Comparative Study of Rural & Urban Consumer Behavior

UNIVERSITY OF MUMBAI
SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS
BACHELOR OF MANAGEMENT STUDIES 2009-2010 SEMESTER V
TITLE OF THE PROJECT:

COMPARATIVE STUDY OF RURAL AND URBAN CONSUMER BEHAVIOUR IN INDIA
SUBMITTED BY: PRACHI KISHOR MORE
UNDER THE GUIDANCE OF: PROF. R. KRISHNAMOORTHY
DECEMBER 2009
Comparative Study of Rural and Urban Consumer Behaviour1
DECLARATION
I, MS. PRACHI KISHOR MORE OF SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS, CHURCHGATE, MUMBAI OF T.Y.BMS
(SEM V) HAVE COMPLETED THE PROJECT ON COMPARATIVE STUDY OF RURAL AND URBAN CONSUMER BEHAVIOUR IN INDIA IN THE ACADEMIC YEAR 2009-2010 AS A PARTIAL COMPLETION OF THE COURSE.
Date:
Signature of the Student
Place: Mumbai
CERTIFICATE
I, PROF. R. KRISHNAMOORTHY , HEREBY CERTIFY THAT MS.
PRACHI KISHOR MORE OF SYDENHAM COLLEGE OF COMMERCE AND

ECONOMICS, CHURCHGATE, MUMBAI OF T.Y.BMS (SEM V) HAS
COMPLETED THE PROJECT ON COMPARATIVE STUDY OF RURAL AND URBAN CONSUMER BEHAVIOUR IN INDIA IN THE ACADEMIC YEAR 2009-2010 AS A PARTIAL COMPLETION OF THE COURSE.
__________________ SIGNATURE OF PROJECT CO-ORDINATOR
__________________ SIGNATURE OF PRINCIPAL
ACKNOWLEDGEMENT
Words lack penetration while expressing other extreme though full of sentiments but there is no second alternative to express ones sentiments on paper. This research study bears the imprint of many persons who in formal & informal way made a significant contribution in its successful completion. It is my profound privilege to express my deep sense of gratitude to my guide Prof. R. Krishnamoorthy who helped me in completing my project. He continuously motivated and encouraged me all the way during this project. This study is due to his guidance. He is a great teacher and always ready for enlightening students with her vast knowledge. I extend my sincerest thanks to all the respondents who spends their valuable time for filling up the questionnaire and feedback. I am also thankful to our BMS co-ordinator Prof. K.L. Bhatia, Ms. Jharna Kalra and the non-teaching staff of BMS office Mr.Sandeep and Mr.Sheikh who all have been a great source of inspiration and vast source of knowledge in the entire project. I am also very thankful to my family and friends for their help throughout the project.
BACHELOR OF MANAGEMENT STUDIES 2009-2010
Project on:
COMPARATIVE STUDY OF RURAL AND URBAN CONSUMER BEHAVIOUR IN INDIA
SUBMITTED BY: PRACHI MORE
UNDER THE GUIDANCE OF: PROF. R. KRISHNAMOORTHY
EXECUTIVE SUMMARY
The object of the study i.e., comparative study of rural and urban consumers is to understand the buying behavior or purchasing decision. The study gives a comparative analysis of the consumption pattern of the consumer behavior of rural and urban consumer.
The objective is to understand: The Buying Behavior of the consumers both in urban and rural markets. What attracts the consumers more in both the regions? What are the promotional activities to be undertaken by various firms to promote their products in the urban and rural markets? What kind of pricing strategy to be undertaken in both the region? What attracts them the most in the respective regions? What are the most popular products in the urban and rural regions? The growth in rural quarter and its counterparts Challenges faced by the rural markets and its urban counterparts
The study suggests the difference between the rural and urban environment. The buying decision of the urban and rural consumers. Also a survey is done in order to understand the consumption pattern.
TABLE OF CONTENT
SR. NO. CONTENT PG. NO.
INTRODUCTION CONSUMER BEHAVIOUR - MEANING DETERMINANTS OF CONSUMER BEHAVIOR y y y y CULTURAL SOCIAL PERSONAL PSYCHOLOGICAL
9 10 11-12
MARKETING AND CONSUMER BEHAVIOR CONSUMER SPENDING BEHAVIOUR RURAL MARKET RURAL CONSUMER BEHAVIOUR PROFILE RURAL CONSUMER y y RURAL CONSUMER SIZE AND COMPOSITION OF RURAL DEMAND
13 14-15 16 16 17-18
FEATURES / PROFILE OF RURAL MARKET CONSTRAINTS IN TAPPING RURAL MARKET FACTORS INFLUENCING RURAL CONSUMER BEHAVIOUR
SEGMENTATION y y y DEMOGRAPHIC GEOGRAPHIC BEHAVIOURAL
19 20-26 27-28
29-31
MARKETING STRATEGY MARKETING MIX y y y PRODUCT PRICE PROMOTION
32-36 37-38
PLACE 39-41 42 42 43 44 45 45-46 46 47
GROWTH IN RURAL MARKETS URBAN MARKET URBAN CONSUMER URBAN CONSUMER BEHAVIOUR PROFILE OF URBAN CONSUMER CULTURAL ELEMENTS OF URBAN MARKETS PROFILE OF URBAN MARKET PROBLEMS FACED BY URBAN MARKETS SEGMENTATION y y y ATTITUDINAL BEHAVIOURAL DEMOGRAPHIC
MARKETING MIX y y y y PRODUCT PRICE PROMOTION PLACE
48-49
GROWTH IN URBAN MARKETS DISTINGUISH BETWEEN RURAL AND URBAN CONSUMER DISTINCTIVE FEATURES OF RURAL MARKETS Vs. URBAN MARKETS RESEARCH DESIGN OF THE STUDY FINDINGS OF THE RESEARCH CONCLUSION ANNEXURE y y MARKET SURVEY COMPANY SURVEY
50-53 54
55-56
57-59 60 61 62-64
BIBLIOGRAPHY
65
1. INTRODUCTION
Consumer Behaviour implies study of behaviour of purchaser of all goods and services whether purely consumer goods, intermediate goods or capital goods. In other words it implies study of attitude of all consumers in disposing of their resources. Further it is not confined to final users but also include study of attitudes, of all those who take investment decisions whether they consume themselves or buy for others. It also includes study of behaviour of those who are consultant, advisers and give their opinion to buy or not to buy a particular thing and the study of factors which influence their advice/opinion.
Consumer behaviour is an art and a science, economics, psychology, sociology. The study of consumer behaviour envelops all these and more. Be it a housewife buying a tube of tooth paste, an executive buying a tie, a school kid buying a pen or a multimillion dollar corporation buying heavy capital equipment, the process of buying is complex and, at times, intriguing. The consumer buying process is influenced by the consumers financial position, personality, tastes, preferences, reference groups, social standing, and even the economic sentiment that is dictated by the status of the economy.
Consumer behavior is defined as "all psychological, social and physical behaviors of potential customers as they become aware of evaluate, purchase, consume, and tell others about product and services".
2. CONSUMER BEHAVIOUR
Meaning and definition
The study of consumer behaviour implies how and why a particular consumer or group reacts to decisions of producers. Consumer behaviour could be defined as those actions directly involved in obtaining, consuming, and disposing of products and services, including the decisions process that proceeds and follow the action.
According to another author consumer behaviour is the behaviour that consumer display in scanning for purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. The study of consumer behaviour is the study of how individuals make decisions to spend their available resources (time, money, effort) on consumption related items. It includes the study of what to buy, when to buy, why to buy, from where to buy, how often to buy, and how often they will use it.
In a competitive environment, one cannot trust a product or a consumer. The producer has to produce what is demanded or what can be demanded. Study of consumer behaviour will help us to know what can be sold and what goods and services are likely to get rejected.
In certain products like medicines one buys on the prescription of a physician which is also a part of consumer behaviour. In case of capital goods that is plant, equipment, machinery, buildings etc the decisions are often based on technical advice of others. In case of industrial raw materials the decision is influenced by supplier of equipment. Then there are purely consumer goods with short life and once they are used they extinguish. They are called Fast Moving Consumer Goods (FMCG).
3. DETERMINANTS OF CONSUMER BEHAVIOR
A buyer's purchase decisions are highly influenced by buyer's culture, social, personal, psychological factors.
3.1.CULTURAL FACTORS Culture represents an overall social heritage, a distinctive form of environment or adaptation by a whole society of people, it includes a set of learned beliefs, values, attitudes, morals, customs, habits and forms of behavior that are shared by a society.
3.2.SOCIAL FACTORS 3.2.1. References group Consumers accept information provided by their peer groups on the quality, performance, style, etc. These groups influence the person's attitude, expose them to new behaviors and' life style, and create a pressure on the individual.
3.2.2. Family Most consumers belong to a family group. The family can exert considerable influence in the shaping the patterns of consumption and indicating the decision making roles.
3.2.3. Roles and Status Roles are activities of the person in a group. Each role carries a status. People will choose the products that will communicate their status to the society.
3.3.PERSONAL FACTORS A buyers decision is also influenced by personal characteristics, notably the life cycle stage, occupation, economic, circumstances, lifestyle and personality and selfconcept. Personality is defined as the person's distinguishing psychological characteristics that lead to relatively consistent and enduring responses to his or her environment. Personality is described in terms of such trades as self-confidence, dominance, autonomy, difference, sociability, defensiveness and adaptability. Comparative Study of Rural and Urban Consumer Behaviour11
3.4.PSYCHOLOGICAL FACTOR Motivation acts as a driving force in the floor towards purchase action. Motivation that is, set into motion to take action to fulfill the need or wants. A human being is motivated by want when these needs are backed by purchasing power it becomes a want. Motivation is mental phenomenal.
3.4.1. Perception Perception is operationally critical. Perception causes the behavior in a certain way. Perception gives the direction or part to be taken by the buyer. To perceive is to see, to hear, to touch, to taste, to smell and to sense something or event or relation and to organize, interpret and find the meaning in the experience.
3.4.2. Learning Learning describes changes in an individual's behavior arising from experience. Learning reference to change in the behavior brought about by practice or experience. Almost everything one does or things his learned.
3.4.3. Beliefs Believe is a descriptive though that a person holds about something. These beliefs may be based on knowledge, opinion or faith.
3.4.4. Attitude Attitude describes as a person's emotionalized inclination to respond positively or negatively to an object or class of objects. Attitude affects both perception and behavior to have an attitude means to be involved emotionally and ready for action.
4.
MARKETING AND CONSUMER BEHAVIOR
The term consumer behavior refers to the behavior that consumers display in searching for purchasing, clothing, evaluating and disposing of product and services that may expects will satisfy their needs. Study of consumer behavior is the study of how individual make decisions to spend their available (time, money, and efforts) on consumption related items.
The Field of consumer behavior is rooted in the marketing concept, a marketing strategy that involves in the late 1950. The marketing concept refers to the consumer needs and wants that are to be given prime importance rather than more profit making. The marketing concept is based on premises that a marketer should make what it can sell instead of trying to sell what it has made.- While the selling concept focus on the needs the seller, the marketing concept focus on the need of the buyer. The primary purpose for studying the consumer behavior as a part of marketing curriculum is to understand why and how consumers make their purchase decisions. On the other hand and in depth understanding gives marketers and unfair advantage over sensitive element like price, quality, etc., Finally Phillip Kotler and authority on marketing states, although it only takes a semester to learn marketing it takes a lifetime to master it.
CUSTOMERS C U S T O M E R S Care for the customers Understand the customers Study the customers Trust the customers Oblige the customers Meet the customers Evaluate the customers Response the customers Sell and win the customers
5. CONSUMER SPENDING BEHAVIOUR

The Indian consumer spending has increased from US$ 133.60 in 1992-93 to US$ 350.74 in 2002-03, a compound annual growth of 10.13 per cent at current prices. The way Indian consumers are spending their money on various items has changed in recent years. The share being spent on the basis (food and beverages) has fallen from 54.07 per cent in 1992-93 to 44.8 per cent in 2002-03. Other items have increased in importance, for example, medical and healthcare spending has increased from 3.5 per cent to 8.5 per cent of total expenditure over the same period, a compound growth rate of 19.71 per cent. Similarly spending on transport and communication has grown at 13.2 per cent. While the Compound Annual Growth Rate (CAGR) in total consumer spending has been around 12 per cent a year over the past decade, there have been sharp ups and downs. Consumer expenditure has been in tandem with the annual GDP growth. For rural India, per capita 30 days' consumer expenditure of US$ 12.34 was split up into US$ 6.78, on an average, for food, and US$ 5.56 for non-food. Food expenditure included US$ 2.25 for cereals and cereal substitutes, and US$ 2.37 for milk, milk products, vegetables, edible oil and US$ 2.16 on others. Non-food expenditure included US$ 1.11 for fuel and light, and another US$1.00 for clothing, footwear and US$3.45 on other non-food expenditure. For the urban sector, average Monthly Per Capita Consumer Expenditure (MPCE) of US$ 23.53 was split up into US$ 10.00 for food and US$ 13.53 for non-food. Of food expenditure, US$ 2.37 went towards cereals and cereal substitutes while US$ 3.67 was spent on milk, milk products, vegetables and edible oil and US$3.96 on other food items. US$ 2.11 was spent per person per month on fuel and light, and US$ 1.65 on clothing and footwear and US$9.77 on other non-food items. Urban expenditure levels per capita exceeded rural levels for all the product groups, except on cereals and cereal substitutes. The average monthly per capita expenditures on cereals and cereal substitutes for rural and urban areas are very close to each other. The gap between rural and urban averages of MPCE was of the order of US$ 11.16. The item-groups viz. milk and milk products, beverages etc, fuel and light,
education, miscellaneous consumer goods & services, conveyance and rent contributed to the gap significantly. Non-food expenditure per person in the urban sector was more than double of that for the rural sector, where it was about US$ 5.55. In India, the higher income group (>US$2,465) spends more amount of their income on luxury goods and trendy products than fact moving consumer products. The middle income group (US$1,162 US$1,190) spends more on consumer expendables than the rich. Combined the middle and the lower income group provide 60 per cent of the value of the Indian market.
Urban-Rural divide in Spending (%)
Category Entertainment Consumer Services Durables Misc. Consumer goods Clothing and Footwear Food
Rural 33 44 50 57 61 64
Urban 67 56 50 43 39 36
Source: KPMG/Research
6. RURAL MARKETS
"Typically, from an Indian census point of view, rural has been defined with a 'deprivation' orientation, rural being a landmass without access to continuous electricity, water, the stock market. There has been a correction in this view, however. Marketers today define rural as people living a different lifestyle as opposed to that of those who have settled in the bigger cities and towns. Rural is defined as pastoral in nature and as a mass of people who relate their income closely to the lands they till or use to raise their cattle and livestock. "Definitions for rural India abound while the most convenient remains, 'anything that is not urban',"
7. RURAL CONSUMER BEHAVIOUR

Consumer Buyer Behaviour refers to the buying behaviour of final consumers individuals and households who buy goods and services for personal consumption. All of these final consumers combined make up the consumer market. The consumer market in this case is Rural India. About 70% of India's population lives in rural areas. There are more than 600,000 villages in the country as against about 300 cities and 4600 towns. Consumers in this huge segment have displayed vast differences in their purchase decisions and the product use. Villagers react differently to different products, colours, sizes, etc. in different parts of India. Thus utmost care in terms of understanding consumer psyche needs to be taken while marketing products to rural India. Thus, it is important to study the thought process that goes into making a purchase decision, so that marketers can reach this huge untapped segment.
8. PROFILE RURAL CONSUMER

8.1.RURAL CONSUMER: 8.1.1. Size of rural consumer population
1971 Rural population Urban Population 80% 20%
1981 76.3% 23.7%
1991 76% 24%
Majority of the population of India still exist in the Rural Area itself. States like Uttar Pradesh, Madhya Pradesh, Rajasthan and Kerala have > 80% of the population in the Rural areas only. While, States like Bihar and Orissa still have > 90% in the Rural area.
8.1.2. Consumer Characteristics: Low purchasing power Low standard of living Low per capita income Low literacy level Low economic and social position Tradition bound community Religion, culture and even superstition
8.1.3. Location Pattern Urban: Population concentrated in 3200 cities & towns Rural: Population scattered over 576000 villages. 6300 villages have population more than 5000 persons More than 55% villages have population of 500 or less people More than 1.5 lakh or nearly 25% of the villages have population of 200 or less. Inference: Rural demand is scattered over a large area.
8.1.4. Literacy level: Comparative Study of Rural and Urban Consumer Behaviour17
Rural India 23% literacy as compared with 36% of whole country In absolute numbers 11.5 crore of literate people are in Rural India compared with 12 crore in urban India. Every year 60 lakh is getting added to the literate population of rural India.
8.1.5. Rural income: Evidently, rural prosperity and the discretionary income with the rural consumer are directly tied with agricultural prosperity because, nearly, 60% of rural income is from Agriculture. Inference: Rural Demand is Seasonal and Festival linked.
8.1.6. Rural savings: The commercial and co-operative banks have been marketing the saving habit in the rural areas for quite some years. 70% of rural households are saving and majority of them belong to salary earners and self-employees non -farmers.
8.2. Size And Composition Of Rural Demand: Size of Rural market in non-food consumption items has been increasing from Rs. 5000 crores in 1969-70 to Rs. 22000 crores in 1993-94 (Size of market at current prices) Composition of demand: Many new products have entered the consumption basket of rural consumer. Product categories like cooking utensils, packaged tea, ornament or jewellery, bathing soaps, washing soaps, detergents, etc. As per an IMRB study, more than 60% of the villages in India now have shops stocking soaps, detergents, packaged tea and batteries. There has also been a rapid growth in consumption of Agri-inputs
9. FEATURES / PROFILE OF RURAL MARKET

9.1. LARGE AND SCATTERED MARKET: Comparative Study of Rural and Urban Consumer Behaviour18
The rural market of India is very large, consisting of >600 million consumers, scattered / spread over 5,76,000 villages. In terms of business generated too, it is a big market; 22,000 crore rupees worth of non-food consumer goods are being sold per year. No. of consumers Large is in terms of Business
9.2.HETEROGENEOUS MARKET: The relative status of the rural areas of different states differs. Parameters on which they differ are Health and education facilities, nature of facilities, availability of public transport, electricity, TV transmission, banks, post offices, water supply etc. IMRB study reveals that an average village in India has 33 development index points, Keralas average Is 88 and so.
9.3.DEMAND, SEASONAL AND AGRICULTURE DEPENDENT: The basic occupation of people in Rural Indian is Agriculture and agriculture is seasonal. Rural people have money only during the harvest period and most of the harvest periods are celebrated as Festivals in India. Hence, Rural demand is not only harvest linked but also festival linked.
9.4.CHARACTERISED BY GREAT DIVERSITY: The rural consumers of India are vastly diverse in terms of religious, social, cultural and linguistic factors.
9.5. STEADY GROWTH DESPITE INHIBITING FACTORS: The market has grown not only in quantitative terms, but qualitatively also. Many new products have made entry into rural consumer basket.
10.
CONSTRAINTS IN TAPPING RURAL MARKET
While the rural market of India certainly offers a big attraction to marketers, it would be totally naive to think that any firm can easily enter the market and walk away with a sizeable share of it. A firm seeking a share of this market has to work for it, as the market bristles away with a variety of problems. The enterprise has to grapple with these problems and find innovative solutions to them. In fact, only because a few pioneering firms correctly understand these problems and came up with innovative solutions to them, that we now see a wonderful trend of growth in rural markets. What are these problems? How are they peculiar to the rural market? And how does a firm solve them? The existing problems in rural marketing are: a. b. c. d. e. f. g. h. i. j. k. l. Physical Distance Language/Culture Accessibility Money/Expensive Lack of Human Resource Competition Technology Rules & Regulation Lack of Information Size of the Market Buying Power Image
Major Problems in Tapping the Rural Markets and the possible solutions are as follows: 10.1. MANAGING PHYSICAL DISTRIBUTION IN RURAL MARKETS
The main problems in physical distribution in the rural context relate to: 10.1.1. Transportation: Inadequate railways Bad or no roads Immediate carriers or cargo operators Eg. Accidents in India 1per day and 1 in 4 days complete loss to property and some life 10.1.2. Warehousing Problems No electricity (only 35% of India have electricity) Unavailability of godowns Marketing purposes 10.1.3. Communication Problems Only 3% of India is connected by phones Unreliable post and telegraph facility (1947 1 postman for 9000 people, 2000 1 postman for 47000 people) Transportation problems
Transportation infrastructure is quite poor in rural India. Though India has the 4th largest railway system in the world, many parts of the rural India remain outside the rail network. As regards road transport, nearly 50% of the 576000 villages in the country are not connected by roads at all. Many parts in rural India have only kacha roads and many parts of the rural interiors are totally unconnected by roads with any mandi level town. As regards carriers, the most common mode is the animal drawn cart. Because of these problems in accessibility, delivery of products and services continues to be difficult in rural areas. Warehousing problems In warehousing too, there are special problems in the rural context. Business firms find it quite difficult to get suitable godowns in many parts of rural India. And there is no public warehousing agency in the interiors of rural India. The central warehousing corporation (CWC) and the state warehousing corporation (SWCs) which constitute the top tier in public warehousing in India, do not extend their network of warehouses to the rural parts. They go only upto the nodal points or major market centers. The warehouses at the mundi level which constitute the second tier in the warehousing chain are mostly owned by cooperatives. And the same is the case with rural godwons, which form the third tier. None of these tiers function as public warehousing agencies ; they provide the warehousing service only to their members. As such, a business firm has to manage with the CWC/SWC network which stops with the nodal points, or it has to establish its own depots or stock points run by its stockists / distributors. Of course, in such cases, the commercial advantages of operating through a public warehousing agency like CWC/SWC are lost to the firm. Communication problems Communication infrastructure, consisting of posts and telegraph and telephones, is quite inadequate in rural areas. Since communication is the first requirement of efficient marketing, lack of proper communication infrastructure poses difficulties, especially in physical distribution. Comparative Study of Rural and Urban Consumer Behaviour22
10.1.4. Cost-Service Dilemma Gets More Acute The effect of these problems on the physical distribution front is certainly felt by any business firm venturing into the rural market. They adversely affect the service aspect as well as the cost aspect. Maintaining the required service level in the delivery of the products at the retail level becomes very difficult. At the same time, physical distribution costs get escalated with 80 per cent Of the total rural consumers living in the 'less than 1,000 people' category of villages. The scattered nature of the market and its distance from the urban based production points, compound the difficulty arising from the constraints in transportation, warehousing and communication. Larger pipeline stocks and bigger inventories in warehouses are the natural outcomes of these constraints. It means higher costs of transportation, higher inventory carrying costs and transit and storage losses. And as we will see in detail in the next section, costs of distribution channels too are much higher in the rural context. Consequently, the total distribution cost per unit is higher by as much as 50 per cent on an average in the rural market, as compared to the urban market. In fact, the experiences of some companies operating in the 2rural market show that the cost of distribution in rural areas is two and a half times that of urban areas.
10.2.
CHANNEL MANAGEMENT IN RURAL MARKETS
Organizing an effective distribution channel is the second major task in rural marketing. This task too is beset with many unique problems. Problems in Channel Management 10.2.1. Multiple tiers, higher costs and administrative problems In the first place, the distribution chain in the rural context require large no. of tiers, compared with the urban context. The long distances to be covered from the product points and the scattered locations of the consuming households cause this situation. At the minimum, the distribution chain in the rural context needs the Comparative Study of Rural and Urban Consumer Behaviour23
village level shopkeeper, the mandi level distributor and the wholesaler/ stockists in the wholesalers / stockists in the town. And on top of them, it involves the manufacturer own warehouses/ branches office operations at selected centers in the marketing territory. Such multiple tiers and scattered outfits push up costs and make channel management a major problem area. 10.2.2. Scope for manufacturers own outlets limited; greater dependence The scope for manufacturers direct outlets such as showrooms or depots is quite limited in the rural market unlike in the urban context. It becomes expensive as well as unmanageable. Dependence of the firm on the intermediaries is very much enhanced in the rural context as direct outlets are often ruled out. But controlling such a vast network of intermediaries is a difficult task. Control is almost indirect. And because of these factors the firm has to be more careful while selecting the channel members in the rural context. 10.2.3. Non availability of dealers In addition, there is the problem of availability of dealers. Many firms find that availability of suitable dealers is limited. Even if the firm is willing to start from scratch and try out rank newcomers, the choice of candidates is really limited. 10.2.4. Poor viability of the retail outlets Moreover, sales outlets in the rural market at the retail level suffer from poor viability. A familiar paradox in rural distribution is that the manufacturers incurs additional expenses on distribution and still the retail outlets find that the business is not remunerative to them. The scattered nature of the market and the multiplicity of the tiers in the chain use up the additional funds the manufacturer is prepared to part with. And no additional remuneration accrues to any of the groups. Moreover, the business volume is not adequate enough to sustain the profitability of all the groups and the retail tier is the worst sufferer.
10.2.5. Inadequate bank facilities Distribution in rural markets is also handicapped due to lack of adequate banking and credit facilities. Rural outlets need banking support for the three important purposes: To facilitate remittances to principals and to get fast replenishments of stocks. To receive supplies through bank To facilitate securing credit from banks As banking facilities are inadequate in the rural areas, the rural dealers are handicapped in all these aspects. It is estimated that there is only one bank branch for every fifty villages. Analysis shows that many companies hesitate to venture into rural markets largely because of the problems on the distribution front. They find it uneconomic to operate outlets in rural areas as in their perception, cost of selling, cost of transportation, cost of sub distribution and cost of servicing the outlets are all very high in the rural market.
CONSTRAINTS IN MARKETING COMMUNICATION IN THE RURAL CONTEXT Marketing communication, and promotion too, poses problems in rural markets. There are many constraints emanating from the profile of the audience and the availability of media. The literacy rate among the rural consumers being low Rural communication has to necessarily be in the local language and idiom. The constraints of media further compound the difficulty. It has been estimated that all organised media put together can reach only 30 per cent of the rural population of India TV is an ideal medium for communicating with the rural masses. But its reach in the rural areas is limited even today. As regards the print media, the various publications reach only 18 per cent of the rural population. Even in areas reached, the circulation is limited. And as already mentioned, the low literacy level of the rural population acts as a further inhibitor in the use of the print media in rural Comparative Study of Rural and Urban Consumer Behaviour25
communication. Cinema is relatively more accessible. It has been estimated that 33 per cent of the total cinema earnings in the country come from rural India. Rural communication has also become quite expensive. For rural communication to be effective, repeat exposures is a must; and if the gap between exposures is long the message loses its edge during period. These factors make rural communication more expensive. Rural communication has to go through all the time consuming stages of creating awareness, altering attitudes and changing behaviour. In addition, it also has to work against deep-rooted behaviour patterns. In short, the crux of marketing communication in the rural context is one of finding a medium' that will deliver the required message in a cost effective manner to target an audience that is predominantly illiterate. 10.3. PROBLEMS RELATED TO COMMUNICATION 10.3.1. Consumer/market composition related problems. The literacy rate is low. Therefore usage of print media or for that matter any print material is redundant. Moreover even the segment that can be serviced by printed material is multi-lingual in nature. There is social backwardness in rural areas. This implies that in most of the consumer durable segment the user is seldom the buyer or the decision maker. There is an indifferent attitude towards the purchase of certain goods such as packed food, high price premium soaps, hair oils, toothpaste etc. because they are used to the traditional way of consumption. 10.3.2. Media related problems. About 30% of the rural masses can be reached through organized media such as TV, radio, newspapers etc. Theoretically TV covers 25% of the rural population, radio about 90% and the press around 20%. But in reality the %s can be still lower.
11.
FACTORS INFLUENCING RURAL CONSUMER
BEHAVIOUR
The various factors that effect buying behaviour of in rural India are:
11.1. Environmental of the consumer - The environment or the surroundings, within which the consumer lives, has a very strong influence on the buyer behaviour, egs. Electrification, water supply affects demand for durables.
11.2. Geographic influences - The geographic location in which the rural consumer is located also speaks about the thought process of the consumer. For instance, villages in South India accept technology quicker than in other parts of India. Thus, HMT sells more winding watches in the north while they sell more quartz watches down south.
11.3.Influence of occupation The land owners and service clan buy more of Category II and Category III durables than agricultural laborers/farmers.
11.4.Place of purchase (60% prefer HAATS due to better quality, variety & price) Companies need to assess the influence of retailers on both consumers at village shops and at haats.
11.5.Creative use of product ex Godrej hair dye being used as a paint to colour horns of oxen, Washing machine being used for churning lassi. The study of product end provides indicators to the company on the need for education and also for new product ideas.
11.6.Brand preference and loyalty (80% of sale is branded items in 16 product categories)
11.7.CULTURAL FACTORS Cultural factors exert the broadest and deepest influence on consumer behaviour. The marketer needs to understand the role played by the buyer's culture. Culture is the most basic element that shapes a persons wants and behaviour.
11.7.1. Product (colour, size, design, shape): For example, the Tata Sumo, which was launched in rural India in a white colour, was not well accepted. But however, when the same Sumo was re-launched as Spacio (a different name) and in a bright yellow colour, with a larger seating capacity and ability to transport good, the acceptance was higher.
Another good example would be Philips audio systems.
Urban India looks at
technology with the viewpoint of the smaller the better. However, in rural India, the viewpoint is totally opposite. That is the main reason for the large acceptance of big audio systems. Thus Philips makes audio systems, which are big in size and get accepted in rural India by their sheer size.
11.7.2. Social practices: There are so many different cultures, and each culture exhibits different social practices. For example, in a few villages they have common bath areas. Villagers used to buy one Lifebuoy cake and cut it into smaller bars. This helped lifebuoy to introduce smaller 75-gram soap bars, which could be used individually.
11.7.3. Decision-making by male head: The male in Indian culture has always been given the designation of key decision maker. For example, the Mukhiyas opinion (Head of the village), in most cases, is shared with the rest of the village. Even in a house the male head is the final decision maker. In rural areas, this trend is very prominent.
11.7.4. Changes in saving and investment patterns From gold, land, to tractors, VCRs, LCVs
12.
SEGMENTATION:
THE SEGMENTATION PROCESS
This process includes: Identification of the segmentation variable, Segmentation of the market, and, Development of the profile.
The different variables are: 12.1.GEOGRAPHIC: Segmentation on the basis of geography is done depending on various factors such as Region: North, South, East and West. Village Size: < 500 people 501 2000 people 2001 5000 people > 5000 people Proximity to the feeder town Density: The no. Of people per sq. km Climate: Moderate, rain fed or dry with scanty rainfall. Level of Irrigation: Whether good, moderate, scanty or none at all.
12.2. DEMOGRAPHIC: Segmentation based of demographics takes into consideration factors such as Age, Income, Occupation, Literacy (Level of Education) and Caste.
12.3. PSYCHOGRAPHICS/BEHAVIOURAL: Such segmentation is done using variables such as Lifestyle of the people, (whether rigid, traditional, changing or imitating urban), Occasion, (whether on a regular day or a special occasion), Benefits sought from the product (such as Quality, Price and Service), and Loyalty to brands, (whether Low, Medium or High.)
Rural Consumers majorly look into the value that the product offers. They associate value with the Benefits that the product offers, its Availability, and its Cost. When talking of Benefits, they look at the features of the product as well as the Packaging and attractiveness, Availability, whether or not the products are available at Retail Shops and Haats, Cost, whether or not the product is reasonably priced.
Rural Consumer Occupation, income, Culture, Perception, Attitude
Benefits Product features Packaging
Availability Retail Shops Haats
Cost Price
Value
Understanding Rural Consumer 1) TO develop a communication programme for the rural audience, you have to take cognisance of the following characteristics of the rural consumer: 2) The rural consumer is very conscious about getting value for money. 3) He understands symbols and colours better, and looks for endorsement by local leaders or icons. 4) He doesn't like to pay extra for frills he cannot use. 5) He has his daily routine, and there is no sense of urgency in his lifestyle. 6) He has a very high involvement in any product purchased, especially when he decides to buy high-end products, which cost a few hundreds or thousands of rupees. 7) Divisions based on caste, community and other hierarchical factors continue to exist in rural areas. Perceptions, traditions and values vary from State to State and, in some cases, from region to region within a State. 8) I remember the case of a well-known brand of shampoo. When it entered the Rajasthan market some decades ago, with a theatre commercial that showed a beautiful model featuring bouncing hair, the product bombed. Post-research showed that it was considered indecent for a girl to show off her hair, and the audience refused to connect with the brand. 9) Similarly, when I was working on a campaign for MRF bullock cart tyres, I found glaring differences between Western UP and Eastern UP. While bullock carts in Western UP were smaller vehicles with single buffalos, in Eastern UP, they were bigger vehicles pulled by two bullocks. In Western UP, villagers spoke Hindustani whereas in Eastern UP, they spoke Bhojpuri. When we developed the communication package, we had to keep the above factors in mind.
13. MARKETING STRATEGIES FOR RURAL MARKET

13.1. BY COMMUNICATING AND CHANGING QUALITY PERCEPTION Companies are coming up with new technology and they are properly communicating it to the customer. There is a trade-o_ between Quality a customer perceives and a company wants to communicate. Thus, this positioning of technology is very crucial. The perception of the Indian about the desired product is changing. Now they know the difference between the products and the utilities derived out of it. As a rural Indian customer always wanted value for money with the changed perception, one can notice difference in current market scenario.
13.2.BY PROPER COMMUNICATION IN INDIAN LANGUAGE
The companies have realized the importance of proper communication in local language for promoting their products. They have started selling the concept of quality with proper communication. Their main focus is to change the Indian customer outlook about quality. With their promotion, rural customer started asking for value for money.
13.3.BY TARGET CHANGING PERCEPTION
If one go to villages they will see that villagers using Toothpaste, even when they can use Neem or Babool sticks or Gudakhu, villagers are using soaps like Nima rose, Breeze, Cinthol etc. even when they can use locally manufactured very low priced soaps. Villagers are constantly looking forward for new branded products. What can one infer from these incidents, is the paradigm changing and customer no longer price sensitive? Indian customer was never price sensitive, but they want value for money. They are ready to pay premium for the product if the product is offering some extra utility for the premium. Comparative Study of Rural and Urban Consumer Behaviour32
13.4.BY UNDERSTANDING CULTURAL AND SOCIAL VALUES
Companies have recognized that social and cultural values have a very strong hold on the people. Cultural values play major role in deciding what to buy. Moreover, rural people are emotional and sensitive. Thus, to promote their brands, they are exploiting social and cultural values.
13.5.BY PROVIDING WHAT CUSTOMER WANT
The customers want value for money. They do not see any value in frills associated with the products. They aim for the basic functionality. However, if the seller provide frills free of cost they are happy with that. They are happy with such a high technology that can ful_ll their need. As "Motorola" has launched, seven models of Cellular Phones of high technology but none took o_. On the other hand, "Nokia" has launched a simple product, which has captured the market.
13.6.BY PROMOTING PRODUCTS WITH INDIAN MODELS AND FACTORS Companies are picking up Indian models, actors for advertisements as this helps them to show themselves as an Indian company. Diana Hyden and Shahrukh Khan are chosen as a brand ambassador for MNC quartz clock maker "OMEGA" even though when they have models like Cindy Crawford.
13.7.BY ASSOCIATING THEMSELVES WITH INDIA
MNCs are associating themselves with India by talking about India, by explicitly saying that they are Indian. M-TV during Independence Day and Republic daytime makes their logo with Indian tri-color. Nokia has designed a new cellular phone 5110, with the India tri-colour and a ringing tone of "Sare Jahan se achcha". Comparative Study of Rural and Urban Consumer Behaviour33
13.8.BY PROMOTING INDIAN SPORTS TEAM
Companies are promoting Indian sports teams so that they can associate themselves with India. With this, they influence Indian mindset. LG has launched a campaign "LG ki Dua, all the best". ITC is promoting Indian cricket team for years, during world cup they have launched a campaign "Jeeta hai jitega apna Hindustan India India India". Similarly, Whirlpool has also launched a campaign during world cup.
13.9.BY TALKING ABOUT A NORMAL INDIAN
Companies are now talking about normal India. It is a normal tendency of an Indian to try to associate himself/herself with the product. If he/she can visualize himself/herself with the product, he /she becomes loyal to it. That is why companies like Daewoo based their advertisements on a normal Indian family.
13.10. BY DEVELOPING RURAL-SPECIFIC PRODUCTS
Many companies are developing rural-specific products. Electrolux is working on a made-for India fridge designed to serve basic purposes: chill drinking water, keep cooked food fresh, and to withstand long power cuts.
13.11. BY GIVING INDIAN WORDS FOR BRANDS Companies use Indian words for brands. Like LG has used India brand name "Sampoorna" for its newly launched TV. The word is a part of the Bengali, Hindi, Marathi and Tamil tongue. In the past one year, LG has sold one lakh 20-inch Sampoorna TVs, all in towns with a population of around 10,000. By the end of 1999, roughly 12Thats Rs 114 crore worth of TV sets sold in the villages in a year. 13.12. BY ACQUIRING INDIAN BRANDS
As Indian brands are operating in India for a long time and they enjoy a good reputation in India. MNCs have found that it is much easier for them to operate in India if they acquire an Established Indian Brand. Electrolux has acquired two Indian brands Kelvinator and Allwyn this has gave them the well-established distribution channel. As well as trust of people, as people believe these brands. Similarly Coke has acquired Thumps up, Gold Spot, Citra and Limca so that they can kill these brands, but later on they realized that to survive in the market and to compete with their competitor they have to rejuvenate these brands.
13.13. BY EFFECTIVE MEDIA COMMUNICATION
They can either go for the traditional media or the modern media. The traditional media include melas, puppetry, folk theatre etc. while the modern media includes TV, radio, e-chaupal. LIC uses puppets to educate rural masses about its insurance policies. Govt of India uses puppetry in its campaigns to press ahead social issues. Brook Bond Lipton India ltd used magicians effectively for launch of Kadak Chap Tea in Etawah district. In between such a show, the lights are switched o_ and a torch is ashed in the dark (EVEREADYs tact). ITC's e-chaupal (chaupal is the common place where villagers gather) has been the most elaborate and extensive venture in this field so far. Conceived by ITC's international business division and launched in 2000, the e-chaupal project has since grown to around 2,700 chaupals covering a population of around 1.2 million infive states {Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh and Maharashtra. One has to have a strategic view of the rural markets so as to know and understand the markets well.
13.14. BY ADOPTING LOCALISED WAY OF DISTRIBUTING
Proper distribution channels are recognized by companies. The distribution channel could be a big scale Super market; they thought that a similar system can be grown in India. However, they were wrong; soon they realized that to succeed in India they have to reach the nook and the corner of the country. They Comparative Study of Rural and Urban Consumer Behaviour35
have to reach the "local Paan wala, Local Baniya" only they can succeed. MNC shoe giants, Adidas, Reebok, Nike started with exclusive stores but soon they realized that they do not enjoy much Brand Equity in India, and to capture the market share in India they have to go the local market shoe sellers. They have to reach to local cities with low priced products.
13.15. BY ASSOCIATING THEMSELVES WITH INDIAN CELEBRITIES MNCs have realized that in India celebrities enjoyed a great popularity so they now associate themselves with Indian celebrities. Recently Luxor Writing Instruments Ltd. a JV of Gillette and Luxor has launched 500 "Gajgamini" range of Parker Sonnet Hussain special edition fountain pens, priced at Rs. 5000. This pen is signed by Mr. Makbul Fida Hussain a renowned painter who has created "Gajgamini" range of paintings. Companies are promoting players like Bhaichung Bhutia, who is promoted by Reebok, so that they can associate their name with players like him and get popularity.
13.16. MELAS
Melas are places where villagers gather once in a while for shopping. Companies take advantage of such events to market their products. Dabur uses these events to sell products like JANAM GHUTI(Gripe water). NCAER estimates that around half of items sold in these melas are FMCG products and consumer durables. Escorts also displays its products like tractors and motorcycles in such melas.
13.17. PAINTINGS
A picture is worth thousand words. The message is simple and clean. Rural people like the sight of bright colours. COKE, PEPSI and TATA traders advertise their products through paintings.
14. MARKETING MIX

14.1.PRODUCT:
14.1.1. Small unit size and low priced. This kind of packaging is widely used to attract the customers Examples Tiger Biscuit Re.1, 20gm talcum powder(Ponds)
14.1.2. New product designs- sturdy products Rural people think that heavier the product higher is the durability and power. Examples Bullet motor cycle, Ambassador car, Escort motorcycle
14.1.3. Branding The marketers have to come out with some unique name that can be easily remembered by consumers. Examples Tata Steel (corrugated sheets) Tata Shakti, billiwali cell(eveready batteries), lalsaboon(lifebouy), nirma girl, parle baby
14.1.4. Factors to be considered while designing the product: Companies should come out with a product which will suit the condition of rural markets. Example LG TV Devnagari script, Voltas refrigerator
14.1.5. Habits of usage and purchase It is also necessary to understand the likes, dislikes, habits, preferences of the consumers
14.2.PRICING
14.2.1. Low price (Sasta hai toh acha hai) Rural consumers are price sensitive. They want value for money. Examples lifebuoy soap, LPG Cylinders, Samandar Salt Comparative Study of Rural and Urban Consumer Behaviour37
14.2.2. No frill products They need the general necessities of life. They do not expect more than the daily requirements. This helps in cost cutting Example Maharaja Appliances 14.2.3. Refill Example- bourvita, detergents 14.2.4. Credit facilities What attracts the rural masses is the credit facilities provided to them 14.2.5. Discounts & Promotional schemes
14.3.PLACE This involves making available all the product in all the places where ever need Due to some constraints it is difficult to provide proper access to consumers
DISTRIBUTION Direct sales Manufacturer- retailer- consumer Manufacturer-wholesaler-retailer-consumer Manufacturer-co-company-depot-retailer-consumer Manufacturer-company depot- c & F agent-wholesaler-retailer-consumer
14.4.PROMOTION Newspaper Radio Audio vishul vans Group meetings Field Demonstrations Jeep campaigns Information centers Comparative Study of Rural and Urban Consumer Behaviour38
15. GROWTH IN RURAL MARKETS

For quite some time now, the lure of rural India has been the subject of animated discussion in corporate suites. And there is a good reason too. With urban markets getting saturated for several categories of consumer goods and with rising rural incomes, marketing executives are fanning out and discovering the strengths of the large rural markets as they try to enlarge their markets. Today, the idea has grown out of its infancy and dominates discussions in any corporate boardroom strategy session. Adi Godrej, chairman of the Godrej group that is in a range of businesses from real estate and personal care to agri-foods, has no hesitation proclaiming, It is a myth that rural consumers are not brand and quality conscious. A survey by the National Council for Applied Economic Research(NCAER), India's premier economic research entity, recently confirmed that rise in rural incomes is keeping pace with urban incomes. From 55 to 58 per cent of the average urban income in 1994-95, the average rural income has gone up to 63 to 64 per cent by 2001-02 and touched almost 66 per cent in 2004-05. The rural middle class is growing at 12 per cent against the 13 per cent growth of its urban counterpart. Even better, the upper income class those with household incomes of over Rs one million [$22,700] per annum is projected to go up to 21 million by 2009-10 from four million in 2001-02.
A study by the Chennai-based Francis Kanoi Marketing Planning Services says that the rural market for FMCG is worth $14.4 billion, far ahead of the market for tractors and agri-inputs which is estimated at $10 billion. Rural India also accounts for sales of $1.7 billion for cars, scooters and bikes and over one billion dollars of durables. In total, that represents a market worth a whopping $27 billion. It is no wonder that even MNCs have cottoned on to the idea of a resurgent rural India waiting to happen.
Four years ago, Coke ventured into the hinterland. Now Coke's rural growth of 37 per cent far outstrips its urban growth of 24 per cent. Coke is not the first MNC to have cottoned on to the rural lure.
Its global rival Pepsico took a wider approach to the business when it was given permission to set up shop in India in the late 1980s and investment in food processing and farming was a pre-condition for entry. The company imported a state-of-the art tomato processing plant from Italy to Punjab. In five years, productivity improved from 16 tonnes to 52 tonnes per hectare and there was a tomato glut in the state. Farmers weren't complaining because even though prices fell, their incomes increased because of the huge jump in productivity. Pepsi is now heralding a citrus plantation drive in the state and other parts of the country for its brand of Tropicana fruit juices, to replace imported fruit. Hindustan Lever Ltd, the $2.3 billion Indian subsidiary of Unilever, the country's largest FMCG company, has also got on the bandwagon. It's Project Shakti uses self-help groups across the country to push Lever products deeper into the hinterland. Its four-pronged programme creates income-generating capabilities for underprivileged rural women; improves rural quality of life by spreading awareness of best practices in health and hygiene; empowers the rural community by creating access to relevant information through community portals and it also works with NGOs to spread literacy. There are currently over 15,000 Shakti entrepreneurs, most of them women, in 61,400 villages across 12 states. By the end of 2010, Shakti aims to have 100,000 Shakti entrepreneurs covering 500,000 of India s 640,000 villages, touching the lives of over 600 million people. With such an emphasis on rural marketing, consumption patterns are changing and it signals a change in the regulatory environment. Vertical integration of the food market from farm to farm to fork becomes the best way to achieve efficiency and serve the interest of every stakeholder in the chain the farmer, the processor, the retailer and the consumer.
Between the 8th (1992-97) and the 10th (2002-07) Five Year Plans, successive governments have tripled the spending on rural development from $6.82 billion to $20.2 billion. All this potential has got India's big business houses rushing to enter and expand rural businesses. Telecom giant Sunil Mittal, chairman of the $24 billion mobile telephony major Bharti Tele- Ventures, is another unabashed ag-bearer of the 'go rural' strategy. He is confident that the next 'explosive' phase of demand for cellular connections is going to come from Comparative Study of Rural and Urban Consumer Behaviour40
the villages. In an interesting business diversification, he has tied up with the legendary Rothschilds of Europe for a $51 million food processing venture and export of fruits and vegetables. We can replicate our pre-eminence in IT agriculture and transform the country into a global food basket, he points out. Mittal's initial investments include an agriculture research centre and model farm in Punjab. If the hinterland has caught the attention of Mittal, among the country's most recent entrants to the ranks of big business, it has also not escaped the radar of the oldest business house, the $17 billion Tata group, which has consolidated its rural operations. The group's two companies, Tata Chemicals and Rallis India, ran separate rural initiatives till 2003. Tata Chemicals ran a chain called Tata Kisan Kendra, which offered farmers a host of products and services ranging from agriinputs to financing to advisory services. Rallis, on the other hand, was partnering ICICI Bank and Hindustan Lever in offering deals to farmers that covered operations from the pre-harvest to post-harvest stage. In 2004, the two operations were merged and Tata Kisan Sansar, a network of onestop shops providing everything from inputs to know-how to loans, was launched. Today, the Tata Kisan Sansar has 421 franchisee-run centres in three states and reaches out to over 3.6 million farmers. Like the Tatas, the $2.6 billion Mahindra group has successfully established a synergy between its current businesses and the planned rural forays. Mahindra & Mahindra Ltd is India's largest farm equipment company. Its subsidiary, Mahindra Shubhlabh Services, has operations in 11 states, and leverages the strong Mahindra brand, the 700,000-strong Mahindra tractor customer base and the 400-plus dealer network, to provide a complete range of products and services to improve farm productivity and establish market linkages to the commodity market chain. Its retailing arm, Mahindra Krishi Vihar, has been instrumental in increasing the groundnut yield in Rajasthan through a new seed sourced from the state of Maharashtra, and it has alsointroduced a new variety of grapes in Maharashtra. The activities of Mahindra Shubhlabh Services have attracted the attention of the International Finance Corporation.
16. URBAN MARKET

"The Census of India defines urban India," says Gupta of TSMG. "Urban India constitutes places, a. with a population of more than 5,000, b. a population density above 400 per square kilometer, c. all statutory town , that is, all places with a municipal corporation, municipal board, cantonment board, notified area council, etc. d. 75% of the male working population engaged in non-agricultural employment
17. URBAN CONSUMER

Activity within the Urban Consumer Market is a rich area of focus, where each subsegment plays a key role in the trend making process INNOVATORS ARE URBAN Consistently birth new, utility- and environment driven expressions of personal style TRENDSETTERS VALUE URBAN Retrieve underground style elements the first above-ground emergence of trends as such ADOPTERS COMMERCIALIZE URBAN Either reject trend or accept it into cool paradigm - help determine lifespan MAINSTREAM YOUTH CONSUMES URBAN Absorb cool paradigm and all trends included into popular mainstream consciousness Urban Consumers are an Added-Value population. Significant volume comes from the fact that URBAN represents not only those within this segment, but also those Urban-Influenced members of the Mainstream Market. When considering the POWER of this segment, think in terms of: BUYING POWER- Prolific spenders who over-index in particular categories POWER OF INFLUENCE - Highly influential in trend adoption across mainstream segments generally perceived as originators of trends Comparative Study of Rural and Urban Consumer Behaviour42
18. URBAN CONSUMER BEHAVIOUR

The urban consumer behavior is influenced b the following points:
18.1.FAMILY INFLUENCES Family is an important influence on purchase decisions. Bonnet and Kassarjian say Attitudes towards personal hygiene, preferences for food items etc. are acquired from parents.
18.2.PEER GROUP INFLUENCES Researchers say that peer groups are much more likely than advertising to influence attitudes and purchasing behaviour.
18.3.PERSONALITY Personality also affects consumers attitudes. Traits such as aggression, extroversion, submissiveness or authoritarianism may influence attitudes toward brands and products.
18.4.INFORMATION AND EXPERIENCE According to learning theory, consumers past experiences influence their brand attitude and condition their future behaviour. It is seen that brand loyalty will quickly end if brand does not perform well. Therefore, information and experience also determines attitude.
18.5.SITUATIONAL INFLUENCES
Purchase task - who are you buying for? Social surroundings - who are you shopping with? Physical surroundings - where are you shopping? Temporal factors - how much time do you have to shop?
19. PROFILE OF URBAN CONSUMER

19.1.High literacy The literacy rate in urban areas is higher than that of its rural counterparts. Education has become a necessity in the urban quarters
19.2.High income The purchasing power of urban consumer is high and is increasing day by day due to the technological and economical developments in urban areas. Also industrialization has lead to an overall growth of these areas.
19.3.High awareness Due to high literacy rate the urban consumer are aware about the changes in the surroundings. Also, they are aware about the various products in the market. The can take their own decisions of purchase.
19.4.High standard of living High literacy coupled with high income leads to the increase in the standardof living of the urban people.
19.5.Brand conscious Urban consumers are status seekers. they value brand name more than value for price. A urban consumer is brand conscious
19.6.Buying decisions The buying decisions of urban consumer are influenced by family influences, peer group influences, personal interest, information and experience.
URBAN is a gumbo of CULTURAL ELEMENTS
Grass Roots Sensibilities Fast City Living Fusion of Ethnic Cultures Racial & Economic Diversity Keeping It REAL Street smarts Aesthetics of Key Music Subcultures
20. PROFILE OF URBAN MARKET

20.1.Concentrated markets Unlike rural markets urban markets are not scattered, they are concentrated. This is due to inadequacy of land and population explosion.
20.2.Diversified consumer base The urban areas comprise of a gamut of religions and caste. There are diversified consumers in the urban regions. People constitute of different likes,dislikes,tastes, preferences and habits.
20.3.Media exposure Media reach is high in urban areas. The urban consumers being knowledgeable are able to access the media.
20.4.Transportation facilities Transportation facilities are at a booming rate in the urban areas. An urban consumer has access to all the regions very easily through use of various modes of transport such as roadways, railways, airways and waterways. Comparative Study of Rural and Urban Consumer Behaviour45
20.5.Communication facilities Telephones, mobiles, mails, e-banking, e-trading etc are some of the communication facilities available in urban markets.
20.6.Warehousing facilities There is proper warehousing facilities in urban areas. There are different type of warehouse for different products.
20.7.Electrification Proper supply of electricity is another positive feature of urban areas.
20.8.Medical facilities People have become more health conscious thus increasing the need for medical facilities.
21. PROBLEMS FACED BY URBAN MARKETS

21.1.steep rise in the population
21.2.inadequacy of land
21.3.lost open space and natural habitats
21.4. increased air pollution
21.5.more traffic
21.6.depleted natural resources
21.7.Increasing gap between rich and poor Comparative Study of Rural and Urban Consumer Behaviour46
22. SEGMENTATION
22.1 ATTITUDINAL SEGMENTATION Are young-minded / young at heart
Have a "hustler" mentality (in a positive sense)
Are fiercely independent
Take pride in swimming upstream /defying convention
Value exploration and discovery
22.2 BEHAVIOURAL SEGMENTATION Are active participants in passion areas vs. observers/bystanders
Are highly social
Highly mobile
Work tirelessly toward goal of making their passions, their livelihood
Indulge in more vices than their general market counterparts
22.3 DEMOGRAPHIC SEGMENTATION Truly multi-cultural
Build "transcultural" personal identities
Live, work and/or "hang out" in highly metropolitan spaces if not, they have a burning desire
23. MARKETING MIX

23.1 PRODUCT STRATEGY : Products Classification- Service Consumer good. Product Differentiation- Form, Features, Performance, Reliability Superior Technology CSR Initiatives Attractive Packaging Catchy Tag-lines Established as a brand itself. 23.2 PRICING STRATEGY : Optional-Feature Pricing. Product- Line Pricing. Cost-plus pricing Competitive pricing Distribution pricing 23.3. PLACE: In-store placement strategy Comparative Study of Rural and Urban Consumer Behaviour48
Already existing strong links in urban areas Rural penetration Develop marketing channels as strong and penetrated so that it would gain access to remote areas Strategic location of warehouses Increase wholesale dealer in small towns who can cover the nearby villages National coverage would be dealt with by increasing the company DEPOTS & warehouses and creating C&F agents in the smaller cities 23.4. PROMOTION: Media Radio Hoardings Consumer promotion Eco friendly PRODUCTS Newspaper Website promotion (www.naukri.com, www.shadi.com) Various promotional offers Sponsorship Programs
24. URBAN MARKETS: A DISCONTINUITY LED GROWTH OPPORTUNITY

The emergence of urban India as the major consuming segment for products and services should merit a strategy review by consumer facing companies, say Pankaj Gupta, Practice Head - Consumer & Retail and Rajiv Subramanian of Tata Strategic Management Group.
Between 2006 and 2016, Indias population is expected to increase from 1108 Mn to 1269 Mn. While the overall population is expected to grow to an annual rate of ~1.4%, Indias urban population is expected to grow at ~2.3% in the same period to reach ~400 Mn. Indias projected economic prosperity is likely to be spearheaded by a real GDP growth of 8-9% with a possible annual per capita income of ~Rs. 50,000 by 2012. This macro growth would entail significant sub-trends like a dip in low income households and rapid increase in high income (super rich) households, led primarily by urban India.
Emergence of Large, Distinct Consumer Income Segments
Between 2005-06 and 2013-14, the number of households with annual income greater than Rs 12 Lakh (USD 30,000) will grow nearly four fold. Within this band, there are 3.4 Mn households with an income in excess of Rs 24 Lakh (~USD 60,000) at 200506 prices. This segment is likely to include more than 15 Mn people, greater than the population of Denmark, Finland and Ireland put together. By 2014, the middle-high income band will consist of a substantial 11 Mn households. At a median income of USD 22500, this segment represents a total income pool of nearly USD 250 Bn. With spending patterns similar to the high income group; this segment represents a very significant chunk of the consuming base. A positive trend is seen in the middle-low band as well, where the number of households is likely to increase from ~14 Mn in 2006 to over 35 Mn in 2014. While low income households will remain the largest segment, their numbers are expected to decrease by about 4 Mn (0.3% CAGR) in the same period. While the trend of increasing number of higher income households is true pan-India, urban India has always been the much larger contributor in the higher income brackets and is expected to further increase the same in coming years.
Urbanization Trend
While public memory is constantly refreshed that India lives in villages, with urbanization levels slated to cross 31% by 2016, the urban population will be ~400 Comparative Study of Rural and Urban Consumer Behaviour51
Mn. Key markets like Tamil Nadu and Maharashtra with a population of 63 and 81 Mn respectively in 2001 are expected to cross the 50% urbanization mark in 2007 and 2020 respectively. While you would have agri-oriented states of Punjab and Haryana making positive shifts in urbanization, surprises could also be thrown up in states like Orissa and Chattisgarh. Urbanization trends across geographies indicate that states with high urbanization have higher income levels and tend to urbanize faster than others. Thus, current high income high urbanization states like Delhi, Tamil Nadu, Karnataka, Punjab, Haryana, Maharashtra and Gujarat would assume greater importance for marketers in future.
Dominance of Large Cities
By 2026, the number of million plus cities is expected to increase from a current 35 to 75 (Table 2). The contribution of these 75 cities to the total urban population is likely to go up from 48% in 2001 to ~63% in 2026. Most likely their contribution to the total
urban spend would be much higher resulting in higher concentration of spending power. Increasing Relevance of the Urban Consumer
Incomes are slated to increase faster in urban India than in rural India. The ratio of per capita incomes in urban to rural India is expected to go up from 3.3 in 2004-05 to 3.7 in 2010-11. Expectedly, share of urban India in the countrys net domestic product would go up from 52% in 2000 to over 60% in 2011.
Implications
While basic products would target the consumers at the bottom of the pyramid, there would be a shift towards value added products as we move higher up the income pyramid. This demand shift is likely to be spearheaded by urban India with its faster growing incomes and favourable consumer preferences. The expected concentration of demand is likely to spring up newer routes-to-market, with companies finding more efficient and effective ways of serving their target consumer. While marketers have been taught that the key to growth lay in increasing rural penetration, greater urbanization and faster increase in urban incomes has brought the urban consumer back to centre stage. Consumer facing companies in sectors like food, financial products, healthcare, consumer durables, personal care, household products and apparel need to be aware of such discontinuities taking place in their consumer base. It would be imperative for them to revisit their strategies to avoid being caught off guard. Comparative Study of Rural and Urban Consumer Behaviour53
25. DISTINGUISH BETWEEN RURAL AND URBAN CONSUMER

Features Consumer attitude Cultural factors Buying decision Urban Innovative Follow new trends Varies Rural Conservative Values, beliefs, traditions Buying decision by elderly people Agricultural or Agricultural related activities More Fewer contacts with outside world. Simplicity in relation. Speaks through the heart Rural consu mer
Occupation Price sensitive System of interaction
Non agricultural activities Less Impersonal casual relations, superficial, standardized formality of relations Urban consu mer
26. DISTINCTIVE FEATURES OF RURAL MARKETS Vs. URBAN MARKETS

FEATURES DEMAND PATTERN SPREAD LITERACY LEVEL PER CAPITA INCOME AWARENESS OF NEEDS| INFRASTRUCTURE SOURCES OF INFORMATION, COMMUNICATION SUPPLY PRODUCT GUIDANCE CONSUMER PROTECTION DEMAND COMPETITION C ONSUMERS LOCATION LITERACY INCOME EXPENDITURE NEEDS ADOPTION PRODUCT AWARENESS
RURAL Seasonal Scattered Low Low Not entirely known Poor Word of mouth personal/ direct selling, TV, radio, unconventional media Erratic, untimely Needed No awareness High Among units in organized sector Concentrated High High Planned, even High level Faster High
URBAN Uniform Concentrated High High Known Good Advertisements, TV, seminars, product launch and all formal and informal media Timely Adequate Increasing awareness Low Mostly from unorganized units Widely Spread LOW LOW Seasonal, variation low level Slow Low
POSITIONING QUALITY PREFERENCE PRICE SENSITIVE
Easy Good Low Wholesalers, stockists,
Difficult Moderate High Village shops, Haats, satellite distribution, star distribution etc Average Limited TV, radio, print media to some extent. More languages Gifts, price discounts Less opportunities
DISTRIBUTION CHANNELS
retailer, supermarket, specialty stores, & authorised showrooms
TRANSPORT PRODUCT AVAILABILITY PROMOTION/ ADVERTISING SALES PROMOTION PUBLICITY
Good High Print, audio visual media, outdoors, exhibitions etc. Few languages Contests, gifts, price discount Good opportunities
27. RESEARCH DESIGN OF THE STUDY

This project is a descriptive research which seeks to find out "comparative study of urban-rural consumer behaviour".
27.1 SAMPLING PLAN Sampling plan can be classified into 3 sections as mentioned below :
27.1.1. Sampling unit
Sampling unit referrs to who are the sample target. In this project study, the sample units are the business class, executives, professionals, house wives, students and the worker class.
27.1.2. Sample Size This refers to the total number of people included in the sampling plan.
In this project study, sample size is 30consumers (rual-15 & urban-15) in Nerul.
27.1.3. Sampling procedure
This refers to the method incurred for choosing the samples. In this project study the sampling procedure undertaken is the random sampling method.
i. Primary Data
Here first hand information is obtained by distributing printed questionnaires .
ii. Secondary Data Comparative Study of Rural and Urban Consumer Behaviour57
Here the information is obtained from the boards publication, report, journals, books, magazines, and newspapers, management reviews.
iii. Sources Of Data
Mainly two sources of data have been used in the making of this project report. iv. Sources Of Data Primary Data Seconary Data
1) Questionnaries
1) Books 2) Journals 3) Boards Publications & Reports 4) Management Review 5) Newspapers
27.2. DATA COLLECTION INSTRUMENTS
In this study conducted the foremost data collection instrument that has been used is the questionnaires. The questionnaire has been designed both open and closed ended questions.
27.3. FIELD WORK Questionnaire colleges. was distributed at office establishment, colleges, and houses,
27.4. DATA PROCESSING AND ANALYSIS OF PLAN Processing and analysis of data-has been done by means of printed questionnaires method and many statistical techniques that include percentage analysis, pie chart, histograms, which are followed by conclusion and recommendation.
27.5. PIE CHARTS Pie charts represent a percentage of the collected or available data for analysis. It is a circular format diagram showing the various splits. Some of the pie charts are:
160 140 120 100 80 60 40 20 0 LITERACY INCOMESTANDARD OF LIVING LOW(RURAL) HIGH(URBAN)
28. FINDINGS OF THE RESEARCH

The research encompasses survey of total 30 consumer i.e. 15 urban and 15 rural from vashi and nerul. The questionnaire prepared gives the following results or outcome of the survey: The product preference for rural consumer differs from that of urban consumers. If you look at the Maslows Hierarchy Model, rural people need to fulfill the psychological (basic needs) and safety and security needs. Whereas, the urban counterparts focus more on esteem and self actualization needs. Rural consumers prefer more of general necessity products. On the other hand urban consumer prefer consumer durables The buyer or the participant in buying process also differs in rural and urban markets. This is because in rural areas buying decisions are taken by the elderly person or the earner of the family. Whereas in cities, the purchasing is done by anybody. Frequency of buying in rural areas is high as compared to urban areas The mode of purchase made in rural areas can be through Barter System or cash or kind. In case of urban markets is done through cash, credit cards, e-banking, e-shopping etc. Rural consumers are price sensitive whereas urban consumers are status seekers or brand conscious. People in rural areas mainly purchase fron local Kirana Shops, grocery shops, Haats, Melas etc. urban consumers purchase from supermarkets, malls, shopping centres etc. These points and many other points like promotion, income, awareness, infrastructure etc differentiate rural consumer behaviour from their urban counterparts to a great extent.
29. CONCLUSION
Marketing according to a leading management theories Peter Druker can be put in this way " There will be always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sell itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available." Thru this we feel that the gist of mktg. in rural & urban is the same. It is nothing but teasing the minds of people, their desires, needs, expectations & playing with their physiology. But the market for a product may vary in rural & urban area and the marketing strategies to market the product is also different in urban and rural area. In rural area we find more of a stereotype because of similar socio-economic background. But in an urban area it is a multitude of people & personalities & variance in income, background & lifestyle. We found that the movies, which were hit in cities, were doing as well in the rural areas. (E.g. Lagaan, Gadar) But movies, which are hit in rural areas, may not be successful in cities. (E.g. Mithun movies) We also found that people in cities spend more on entertainment than people in rural areas. As from the study we can see that the purchasing power of the people in a city like Mumbai is more than a semi rural area like Ambernath and willingness of the people in the rural area to spend towards movies or any other mode of entertainment is quite less than that of the people residing in urban area. As comparing the purchasing power and the willingness to spend, the marketing strategies and the range of products differ between rural and urban area.
30. ANNEXURE
1) QUESTIONNAIRE
MARKET SURVEY
Your preferences and tastes do matter a lot. I would be glad if you could help me with the same by answering some of the question below relating to your day-to-day life.
Name :_____________________________________________________ Date: __________________ Place: _________________
1. Rank the below mentioned products according to the frequency of your purchase: 1) General necessities (Fruits, vegetables, grains) 2) FMCG (Cosmetics, toothpastes, soaps) 3) Consumer Durables 4) Luxury Items
2. Who participates in the buying process?
3. How do you buy?
1) Bartar System
2) Cash
3) Credit cards
4)Anyother -------------------
4. How frequently do you purchase? 1) Daily 2) Weekly 3) Monthly 4) Quarterly
5. From where do you buy? 1) Kirana Stores 2) Local Grocery Markets 3) Supermarkets 4) Malls
6. Does price affect your buying decisions? 1) Yes 2) No
7. Does a Promotional Activity or Advertisements change your purchasing decisions? 1) Yes 2) No
8. What affects the buying behavior of a consumers? ________________________________________________________ ________________________________________________________ __
I really appreciate your time and consideration. Thanks a lot.

As a part of this project I have interviewed Mr. Vinay Khadye of MGK Industries to study the consumption pattern in urban and rural markets
1) 2) 3) 4) 5) Name of the company : MGK Industries Name of the person interviewed: Mr. Vinay Khadye Product Category: Food Products Products manufactured: Biscuts, chips, beverages, chochlates,etc Products preferred in rural areas: Parle G, Marie, Uncle chips(Balaji),
Zankar etc 6) Products preferred in urban areas: Cream biscuits(bourborn), Lays,
coco cola, Pepsi etc 7) Promotional activities undertaken for rural areas : regional newspapers, tree
boards, jeep campaign, wall painting, sample distribution etc 8) Promotional activities undertaken for urban areas: TV, Banners, Posters,
Hoardings, Internet advertisements, seminars of product launchetc 9) Pricing strategy in Rural Markets: Penetration based pricing, small unit
packaging, credits, discount etc 10) Pricing strategy in urban market: Demand based pricing, Competitive pricing,
cost based pricing , skimming pricing etc 11) Distribution channel in rural markets: Satellite distribution, Star Sellers,
middlemen, stockists etc 12) Distribution channel in urban markets: Wholesaler, Retailer, Dealers etc Comparative Study of Rural and Urban Consumer Behaviour64
BIBLIOGRAPHY
WEBSITES
www.wikipedia.com www.hindubusinessline.com www.economictimes.com www.businessline.com www.marketresearchanalyst.org www.mgkindustries.com

MAGAZINES
Business standard
Frontline
REFERENCE BOOKS
Understanding Consumer Behaviour by prof. Parasuraman Rural Marketing by Prof. R. Krishnamoorthy

Comparative Study of Rural &amp; Urban Consumer Behavior

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UNIVERSITY OF MUMBAI

SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS

BACHELOR OF MANAGEMENT STUDIES 2009-2010 SEMESTER V

TITLE OF THE PROJECT:

SUBMITTED BY: PRACHI KISHOR MORE

UNDER THE GUIDANCE OF: PROF. R. KRISHNAMOORTHY

Signature of the Student

Comparative Study of Rural and Urban Consumer Behaviour2

PRACHI KISHOR MORE OF SYDENHAM COLLEGE OF COMMERCE AND

__________________ SIGNATURE OF PROJECT CO-ORDINATOR

__________________ SIGNATURE OF PRINCIPAL

Comparative Study of Rural and Urban Consumer Behaviour3

Comparative Study of Rural and Urban Consumer Behaviour4

BACHELOR OF MANAGEMENT STUDIES 2009-2010

SUBMITTED BY: PRACHI MORE

UNDER THE GUIDANCE OF: PROF. R. KRISHNAMOORTHY

Comparative Study of Rural and Urban Consumer Behaviour5

Comparative Study of Rural and Urban Consumer Behaviour6

MARKETING STRATEGY MARKETING MIX y y y PRODUCT PRICE PROMOTION

Comparative Study of Rural and Urban Consumer Behaviour7

PLACE 39-41 42 42 43 44 45 45-46 46 47

MARKETING MIX y y y y PRODUCT PRICE PROMOTION PLACE

Comparative Study of Rural and Urban Consumer Behaviour8

Meaning and definition

3. DETERMINANTS OF CONSUMER BEHAVIOR

Comparative Study of Rural and Urban Consumer Behaviour10

MARKETING AND CONSUMER BEHAVIOR

Comparative Study of Rural and Urban Consumer Behaviour12

5. CONSUMER SPENDING BEHAVIOUR

Comparative Study of Rural and Urban Consumer Behaviour14

Urban-Rural divide in Spending (%)

7. RURAL CONSUMER BEHAVIOUR

8. PROFILE RURAL CONSUMER

8.1.RURAL CONSUMER: 8.1.1. Size of rural consumer population

1971 Rural population Urban Population 80% 20%

1981 76.3% 23.7%

1991 76% 24%

9. FEATURES / PROFILE OF RURAL MARKET

Comparative Study of Rural and Urban Consumer Behaviour19

CONSTRAINTS IN TAPPING RURAL MARKET

Comparative Study of Rural and Urban Consumer Behaviour20

Comparative Study of Rural and Urban Consumer Behaviour21

CHANNEL MANAGEMENT IN RURAL MARKETS

Comparative Study of Rural and Urban Consumer Behaviour24

Comparative Study of Rural and Urban Consumer Behaviour26

FACTORS INFLUENCING RURAL CONSUMER

Comparative Study of Rural and Urban Consumer Behaviour27

Another good example would be Philips audio systems.

Urban India looks at

Comparative Study of Rural and Urban Consumer Behaviour28

Comparative Study of Rural and Urban Consumer Behaviour29

Rural Consumer Occupation, income, Culture, Perception, Attitude

Benefits Product features Packaging

Availability Retail Shops Haats

Comparative Study of Rural and Urban Consumer Behaviour30

Comparative Study of Rural and Urban Consumer Behaviour31

13. MARKETING STRATEGIES FOR RURAL MARKET

13.2.BY PROPER COMMUNICATION IN INDIAN LANGUAGE

13.3.BY TARGET CHANGING PERCEPTION

13.4.BY UNDERSTANDING CULTURAL AND SOCIAL VALUES

13.5.BY PROVIDING WHAT CUSTOMER WANT

13.7.BY ASSOCIATING THEMSELVES WITH INDIA

13.8.BY PROMOTING INDIAN SPORTS TEAM

Comparative Study of Rural & Urban Consumer Behavior

Comparative Study of Rural & Urban Consumer Behavior

8. What affects the buying behavior of a consumers? __