Rural Marketing in India: Challenges and Opportunities

International Journal of Management and Social Sciences Research (IJMSSR)
Volume 2, No. 8, August 2013
ISSN: 2319-4421
Rural Marketing in India: Challenges and Opportunities

Pawan Kumar, Research Scholar, Department of Commerce, Kurukshetra University, Kurukshetra
Neha Dangi, Research Scholar, Department of Commerce, Kurukshetra University, Kurukshetra
ABSTRACT
In the recent years rural market have acquired
significance and attract the attention of marketers as
68.84% population of India reside in 6, 38,000 villages
and overall growth of economy has resulted into
substantial increase in the purchasing power of the rural
communities. Due to green revolution, the rural areas are
consuming a large quantity of industrial and
manufactured products. In this way rural market offers
opportunities in the form of large untapped market,
increase in disposable income, increase in literacy level
and large scope for penetration. To take the advantage of
these opportunities, a special marketing strategy Rural
Marketing has emerged. This paper tries to understand
the rural market, importance of rural marketing and status
of rural market. The main aim of the study to observe the
potentiality of Indian rural markets and find out various
problems are being faced by rural marketer.
Keywords:
Rural Market,
Consumers.
FMCG,
Disposable
Income,
Rural
INTRODUCTION
Since the 1980s the mass rural market was used to attract
the marketers in Indian consumer market. The fact that
70% of countrys population was unaddressed, which was
the major attraction for marketers. In recent time this
attraction has increased with the additional money that
comes into hands of rural consumers due to green
revolution, rise in Agri-produce prices and MNREGA
spending. Budget 2013 further strengthens the rural story
with MNREGA because there has been a substantial
increase in their spending. These initiatives shift the rural
consumers towards Brands. Rural market constitute an
important segment of overall economy, for example in
USA, 55 million people reside in rural areas (Kotni, 2012).
Government agencies like IRDA (Insurance Regulatory
and Development Authority) and NCAER (National
Council for Applied Economics Research) define rural as
a village with a population less than 5000 with 75% male
population engaged in agriculture, while Hindustan lever,
ITC and most FMCG companies define rural as any place
with a population below 20,000.
i-Xplore International Research Journal Consortium
Rural marketing is promotion of a companys product in

the rural market by using strategies which differ from the
urban market. The rural market is more prices sensitive
but it has preference to quality. Rural marketing is
confused with agriculture marketing. The later denotes
marketing of produce of rural areas to the urban
consumers or industrial consumers while rural marketing
involves delivering manufactured or processed input or
services to rural consumers.
Phases in Rural Marketing

Part1 (before 1960s)
It was completely an unorganized market where baniyas
and mahajans dominate the market. Rural marketing was
another word for agriculture marketing because,
agriculture produces like food grains and industries like
cotton, oil seeds, etc. occupied primary attention.
Part2 (1960 to 1990)
The greatest thing which happened in this period was
green revolution which led to farming involves scientific
and technological methods and many poor villages
become prosperous business centers. Rural marketing
meant marketing of agriculture inputs and agriculture
marketing. Agencies like khadi and village industries
commissions bloomed and government paid attention to
promote these products.
Part3 (after Mid 1990)
Since 1990, Indias industrial sector had gain strength and
maturity. Its contribution to GNP increased substantially.
With support and development programs of center and
state government rural area progressed socially and
economically and emerges as a new market. Rural
marketing was considered different from agriculture
marketing. Rural marketing define as a function which
mange all those activities in assessing, stimulating and
converting the purchasing power of rural people into an
effective demand for specific products and services and to
create satisfaction and better standard of living for
achieving organization goals. Rural marketing in Indian
economy can be classified under two broad categories
these are: the market for consumer goods that comprise of
both durable and non-durable goods and market for
agriculture inputs that include fertilizers, pesticides, and
seeds and so on.
www.irjcjournals.org
93

OBJECTIVES
94
RESEARCH METHODOLOGY
To study the present scenario of rural market in

India.
To identify the major opportunities available in the
rural market.
To study the major challenges faced by marketer in
rural market.
India
Rural
Urban
ISSN: 2319-4421
The present study is descriptive in nature. The data used is

secondary in nature and has been collected from various
websites and reputed journals.
Rural India has a population of 83.3 crore (Table: 1)
spread across 6, 38,000 villages. The rural urban
distribution ratio currently is 68.84% and 31.16%
respectively.
Table: 1 Share of rural in total population

2001(in crore)
2011(in crore)
102.9
121.0
74.3
83 .3
28.6
37.7
Difference(crore)
18.1
9.0
9.1
Source: census of India 2011

The above table shows that the share of rural in the total
population of India. Rural population has been increased
by 9% from 2001 to 2011 and comprises of 833 million
people as compare to 377 million people in urban area
which shows greater opportunities for marketers.
What constitutes rural market?
The Census of India defines rural as habitation where
population density is less than 400 per sq. Km, and where
at least 75% of the male working population engaged in
agriculture, and where there is not any municipality or
board.
Planning Commission of India defines rural as a town
having population up to 15,000.
The difference between rural and urban consumers always
exists in India. Most of Indian rural consumers are
illiterate and poor. Illiteracy leads to inability to identify
brand differences and read basic text on packages.

Moreover products are sold lose, giving high competition
to branded sealed products. Irregular income, induce the
rural consumers to buy in small quantities. It is important
for rural marketers to provide products in small quantities
as well as good credit system for larger products.
Rural market status
The market scenario in the rural areas today is changing
very rapidly. Rural consumers demand branded products
mainly because of increase in disposable income and
literacy level. Rural families do not like to cut their
expenditure on weddings, pilgrimages, constructions and
consumptions. Rural consumers have more aspirations,
today this segment of buyers consumes large variety of
products, both durable and non-durables and willing to pay
right price for right products. Pardeep Kashyap, CEO,
MART, says The rural India has cash in hand and is not
bound by EMIs or loans, with the majority of our
population based in tier III, tier IV cities and villages. It is
right time to penetrate into rural market.
Rural share in stock of Consumer Goods

Table: 2 Rural share in stock of consumer goods
Stock
1995-96
Share
in 2001-02
Share in 2009-10
(in000)
percent
(in000)
percent
(in000)
Cars/Jeeps
197
7.4
389
6.9
1876
Motorcycle
2210
45.8
6710
50.4
34724
Scooters
2496
25.2
4416
29.8
6125
Mopeds
2096
37.3
3930
42.2
7333
Automotive
6999
30.5
15445
35.9
50058
Television
21411
40.7
40605
47.6
63295
All Fans
37990
42.4
74673
49.3
157237
Other White goods 3337
13.5
7766
16.7
16730
Low cost items
226952
57.9
313892
58.7
521999
Source: The Great Indian Market, National Council of Applied Economic Research.
Share
percent
9.3
55.4
32.0
46.6
42.5
44.9
49.0
16.7
58.5
in

The above table shows that the rural share in stock of

consumer goods like car/jeeps, motorcycle, scooters,
moped, automotive, television, fans, other white goods and
low cost items. The rural share in automotive has
increased from 30.5% in 1995-96 to 35.9% in 2001-02 and
42.5% in 2009-10, cars/ jeeps from 7.4% in 1995-96 to 9.3
in 2009-10,motorcycle from 45.8% (1995-96) to 50.4
(2001-02) and 55.4 (2009-10), scooters from 25.2%
ISSN: 2319-4421
(1995-96) to 29.8% (2001-02) and 32.0 (2009-10), moped

from 37.3% (1995-96) to 46.6 (2009-10). Similarly, in
television it has registered an increase from 40.7% (199596) to 44.9% (2009-10). Thus it is clear from the table that
the percentage of rural share in the stock of consumer
goods has been raising since 1995-96 to 2009-10.
Rural share in stock of consumer demands:

Table: 3 Rural share in stock of consumer demands
Demand
1995-96
(in 000)
6
359
368
286
1016
4852
7050
Share
percent
2.1
47.3
33.1
52.7
37.9
54.0
50.0
in
2001-02
(in 000)
63
1036
355
235
1689
6400
14627
Share
percent
8.0
39.8
39.4
58.2
36.0
54.5
56.9
in
2009-10
(in 000)
376
4045
311
141
4873
7712
32561
Share
percent
10.9
48.3
39.9
57.7
37.9
44.2
56.7
Cars/Jeeps
Motorcycle
Scooters
Mopeds
Automotive
Television
All Fans
Other White
819
23.8
1439
23.9
3120
goods
Low
cost
29228
58.1
45139
60.1
88607
items
Source: The Great India Market, National Council of Applied Economics Research
The table shows that the rural share in stock of consumer
demands. The rural share in demand for car/jeeps has
increased from 2.1% in 1995-96 to 8.0% in 2001-02 and
10.9% in 2009-10 and for motorcycle it has increased
in
23.7
61.3
from 47.3% in 1995-96 to 48.3% in 2009-10. Similarly,

the demand of fans, scooter, moped and low cost items has
also increased. Share of automotive remained same at
37.9%.
Rural share in demand for Consumables

able: 4
YEAR
T
Difference in rural urban demand
(in thousands)
Other White
Goods
2001-02
Rural
1626
6400
1439
Urban
2279
5334
4585
2009-10
Rural
4497
7712
3122
Urban
4896
9746
10028
Two Wheelers
Televisions
The above table shows that the rural demand for two
wheelers have increased from 1626 thousand in 2001-02
to 4497 thousand in 2009-10 which account 176% change
in rural demand for two wheelers while the urban demand
has increased by 114.8%. In case of television 6400
thousand TV sets were demanded in rural area in 2001-02,
while in urban area only 5334 thousand TV sets were
Low
Goods
45139
29971
88607
55908
Cost
demanded. In 2009-10, 7712 thousand TV sets are

demanded in rural areas while in urban areas 9746
thousand TV sets are demanded. Rural demand for TV has
increased by 20.5% where as urban demand has increased
by 82.7% from 2001-02 to 2009-10. Similarly, in respect
of low cost goods rural demand increased by 96.2% while
urban demand registered a growth of 86.5%.
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Rural Urban Demand

Table: 5 Difference in the rural urban demand (consumable)
Items
2001-02
2009-10
Percentage
(figures in000)
(figures in000)
(%)
Shampoos
Urban
13.6
31.4
130.8
Rural
6.7
16.3
143.2
Edible Oil
Urban
2328.0
3986.5
71.24
Rural
4681.6
666.2
42.3
Health Beverages
Urban
96.5
223.4
131.5
Rural
37.0
88.9
140.2
Packaged Biscuits
Urban
550.4
1091.0
98.2
Rural
294.4
521.6
77.1
Washing Cakes
Urban
510.7
616.5
20.7
Rural
1351.7
2104.5
55.6
Toilet Soap
Urban
335.9
464.2
38.1
Rural
469.4
657.7
40.1
Washing Powder
Urban
847.1
1485.4
75.3
Rural
1005.2
1847.8
83.8
From the table we can see that percentage increase in
demand shampoos, health beverages, toilet shop, washing
cakes and washing powder is more in rural areas as
compare to urban area. While in edible oil and packed
biscuits increase in demand is more in urban area as
compare to rural area. Thus we can say that the
consumption of many items areas is increasing at a high
speed and higher than the growing demand in urban area.
What Rural India Buys?

* Products more often (mostly weekly).
* Buys small packs, low unit price more important than
economy.
* Many brands are building strong rural presence without
much advertising support, like shampoos, detergent,
talcum powder and beauty cream, etc.
* Fewer brand choices in rural areas; number of FMCG
brands in rural areas is half of urban area.
* Buys value for money, not cheap products.
Importance of Rural Marketing

Rural market is getting importance because of the
saturation of urban market. So the marketers are looking
for extending their product categories to an unexplored
market i.e. the rural market. According to the Nielsons
survey the rural market for FMCG (Rs. 65,000 crores),
durables (Rs. 5,000 crores) and clothing and footwear (Rs.
35,000 crores) was as large as Rs. 1, 05,000 crores in
2008. Certainly the size is much bigger now. According to
Nielson by 2025, the rural FMCG sale is estimated to be $
100 billion from the current $ 12 billion. This has also led
to the CSR activities being done by the corporate to help
the poor people attain some wealth to spend on their
product categories. Here, we can think of HLL initiatives
Increase
in the rural India. One of such product is project Shakti,

which is not only helping their company attain some
revenue but also helping the poor women of the village to
attain some wealth which is surely going to increase their
purchasing power.
Rural market is mystery for the companies. Due to lack of
dipper insights into the psyche of the rural consumers,
companies are hesitant to explore this territory. But local
brand like Ghadi detergent in Kanpur have been able
successfully tap the opportunities presented by rural
market.
Rural India offers sustainable sales and profit for growth.
Growth of rural market is possible due to green revolution
and white revolution, which results into substantial wealth
generation in rural area. In recent years, rural markets have
acquired significance in the country like China and India
as the overall growth of the economy has resulted into
substantial increase purchasing power of rural
communities. Due to green revolution in India,
consumption pattern of rural people are changed.
What Makes Rural Market Attractive?

Rural market has following attributes and facts:
About 833 million people reside in rural area as
compared to 377 million people in urban area.
53% of all FMCGs and 59% of all consumer
durables are sold in the rural market.
Estimated annual size of rural market:FMCG Rs. 65,000 crores
Durables Rs. 5,000 crores
Agri-inputs and Tractors Rs. 45,000 crores
2/4 wheelers Rs. 8,000 crores
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50% of BSNL mobile connections in small towns/

villages.
42 million rural households availing banking

services in comparison to urban households.
Indian rural market is almost twice as compared to
the entire market of USA and Russia.
46% of soft drinks sales come from rural areas.
49% of motorcycles sales come from rural areas.
Rural India accounts for 59% of cigarettes sales.
In 20 years, rural Indian market will be larger than
the total consumer markets in countries such as
South Korea and Canada and almost 4 times of the
size of todays urban market.
Close to 10% of Maruti Suzukis sale come from
rural market.
Opportunities
The rural market has been growing gradually over the past
few years and is now even bigger than the urban market.
The saving to income percentage in rural area is 30%
higher than urban area. At present 53% of all FMCGs and
59% of consumers durables are being sold in rural area.
Major opportunities available in rural market are as
follow:
Increase in Literacy Rate

Literacy rate is increasing in rural areas. According to
census 2011 it stood at 68.9% (2001 census 58.7%).
Table: 6 Increase in literacy rate

Overall India
Rural
Urban
2001
64.8
58.7
79.9
2011
74.0
68.9
85.0
Difference
+9.2
+10.2
+5.1
Source: census of India 2011

There are more graduates in rural than in urban India. This
brings social and cultural changes in buying behavior of
the rural customers and more aware about national and
international brand. Due to increase in literacy rate they
get jobs in nearby towns. They earn urban salaries but
continue to live in self owned homes in the villages, they
have high purchasing power and prefer to buy branded
product.
Increasing in disposable
purchasing power
income
and
Projects from private companies and the rural employment

initiatives by the Government like MNREGA (Mahatma
Gandhi National Rural Employment Guarantee Act)
schemes have given the rural population an opportunity to
meet their daily needs. Government decided to expand the
agriculture loan at lower rate of interest and distribute
million of Kisan Credit Cards, has given a boost to the
income level to the rural sector. According to advanced
estimates of national income released by center statistic
organization The Per Capita income at current prices
during 2011-12 is estimated to be Rs. 60,972 compared to
Rs. 53,332 during 2010-11 showing a rise of 14.3%.
Companies have the opportunity to enter in this new
market and take the advantage of increased disposable
income.
Reduction of Risk during Recession:

It has been observed that companies which cater both
urban and rural markets tackle the recession in the better
way. The demands for goods in the urban market often

follow a cyclic whereas in the rural market it is steady. So
companies can safeguard themselves from the harmful
effects of recession after entering in the rural market.
IT Penetration in Rural India

Todays rural children and youth will grow up in an
environment where they have information access to
education opportunities, job opportunities, government
schemes, world wide news and mandi prices. Rural areas
offer a great potential for growth in internet usage with the
number of claimed internet users in these spaces to be
reached at 45million by Dec. 2012, according to the recent
IMRB survey, conducted jointly with internet and Mobile
Association of India (IMAI). The number of claimed
internet users has witnessed a compounded annual growth
rate of 73% since Dec. 2010. As the electronic ethos and
IT culture moves into rural India, the possibility of change
are becoming visible.
Infrastructure improving rapidly

In 50 years only, 40% villages have been connected by
roads, in next 10 years another 30% would be connected.
Rural telephone density has gone up by 300% in the last
10 years. Government of India is planning its most
ambitious national program in Jan.2013 to facilitate
electricity through decentralized renewable energy
sources. The government aims to provide LED lights to
around 400million homes that do not have an electricity
connection by 2017. Rapid development of rural
infrastructure is also major attraction for marketers.
97

ISSN: 2319-4421
Marketers can make effective use of the large available infrastructurePost Offices
Haats (periodic markets)
Melas (exhibitions)
Mandis (agri markets)
Public Distribution Shops
Bank Branches
1,38,000
42,000
25,000
7,000
3,80,000
32,000
So there is a sea of opportunities for retailers to serve the
consumers in rural and semi urban India. CRISIL study
estimates that over 60% of Indias population would be
residing in rural area in 2026.
Increase Population and hence Increase in

Demand
The rural market in India is vast and scattered and offers a
plethora of opportunities in comparison to the urban
sector. It covers the maximum population and regions and
thereby, the maximum number of consumers. More than
eighty percent of rural markets in India still do not have
access to any sort of organized marketing and distribution.
Low Penetration Rate

Penetration rate in rural India is very low.
Table: 7 Low rate of penetration

Durables
CTV
Refrigerator
Urban
30.4
33.5
Rural
4.8
3.5
Total(%of rural HH)

12.1
12.0
FMCGs
Shampoo
Toothpaste
Urban
66.3
82.2
Rural
35.2
44.9
Total(%of rural HH)

44.2
55.6
Above table shows the rural and urban share in stock of

consumer durables like: color T.V and refrigerator and in
stock of FMCGs like shampoo and toothpaste. It is clear
from the table that 30.4% urban population have color T.V
and 33.5% have refrigerator on the other hand only 4.8%
rural population have color T.V and 3.5% have
refrigerator. Other table shows that 66.3 urban population
use shampoo and 82.2% use toothpaste, while 35.2% rural
population use shampoo and 44.9% use toothpaste. It is
clear that penetration rate in rural market is low as
compared to urban market; low penetration indicates the
existence of unsaturated markets, which are likely to
expand as the income level rise as well as awareness
increases. It provides an excellent opportunity for the
industry players in form of vastly untapped market.
Challenges
The peculiarities of rural markets and rural consumers
pose challenges to marketers in reaching them effectively.
There are a large number of small villages which are not
easily accessible because of all weather roads. The main
challenges of rural marketing are discussed below:
Transportation problems
Transportation is essential for movement of products from
urban production centers to remote villages. In rural India
transportation facilities are quite poor. Nearly 80
percentages of villages in the country are not connected by
well constructed roads. Many parts of India have kuccha

roads. Due to poor transportation facilities it is not
possible for a marketer to access the rural market.
Warehousing problems
A storage function is necessary because there is a time gap
between production and consumption of commodities.
Agricultural commodities are produced seasonally but
they are demanded over the year so there is need to store
them. But in rural areas, there is lack of public as well as
private warehousing. Marketers face problems of storage
of their goods.
Underdeveloped people and underdeveloped

markets
Rural society in India is underdeveloped. Modern
technology has tried to develop the people and markets in
rural areas. But the technology has made very less impact
in rural areas.
Inadequate media coverage

Media have lots of problem in rural areas. Television is a
good source to communicate the message to rural people.
But due to non availability of power as well as television
sets, majority of rural population cannot get the benefits of
various media.
98

Many languages
India is a country of many languages. Language becomes
barrier in effective communication in the market efforts.
The number of languages vary from state to state, region
to region and district to district, etc.
Low level of literacy

The literacy rate is low in rural areas as compared to urban
areas. Marketers face communication problem due to the
lack of literacy rate. Print medium is not much effective
and it is irrelevant since its reach is poor. So, low level of
literacy becomes challenge for marketers in rural areas.
Seasonal demand
Seasonal demand is main problem of rural market.
Agriculture situation plays a significant role in the demand
of commodities in the rural market because it is the main
source of income. Again agriculture depends on monsoon
so buying capacity of rural consumers varies. Despite this,
many rural areas are not connected by rail transport.
Kuccha roads become unserviceable during monsoon.
Some of the organized retail model working

in Rural India
Hariyali Kisaan Bazaar:
It is the decision of DMC Shriram consolidated LTDs
Agri business. The company operates in two lines of
business: Agri/rural, Chemicals and polymers. Their Agribusiness offering agriculture inputs, both manufactured
and merchandised, outputs and services. The company
initiated rural retailing with the objective to move towards
providing total solutions to farmers. Hence it can be said
one stop shop for meeting farming and family needs of
rural population. It has 264 outlets in many villages of
eight different states: Haryana, Punjab, Utter Pradesh,
Rajasthan, Uttrakhand, Madhya Pradesh, Maharashtra and
Andhra Pradesh.
ITC Choupal Sagar:
ITC launched the choupal sagar in 2004. It is a rural hyper
market which is managed by ITCs Agri-business division.
Farmers can sell their commodities and can buy almost
everything including cosmetics, garments, electronics,
appliances and even tractors. Currently there are 24
choupal sagars: 11 in Madhya Pradesh, 5 in Maharashtra
and 8 in Utter Pradesh. Local sourcing of vegetables and
fruits allows the company to delivering fresh vegetables
and fruits to consumers. Moreover ITCs procurement
centers provide farmers the option of selling their product
directly to ITC, instead of billing it to mandi. ITCs Agribusiness division conceived e-choupal as a more efficient
supply chain aimed at delivering value to its customers
around the world on a sustainable basis.
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CONCLUSION
The study concluded that rural India offers huge
opportunities which companies can tap for their growth
and development. However, Companies face many
challenges in tackling the rural markets. 833 million
people reside in India as compared to 377 millions in
urban India so vast untapped opportunities are available in
rural India, but marketer unable to tap these opportunities
because of lack of infrastructure facilities. Literacy rate is
low in rural area so people are unable to identify brand
difference. Now trend has gone to change literacy rate in
rural area is increasing. Number of middle and higher
income household in rural India is expected to grow from
80 million to 111 million. There is rapid development in
infrastructure all these opportunities attract companies to
target rural market. With some technologies breakthrough
in distribution and marketing of products in rural India,
companies in rural market can earn more profits, market
share, etc. The Rural market is a greater future prospect
for the marketers and there are many opportunities
available for them in rural markets.
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[19] www.miteshk.webs.com
[20] www.indianmba.com/occasionalpapers/op264/op26
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Rural Marketing in India: Challenges and Opportunities

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Rural Marketing in India: Challenges and Opportunities

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International Journal of Management and Social Sciences Research (IJMSSR)

Volume 2, No. 8, August 2013