all those activates involved in assessing, stimulating and converting the purchasing power into an effective demand for specific products and services, and moving them to the people in rural area to create satisfaction and a standard of living to them and thereby achieves the goals of the organization.

Rural v\s Urban

OCCUPATION:Rural: Cultivators n few non –agricultural pursuits.Urban: manufacturing,trade,commerce,professions

Size of community

• Rural:open farms & small community are negatively co-related• Urban: urbanity & size of community

are positively co-related

Density of population

• Rural:density of population is lower than urban

MobilityRural: social mobility less. More migration from villages to town.Urban: social mobility increases with urbanity.

System of interaction

• Rural: less numerous contacts per man. Predominance of personal & relatively durable relations.

• Urban: Greater complexity, superficiality & standardized formality in relations.

• Although the melting of the urban - rural divide will take a while, this is not for want of the availability of the means but for want of the rural consumer's mindset to change; which has its own logic, which is driven by tradition, custom and values that are difficult to shed,

Attractiveness of rural market

Rural markets have become the new targets to corporate enterprises for two reasons :

1. Urban market has become congested with too many competitors.

2. The market have reached a near saturation point.

Various factors which have made rule markets viable:-

1. Large population 2. Raising prosperity 3. Growth in consumption4. Life-style changes5. Life-cycle advantages6. Market growth rates higher than urban7. Rural marketing is not expensive8. Remoteness is no longer a problem

• Now for some facts and figures. The Indian rural market today accounts for only about Rs 8 billion (53 per cent - FMCG sector, 59 per cent durables sale, 100 per cent agricultural products) of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total share. So clearly there seems to be a long way ahead.

• Time and again marketing practitioners have waxed eloquent about the potential of the rural market. But when one zeroes in on the companies that focus on the rural market, a mere handful names come to mind. Hindustan Lever Limited (HUL) is top of the mind with their successful rural marketing projects like 'Project Shakti' and 'Operation Bharat'.

Project shakti

• Clearly the main challenge that one faces while dealing with rural marketing is the basic understanding of the rural consumer who is very different from his urban counterpart.

• Also distribution remains to be the single largest problem marketers face today when it comes to going rural.

• "Reaching your product to remote locations spread over 600,000 villages and poor infrastructure - roads, telecommunication etc and lower levels of literacy are a few hinges that come in the way of marketers to reach the rural market

• In 1998 HUL’S personal products unit initiated Project Bharat, the first and largest rural home-to-home operation to have ever been prepared by any company. The project covered 13 million rural households by the end of 1999.

• During the course of operation, HUL had vans visiting villages across the country distributing sample packs comprising a low-unit-price pack each of shampoo, talcum powder, toothpaste and skin cream priced at Rs. 15.

• This was to create awareness of the company’s product categories and of the affordability of the products.

Khaitan fans' ad on a horse cart

• The greatest challenge for advertisers and marketers continues to be in finding the right mix that will have a pan-Indian rural appeal. Coca Cola, with their Aamir Khan ad campaign succeeded in providing just that.

"Yaara da Tashan...” ads with Aamir Khan created universal appeal for Coca Cola

• "Yaara da Tashan..." ads with Aamir Khan created universal appeal for Coca Cola

• Coca-Cola India tapped the rural market in a big way when it introduced bottles priced at Rs 5 and backed it with the Aamir Khan ads.

• The company, on its behalf, has also been investing steadily to build their infrastructure to meet the growing needs of the rural market, which reiterates the fact that this multinational has realised the potential of the rural market is going strength to strength to tap the same.

• For HLL, a one rupee or a five rupee sachet or the Kutti Hamam (the small Hamam) helps in giving the consumers a trial opportunity. While it does help in generate volume but not in terms of values. "Till the time that volume - value equation is managed better.

• Amul is another case in point of aggressive rural marketing.

OTHER EXAMPLES ARE,

• Interestingly, the rural market is growing at a far greater speed than its urban counterpart. "All the data provided by various agencies like NCAER, Francis Kanoi etc shows that rural markets are growing faster than urban markets in certain product categories at least.

• The share of FMCG products in rural markets is 53 per cent, durables boasts of 59 per cent market share. Therefore one can claim that rural markets are growing faster than urban markets

Satellite dish antennas reach rural India

In 2000, ITC took an initiative to develop direct contact with farmers who lived in far-flung villages in Madhya Pradesh. ITC's E-choupal was the result of this initiative.

Typical shop in rural India

WAYS OF RURAL ADVERTISING

Tapping the rural markets

-Segmentation-Product Strategy-Pricing strategy-Physical distribution-Channel Management-Sales Force Management-Marketing Communication

1.Segmentation

- Geographic segmentation: North, South, West, East - Climate/irrigation level: Favorable climate are usually more prosperous than climatically handicapped region. Irrigated areas and dry areas pose different economic/marketing environment. - Nearness to town: the village which is nearer to feeder town, the people from that village go to the village once in a month to buy their requirements and sell their products. They exposed to town lifestyle.

Demographic Segmentation

-Population concentration:40% of rural population lives in 7% of the villages of the

country, and remaining 60% in the other 93% of the villages

-Age: Youth in the rural areas can be picked up as a separate

market. In rural population 25 crore people are between age of 16-30

-Income: Regular income and seasonal income. Some people have

seasonal income only while some have regular income as well as seasonal income also.

2. Product Strategy:

Whether to offer same product that is offering to the urban area or there is need to change the product.For ex. Small size, lower price.

-Specifically Designed ProductsEx. Philips hand wound radio, phiips smokeless chulhas,

-Color Preference: They mostly like the bright colors. Asian pain introduce new bright color for riral market. HUL has put this knowledge to good use in the color choice for lifebuoy.

-Package to be appropriate: Packaging should be appropriate, bcause most of the people in rural area recognize the brand by its packaging. Ex. Pears, fair and lovely.

Small packs are more effective in rural areas. Shampoo company are doing so for the rural market. Small packaging of vicks vaporub, lifebuoy etc.

-Logo, symbol : Most of the people recognize the brand by the logo of the company for Ex. Nirma girl, parle girl, dettol sword.

-Product differentiation: Product differentiation is important in rural marketing. They may not have any differentiation to offer in their product. They create differentiation through the service route, providing superior extension service, advice, discount offers, better farming practices.

-Positioning decision: It is necessary to use different positioning strategy for rural market. Ex. Titan. When target is urban area its use as ornament and fashion while targeting rural area its just a watch-an inexpensive yet durable.

3.Pricing strategy:

-Affordability: Economy is more important to them-Common price for both urban and rural market: Samsung an LG have follow this pricing strategy.The argument is that “ there are as many rural rich as there are urban poor.

EX. LG’s rural color TV Sampoorna originally launch for rural area but also successful in urban area. Titan sonata also have same situation

-Special occasion pricing: Marriage-Strategy on payment terms: Mostly have seasonal income

4.Physical distribution:

There is major problem in physical distribution in rural market bcause most of the villages don’t have proper road connectivity and also railway is not there so most of the company use delivery van to distribute their product in the rural area.Ex. ITC

5.Channel Management:Problems :

- Multiple tiers add to the cost - Non Availability of dealers - Poor viability of outlets - Inadequate banking and credit facilities

The village shop is the key to rural distribution

6. Sales force Management:

Rural salesman must posses certain special traits:

- Willingness to be located in rural areas- Cultural congruence- Attitude factor- Knowledge of local language- Ability and willingness for handling several product lines

7. Marketing communication:

Selecting the media mix:-Tv-Radio-Cinema-Print media-Outdoor-POPs-Audio visual units/publicity van-Syndicated AV vans-Puppet shows, folk theater-Demos-Word of mouth

Developmental Marketing-HPCL’s Rasoi Ghars

Developmental Marketing-HPCL’s Rasoi Ghars

Hindustan Petroleum (HPCL) has established ‘rasoi ghars’ or community kitchens in many villages. The rasoi ghar introduces the villagers to cooking gas (LPG). Each rasoi ghar comprises of eight gas stove stations, a gas meter, and a ‘pay as you use’ system.

Everybody knows that appropriately priced, smokeless, efficient and modern cooking fuel / cooking devices will find a big market in rural India.

Objectives:

1. Provide them access to a hands-on experience in the operation of LPG stoves.

2. Eliminating the fear of using the gas.3. Showing them that they can save the large amount of

time they spent in gathering firewood.4. They can do some wage earning work and that those

wages can be used to pay for the gas.5. If their girl children were being used for gathering

firewood, now they can use the time to go o school.

HPCL had set up 600 Rasoi Ghars spread over 30 villages across India.At the next stage, HPCL may go for franchising this business to woman entrepreneurs all over rural India.

The cost of transportation of cylinders makes mini-cylinders unviable from the manufacturer’s point of view and the unit cost makes large cylinders unaffordable from the rural consumer’s point of view.

Firms engaged in such endeavours are obviously in for the long haul, HPCL accepts the fact that it will continue to make losses on the Rasoi ghars for quite a few years. But it is building a big clout and a potential market. HPCL’s objectives are certainly commercial-to develop a big market for its LPG gas , but it is building a big clout and a potential market. HPCL’s objectives are certainly commercial-to develop a big market for its LPG gas, but it is improving rural lives in the bargain.