CHAPTER 1

INTRODUCTION

Increasingly, more companies are turning to rural markets to expand the scope of their
operations and also to pre-empt competition. Rural markets are tomorrow’s markets and
the marketer should know how to penetrate these markets. This is not just because 70
percent of India’s population still lives in rural areas, but because of the sweeping changes
that are occurring here.

Rural markets are today important for all consumer product companies. This is because
most urban markets are getting saturated. The intensity in competition in these markets
impacts the profitability of firms. The rural markets have also gained prominence because
of the socio-economic changes, which are sweeping rural India. The cables and satellite
television as also by the Internet and telecommunication are fueling these changes. This
has enhanced rural consumer’s awareness and aspirations. Also concerted attempts are
being made by self-help groups to generate incomes in the poor areas, which, in turn is
helping create demand for product and services.

Ten years ago, foreign consumer products were scarce in India and only available to the
affluent. Import restrictions prevented or severely hindered foreign consumer goods from
entrance to India. With the economic liberalization that ensued, foreign brands are now
prevalent across India (Luce, 2002). For the rural consumer, access to product or service
is more critical then just its ownership. Rural marketing therefore requires an innovative
approach. It involves changing the value paradigm by altering product’s price-
performance relationship. It also involves designing products that can deliver in sub
optimal condition and despite infrastructural constraints

Today, multinational corporations view emerging markets such as India as prime

opportunities for growth. According to Shanthi Kanaan, writer for The Hindu, rural
markets are growing twice as fast as the urban markets (2001). With a rural population
equal to just under 2.5 times the population of the entire United States as of the 2000

1
census, the potential consumer base is astounding. But generally speaking, success in
India’s rural markets for multinational corporations has been mediocre at best. It is from
these struggles and failures, however, that multinational corporations seeking to enter the
rural Indian market can learn how to do so more wisely.The marketer has three strategic
options, namely extension of urban strategy to rural markets and finally innovate for rural
market success. The challenge today lies in developing relationship-marketing programme
for rural buyers especially since various banks have already issued 41 million kisan cards.

JUSTIFICATION OF RESEARCH

2
There are two schools of thoughts persists. The first school believed that the
products/services, marketing tools & strategies that are successful in urban areas,
could be transplanted with little or no more modifications in rural areas.
However, the second school saw a clear distinction between urban & rural India,
& suggested a different approach, skills, tools & strategies to be successful in rural
markets.

To have a close look over rural market scenario and marketing strategies followed
by different corporate firms and types of product and service offered to consumers
of rural market are the major factors, which motivate us to do this research. Here
we explore the basic 4A approach which is necessary to penetrate in to the rural
market and distribution system of product delivery.

Thus, in a large rural economy like India’s, rural marketing has emerged as an
important & distinct internal sub-division within the marketing discipline. This
sub-division clearly highlights the differences between rural marketing &
mainstream marketing. Further market could be explored on the basis of income,
infrastructural & socio-cultural factors.

CHAPTER
OBJECTIVE

3
Rural consumers are fundamentally different from their urban counterparts. The lower
levels of literacy and limited exposure to product and services are well-known, but there
are also differences in occupation options, with a direct impact on income levels and
income flows, and a high level of inter-dependency affecting the dynamics of rural
community behavior. All contribute to make rural consumer behavior starkly distinct from
the urban.

The main objectives of analysis of rural market are to assess

1. The present and future scenario of rural market.
2. To search for New opportunities in rural market.
3. Rural consumer insight.
4. To evaluate marketing strategy of different companies.
5. Issues and challenges related to rural market

CHAPTER 4
RURAL MARKETING

4
4.1 CONCEPT CLARIFIER
Rural marketing involves the process of developing, pricing, promoting, distributing rural
specific product and a service leading to exchange between rural and urban market which
satisfies consumer demand and also achieves organizational objectives.

URBAN RURAL

RURAL URBAN

RURAL RURAL

It is a two-way marketing process wherein the transactions can be:

1. Urban to Rural: A major part of rural marketing falls into this category. It
involves the selling of products and services by urban marketers in rural areas.
These include: Pesticides, FMCG Products, Consumer durables, etc.
2. Rural to Urban: Transactions in this category basically fall under agricultural
marketing where a rural producer seeks to sell his produce in an urban market. An
agent or a middleman plays a crucial role in the marketing process. The following
are some of the important items sold from the rural to urban areas: seeds, fruits and
vegetables, milk and related products, forest produce, spices, etc.
3. Rural to Rural: This includes the activities that take place between two villages
in close proximity to each other. The transactions relate to the areas of expertise
the particular village has. These include selling of agricultural tools, cattle, carts
and others to another village in its proximity.
Rural marketing requires the understanding of the complexities. Indian agricultural
industry has been growing at a tremendous pace in the last few decades. The rural areas
are consuming a large number of industrial and urban manufactured products. The rural
agricultural production and consumption process plays a predominant role in developing

5
the Indian economy. This has designed a new way for understanding a new process called
Rural Marketing.

The concept of rural marketing has to be distinguished from Agricultural marketing.

Marketing is the process of identifying and satisfying customers needs and providing them
with adequate after sales service. Rural marketing is different from agricultural marketing,
which signifies marketing of rural products to the urban consumer or institutional markets.
Rural marketing basically deals with delivering manufactured or processed inputs or
services to rural producers, the demand for which is basically a derived outcome.

Rural marketing scientists also term it as developmental marketing, as the process of rural
marketing involves an urban to rural activity, which in turn is characterised by various
peculiarities in terms of nature of market, products and processes. Rural marketing differs
from agricultural or consumer products marketing in terms of the nature of transactions,
which includes participants, products, modalities, norms and outcomes. The participants
in case of Rural Marketing would also be different they include input manufacturers,
dealers, farmers, opinion makers, government agencies and traders.

Rural marketing needs to combine concerns for profit with a concern for the society,
besides being titled towards profit. Rural market for agricultural inputs is a case of market
pull and not market push. Most of the jobs of marketing and selling are left to the local
dealers and retailers.

The market for input gets interlocked with other markets like output, consumer goods,
money and labour. Rural marketing in India is not much developed there are many
hindrances in the area of market, product design and positioning, pricing, distribution and
promotion. Companies need to understand rural marketing in a broader manner not only to
survive and grow in their business, but also a means to the development of the rural
economy. One has to have a strategic view of the rural markets so as to know and
understand the markets well. In the context of rural marketing one has to understand the
manipulation of marketing mix has to be properly understood in terms of product usage.

6
Product usage is central to price, distribution, promotion, branding, company image and
more important farmer economics, thus any strategy in rural marketing should be given
due attention and importance by understanding the product usage, all elements of
marketing mix can be better organised and managed.

4.2 EVOLUTION OF RURAL MARKETING

MAJOR SOURCE DESTINATION

PHASE ORIGIN FUNCTION
PRODUCTS MARKET MARKET
I Before Mid-
1960 (from Agricultural Agricultural Rural Urban
independence Marketing Produce
to green
revolution)
II Mid- Sixties
(Green Marketing Of Agricultural Urban Rural
revolution to Agricultural Inputs
Pre- Inputs
liberalization
period)
III Mid- Nineties Consumables
(Post- Rural And Urban & Rural
liberalization Marketing Durables For Rural
period on 20th Consumption
century) & Production

IV 21st century Developmental All products & Urban & Urban &
marketing services Rural Rural

 Phase I (from Independence to Green Revolution):

Before the advent of the Green revolution, the nature of rural market was altogether
different. Rural marketing then referred to the marketing of rural products in rural &

7
urban products.
 Phase II (Green Revolution to Pre-liberalization period):
During these times, due to the advent & spread of the Green Revolution, rural marketing
represented marketing of agriculture inputs in rural markets & marketing of rural produce
in urban areas.
 Phase III (Post-liberalization period on 20th century):
The third phase of rural marketing started after the liberalization of the Indian economy.
In this period, rural marketing represented the emerging, distinct activity of attracting &
serving rural markets to fulfill the need & wants of rural households, peoples & their
occupations.
 Phase IV (21st century):
Learning from its rural marketing experiences after the independence, the corporate world
has finally realized the quick-fix solutions & piecemeal approaches will deliver only
limited results in the rural markets. And, if an organization wants to tap the real potential
of the rural market, it needs to make a long-term commitment with this market. Its
approach & strategies must not focus in just selling products & services, but they should
also aim at creating an environment for this to happen.

The objective of rural marketing in the current phase is the improvement of the quality of
life by satisfying the needs & wants of the customers, not through atand-alone products or
services, but by presenting comprehensive & integrated solutions which might involve a
set of inter-related products & services.

Till recently, the focus of marketers in India was the urban consumer and by large number
specific efforts were made to reach the rural markets. But now it is felt that with the tempo
of development accelerating in rural India, coupled with increase in purchasing power,
because of scientific agriculture, the changing life style and consumption pattern of
villagers with increase in education, social mobility, improved means of transportations
and communication and other penetrations of mass media such as television and its
various satellite channels have exposed rural India to the outside world and hence their
outlook to life has also changed. Because of all these factors, rural India in now attracting

8
more and more marketers.

Increase in competition, saturated urban markets, more and move new products
demanding urban customers, made the companies to think about new potential markets.
Thus, Indian rural markets have caught the attention of many companies, advertisers and
multinational companies. According to a recent survey conducted by the National Council
for Applied Economic Research (NCAER), the purchasing power of the rural people has
increased due to increase in productivity and better price commanded by the agricultural
products. By and large this rise in purchasing power remains unexploited and with the
growing reach of the television, it is now quite easy for the marketers to capture these
markets.

Rural marketing has become the latest mantra of most corporate. Companies like
Hindustan Lever, Colgate Palmolive, Britannia and even Multinational Companies
(MNCs) like Pepsi, Coca Cola, L.G., Philips, Cavin Kare are all eyeing rural markets to
capture the large Indian market.

Coming to the frame work of Rural Marketing, Rural Marketing broadly involves
reaching the rural customer, understanding their needs and wants, supply of goods and
services to meet their requirements, carrying out after sales service that leads to customer
satisfaction and repeat purchase/sales.

4.3 NATURE OF RURAL MARKET

 Large, Diverse and Scattered Market: Rural market in India is large, and
scattered into a number of regions. There may be less number of shops available to
market products.

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  Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied
with agriculture prosperity. In the event of a crop failure, the income of the rural
masses is directly affected.
 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 per capital income, societal backwardness, low savings, etc. But
the new tax structure, good monsoon, government regulation on pricing has
created disposable incomes. Today the rural customer spends money to get value
and is aware of the happening around him.
 Traditional Outlook: Villages develop slowly and have a traditional outlook.
Change is a continuous process but most 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.
 Rising literacy levels: It is documented that approximately 45% of rural Indians
are literate. Hence awareness has increases and the farmers are well-informed
about the world around them. They are also educating themselves on the new
technology around them and aspiring for a better lifestyle.
 Diverse socioeconomic background: Due to dispersion of geographical areas and
uneven land fertility, rural people have disparate socioeconomic background,
which ultimately affects the rural market.
 Infrastructure Facilities: The infrastructure facilities like cemented roads,
warehouses, communication system, and financial facilities are inadequate in rural
areas. Hence physical distribution is a challenge to marketers who have found
innovative ways to market their products.

4.4 CLASSIFICATION OF RURAL CONSUMERS

The rural consumers are classified into the following groups based on their economic
status:

10
  The Affluent Group: They are cash rich farmers and a very few in number. They
have affordability but not form a demand base large enough for marketing firms to
depend on. Wheat farmers in Punjab and rice merchants of Andhra Pradesh fall in
this group.
 The Middle Class: This is one of the largest segments for manufacturedgoods and
is fast expanding. Farmers cultivating sugar cane in UP andKarnataka fall in this
category.
 The Poor: This constitutes a huge segment. Purchasing power is less,but strength
is more. They receive the grants from government and reapthe benefits of many
such schemes and may move towards the middleclass. The farmers of Bihar and
Orissa fall under this category.

CHAPTER 5
EFFECT OF CONSUMER BEHAVIOUR PRODUCT AND MARKETING MIX

11
5.1 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.
Factors influencing buying behavior
The various factors that affect buying behavior of in rural India are:
1. Environmental of the consumer - The environment or the surroundings, within
which the consumer lives, has a very strong influence on the buyer behavior, egs.
Electrification, water supply affects demand for durables.
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.
3. Family – it is an important buying decision making organization in consumer
markets. Family size & the roles played by family members exercise considerable
influence on the purchase decisions. Industry observers are increasingly realizing
that at times, purchase of durable has less to do with income, but has more to do
with the size of the family & that’s where rural India with joint family structures,
becomes an attractive proposition.
4. Economic factors – The quantum of income & the earning stream are one of the
major deciding factors, which determine to a great extent, what the customer will

12
 be able to buy. Many people in the rural market are below poverty line & for large
number of people, agriculture is the primary occupation. More than 70% of the
people are in small-scale agricultural operation. These factors affect the purchase
decision.
5. 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.
6. 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.
7. Brand preference and loyalty (80% of sale is branded items in 16 product
categories)
8. Cultural factors influencing consumer behaviour
9. 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 person’s wants and behaviour.
10. In India, there are so many different cultures, which only goes on to make the
marketer’s job tougher. Some of the few cultural factors that influence buyer
behaviour are:
 Product (colour, size, design, and shape): There are many examples that support
this point.
a) 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.
b) 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,

13
 which are big in size and get accepted in rural India by their sheer size.
 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.
 Decision-making by male head: The male in Indian culture has always been given
the designation of key decision maker. For example, the Mukhiya’s 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.
 Changes in saving and investment patterns From gold, land, to tractors, VCR’s,
LCV’s

5.2 SELLING IN RURAL INDIA

The Indian rural market with its vast size and demand base offers a huge opportunity that
MNCs cannot afford to ignore. TO expand the market by tapping the countryside, more
and more MNCs are foraying into India's rural markets. Among those that have made
some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard Life,
Philips, Colgate Palmolive and the foreign-invested telecom companies.

OPPORTUNITY
The Indian rural market with its vast size and demand base offers a huge opportunity that
MNCs cannot afford to ignore. With 128 million households, the rural population is
nearly three times the urban.
As a result of the growing affluence, fuelled by good monsoons and the increase in
agricultural output to 200 million tones from 176 million tones in 1991, rural India has a
large consuming class with 41 per cent of India's middle-class and 58 per cent of the total
disposable income.
The importance of the rural market for some FMCG and durable marketers is underlined
by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and

14
38 per cent of all two-wheeler purchased.
The rural market accounts for half the total market for TV sets, fans, pressure cookers,
bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market
for FMCG products is growing much faster than the urban counterpart.

5.3 THE 4A APPROACH:

The rural market may be alluring but it is not without its problems: Low per capita
disposable incomes that is half the urban disposable income; large number of daily wage
earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked
to harvests and festivals and special occasions; poor roads; power problems; and
inaccessibility to conventional advertising media.
However, the rural consumer is not unlike his urban counterpart in many ways.
The more daring MNCs are meeting the consequent challenges of availability,
affordability, acceptability and awareness (the so-called 4 As)

Availability
The first challenge is to ensure availability of the product or service. India's 627,000
villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas,
finding them is not easy. However, given the poor state of roads, it is an even greater
challenge to regularly reach products to the far-flung villages. Any serious marketer must
strive to reach at least 13,113 villages with a population of more than 5,000. Marketers
must trade off the distribution cost with incremental market penetration. Over the years,
India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong
distribution system, which helps its brands reach the interiors of the rural market. To
service remote village, stockiest use auto rickshaws, bullock-carts and even boats in the
backwaters of Kerala. Coca-Cola, which considers rural India as a future growth driver,
has evolved a hub and spoke distribution model to reach the villages. To ensure full loads,
the company depot supplies, twice a week, large distributors which who act as hubs.
These distributors appoint and supply, once a week, smaller distributors in adjoining
areas. LG Electronics defines all cities and towns other than the seven metros cities as

15
rural and semi-urban market. To tap these unexplored country markets, LG has set up 45
area offices and 59 rural/remote area offices.

Affordability
The second challenge is to ensure affordability of the product or service. With low
disposable incomes, products need to be affordable to the rural consumer, most of whom
are on daily wages. Some companies have addressed the affordability problem by
introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair
Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya
Pradesh, Bihar and Uttar Pradesh — the so-called `Bimaru' States.
Hindustan Lever, among the first MNCs to realize the potential of India's rural market,
has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The
move is mainly targeted at the rural market. Coca-Cola has addressed the affordability
issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has
paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has
also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix
Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and mutiserve sachet
of 200 gm priced at Rs 15.

Acceptability
The third challenge is to gain acceptability for the product or service. Therefore, there is a
need to offer products that suit the rural market. One company, which has reaped rich
dividends by doing so, is LG Electronics. In 1998, it developed a customised TV for the
rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the
very first year. Because of the lack of electricity and refrigerators in the rural areas, Coca-
Cola provides low-cost ice boxes — a tin box for new outlets and thermocol box for
seasonal outlets.
The insurance companies that have tailor-made products for the rural market have

16
performed well. HDFC Standard LIFE topped private insurers by selling policies worth
Rs 3.5 crore in total premium. The company tied up with non-governmental organizations
and offered reasonably priced policies in the nature of group insurance covers. With large
parts of rural India inaccessible to conventional advertising media — only 41 per cent
rural households have access to TV — building awareness is another challenge.
Fortunately, however, the rural consumer has the same likes as the urban consumer —
movies and music — and for both the urban and rural consumer, the family is the key unit
of identity. However, the rural consumer expressions differ from his urban counterpart.
Outing for the former is confined to local fairs and festivals and TV viewing is confined to
the state-owned Doordarshan. Consumption of branded products is treated as a special
treat or indulgence.
Hindustan Lever relies heavily on its own company-organised media. These are
promotional events organized by stockiest. Godrej Consumer Products, which is trying to
push its soap brands into the interior areas, uses radio to reach the local people in their
language.
Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of
rural households. It doubled its spend on advertising on Doordarshan, which alone
reached 41 per cent of rural households. It has also used banners, posters and tapped all
the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola
advertising stressed its `magical' price point of Rs 5 per bottle in all media. LG
Electronics uses vans and road shows to reach rural customers. The company uses local
language advertising. Philips India uses wall writing and radio advertising to drive its
growth in rural areas.
The key dilemma for MNCs eager to tap the large and fast-growing rural market is
whether they can do so without hurting the company's profit margins. Mr. Carlo Donati,
Chairman and Managing-Director, Nestle, while admitting that his company's product
portfolio is essentially designed for urban consumers, cautions companies from plunging
headlong into the rural market as capturing rural consumers can be expensive. "Any
generalisation" says Mr. Donate, "about rural India could be wrong and one should focus
on high GDP growth areas, be it urban, semi-urban or rural."

17
5.4 NEW MARKETING MIX FOR SELLING TO RURAL INDIANS
12.2% of the world lives in Rural India. Put in a different context, this works out to 1 in 8
people on Earth. Being able to successfully tap this growing market is every marketer’s
dream. However, myths abound. India’s rural markets are often misunderstood. A clear
distinction needs to be made with regard to the reality versus the image of rural India. If
such a distinction is not made, we will be unable to distinguish between the serpent and
the rope and the rope and the serpent.

The rural market is not homogeneous. Though the aggregate size is very large, individual
subsets of this market tend to be rather small and disparate. Geographical, demographical,
statistical, logistical differences are very apparent. Positioning and realities regarding the
potential of each of these market segments differ and lie at the very core of forming the
strategy for the rural markets.

The face of Indian agriculture is changing from dry land and irrigated agriculture into
high-tech and low-tech agriculture. Farmers in states like Maharashtra and Andhra
Pradesh have reaped the benefits of adopting new age farming practices, including green
house cultivation, fert-irrigation and hydroponics. This has radically changed the
economics of farming, with the investment in these systems lowering the cost of
cultivation, increasing yields due to integrated crop management practices and reducing
the dependence on rainfall. As a result, disposable income has grown sharply. The
aspirants are becoming climbers showing a sustained economic upturn as purchasing
power is increasing in the rural markets. The proportion of very rich has increased five-
fold. The growing incomes have modified demand patterns and buyer behaviour.
Moreover, the need for a product or service is now adequately backed up with the
capacity, ability and willingness to pay.

However, the market still remains largely unexploited. At most times, potential markets
need tobe found and at times, even created. Such creation of demand needs efficient
management of thesupply chain. To increase market share, behavioural change needs to
be at the forefront of anystrategy. Further, due to the diversity of this market, marketers

18
need to think, plan and act locally.It is therefore essential to develop an accurate
Marketing Mix for selling to rural Indians.

Product
The Rural market is not a homogenous set of customers with preferences frozen in time.
When developing products in any category, marketers must identify the typical rural
specific needs. Urban products cannot be dumped onto rural markets without
modifications. Tailor-made products are better received by the rural audience as the
consumers feel empowered and tend to dentify with the offering.

For instance, shampoos or soaps with distinctive, strong rose or jasmine perfumes are very
popular with the rural women in South India. The urban women do not identify as
strongly with these perfumes. Sachetization is also a distinctly rural-driven phenomenon.
As demand in several categories is being created, intensity of use is quite low. On
average, rural folk would use a shampoo only once a week. Habits take time to change
and making unit sachet packs affordable is the key to inducing trial and
purchase.Systematic, in-depth research that can help understand the depths of the mind of
the villagers, their buying criteria, purchase patterns and purchasing power are an essential
input while developing rural specific products or services.

A common error has been to launch a completely stripped down version of the urban
product in the rural market, with the objective of offering the lowest possible price. This is
not what a rural consumer wants. What is required is to introduce a product with
‘essential’ features, whose needs are recognized and for which the consumer is willing to
pay (value-adding features). Product developers should aim at eliminating all the cost-
adding features, i.e., features which a consumer is unwilling to pay for as he sees no
obvious utility. This would “redefine value” in the minds of the consumer and
tremendously increase product acceptability.

19
Product development is severely constrained by legislation in the case of agricultural
inputs like fertilizers, insecticides and pesticides. In the case of fertilizers for instance,
though levels of deficiency of nutrients have increased significantly over the past decade,
no significant changes in formulations notified under the Fertilizer Control Order have
taken place. This has severely restricted the availability of cost effective specialty
fertilizers of global standards to Indian farmers. Technological know-how for manufacture
of such fertilizers exists within the country. However, farmers using modern farming
practices are unable to get an assured supply of such farm inputs due to draconian
legislation. A move to liberalize the sector could perhaps consider the accepted worldwide
norm of allowing manufacturers with a strong R&D base to decide their own formulations
with the government machinery conducting checks on market samples of finished
products to ensure that they live up to the labelled specifications. This would be a major
policy initiative that would give a huge impetus to innovative product development in the
farm sector.

Product life cycles as are becoming shorter and these are having their impact on company
life cycles. Thus for any company wishing to develop its product portfolio, allegiance to
the classic American P-A-L Principle of Partnership - Alliances - Linkages is a basis for
survival.

Pricing
Every marketer must realize that the rural consumer is not a miser. He is not simply
looking for the cheapest product in every category. He understands and demands value for
money in every purchase that he makes. Pricing therefore is a direct function of factors
including cost-benefit advantage and opportunity cost. Pricing offered to consumers
should be for value offerings that are affordable. Price sensitivity is extremely high and
comparison with competitive prices is common. Consumers seem to create narrow
psychological price bands in their minds for product groups and price elasticity beyond
the extreme price points is very high. The perceived utility or value of the product or
service is the ultimate decision making factor.

20
It is certain however, that buying cheap is not the primary objective. Rather, it is “buying
smart”. A study revealed that the average rural consumer takes approximately 2 years to
decide on buying a watch! He will not do so unless he is totally convinced that he is
getting value for Money. Impulse buys and purchases for conspicuous consumption are
also extremely few and far Between considering the “value for money” factor that reigns
supreme in most rural purchase decisions.

It must be remembered that the rural consumer does not have a budget problem. He has a
cash flow problem. This is because the village folk receive funds only twice a year. At
these times, he is capable of making high volume purchases. At all times, however, the
unit price is critical and so is the pack size. Because of this, in the lean season when there
is a cash flow crunch, marketers need to provide financial products, schemes or solutions
that suit the needs of the rural population.

Promotions & Advertising

There are a lot of barriers that militate against homogenous media and message delivery.
These barriers stem from the fact that rural markets vary immensely in terms of tastes,
habits and preferences leading to different expectations of every segment of the
population.

However, one fact is certain across all areas. The rural consumer likes to touch and feel a
product before making a choice. Demonstrations are undoubtedly the most effective
promotional tool that shapes purchase decisions of the rural population. Demonstrations
establish the credentials of any new technology used in developing the product.

In today’s information era, it is very important for companies to wise-up on emerging

technologies. It has in fact become a medium to attract larger audiences for a product
demonstration. Technology must be used to prepare a database of customers and their
requirements. The use of video using mobile vans and even large screen video walls at
events should be arranged.

21
The classic conundrums of reach and coverage of the media are shattered. Several creative
communication media have been used by various companies to tackle the problem of
having to use visual communication and non-verbal communication to reach the rural
audience. This is required because a large proportion of the rural population cannot read
or write. Alliances with cottage industries, dharmsalas, panchayats, post offices and police
stations for advertising have also helped immensely. More importantly, in rural India,
experience has proved time and time again that word of mouth is the key influencer.

Intermediaries are the foundation to rural distribution. If the intermediary understands and
is constantly reminded about your product, then the end user will not be allowed to forget.
The companies must reinforce this highly effective medium and use all their innovation
and money tom develop more dramatic point of sale and point of contact material. This
becomes all the more important when in rural India, more often than not, the overlap
between the product categories sold in a single outlet in tremendous. For instance, a store
may call itself as a grocery store but will stock everything from groceries to vegetables to
fertilizers and may at times even stock medicines. In such cases, the point at which the
customer actually comes in contact with a product may not be the point at which the sale
is affected.

The re-use capacity and colour of the container in which the product is packed is also a
crucial factor. In fact, reusable packaging is considered a major aid in promoting sales for
products in the rural market.Consumer and Trade schemes that Incentivise Spending using
discount coupons, off season discounts, free samples, etc. encourage spending. Lucky
draws and gift schemes are a major hit in most states.

The use of local idioms and colloquial expressions are an excellent way to strike a rapport
with the rural consumer and must be borne in mind when developing media plans and
public relations programmes. No high voltage publicity is required. The rural consumer is
very down to earth but equally discerning and marketers need to step into the shoes of the
rural folk while creating product promotion campaigns.

22
Another unique feature of rural markets is that the Decision making process is collective.
The persons involved in the purchase process - influencer, decider, buyer, one who pays
can all be different. So marketers must address brand messages in their campaigns at
several levels. Apart from regular household goods, several agribusiness companies have
also started providing gift schemes with offers for free jewellery that influences the ladies
to pressure the farmers to purchase agricultural inputs from select companies. This
promotion strategy thus makes women influence purchase decisions that they would
ordinarily not be involved in.

Youth power is becoming increasingly evident in villages. Rural youth bring brand
knowledge to the households. This has forced several companies to change the focus and
positioning of their products and services towards this segment that is growing in absolute
number and relative influence.
There are other attributes in the promotion strategy which are explained as under:

1. Mass media: In the present world mass media is a powerful medium of

communication. The following are the mass media generally used:
Television.
Cinema
Radio
Print media: Handbills and Booklets, posters, stickers, banners, etc.

2. Personal selling and opinion leaders: In personal selling it is required that the
potential users are identified and awareness is created among them about the product, its
features, uses and benefits. This can be achieved only by personal selling by highly
motivated sales person. In fact the word of mouth information holds lot validity in rural
areas even today. This is the reason why opinion leaders and word of mouth are thriving
among rural consumers. An opinion leader in rural areas can be defined as a person who is
considered to be knowledgeable and is consulted by others and his advice is normally
followed. The opinion leaders may be big landlords or politicians or progressive farmers.

23
3. Special campaigns: During crop harvest and marketing seasons it is beneficial to take
up special promotion campaigns in rural areas. Tractor owners (tone) conducted by MRF
Limited is one such example. Brooks Bond carries out marches in rural areas with band,
music and caparisoned elephants to promote their brand of tea.

4. Mandi and Mela magic

At last count, India witnessed over 50,000 melas. Of these 25,000 meals are held to
signify religious, cultural festivals as well as local fairs and events. On an average, visitors
at these melas spend between Rs. 5,000 to Rs. 50,000 a day. For example, 3 lakh people
visited the annual mela at Navchadi which lasts for 7 days in Meerut. The largest such
mela is the Maha Kumbh Mela which is visited by an average of 12 crore people.

There is however, a caveat when an organization is considering using mela for marketing
their products. Is the audience at this mela fit for promotion of the product at hand? What
are the psychographics of this audience? What is the motivational and behavioural
impetus that brings visitors to each of these melas. On considering these questions, it has
been observed that melas are fit to generate product exposure, package familiarity, brand
reminder and word of mouth. However, for products that need concept marketing and
those that have high prices, such melas are not suitable promotion media. This is because
the time and the mood of the people that visit these melas are not right to digest technical
information or for making large purchases. People come to melas to have a good time and
are not reminded of such high technology or high priced products when they return home.
In the words of Mr. Neville Gomes, Managing Director of Multimedia Aquarius,
promotion at melas is like a “one night stand”. There will be no reminder later. Thus, a
large amount of qualitative judgment is indeed in planning promotions at melas by media
planners.

Place
place is the major reason behind the evolution of rural marketing as a distinct discipline. A
village as a place for promotion, distribution & consumption is very different from a town

24
or city, thus the general marketing theories can’t be applied directly in rural markets.
Reaching the right place is the toughest part in today’s rural marketing, as most of the
products reach up to the nearest townships of any village, but due to higher distribution
costs, these products fails to reach the village as the distribution channel fails to put in the
required efforts. Most of the times, the rural retailers themselves go to the urban areas to
procure these goods. Rural markets imply complex logistical challenges that show up as
high distribution costs.

Significance of Distribution
No matter how well devised a company’s product, pricing or promotion strategy, the most
crucial link in ensuring the success of rural marketing efforts is distribution. Distribution
must be strengthened and this would raise investment cost barriers for new entrants.
In Rural India, the selection and use of distribution channels is a nightmare. The reason
for this is very clear when we consider that on an average, Urban and Rural India both
have approximately 3 million retail outlets. However, Urban India has only 4,000 towns
where these outlets are located. On the other hand, Rural India’s 3 million outlets are
located in 6.3 lakh villages. Thus, marketers are faced with the problem of feeding 3
million shops located in vastly diverse areas each of which records an average sale of only
Rs.5,000 per outlet. Further compounding this problem is the fact that even this meagre
sale is mostly on credit. The diversity in the distribution of shops is the self-limiting factor
in terms of servicing the rural distribution network.

25
The distribution of outlets however shows that a marketer need not be present in all
markets at all times. Being present in 6 lakh villages is virtually impossible for an
organization of any size. Rural wealth and demand is concentrated typically at satellite
towns, district headquarters, assembly markets and such central locations. Rural
distribution has a rigid hierarchy of markets that make channel decisions relatively
structured.

26
It is essential for rural marketing companies to understand this hierarchy. Rural folk are
habituated to travelling once a week for their weekly purchases to a satellite town. They
do not expect such items to be present in every village. For durables where the outlay
involved is typically large, the purchase would be made in an assembly market for reasons
of choice and availability of adequate cash flow. This is due to the fact that it is at
assembly markets that auction yards are present where the farmers congregate to sell their
output. After such sale of produce, they are cash rich and can afford to make such
purchases. It is therefore not necessary for a marketer of TV sets to take their distribution
channel all the way down to the village shop. A TV will not be sold there as the cash flow
does not exist at that point in the hierarchy of markets. A television distributor must be
present at assembly markets which are much smaller in number, more controllable, easier
to reach and service. Keeping the hierarchy in mind will help decide the optimum level of
penetration required to reach a critical mass of rural consumers.

Haats
Haats are the nerve centre of Rural India. They are a readymade distribution network
embedded in the fabric of rural society for over 1000 years. They have been held on a
regular basis across the length and breadth of the country for over 1000 years. Right from
the time of Chandragupta Maurya, Haats are seen as a place for social, cultural and
economic interchange.

27
One in every five villages with a population of over 2000 has a haat. In villages with less
than 2000 people this figure reduces to 1 in 20 villages. Typically, an average haat will
have close to 300 stalls. A haat usually serves around 5000 visitors. Considering that the
average population of an Indian village is approximately 1000, each haat serves 5 villages.
A study estimates that 47,000 haats are conducted in rural India. These rural super
markets are much larger than all the world's K-marts and Wal-marts put together.

A lot of re-distribution also occurs through haats. This is because, a large number of
retailers and sub-wholesalers buy from haats for their village stores. What is most
attractive to marketers is that 90% + of sales in haats are on cash basis. Traditionally, in
village shops a lot of credit sales occur due to the fact that in a small geographic area of a
village, everybody knows everybody. Considering that over 5000 visit a haat from 5
villages, the system gets derelationalised. Apart from the 90% cash sale, 5 to 7% is
conducted on barter system and the rest 3 to 5% is on credit. Also attractive to companies
wishing to use the system is the low selling overheads. Participation fees at haats are a flat
Re.1 to Rs.5 per stall and this rate is common to a giant like Hindustan Lever and the
smallest local seller.

Distribution costs must be reduced through optimum utilization of the network. Thus,
incorporating haats in the distribution strategy of a rural marketing organization selling
consumer goods and FMCG products (typically once a week purchase items) is a
tremendous opportunity.

Perhaps the other most important factor to consider while developing rural distribution
strategy is that the move from transactional marketing to relationship marketing is most
evident in the village market. A strong bond needs to be created with every consumer
even in the remotest village and the smallest town. Marketing in Rural India is
undoubtedly a long-haul exercise and one that involves great expense. Only those with a
strong mind, a tough heart and stiff hands survive.

There is also a need to realise that the dealer is the company's "unpaid" sales force. It is

28
essentialto educate and involve him as he is the local company representative and is the
only member inthe channel of distribution that is in direct contact with the final consumer.
The dealers' feedback needs to be obtained as the direction for future strategy emanates
here.

CHAPTER 6

29
 POTENTIAL OF RURAL CONSUMER
6.1 THE PARADIGM SHIFT
 In most of the rural areas in different parts of the country, there is considerable
awareness on various latest products that are available in the market. This has been
possible due to the penetration of cable and satellite channels that have brought
down the world at the fingertips of the common man. The media influenced the
mindset of the rural consumer to such an extent that people who had money started
purchasing the products unmindful of the costs, just to satisfy their needs as well
as their ego. But, the growth of rural market could be attributed to many other
reasons that in one way increased the sales as well as the profits of the companies.
Some of the important causes for the growth of rural markets are –

* The rise in disposable income of the rural families

* The economic boom
* Timely rains
* Rural population involved themselves in business other than agriculture
* Increase white-collar jobs in nearby towns
* Commercialization of agriculture
* Saturation of the urban markets
* Media penetration in rural areas (particularly satellite channels)
* Globalization
* Economic liberalization
* Revolution in the Information Technology
* Women empowerment
* Improving infrastructure
However, there was a significant role of the corporate enterprises simultaneously in the
development of rural market. Their timely intervention into the rural areas, their
appropriate planning, their perception and identification about the growth of rural markets
and the use of marketing strategies all have equally contributed for the progress of rural
markets. Even though corporate houses were hedged with so many problems in the rural
areas, they saw a galore of opportunities in the rural market and converted all the

30
pessimistic characteristics of the rural market into affirmative attributes. They satisfied
themselves with the availability of limited infrastructure, saw a sign of prosperity rather
than fear during the entry of competitors into the rural markets, showed excitement at the
availability of satellite channels in the rural households, visualized their cash bells ringing
with the increase in purchasing power of the rural masses that came equivalent to their
urban counterparts. They traced a constant rise in the demand for those products that were
once confined mostly to the urban houses. But, blame it on the kind of awareness created
by the companies – people started using the products for other purposes as seen earlier.

In many villages, one can see today the alternate use of the products other than for their
actual purpose. People in the state of Bihar feed the cattle with Horlicks as a health drink
to fatten them! Similarly, people in Punjab use washing machine not for washing clothes
but to make frothy lassi in huge quantities! Animals are rubbed with Iodex on their skins
to relieve them from muscular pains after a day's hard work. Paints meant for houses are
used on the horns of cattle for easy identification and theft prevention! The weavers in
North India wear condoms on their fingers as gloves to weave fine threads while its
lubrication allows them fine control on threads and protect their sensitive fingers! If
companies felt happy with their increased sales and profits through this means and
thought that they captured the rural markets, then it is time for them to review their
marketing strategies. They should understand that these results do not coincide with the
application of the marketing tools and the technical expertise that are generally used to
satisfy the customers as well as the company objectives. The implications of 4 Ps of
marketing mix or the use of 4 As for successful rural marketing have produced wrong
results.
All companies usually claim that they provide the right product at the right place at right
price with right kind of promotion. Then why did the rural consumer used for different
purpose accept a right product? Why did he afford to spend either much or less on the
product that has not derived him the kind of benefit as claimed by the manufacturer? Why
did the place of offer differ than to where and to whom it actually was supposed to be
available? Why the right promotion has created wrong awareness in the minds of the
target customers?

31
There was something missing in the marketing strategies of the companies while serving
the rural markets. Otherwise, the results should have been more astonishing where the
sales turnover or the balance sheet would have shown much more than what is presently
achieved. Though, only the consumers in this way used few products, that use might be
the result of the accidental or wrongful application by the rural consumers. The marketer's
planning about the product and the communication with the target customers should be
perfect that produces the desired results.

6.2 RURAL INDIA-HUB OF POTENTIAL CONSUMERS

India's consumer and household product companies will probably sell more goods in the
country's villages and towns as rural incomes increase, a survey said.
Demand for products such as toothpaste, instant coffee and deodorants in the nation's
villages and small towns will increase by 60 percent by 2012, said the Associated
Chambers of Commerce and Industry of India, a New Delhi-based association of
companies.
``The per capita income of rural and semi-urban populace will increase as the economic
activities grow there due to government focus on their industrialization,'' the association
said.

About 70 percent of India's more than 1.1 billion people live in rural areas. The
government is spending more to build roads to connect villages, expand irrigation
networks and supply electricity to improve productivity and raise incomes.
The country's consumer and household products market will expand to 1.23 trillion rupees
($27.6 billion) by 2012 from about 700 billion rupees now, the association said. About 60
percent of all household products will be consumed in villages and small towns, it
said.Companies such as the local unit of Unilever and the country's biggest cigarette
maker, ITC. LTD, are expanding their reach in the 638,000 villages and 3,784 towns with
less than 100,000 people.

Expanding Consumer Market India's economy has grown at an average of more than 8

32
percent in the past three years. Finance Minister P. Chidambaram said on Dec. 21 the
countries gross domestic product may grow at about 9 percent in the year ending March
31. Last year, Prime Minister Manmohan Singh unveiled the Bharat Nirman, or Building
India, project with a plan to spend 1.76 trillion rupees by 2009 to build roads, provide
electricity to 100,000 villages, extend irrigation to an additional 10 million hectares (24.7
million acres) and build 6 million houses.
The country has 235 million farmers and agriculture accounts for about a fifth of the $775
billion economy.

Kolkata-based ITC, a cigarette maker that has diversified in the past six years into retail
store networks to sell cookies, garments, incense sticks and matches, plans to set up 54
retail stores called Choupal Fresh in the next three years to sell fresh fruits and vegetables.
It also plans to expand the number of its rural supermarkets called Choupal Sagars to 700
by 2013 from 11 currently.
HLL, the Mumbai-based local unit of Unilever, sells its products through 6.3 million
shops, reaching eight out of 10 households in India.

``There is so much potential for penetration and increased consumption in rural markets,’
HARISH MANWANI, chairman of Hindustan Lever, said last month. ``Seventy percent
of India is still in rural markets. In the longer term, rural markets will trend upward.''
While there is a general tendency to equate rural India to BoP market, here are some of
the consumption numbers that will blow your mind
 46% of the soft drinks sales happen in the rural areas.
 Rural India accounts for 49% of motorcycle sales.
 Rural India accounts for 59% of Cigarettes sales.
 53% of FMCG sales happen at Rural India. Rural India Opportunities
 Talcum powder is used by more than 25% of rural India.
 Lipsticks are used by more than 11% of the rural women and less than 22% of the urban
women.
 Close to 10% of Maruti Suzuki’s sales come from the rural market.
 Hero Honda, on its part, had 50% of its sales coming from rural market in FY’09.

33
 Rural India has a large consuming class with 41% of India’s middle-class and 58% of
the total disposable income accounting for consumption.
 By 2010 rural India will consume 60% of the goods produced in the country.
 In 20 years, rural Indian Market will be larger than the total consumer markets in
countries such as South Korea or Canada today, & almost 4 times the size of today’s
urban Indian market.
 200% growth in consumption of washing machines, TV.
 9% increase in the rural consumer expenditure since 2002.
 INR 500billion market of consumer durables.
 INR 6500billion market of FMCG.
 Agri inputs of INR 5400billons.

6.3 RURAL CONSUMERS LOOK FOR VALUE PRODUCTS

Savvy customers make it difficult for companies to penetrate the country's rural markets
for goods and services — estimated at over Rs 50,000 crore annually. To compound the
problem for companies, rural consumers are not swayed by successful urban marketing
strategies.

Rural consumers are clued-in to the value of a product because they are willing to
research extensively, said Mr. R.V. Rajan, Chairman and Managing Director, Anugrah &
Madison Advertising Pvt. Ltd. To illustrate the point, he gave the example of a farmer in
Meerut, near Delhi, who planned to replace tires for his bullock cart.

He examined a tire for nearly two hours. He then compared the product and price in other
shops and also asked one of his friends to test the tire’s quality. When there was another
tire buyer, the farmer watched carefully what he was doing and later tried the same. He
decided to buy the product after analyzing the product for nearly six hours.
Mr. Rajan was addressing the students of the School of Management, Bharath Institute of
Higher Education and Research, here on Friday, on `Rural Communications'. Companies
need to do an in-depth study of the mindset of rural consumers in each region before
developing a communication package for a product. Experience of one product category

34
cannot be repeated with another, he said.

Rural India, we have seen that on an average, there are 2-3 brands per product stocked.
This means that if the marketer can ensure that his brand is available in the rural shop at
the same price as that in the nearby town, he has fewer brands to compete with.

CHAPTER 7
CURRENT SCENARIO
7.1 ROADBLOCKS OF INDIAN RURAL MARKETS

35
 There are several roadblocks that make it difficult to progress in the rural market.
Marketers encounter a number of problems like dealing with physical distribution,
logistics, proper and effective deployment of sales force and effective marketing
communication when they enter rural markets. The major problems are listed below.

1. Standard of living: The number of people below the poverty line is more in rural
markets. Thus the market is also underdeveloped and marketing strategies have to be
different from those used in urban marketing.
2. Low literacy levels: The low literacy levels in rural areas leads to a problem of
communication. Print media has less utility compared to the other media of
communication.
3. Low per capita income: Agriculture is the main source of income and hence
spending capacity depends upon the agriculture produce. Demand may not be stable or
regular.
4. Transportation and warehousing: Transportation is one of the biggest challenges in
rural markets. As far as road transportation is concerned, about 50% of Indian villages
are connected by roads. However, the rest of the rural markets do not even have a
proper road linkage which makes physical distribution a tough task. Many villages are
located in hilly terrains that make it difficult to connect them through roads. Most
marketers use tractors or bullock carts in rural areas to distribute their products.
Warehousing is another major problem in rural areas, as there is hardly any organized
agency to look after the storage issue. The services rendered by central warehousing
corporation and state warehousing corporations are limited only to urban and suburban
areas.
5. Ineffective distribution channels: The distribution chain is not very well organized
and requires a large number of intermediaries, which in turn increases the cost and
creates administrative problems. Due to lack of proper infrastructure, manufacturers
are reluctant to open outlets in these areas. They are mainly dependent on dealers, who
are not easily available for rural areas. This is a challenge to the marketers.
6. Many languages and diversity in culture: Factors like cultural congruence, different
behaviour and language of the respective areas make it difficult to handle the

36
 customers. Traits among the sales force are required to match the various requirements
of these specific areas.
7. Lack of communication system: Quick communication is the need of the hour for
smooth conduct of business, but it continues to be a far cry in rural areas due to lack of
communication facilities like telegraph and telecommunication systems etc. The
literacy rate in the rural areas is rather low and consumer’s behaviour in these areas is
traditional, which may be a problem for effective communication.
8. Spurious brands: Cost is an important factor that determines purchasing decision in
rural areas. A lot of spurious brands or look-alikes are available, providing a low cost
option to the rural customer. Many a time the rural customer may not be aware of the
difference due to illiteracy.
9. Seasonal demand: Demand may be seasonal due to dependency on agricultural
income. Harvest season might see an increase in disposable income and hence more
purchasing power.
DISPERSED MARKETS: RURAL POPULATION IS HIGHLY DISPERSED AND REQUIRES A LOT OF

MARKETING EFFORTS IN TERMS OF DISTRIBUTION AND COMMUNICATION.

7.2 STRATEGIES

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.

BY PROPER COMMUNICATION IN INDIAN LANGUAGE

37
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

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.

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.

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 provides frills
free of cost they are happy with that. They are happy with such a high technology that can
full 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.

BY PROMOTING PRODUCTS WITH INDIAN MODELS AND ACTORS

Companies are picking up Indian models, actors for advertisements as this helps them to

38
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.

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 make
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".

BY PROMOTING INDIAN SPORTS TEAM

Companies are promoting Indian sports teams so that they can associate themselves with
India. With this, they in uniqe 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. 2.9 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.

BY DEVELOPING RURAL-SPECIFIC PRODUCTS

Many companies are developing rural-species products. Keeping into consideration the
requirements, a firm develops these 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.

BY GIVING INDIAN WORDS FOR BRANDS

39
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.

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
Always 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.

BY EFFECTIVE MEDIA COMMUNICATION

Companies are using Media Rural marketing. 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 Kodak Chap Tea in Etawah district. In between such a
show, the lights are switched o_ and a torch is ashed in the dark (Eveready’s 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 in states {Madhya Pradesh,
Karnataka, Andhra Pradesh, Uttar Pradesh and Maharashtra. Rural marketing requires the
understanding of the complexities and this article reviews some of the key issues. Indian
agricultural industry has been growing at a tremendous pace in the last few decades. The

40
rural areas are consuming a large number of industrial and urban manufactured products.
The rural agricultural production and consumption process plays a predominant role in
developing the Indian economy. This has designed a new way for understanding a new
process called Rural Marketing. The concept of rural marketing has to be distinguished
from Agricultural marketing. Marketing is the process of identifying and satisfying
customers needs and providing them with adequate after sales service. Rural marketing is
different from agricultural marketing, which signifes marketing of rural products to the
urban consumer or institutional markets. Rural marketing basically deals with delivering
manufactured or processed inputs or services to rural producers, the demand for which is
basically a derived outcome. Rural marketing scientists also term it as developmental
marketing, as the process of rural marketing involves an urban to rural activity, which in
turn is characterized by various peculiarities in terms of nature of market, products and
processes. Rural marketing differs from agricultural or consumer products marketing in
terms of the nature of transactions, which includes participants, products, modalities,
norms and outcomes. The participants in case of Rural Marketing would also be different
they include input manufacturers, dealers, farmers

Opinion makers, government agencies and traders. The existing approach to the rural
markets has viewed the markets as a homogeneous one, but in practice, there are
significant buyer and user divergences across regions as well as within that requires a
deferential treatment of the marketing problems. These divergences could be in terms of
the type of farmers, type of crops and other agro-climatic conditions. One has to
understand the market norms in agricultural input so as to devise good marketing
strategies and to avoid unethical practices, which distort the marketing environment.
Many of the inputs used for production process have implications for food, health and
environmental sectors. Rural marketing needs to combine concerns for port with a
concern for the society, besides being titled towards port. Rural market for agricultural
inputs is a case of market pull and not market push. Most of the jobs of marketing and
selling is left to the local dealers and retailers. The market for input gets interlocked with
other markets like output, consumer goods, money and labour. The importance of rural
marketing can be understood from the fact that today modern inputs i.e. diesel, electricity,

41
fertilizers, pesticides, seeds account for as much as 70Green Revolution areas. Further the
percentages were higher at 81of land. Strategic aspects Rural marketing in India is not
much developed there are many hindrances in the area of market, product design and
positioning, pricing, distribution and promotion. Companies need to understand rural
marketing in a broader manner not only to survive and grow in their business, but also a
means to the development of the rural economy. One has to have a strategic view of the
rural markets so as to know and understand the markets well. In the context of rural
marketing one has to understand the manipulation of marketing mix has to be properly
understood in terms of product usage. Product usage is central to price, distribution,
promotion, branding, company image and more important farmer economics, thus any
strategy in rural marketing should be given due attention and importance by understanding
the product usage, all elements of marketing mix can be better organized and managed.

BY ADOPTING LOCALISED WAY OF DISTRIBUTING

Companies recognize proper distribution channels. The distribution channel could be a big
scale Super markets; they thought that a similar system could 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 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.

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. Mr. MAKBUL FIDA HUSSAIN sighed
that pen. 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.

42
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 display its
products like tractors and motorcycles in such melas.

PAINTINGS
A picture is worth thousand words. The message is simple and clean. Rural people like the
sight of bright colors. COKE, PEPSI and TATA traders advertise their products through
paintings.

7.3 Myths About The Indian Rural Market

Myth no 1: In the aftermath of urban-rural convergence, rural market will be mainly an

extension of urban markets and will eventually embrace the product and brand lifestyles
of the latter, supported by higher disposable incomes, aggressive retail promotion and
advertising.
The reality: Rural markets represent a distinct dynamic in how they come into being and
make unique demands on how the product is designed and how the brand is positioned
and promoted. Greater the strategic attention to these unique demands, assure greater the
chances of product's success in the rural market.

Myth no 2: The market size can be estimated based on mere demographic interpolation of
current penetration levels and sales volumes and that even fringe presence or limited
acceptance of lifestyle consumer products in rural market would translate into future
market potential to be tapped.
The reality: Fringe acceptance of consumer products or brands is no indication of market
potential. It actually would only result in higher incidence of brand and product mortality
as more firms try to choke those segments with competing brands. Rural market dynamics

43
instead demand sustained effort at brand building and product acceptance.

Myth no 3: That rural market represents a more or less homogenous matrix of attitudes,
values and purchasing behavior across regions leading to what may be termed "one size
fits all" approach.
The reality: The Indian rural market is a complex mosaic of mind-sets, cultures, and
lifestyles. While education, employment, income, agricultural land ownership may still be
the major deciding factors accounting for social differentiation, they do not yield
reciprocal cohort behavioral patterns, with respect to consumption patterns, purchasing
decisions and priorities of product ownership.

Myth no 4: That rural markets are highly price-inelastic and only suited for 'value-for
money' products as against premium quality products.
The reality: Despite lower incidence of premium product purchases, the rural consumers
across all income segments exhibit marked propensity to spend on premium high quality
products, which are backed by strong brand values, where they correspond to their own
aspirations and quality needs. The problem really lies in market not being able to offer a
premium product in the specific context of rural demand.

CHAPTER 8
RURAL V/S URBAN MARKET

44
8.1 RURAL INDIA CATCHING UP FAST WITH URBAN INDIA
Riding on economic growth, the average expenditure on consumer durables in rural India
is fast catching up with that of urban India. The National Sample Survey Organization has
stated this in its 61 round of National Sample Survey (NSS) during the July 2004-05
period. The data were collected from a
Sample of 79,298 rural households spread over 7,999 villages and 45,346 urban
households in 4,602 urban blocks.
In 2004-05, expenditure on durable goods formed 3.75 per cent (Rs 21.74 out of
Rs 579.17) of average per capita consumer expenditure in rural areas and
4.27 per cent (Rs 47.16 out of Rs 1104.60) in urban areas. In 1999-2000, their share was
2.62 per cent in rural sector and 3.61 per cent in urban areas. "As your income rises, the
share of essential items in the total expenditure, especially food items, drops significantly.
With rural income catching up with urban income, this trend is obvious," said chief
statistician Pronab Sen.

Percentage-wise, the number of rural households having motorcycles has gone up from 2
per cent in 1993-94 to 7.7 percent in 2004-05. About 0.8 percent rural households owned
a car in 2004-05, compared with 0.2 percent in 1993-94. Around 25.6 per cent rural
households had TV sets during the same period as against 7 percent in 1993-1994.
Electric fans were found in 38 percent rural households, showing an increase of 12-
13percentage points since 1999-2000. Refrigerators were used in 4 per cent rural
households in 2004-05,compared with 1 per cent in 1993-94.

8.2 RURAL VS URBAN MARKETING-SUMMARY

NO. ASPECT URBAN RURAL

1 Marketing & Societal Marketing & Societal
Concepts & Concepts,
Relationship Development
PHILOSOPHY
Marketing Marketing &
Relationship
Marketing

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2 A) MARKET
B) DEMAND High Low
C) COMPETITION Among Units In Mostly From
Organized Sector Unorganized Units
CONSUMERS
LOCATION Concentrated Widely Spread
LITERACY High Low
INCOME High Low
EXPENDITURE Planned, Even Seasonal, Variation
NEEDS High Level Low Level
INNOVATION/ADOPTION Faster Slow
3 PRODUCT
AWARENESS High Low
CONCEPT Known Less Known
POSITIONING Easy Difficult
USAGE METHOD Easily Grasped Difficult To Grasp
QUALITY PREFERENCE Good Moderate
4 PRICE
SENSITIVE Yes Very much
LEVEL DESIRED Medium-high Medium-low
5 DISTRIBUTION
Wholesalers, stockiest, Village shops,
retailer, supermarket, “Haats”
CHANNELS
specialty stores, &
authorized showrooms
TRANSPORT FACILITIES Good Average
PRODUCT AVAILABILITY High Limited
6 PROMOTION
Print, audio visual TV, radio, print media
media, outdoors, to some extent. More
ADVERTISING
exhibitions etc. few languages
languages
Door-to-door, Occasionally
PERSONAL SELLING
frequently
Contests, gifts, price Gifts, price discounts
SALES PROMOTION
discount
PUBLICITY Good opportunities Less opportunities

8.3 RURAL RETAILING

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The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two-thirds of countries consumers live in rural areas and almost half of the
national income is generated here. It is only natural that rural markets form an important
part of the total market of India. Our nation is classified in around 450 districts, and
approximately 630000 villages, which can be sorted in different parameters such as
literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc.

Few Facts
70 % of India's population lives in 627000 villages in rural areas. According to the
NCAER study, there are almost twice as many 'lower middle income' households in rural
areas as in the urban areas.
1. At the highest income level there are 2.3 million urban households as against 1.6
million households in rural areas.
2. Middle and high-income households in rural India is expected to grow from 80
million to 111 million by 2007.
3. In urban India, the same is expected to grow from 46 million to 59 million. Thus,
the absolute size of rural India is expected to be double that of urban India.

CASE STUDY: ITC E-CHOUPAL

Rural Malls: Chaupal Sagar
Chaupal Sagar is one of the first organized retail forays into the hinterland. It was soft-
launched on 15 August. It is actually a warehouse for storing the farm produce that ITC
buys through its e-chaupals. The mall has come up in one part of this warehouse. It has
been set up by the international business division of tobacco major ITC. It has been
initiated as rural shopping-cum-information centres in Madhya Pradesh. The first rural
mall has come up 40-odd kilometers journey from Bhopal towards Sehore. ITC Spent 3
years and Rs.80 crores on research and development of this concept including investments
in E-choupal.

Objective
ITC describes the establishment as a set to create a high-quality, low-cost fulfillment

47
channel for rural India. However, any organization is driven by the profit motive which
are served through this initiative:
Reap benefits from the market they have created
Creating an entry barrier for other prospective players ITC has very effectively integrated
its profit and social motives.

Concept
KSA Technical - "It is definitely a pioneering venture because no other Indian company
has yet entered rural retailing with the all-under-one-roof concept."
Malls stocking wide variety of products with floor space of 7000 sq.ft, plus a trading zone
and information centre. It is a Hub cum Supermarket, which has been set up in a section
of the ITC rural warehouses.

Facilities
Spread over 5 acres of land at Sehore in Madhya Pradesh: -
1. Rural shopping malls will be open from 6 am to 9 pm.
2. Features and facilities at these ITC malls can overshadow those in the metros. The
ITC store sells everything that a rural consumer may ask for - sarees to kurta-
pyjamas to shirts (in the range of Rs 99-500), footwear, groceries, electronic
durable from TVs to microwaves, cosmetics and other accessories, farm
consumption products like seeds, fertilizers, pumps, generators and even tractors,
motorcycles and scooters.
3. Banking and automated teller machines will be standard at the malls.
4. Insurance products for farmers.
5. Entertainment facilities, restaurants, public facilities and parking space will also
be available.
6. There is even a fuel pump in tie-up with BPCL and a cafeteria.
7. Parking lot for 160 tractors.
8. There will be a primary healthcare facility to be serviced by a private healthcare
service provider.
9. Information centres: The company will create the facility for providing online

48
 information on commodity rates and weather.
10. Shopping malls will have a training facility on modern farm techniques.
11. Farmers can come and log on to the Internet and check the pricing and sell their
commodities.
12. There will also be godowns for storing the wheat and soybean and also for
stocking products retailed at the mall.

OPERATIONAL COST IN COMPARISION TO MANDIS

QuickTimeª and a
decompressor
are needed to see this picture.

49
Risk analysis & challenges
Radical shifts in computing access will break community-based business models. The
sanchalaks are ITCs partners in the community, and as their
power and numbers increase, there is a threat of unionization and
rent extraction. The scope of the operation: the diversity of activities required of every
operative and the speed of expansion create real threats to efficient management. If ITC
fails to full the aspirations of farmers, they will look elsewhere for satisfaction.

CHAPTER 9
CONCLUSION
With an approximate population of 700 million people, the rural Indian market is
important for multinational corporations to tap. Although rural Indians need to purchase
consumer goods just as their urban counterparts do, rural Indian consumers have a
different set of needs that must be met by both package and product. Spending time
researching the rural Indian consumer as well as the market before diving in can help to
prevent unnecessary struggles and failures. If the opportunity exists, partnering with an
existing Indian company upon market entry can provide several key advantages to a
company. Understanding the available distribution networks in rural India is crucial to
making a successful entry into the rural Indian market

SOME GROWTH AVENUES ARE

FMCGFICCI says that in a clear defiance of the economic slowdown of the past 12

50
months, India's Fast Moving Consumer Goods (FMCG) sector has grown consistently
during the last three to four years, reaching a size of US $ 25 billion (Rs. 120,000 crore)
Rural consumers spend around 13 per cent of their income, the second highest after food
(35 per cent), on fast moving consumer goods (FMCG), as per a RMAI study.

Retail the rural retail market is currently estimated at US$112 billion, or around 40 per
cent of the US$ 280 billion retail market. Major domestic retailers like AV Birla, ITC,
Godrej, Reliance and many others have already set up farm linkages. Hariyali Kisan
Bazaars (DCM) and Aadhars (Pantaloon-Godrej JV), Choupal Sagars (ITC), Kisan
Sansars (Tata), Reliance Fresh, Project Shakti (Hindustan Unilever) and Naya Yug Bazaar
are established rural retail hubs.

PharmaceuticalsAccording to a report by McKinsey, the rural and tier-2 pharma market

will account for almost half of the growth till 2015. The tier-2 market will grow to 44 per
cent by 2015, amounting to US$ 8.8 billion.

Telecommunication A Gartner forecast revealed that Indian cellular services revenue will
grow at a compound annual growth rate (CAGR) of 18.4 per cent to touch US$ 25.6
billion by 2011, with most of the growth coming from rural markets. Also, a joint
Confederation of Indian Industries (CII) and Ernst & Young report reveals that of the next
250 million Indian wireless users, approximately 100 million (40 per cent) are likely to be
from rural areas, and by 2012,

Automobiles: Passenger car and two-wheeler companies are driving on rural roads to
push sales. While growth in urban markets has been flat or negative, the rural markets are
booming, insulated from economic downturn. Rural markets' share in Maruti's overall
sales during April-January 2009 has gone up to 8.5 per cent from 3.5 per cent in the same
period last year.

Consumer durables A survey carried out by RMAI has revealed that 59 per cent of
durables sales come from rural markets. According to FICCI, Consumer goods segment

51
were also observed to post negative growth of 3% during February 2009 compared to
positive 11.7% in the corresponding month of previous year. The growth in total
consumer goods is seen to erode due to fall in the growth of consumer non-durables
category.

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

LIMITATIONS
Information collected is secondary in nature due to that chances of little deviation in
analyzing the opportunities in rural market might be possible.

On the basis Certain Parameters comparison is made between rural and urban market but
scope is limited to north India only.

Brand loyalty and perception of rural consumers towards any brand is not considered here.

Rural consumers are not segregated on the basis of the income levels as upper or middle
class and comparisons are not made between two.

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