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Impact of Rural Marketing on Indian Economy

Lakshmi priya
1
, Vandana Bajpai
2

Student , Kanpur Institute of Technology, Kanpur
Email id- lpriya19091990@gmail.com , P.No- 9721417807

ABSTRACT
It will be right start to develop Indian economy that if Indian corporate look forward for
developing Indian rural market and consumer. The Indian rural market has a huge demand base
and offers great opportunities to marketers. Two-thirds of Indian people as well prospect
consumers live in rural areas , approx 30% GNP generated from rural business . If we cast a
glance over demographically at global perspective that Indian rural population contribute approx
12.2% of total global population which is a huge and unorganized market.

Rural management encompasses all sectors of rural life. In its widest sense, it implies
development of every aspect of rural life. The basic objectives of rural management is to
organize, develop and utilize the available at optimal level to proper utilization and productivity
of resources, in such a manner that the entire rural population may be benefited by it and
increase the production and consumption to increase Indian economy. Rural management also
helps to enhance living standard rural people. Since independence, the Government has initiated
certain plans for the betterment of rural people. Upgrading rural market is one way to improve
access to marketing opportunities.
Early to pre-independent, Indian rural people played very important role in Indian independent
movement and make India free from British regime, but rural people did not get much attention
from Indian govt. and other business organization, to understand them and fulfill their needs and
wants.
Although India is an agriculture based country and Indian economy is totally based upon
agriculture and villagers, even they have being ignored. Since 1990 the wave of L.P.G.
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(Liberalization, Privatization and Globalization) has changed the face of Indian rural markets and
still is in its transition period, due cut throat competition in urban markets, more market
saturation and negative demands.
Key Words:- Rural Marketing ,Indian corporate , Rural population, Indian economy , Agriculture

Introduction:
742 million Indians constituting 138 million households reside in 6, 38,365 villages. The size of rural
market itself speaks of its potential. The current marketing environment and economic scenario have
brought the corporate under contemporary roofs of modern India, which is challenging the current
standards of segmenting, targeting and reaching the customers. Realistically, India as a nation has come a
long way from the place where only urban population which constitutes 20 per cent of customer base for
companies are responsible for 80 per cent of their profits. The companies are looking for new
opportunities and avenues, as they are witnessing a decline in their growth rates in urban markets due to
market saturation and they do have a huge, untouched and untapped rural Indian market. The driving
force for this is rural youth who are educated, have access to technology and have openness to change.
Also rural markets have acquired significance, as the overall growth of economy has resulted into
substantial increase in the purchasing power of the rural communities. A survey by India's premier
economic research entity, National Council for Applied Economic Research (NCAER) indicates that rise
in rural incomes is keeping pace with the rise in urban incomes. The rural middle class is growing at 12
per cent, close to the urban middle class which is growing at 13 percent.
Indian economy post independence:
The Indian economy at the time of independence showed all the signs of stagnation. About 47% of the
population was below the poverty line in 1951.This figure went up in 1964-65, came down and again
went up in 1977-78. Presently the World Bank estimates that a third of the global poor reside in India. At
the time of independence 72% of the work force was employed in agriculture and it contributed to nearly
50% of the national income. Industrialization was at a very low level with only 2% of the work force
employed in industries. In addition to this there was hardly any investment in industries. The only
industries which existed were cotton and jute industries. They also suffered a major setback, as at the time
of partition major jute producing areas went to Pakistan and as a result there was a shortage of raw
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material. Thus, at the time of Independence, low agriculture output, little industrialization, low figure of
national income, high poverty and unemployment, slow economic progress were the features of Indias
economy.
After India got independence from colonial rule in 1947, the process of rebuilding the economy started.
For this various policies and schemes were formulated. First five year plan for the development of Indian
economy came into implementation in 1952. These Five Year Plans, started by Indian government,
focused on the needs of the Indian economy.
If on one hand agriculture received the immediate attention on the other hand the industrial sector was
developed at a fast pace to provide employment opportunities to the growing population and to keep pace
with the developments in the world. Since then the Indian economy has come a long way.
The GDP growth rate for the 2008-09 period has been 6.7%. Despite improvement in many areas it is true
that poverty, unemployment and illiteracy are major stumbling blocks to the nations development.
Before competing with China to become the biggest and most powerful economy, we have to realize that
there are many problems within the country which need to be tackled first. Benefits of economic reforms
seem limited to urban centers while the condition in rural areas is going from bad to worse. It is
imperative that the villages of India be made self-sufficient as they once were. More initiatives like
Grameen Bank which provide micro credit to the poor need to be encouraged. On their part, the
government should make sure the funds allocated for rural development are utilized efficiently. The
Indian youth which is madly running after MNCs and 6 digit salaries needs to stop and think about the
rest of the country, how some people dont get even 2 square meals a day and play an active role in the
developmental process. This is our country, every citizen is a stakeholder in the nations interest and
therefore its problems will also have to be solved jointly and in cooperation with one another The Gross
Domestic Product (GDP) at factor cost, which was 2.3 % in 1951-52 reached 6.5 in the financial year
2011-2012
Trade liberalization, financial liberalization, tax reforms and opening up to foreign investments were
some of the important steps, which helped Indian economy to gain momentum. The Economic
Liberalization introduced by Man Mohan Singh in 1991, then Finance Minister in the government of P V
Narsimha Rao, proved to be the stepping-stone for Indian economic reform movements.
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Financial year
GDP of India at factor cost (in
percent)
1951-52 2.3
1956-57 5.7
1961-62 3.1
1966-67 1
1971-72 1
1976-77 1.2
1981-82 6
1986-87 4.3
1991-92 1.3
1996-97 7.8
2001-02 5.8
2006-07 9.2
2010-11 9.6
2011-12 6.9
(SOURCE: mapsofindia.com/india-economy)
What is rural?
Low population number, low median income, poor infrastructure [roads, electricity, communications],
and agrarian rather than industrial activity. Such rural areas are within the sphere of influence of
neighbouring cities and metros.
Rural consumer insight
Rural India buys:
Products more often (mostly weekly)
Buys small packs, low unit price more important than economy
In rural India, brands rarely fight with each other; they just have to be present at the right place.
India's GDP rate since 1951-51:
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Many brands are building strong rural base without much advertising support
Chik shampoo, second largest shampoo brand
Ghadi detergent, third largest brand
Fewer brand choices in rural: number of FMCG brand in rural is half that of urban.
Buy value for money, not cheap products
Salient features of rural india
Some common characteristics that do exist amongst most of the rural markets in India are as follows:
A. Population: 83.3 per cent of the villages have a population of less than 2000
B. Levels of education: Although the percentage of literates has increased, there is still
approximately 60 per cent of the rural population who lies below the middle education bracket.
C. Occupational pattern: Almost 76 per cent of the rural population depends on cultivation or
wages for their living.
D. Characteristics: in terms of occupation, consumption and buying behaviour change prominently
from urban to rural in locations with population more than 10000.
E. Income level: Though rural incomes have grown manifold in the last one decade, still an
average rural consumer has a much lower income than his or her urban counterpart. Still
a large part of his income goes to provide the basic necessities, leaving smaller income to
be spent on other consumer goods. This makes the rural consumer more price
sensitive than the urban consumer.



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Rural consumer
It is widely acclaimed that India is one of the largest consumer market in the world. But the consumer in
India shows wide variation in size and potential of various consumer market segments. These differences
Can be seen in terms of geographical difference, urbanrural consume age and family life cycle, income
level, education level, linguistic and religion diversity, food habit; festival etc. revolution in
communication technology are forcing marketer to look beyond time tested concept such as brand loyalty
and mass marketing. Marketer are trying to determine the underlying need and motive of consumer as
well as various factor which influence the formation of these need and satisfaction of these. Marketer are
also trying to understand the learning Process adopted by buyer and consumer.
The Learning process can also be linked to other cognitive structure such as attitude and beliefs. Buying
behavior is also influenced by other psychological concept such as personality, motivation and
perception. Knowing the impact of these concept on buying behavior will help marketer in the generation
of new product ideas and adopted customization for core product; some additional feature and by offering
of additional services, all done with the intention to add the customer delight.










Identify Customer
Need

Offer
Individualized
product
Induce Customer
Trial
Proper Distribution
and Sales

Through
Advertisement and
Communication
Communicafon

Customer
Want


Result in


Customer
Experience With
the Product
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Rural marketing concept:
In recent years, rural markets have acquired significance, as the overall growth of the economy has
resulted into substantial increase in the purchasing power of the rural communities. On account of green
revolution, the rural areas are consuming a large quantity of industrial and urban manufactured products.
In this context, a special marketing strategy, namely, rural marketing has emerged. But often, rural
marketing is confused with agricultural marketing the latter denotes marketing of produce of the rural
areas to the urban consumers or industrial consumers, whereas rural marketing involves delivering
manufactured or processed inputs or services to rural producers or consumers.
Factors responsible for the rural market boom to come into existence:
1. Increase in population and hence increase in demand.
2. A marked increase in the rural income due to agrarian prosperity.
3. Standard of living is also increasing in rural areas.
4. Large inflow of investment for rural development programmes from government and other
sources.
5. Increased contact of rural people with their urban counterparts due to development of transport
and wide communication network.
6. Increase in literacy and educational level and resultant inclination to sophisticated lives by the
rural folks.
7. Inflow of foreign remittances and foreign made goods into rural areas.
8. Change in the land tenure systems causing a structural change in the ownership patterns and
consequent changes in the buying behaviour.
9. Rural markets are laggards in picking up new products. This will help the companies to phase
their marketing efforts. This will also help to sell inventories of products out dated in urban
markets.
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Glimpse about rural market attractiveness:
Rural market has following arrived and the following facts substantiate this:
742 million people
Estimated annual size of the rural market
FMCG Rs 65,000 Crore
Durables Rs 5,000 Crore
Agri-inputs (incl. tractors) Rs 45,000 Crore
2 / 4 wheelers Rs 8,000 Crore
LIC sold 55 % of its policies in rural India.
Of two million BSNL mobile connections, 50% in small towns/villages
Of the six lakh villages, 5.22 lakh have a Village Public Telephone(VPT)
41 million Kisan Credit Cards issued with cumulative credit of Rs 977 billion resulting in tremendous
liquidity.
Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from these towns on
Rediff online shopping site.
42 million rural availing banking services in comparison to 27 million urban HHs.
Investment in formal savings instruments: 6.6 million in rural and 6.7 million in urban

Rural market is big chunk for marketers:
1) Infrastructure is improving rapidly.
2) In 50 years only 40% villages connected by road, in next 10 years another 30%.
3) More than 90 % villages electrified, though only 44% rural homes have electric connections.
4) Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected
by STD.
5) Social Indicators have improved a lot between 1981 and 2001
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6) Number of pucca houses doubled from 22% to 41% and kuccha houses halved (41%to 23%)
7) Percentage of BPL families declined from 46% to 27%
8) Rural Literacy level improved from 36% to 59%
9) Low penetration rates in rural so there are many marketing opportunities.

Rural marketing in modern India:
Rural Marketing is defined as a function that manages all activities involved in assessing, stimulating
and converting the purchasing power of rural consumers into an effective demand for specific products &
services and moving these products & services to the people in rural areas to create satisfaction and a
better standard of living and thereby achieving organizational goals The process should be able to
straddle the attitudinal and socio-economic disparity between the urban and rural customers.







Urban to Rural (U 2 R): A major part of rural marketing falls into this category. It includes the
transactions of urban marketers who sell their goods and services in rural areas, like pesticides, fertilizers,
seeds, FMCG products, tractors, bicycles, consumer durables, etc.
Rural to Urban (R 2 U): Transactions in this category basically fall under agricultural marketing where a
rural producer seeks to sell his produce in an urban market, like seeds, fruits and vegetables, milk and
related products, forest produce, spices, etc.
URBAN
RURAL

RURAL
RURAL
URBAN
RURAL

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Rural to Rural (R 2 R): This includes the activities that take place between two villages in close
proximity to each other, like agricultural tools, handicrafts and bullock carts, dress materials, etc.
TABLE 1: RURAL POPULATION STATISTICS
Population Number of Villages Percentage of total villages
Less than 200 114267 17.9
200-499 155123 24.3
500-999 159400 25
1000-1999 125758 19.7
2000-4999 69135 10.8
5000-9999 11618 1.8
10000 & above 3064 0.5
Total 638365 100

Attracting attributes of rural markets
TABLE 2: ESTIMATED ANNUAL SIZE: RURAL MARKET
FMCG INR 65000 crore
Durables INR 5000 crore
Agri-inputs (including tractors) INR 45000 crore
Two / Four Wheelers INR 8000 crore
TOTAL INR 123000 crore

The immense potential of the rural market can be realized if the marketers understand this market. The
huge untapped needs of the rural mass, the growing rural economy and the increasing media penetration
and brand awareness make this market extremely attractive to marketers (Goswami, 2009). A look at the
estimated annual size of the rural market would make us understand the true potential of this untapped
market. The growth statistics for FMCG and Consumer Durables sector suggests huge potential for the
Indian Rural markets
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Understanding the potential of rural market:
1. Large population: 742 million Indians constituting 138 million households reside in 6,38,365
villages. The size of rural market itself speaks of its potential
2. Growth in market: The market has been growing at 3-4% per annum adding more than one
million new consumers every year.
3. IT penetration in rural india: Today's rural children and youth will grow up in an environment
where they have 'information access' to education opportunities, exam results, career counselling,
job opportunities, government schemes and services, health and legal advice and services,
worldwide news and information, land records, mandi prices, weather forecasts, bank loans,
livelihood options. If television could change the language of brand communication in rural India,
affordable Web connectivity through various types of communication hubs will surely impact the
currency of information exchange. As the electronic ethos and IT culture moves into rural India,
the possibilities of change are becoming visible.
4. Impact of globalization: Globalization will have its impact on target groups like farmers, youth
and women. Farmers, today 'keep in touch' with the latest information and maximize both ends.
On youth its impact is on knowledge and information and while on women it still depends on the
socio-economic aspect. The marketers who understand the rural consumer and fine tune their
strategy are sure to reap benefits.
5. Increasing income and purchasing power: The agricultural development programs of the
government have helped to increase income in the agricultural sector. These in turn have created
greater purchasing power in rural markets.
6. Accessibility of markets: The attraction of a market depends not only on its potential but also on
its accessibility. The road network has facilitated a systemized product distribution system to
villages. An increasing number of companies are supplying village markets directly. Increasing
direct contacts to villages helps product promotion and availability of the product in the village
shop.
7. Consumer behaviour changes: Increased literacy and greater awareness in rural markets create
new demands and discriminating buyers. This is observed more in the younger generation. In
villages today, this segment of buyers consumes a large variety of products, both durables and
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non-durables. There is a visible increase in the consumption and use of a variety of products,
which is easily observed.
8. New employment opportunities: Government schemes like IRDP (Integrated Rural
Development Programme), JRY (Jawahar Rozgar Yojana) and TRYSEM (Training Rural Youth
for Self Employment) have created new employment opportunities in Rural India. Co-operative
banks and Public sector banks are extending loans to rural people, thereby creating job
opportunities for them.
9. Green revolution: The vision of Dr. Swami Nathan, the father of the green revolution to achieve
self-sufficiency in food grain production in 1995, gave a major breakthrough in food grain
production by the use of scientific methods in agriculture. At present, Rural India generates 299
million tons annually.
10. Various government policies: The government stress on self-sufficiency resulted in various
schemes like Operation Flood (White Revolution), Blue Revolution, Yellow Revolution, etc.
resulted in the production of 15 million tons of milk per annum.
11. Better credit facilities through banks: With co-operative banks taking the lead in the rural
areas, every village has access to short, medium, long-term loans from these banks. The credit
facilities extended by public sector banks through Kisan Credit Cards help the farmers to but
seeds, fertilizers and every consumer goods on installments.
12. Green card / credit card for farmers: The government initiated credit cards for farmers through
public sector banks. The farmer had a choice to take short or medium term loans through these
credit cards to buy seeds, fertilizers, etc. This enabled him to produce more and thereby increase
his income.
13. Improved exports due to export policy: The new Export Policy 2000 paves the way for open
market status for agriculture. WTO Policy for agro-exports has increased exports of Indian
agricultural produce thereby increasing incomes of the rural population.
14. Remittances from indians working abroad: These remittances are a sizeable contribution to
growing rural income & purchasing power.
15. Media: Mass Media has created increased demand for goods and services in rural areas. Smart
marketers are employing the right mix of conventional and non-conventional media to create
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increased demand for products. The role cable television has been noteworthy in bringing about
the change in rural peoples mindset and influencing their lifestyles.
Challenges in Rural Marketing:
Though rural markets are a huge attraction to marketers, it is not easy to enter the market and take a
sizeable share of the market, in the short time due to the following reasons.
Low Literacy: There are not enough opportunities for education in rural areas. The literacy level
is as low (36%) when compared to all- India average of 52%.
Seasonal Demand: Demand for goods in rural markets depends upon agricultural situation, as
agriculture is the main source of income. Agriculture to a large extent depends upon monsoon
and, therefore, the demand or buying capacity is not stable or regular.
Transportation: Many rural areas are not connected by rail transport. Kacha roads become
unserviceable during the monsoon and interior villages get isolated.
Distribution: An effective distribution system requires village-level shopkeeper, wholesaler or
preferred dealer, distributor or stockiest at district level and company-owned depot or
consignment distribution at state level. The presence of too many tiers in the distribution system
increases the cost of distribution.
Communication Problems: Facilities such as telephone, fax and telegram are rather poor in rural
areas.
Traditional Life: Life in rural areas is still governed by customs and traditions and people do not
easily adapt new practices.
Buying Decisions: Rural consumers are cautious in buying and decisions are slow and delayed.
They like to give a trial and only after being personally satisfied, do they buy the product.
Media for Promotions: Reach of formal media is low in rural households; therefore, the market
has to undertake specific sales promotion activities in rural areas like participating in melas or
fairs.
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Cultural Factors: Culture is a system of shared values, beliefs and perceptions that influence the
behavior of consumers. There are different groups based on religion, caste, occupation, income,
age, education and politics and each group exerts influence on the behavior of people in villages.
Future Trends: Markets which are not able to face the stiff competition posed by MNCs, can
restore their profits in the rural sector. The market share of urban market when compared to the
rural market is low, hence if Indian industries concentrate on rural markets their sales will
increase. If rural markets are brought into the limelight of development, they pave way to
prosperity. Prosperity of India lies in the prosperity of every Indian, hence no rural segment
should be left untapped.
Rural marketing involve a number of strategies, which include:
1. Client and Location specific promotion involves a strategy designed to be suitable to the
location and the client.
2. Joint or co-operative promotion strategy involves participation between the marketing agencies
and the client.
3. 'Bundling of inputs' denote a marketing strategy, in which several related items are sold to the
target client, including arrangements of credit, after-sale service, and so on.
4. Developmental marketing refer to taking up marketing programmes keeping the development
objective in mind and using various managerial and other inputs of marketing to achieve these
objectives.
5. Media, both traditional as well as the modern media, is used as a marketing strategy.
6. Unique Selling Propositions (USP) involves presenting a theme with the product to attract the
client to buy that particular product.
7. Extension Services denote, in short, a system of attending to the missing links and providing the
required know-how.
8. Ethics in Business form, as usual, an important plank for rural markets and rural marketing.
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9. Partnership for sustainability involves laying and building a foundation for continuous and
long lasting relationship.
The 4A Approach:
The Indian rural market contributes 50% in the total sales of durable and nondurable products. The rural
consumer is not unlike his urban counterpart in many ways. the Indian rural market is growing faster than
the urban market. The four As of rural marketing is similar to marketing mix. The four As of rural
marketing are as follows:
i) Affordability: Refers to the ability of customers to pay for the product. The price of products should be
set to match the income level of rural customers. Affordability does not mean that the marketer should
provide cheaper products but the product should be brought into the range of ability to pay. The income
of rural population is less than urban population so they cannot invest a large sum on a single product.
Therefore, rural population prefers to buy small quantity of products, which are affordable for them.
ii) Availability: Refers to the reach of a distribution channel in the rural market. Distribution is the
biggest problem of the rural market due to lack of transportation facilities. In rural areas, retailers
maintain good relationships with customers; therefore, it takes less time to sell a new product. An
organization should adopt the best distribution channel to reach the rural market with minimum cost
possible.
iii) Awareness: Refers to promotional activities to provide information to customers. The best media to
reach the rural market are TV and radio. The organization should conduct awareness programs in local
languages to convey the message.
iv) Acceptability: Implies that a product should be readily acceptable by rural customers. Marketing mix
should be properly designed to suit the rural customers.
Emerging trends in markets:
Online rural market (internet, nicnet): Rural people can use the two-way communication through
on line service for crop information, purchases of Agri-inputs, consumer durable and sale of rural
produce online at reasonable price. Farm information online marketing easily accessible in rural areas
because of spread of telecommunication facilities all over India. Agricultural information can get
through the Internet if each village has small information office.
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Information through local agriculture input dealers: Most of the dealers have direct touch with
the local farmers; these farmers need awareness about pests, decease, fertilizers, seeds, technology
and recent developments. For this information, farmers mostly depend on local dealers. For
development of rural farmers the government may consider effective channel and keep information at
dealers, for farmer education hang notice board and also train the dealer recent changes and
developments in agriculture.
Cost benefit analysis: Cost benefit can be achieved through development of information technology
at the doorsteps of villagers; most of the rural farmers need price information of agri-produce and
inputs. If the information is available farmers can take quick decision where to sell their produce, if
the price matches with local market farmer no need to go near by the city and waste of money & time
it means farmers can enrich their financial strength.
Need based production: Supply plays major role in price of the rural produce, most of the farmers
grow crops in particular seasons not throughout the year, it causes oversupply in the market and
drastic price cut in the agricultural produce. Now the information technology has been improving if
the rural people enable to access the rural communication, farmers awareness can be created about
crops and forecasting of future demand, market taste. Farmers can equates their produce to demand
and supply, they can create farmers driven market rather than supply driven market. If the need based
production system developed not only prices but also storage cost can be saved. It is possible now a
days the concept of global village.
Market driven extension: Agricultural extension is continuously going through renewal process
where the focus includes a whole range of dimensions varying from institutional arrangements,
privatization, decentralization, partnership, efficiency and participation. The most important change
that influences the extension system is market forces. There is a need for the present extension system
to think of the market driven approach, which would cater the demands of farmers.
Processing industry: India is the second largest producer of fruits and vegetables in the world with
an annual production of more than 110 million tones of fruit and vegetable only 1.3 percent of the
output is processed by the organized sector commercially, the reason higher consumption in fresh
form. However, as the packaging, transportation and processing capacities increase, the market for
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processed fruits and vegetables is projected to grow at the rate of about 20 % per annum. 100 %
export oriented units (EOU) and Joint venture units required improving the processing industry.
Apana mandi / kisan mandi / rythubazaar: There is a need to promote direct agricultural
marketing model through retail outlets of farmer's co-operatives in urban areas. The direct link
between producers and consumers would work in two ways: one, by enabling farmers to take
advantage of the high price and secondly, by putting downward pressure on the retail prices.
Rural agri- export: Rural produce, raw fruits and vegetable, processing goods, have the potential
market in Asian, Europe and western countries. Particularly soudhy countries have commendable
potential for Indian rural produce.