Rural Marketing Environment

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CHANDIGARH BUSINESS SCHOOL
GHARUAN, MOHALI

ASSIGNMENT
NO.1
RURAL MARKETING
ENVIRONMENT
SUBMITTED TO:

SUBMITTED BY:

DR. BPS CHAHAL

Arunjeet Singh

USB

M.B.A 4D
ROLL NO.467
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Rural Marketing Environment

Rural marketing involves addressing over 700 million potential consumers and over
40 per cent of the Indian middle income. No wonder, the rural markets have been a
vital source of growth for most companies. For a number of FMCG companies is the
country, more than half their annual sales come from the rural market.

INTRODUCTION
India lives in villages is an often quoted fact. The Indian rural markets with its vast size and demand
base offer great opportunities to marketers. 70% of the consumers live in rural areas (833,087,662 as
per 2011 census report) and more than half of the national income is generated here. Our nation is
distributed approximately in 6,30,000 villages which can be sorted in different parameters such as
literary levels, accessibility, income level, penetration, distance from nearest town etc. It is only
natural that rural India occupies an important position in the marketing strategies both in the narrower
and broader spectrum. Since 1970s and more particularly from the mid 1980s, the rural economy of
India has started showing potentialities. During 90s, there has been a steady shift to as well as growth
of purchasing power of rural India. Thus in recent years the rural sector provides a unique opportunity
to expand their market since the urban segment is clearly showing signs of saturation. The nature and
characteristics of rural market is quite different than that of urban market. Therefore it is worthwhile to
understand the rural characteristics and environment as a prelude.

RURAL AREA DEFINED

There is a clear-cut demarcation between urban and rural areas due to the differences in the physical
and functional characteristics. Government of India, by conducting (census survey 1961) clearly
defined urban areas and those areas not coming under the purview of urban area is considered as rural
area. As per the census report 2001 an urban area is defined as following.
a) All places with a Municipality Corporation, cantonment board or notified town area committee.
b) A place satisfying the following three criteria simultaneously.
1. Minimum population of 5000
2. At least 75 percent of male working population engaged in non agricultural pursuits and
3. Density of population at least 400 sq.mile (1000 per sq. mile).

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Apart from these, the outgrowths of cities and towns have also been treated as urban under urban
agglomerations. Example: Railway colonies, University campuses, port areas, military
camps etc.
All other areas not under the purview of the above definition are considered as rural area.

CHARACTERISTICS OF RURAL MARKETING

1. Large, diverse and scattered market:
Rural marketing in India is large, and scattered into a number of regions. There may be less number of
shops available to market products.
2. Major income of rural consumers is from agriculture:
Rural prosperity is tied with agriculture prosperity. In the event of crop failure, the income of masses is
directly affected.
3. Traditional outlook:
Villages develop slowly and have a traditional outlook. Change is a continuous process but rural
people accept change gradually. This is gradually changing due to literacy especially in the youth who
have begun to change the outlook in the villages.
4. Standard of living and rising disposable income of the rural customers:
It is known that majority of the rural population lives below poverty line and has low literacy rate, low
savings etc. Today the rural customers spend money to get value and are aware of the happening
around him.
5. Rising literary levels:
It is documented that approximately 45% of rural Indians are literate. Hence awareness has increase
and the formats are well informed about the world around them. They are also educating themselves
on the new technology for a better lifestyle
6. Diverse socio economic background:
Due to differences in geographical areas and uneven land fertility, rural people have different socio
economic background, which ultimately affects the rural markets.
7. Infrastructure facilities:
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The infrastructure facilities like warehouses, communication systems and financial facilities are
inadequate in rural areas and physical distribution is a challenge to marketers.

POTENTIAL OF RURAL MARKETS

1. Large population:
A staggering 12 per cent of worlds population and according to 2011 census, 69 per cent of the
countrys population lives in rural India and it is scattered over a large geographical area.
2. Rising rural prosperity:
Average income level of the rural people have improved due to modern farming practices, contract
farming, industrial growth, migration to urban areas, etc. Since 2000, the Compounded Annual Growth
Rate (CAGR) has been 6.2 % for rural India and 4.7 % in urban India.
3. Growth in consumption:
56 % of Indias consumption comes from rural areas. Between 2009-2010 and 2011-2012, rural
consumption grew annually at 19 % whereas urban growth has been 17 %. Between 2009 and 2012,
the spending in rural India was $ 69 billion and for urban India it was $ 55 billion.
4. Change in life style:
Life style of rural people has changed considerably and rural consumption has increased shift to
discretionary items like electric fan, bi-cycle, TV, two and four wheeler, mobile phones, etc.
5. Higher market growth rate:
The growth rate of Fast Moving Consumer Goods (FMCG) market and durable market is high in rural
areas. The rural market share is more than 50 % for products like cooking oil, hair oil, etc. The growth
of rural market has been 5 time more than the urban market in recent times.
6. Life cycle advantage:
The products which have attained maturity stage in the urban market are still in growth stage in rural
market giving the manufacturer and marketer a good scope for profit making.
7. Rural marketing is not expensive:
Cheap labour in the rural areas make promotion and movement goods within the rural markets much
less expensive compared to urban markets. According to Labour Bureau of India, in 2012 the daily
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wages of men and women in rural areas was ` 194 and `132 respectively which is much cheaper than
the urban areas.
8. Remoteness is no longer a problem:
1433577 km of rural roads as per Census 2011 has made rural connectivity much easier and reaching
the rural markets in many parts of the country is no longer a problem. This has also contributed to the
influx of FMCG and durables in rural markets. Rural marketing environment Rural marketing
environment is a complex and ever changing one and the marketing organizations need to
continuously keep pace with it, adopt strategies accordingly and employ creative marketing strategies
to strive in the rural marketing environment.

The Major Components Of Rural Marketing Environment Are

a) Social environment
b) Economic environment
c) Ethical environment
d) Political environment
e) Physical environment
f) Technological environment
A. Social environment:
The main components of social environment are discussed below:
1. Psychological factors:
Consumer behaviour, attitudes, personality and mental make-ups are unique. These factors
greatly influence the buying and spending behaviour of the rural consumers. The study of these
behaviour is also vital to plan strategic marketing mix.
2. Sociological factors:
Consumer society or the community is important. The consumer life style is influenced by the
social set-up. The social constitution and changes influence customer habits, taste, and lifestyles.
3. Anthropological factors:
The reasonable cultures and subcultures and living patterns influence advertising sales promotion,
selling strategies and packing. The consumers in East India have different taste than consumers in
South India and these factors are important considerations in marketing.

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4. Demographic factors:
1971 1981 1991 2001 2011 Total population (million) 548.2 683.3 848.3 1026.9 1210.2 Rural
population (million) 524.0 628.8 741.6 833.1 Proportion of rural population to total population
(million) 80.1 76.6 74.3 72.2 68.9 Decadal variation (%) 19.8 16.7 15.2 9 Source: Census, 1991,
2001, 2011
5. Education:
Rural literacy 1981 1991 2001 2011 % of literates 36 45 59 67.77 Source: Census, 1991, 2001,
2011
6. Household number Particulars 1991 2001 2011 Rural Urban Total Rural Urban Total Rural Urban
Total Household number (million) 112 40 152 138 54 192 220 110 330 Family size 5.55 5.32 5.36
5.31 5.08 4.81 Source: Census, 1991, 2001, 2011
7. Rural housing pattern House type 1981 1991 2001 2011 Pucca (%) 22 31 41 55.4 Semi-pucca (%)
37 36 36 27.6 Kuccha (%) 41 33 23 17 Total 100 100 100 100 Source: Census, 2001, 2011; NSS 2009
8. Occupational pattern Occupation Population in million Total Rural Urban Ain worker 362 245 116
Marginal worker 119 102 17 Cultivators 118 114 4 Agricultural labourers 144 136 8 Household
industry worker 18 11 7 Other workers 200 85 115 Source: Census of India, 2011
B. Economic environment:
The components of economic environment are as follows:
1. Price:
Pricing is a delicate issue in rural markets where it should be market-friendly and consumerfriendly as the rural consumers are more price sensitive compared to their urban counterparts. The
marketers have to keep in mind to get descent returns on investment and effects of producers and
marketers.
2. Competition:
Compared to the urban market, rural market has much less competition mostly because of the late
attention it received from the marketing agencies and the organized sector. But currently with
saturation of the urban markets, the competition is rising in rural markets mostly among the
FMCG.
3. Consumer:
The awareness level of the rural consumers are increasing everyday thanks to increasing literacy
levels, increased exposure to mass media channels, Information and Communication Technology
and shifting attention of the marketing agencies.
4. Consumers expenditure pattern:
Composition of rural per capita expenditure Food Non-food 1983 66 34 1991 63 37 2001 59 41
2013 49 61
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Source: NSSO, 2001, 2013
5. Size of rural market:
Total size of the rural market in 2012 was worth US$ 425 billion Annual size of rural market in
2012-13 FMCG US$ 14.8 billion Durables US$ 604 billion Seed US$ 2 billion Rural
development Population below the poverty line (Rural) Period No. of Persons (Million) % of
Persons Poverty line (Rs.) 1983 252 46 89.5 1993-94 244 37 206 1999-2000 193 27 328 2013 270
22 368
Source: Human Development Report, 2001; Economic Times, 2013
6. Five Year Plan allocations:
Sectoral allocations during the five-year plans (Rs. crore) Head of Development 7th FYP 8th FYP
9th FYP 10th FYP 11th FYP 12th FYP Agriculture 105 225 372 589 1,165 2,840 Rural
Development 89 344 890 1,219 3975 6730
Source: Planning Commission 2002; National Development Council, 2013
C. Ethical environment:
Business minus ethical values brings degeneration. In the long run it brings problems. Lack of
standardization, exploitation, falsification, etc. disenchants the rural consumers towards a product or a
brand or company itself.
D. Political environment:
The government policies towards trade and commerce, internal taxation and preferential treatments
have a influence on the marketing strategies. The marketing environment has to meet the political
frame work in which a government is made to work.
E. Technological environment:
The fast changing science and technology gives a cutting edge to the marketing of products. These
changes warrant changes in marketing inputs and strategies. Faster and efficient communication and
transport systems have speeded up the marketers. The capital is made to work faster and harder .So the
marketer has to use these new marketing tools and facilities in designing and implementing his
marketing strategies which are adaptive to the change in environment and ensure success.
F. Physical environment:

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The infrastructure availability for movement and storage of goods play an important role in the
physical distribution of goods and reaching the consumers. Efficient and cheaper logistics helps the
market in a big way to keep prices in limits.

Main Problems in Rural Marketing are as Follows:

1. Under developed people and underdeveloped markets:
The impact of agricultural technology is not felt uniformly throughout the country. Some districts in
Punjab, Haryana and the Western U.P. where the rural consumers are somewhat comparable to their
urban counter part; but there are large areas and grown of people who have repaired beyond the
technological breakthrough. In addition, the farmers with small agricultural land holding are also
unable to take advantage of the new technology.
2. Lack of power physical communication facilities:
Nearly 50 percent of the villages in India do not have all weather roads, physical communication to the
villages is highly expensive. Especially during the monsoon 4 months these villages become complete
inaccessible.
3. In adequate media coverage for rural-communication:
A large number of rural families own radio and TV sets, there are also community radio and TV sets.
These have been used to diffuse agricultural technology to rural areas. However, the coverage relating
to marketing is inadequate.
4. Many languages and dialects:
The number of languages and dialects vary from state to state and region to region. This type of
distribution of population warrants appropriate strategies decide the extent of coverage of rural market.
5. Other problems of rural marketing are natural Calamites:
Of draught or examine rain, epidemics, primitive methods of cultivation, lack of printer storage
facilities, transportation problem and inadequate market intelligence, including long chain of
intermediaries between cultivator and farmer and wholesaler and retailers.
There are also problems of extending marketing efforts to small villages with 200-500 population. Vast
cultural diversity, vastly varying rural demographics, poor infrastructure, low income levels and low
levels of literacy often tend to lower the presence of large companies in the rural markets.
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(d) Rural Marketing Strategy:
Rural marketing strategy is based on their As Availability Affordability and Acceptability. The first
A-Availability emphasises on the availability of the product for the customers, i.e., this gives
importance on effective distribution through efficient channels of distribution.
The second A- Affordability which focuses on product pricing, i.e, this gives importance for smaller
packages/pouches easily affordable by families in the rural areas, The third A Acceptability focuses
on convincing the customers to buy the product, i.e., extending suitable promotional efforts to
influence the customers to buy the product. Marketers need to understand the psycho of the rural
consumers and then act accordingly.
Rural marketing involves more intensive personal selling efforts compared to urban marketing. Firms
should refrain from pushing goods designed for urban markets to the rural areas. To effectively tap the
rural market a brand must associate it with the same things the rural consumers do.
This can be done by utilizing the various rural folk media to reach them in their own language and in
large number so that the brand can be associated with the myriad rituals, celebration, festivals, melas,
fairs and weekly hats.
(e) Rural Distribution Strategy:
One of the ways would be using company delivery mass, which can serve two purposes it can take
the products to the customers in every hook and corner of the market and it also enables the firm to
establish direct contact with them and thereby facilitate sales promotion.
However, only the large manufactures can adopt this channel. The companies with relatively fewer
resources can go in for the syndicated distribution where a tie-up between non-competitive marketers
can be established to facilitate distribution.

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