Rural Marketing

Group 1GowriDeepti

PrasenjitJishnuGeo

ArabindaViral

The Call of Rural India

Rural Markets - Promising Venture

Indian Rural Market : Fortune at the Bottom of the Pyramid

a)742 million rural customersb)42,000 rural supermarketc)Investment in savings instrument- 6.7m

householdsd)Estimated annual size of rural markets

• FMCG Rs 65000cr• Durables Rs 5000cr• Agri-inputs(tractors also) Rs 45000cr• 2/4 wheeler Vehicles Rs 8000cr

Growth Story

• Liberalization of the economy – arrival of well known FMCG’s with greater distribution capabilities

• High growth in rural area in 1990’s due to consecutively good monsoons

• 600% increase in the Five year plan outlay for rural developmental activities

• 230% increase in flow of institutional credit in 1997-98 and 2004-05

• 41 m Kisan Credit Cards issued- Rs. 97000cr

• Increase in crop area, production and yield, facilities like fertilizers, electricity, quality seeds

• Increased reach of Technological developments like cell phones etc.

Growth Story

Popular myths

• Rural people don’t buy brands

• Rural customers buy cheap products

• Rural market is homogenous

4 A’s of Rural Marketing

• AvailabilityStrong distribution Network, e.g. HLL, LG- widespread channelsCoca Cola- Hub and spoke model

• Affordability- Godrej (Cinthol, Fair glow etc.)

• Acceptability – LG TV Sampoorna• Awareness

Challenges

• Eleventh Five Year Plan: Special Focus on Agri & Rural

• To achieve 9 % growth projections - 4 %

Farm growth is a must for self sufficiency, food security and for 2nd Green Revolution

• Deficit Areas for development of Rural Economy

1. Investment and Credit Deficit 2. Infrastructure Deficit3. Market Economy Deficit4. Knowledge Deficit

Rural Distribution

• Marketers need to understand where rural consumers buy their goods and products

• 90% of durables purchased from 20000+population towns

Rural Communication

• Strong Need To Build Reassurance And Trust About Product Quality, Service Support And Company Credentials In The Mind Of Consumers

• Best Medium - Face To Face Interactive Communication

Desire

Conviction

Interest

AICDA MODEL

Awareness

Action

Developing Rural Markets Through Information

Technology• e-Choupal by

ITC

• Inagriline by EID Parry

• Dairy portal by Amul

• STD revolution

Rural Marketing Environment

Definition

Rural Vs Urban

1951 – Urban Population was 17.2 %

2001 – Urban Population was 27.8 %

Census Definition

Rural Village: Basic Unit for rural areas is the revenue

village

Rural Town: Minimum Population >= 5000 Population Density >= 400 per Sq.KM 75% of the male population engaged in

non-agri activity

RBI Definition

Rural Location with population up to 10,000

Semi – Urban Location with population between

10,000 and 1,00,000 Urban

More then 1,00,000

NABARD Definition

All Location with population up to 10,000 is RURAL

Urban IndiaAll the places that fall within the administrative limits of a municipal corporation, municipality, cantonment board 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 kilometres

Corporate Houses

Sahara – Shops and Commercial Establishments’ Up To 10,000

Evaluation of Rural Marketing

Phase I (Before 1960) Agricultural Marketing

Food Grains and Goods Like Cotton, Jute Unorganized Market

Phase II (1960 - 1990) Green Revolution

Agricultural Input Emergence of Mahindra, Escorts, Eicher, Sriram

Fertilizers and IFFCO Khadi and Village industries Commission (KVIC) Shilpa Melas

Evaluation of Rural Marketing

Phase III (1990 Onwards)Last 2 Phase

Potential of IRM was not visibleInfrastructure and AccessibilityUrban FocusExtension of Urban Market

LPG

Definition of Rural Marketing

RM Is The Function That Manages All Activities Involved In Assessing, Stimulating And Converting The Purchase Power Of Rural Consumer Into An Effective Demand For Specific Product And Services And Moving A Better Standard Of Living And Thereby Achieving Organisational Goals.

Rural Market Structure

Rural Environment

• Demographic Environment• Physical Environment• Economic Environment• Political Environment• Technological Environment

Demographic Environment

Population1971 1981 1991 2001

Total Population. (Million)

548.2 683.3 848.3 1026.9

Rural Population. (Million)

- 524.0 628.8 741.6

Rural Proportion to Total Popn. (%)

80.1 76.7 74.3 72.2

Source: Census 2001

• Rural proportion in population has come down.

• Absolute numbers of people living in rural areas have increased.

• Working population has increased.• Purchasing power of the rural

population has gone up from 40% in 1991 to 42% in 2001.

Distribution of Population by Age GroupsAge groups RURAL (%) URBAN (%)

0 – 4 13 11

05 –14 26 23

15 – 19 09 10

20 – 34 23 28

35 – 54 19 20

55+ 10 08

Total 100 100Source: Census 2001

• Largest age group shapes marketing environment.

• School going children and young adults form the largest consumers of consumable and lifestyle products.

• Age group between 20 and 35 forms one fourth of India’s consumption base.

• 48% of the rural population is below the age of 20.

Education

Rural Literacy 1981 1991 2001

% of literates 36 45 59

Census 2001

• Level of literacy influences the effectiveness of communication and demand for educational products.

• Literacy rate has increased by 23% over last 20 years.

• Improvements in socio economic status of the people.

• Product and brand awareness improved and purchase decisions became more matured.

Household Pattern (Family Structure)

1991 2001

Rural Urban Total Rural Urban Total

Households (million)

112 40 152 138 54 192

Family size (number)

5.55 5.32 5.36 5.31

• Rural households have grown by 26 million during the last decade.

• Increase in population created pressure on land and socio economic factors.

• Average family size decreased.• Joint families broke apart to create

nuclear families.• Range and number of branded

products coming in increased.

Caste System

• Marketers need to be sensitive to the caste systems and practices.

• While developing an advertisement or brand communication or promotion plan marketers need to ensure relevance of character and messages.

Cultural Differentials

• Society across the country is highly differentiated.

• Presence of different regions and sub regions.• Presence of different religious, caste and

linguistic groups.• No strict geographic boundaries for

identifying differentials.• Socio cultural behaviour mapped as distinct

socio cultural regions and used for STP

Occupational Pattern

• Demographic profile affects buying behavior.

• Difference in buying behavior between salary earner and wage earner.

• Three fourths of rural household heads are either cultivators or wage earners.

• Daily wage earner has to account for variations in income.

• Salary earner has an assured income.• Cultivators disposable income is highly

seasonal

Physical Environment

Physical Environment

Settlements patterns1.Scattered ,2.Clustered ,3. Combination of

bothCharacteristics of Rural HouseholdsHouses are owner occupied (Farmers)Pattern is according to• 1.Kinship• 2.Caste• 3.Religious group

Classification of Village and Town based on

population

Rural Market (per sq km) Town class

< 200 1lakh and above

201-500 50,000-99,999 501-1000 20,000-

49,999 .…..5000

………….<5000

Economic environment

• Shift in lower income group to higher income group.

• Per capita consumption expenditure increased 4 times over 20 years.

• Saving pattern 42 million in rural to 27 million in urban.

Socio cultural Environment

Socio - Cultural Region (SCR) • A yard stick for segmentation and

targeting.Urban and Rural socio-economic

variables.Settlement patternOccupationRealms of activity

Village Community

Pre Independence Post Independence It is self sufficient in terms of agriculture,

economic infrastructure and political systems.

Post independence it has undergone changes under the democratic system.

The elderly council (The Panchayat) is elected in the democratic system.

Villages are well communicated. Migration to cities for jobs and batter life.

Caste System

Brahmins Kshatriyas Vaishyas Shudras

Zamindari

Political Environment

Panchayati Raj system under the 77th amendment.

The Gram Sabha. (The general Assembly)

Decide developmental works. Suggest remedial measures. Scrutinize the decisions of panchyat. Review the annual financial statement of

gram panchyats.

Technological Environment

Green revolution 1967-78 High yield verities. Increased farm production. Modernization of methodology and equipments

used.

White Revolution In terms of improvement of livestock and

the milk production. Cooperatives like AMUL. Companies like Godrej Agrovet.

NGOs

Independent

Self Help Groups (SHG) Interest Groups (IGs)

Government: NABARD, KVIC, etc…… Help in providing vocational training, job

opportunities, independent business opportunities, and basic Community Health services.

Constitution of Rural Market

• Evolution of rural market– Shift in consumer needs(1980-1990)– Steady reforms in economy(1990

onwards)

• Consumer Market– Households and Individuals– Consumables-Food products, cosmetics, FMCG,

garments– Durables- watches, bicycles, TV, Radio, 2 wheelers

etc.

• Institutional Market– Agriculture, Poultry, Health centers, Schools– Fisheries, cottage industries– Consumables- pesticides, fertilizers, seeds, fuel– Durables- Tractor, Pump set, Genset, Harvestors etc.

• Service Market– Individuals, Households and Production

firms– Services- Banking, Insurance, Credit, Healthcare,

Tuition, ICT, Power etc.

Size of Market

• Rs. 123000 Cr, including FMCG, Durables and Agri products

Nature of Rural Market

• Developmental or Transactional….????• Agri product companies

– Extended support, Education and Training• HPCL’s Community kitchens

– Popularizing the concept at affordable prices• HLL’s Project Shakti

– Empower rural women for income generating capabilities

• A word of caution– Short term commercial goals to be avoided– Create Mutual benefit opportunities

Win - Win Situation

• NGOs and Corporate India

• SEWA – Self Employed Women’s Association, Gujarat based NGO

• ITC – Agri commodity retailer

Thank You