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Answer 2.

Factors that make rural market lucrative/attractive


NEED OF RURAL MARKETING
There are many reasons that have urged the Indian companies to enter the rural India. Some of
them are discussed below:
The rural Indian population is large and its growth rate is also high which shows that the
Indian rural market has great potential which needs to be captured.
The purchasing power in rural India is on steady rise and it has resulted in the growth of the
rural market.
The rural audience has matured enough to understand the communication developed for the
urban markets Television has been a major effective communication system for rural people
and, as a result, companies can identify themselves with their advertisements. Socio-economic
changes (lifestyle, habits and tastes, economic status)
Infrastructure facilities such as roads, electricity and media in rural India has improved and it
now becomes comparatively easy to transport goods to rural parts of the country.
Literacy level among the rural mass is increasing day by day. Rural consumer can understand
the message given by the producers in the advertisements.
742 million people
Estimated annual size of the rural market FMCG Rs 65,000 Crore
Durables Rs 5,000 Crore
Agri-inputs (incl. tractors) Rs 45,000 Crore
2 / 4 wheelers Rs 8,000 Crore
In 2001-02, LIC sold 55 % of its policies in rural India.
Of two million BSNL mobile connections, 50% in small towns/villages
Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT)
41 million Kisan Credit Cards issued (against 22 million credit-plus-debit cards in
urban) with cumulative credit of Rs 977billion resulting in tremendous liquidity.
Of 20 million Rediffmail signups, 60 % are from small towns.50% transactions from
these towns on Rediff online shopping site
42 million rural HHs availing banking services in comparison to27 million urban HHs.
Investment in formal savings instruments: 6.6 million HHs inrural and 6.7 million in
urban
Answer 3. Scope of rural marketing
The difference in rural and urban sector is due to vast difference in:
Income level
Expenditure capacity
Taste and preferences
Educational level
Social, Cultural and environmental
Following Service areas have great potential in rural markets:
1. Agricultural consultancy:
Rural customers require proper consultancy services about the best methods, timings
and seasons, technology, tools, prices and best markets for selling their farming
products.
2. Banking, microfinance and loan facilities:
The rural market has huge potential for banking services for providing following
facilities at affordable prices:
Agricultural loans
Educational loans
Housing loans
Savings accounts and safe deposits
Automobile loans
Personal loans

3. Healthcare:
The availability and location of these services is of great concern as most of the areas
either do not have any or many rural and remote areas needs to be dependent on very
few and distantly located Hospitals
4. Telecom services:
The governments policies for reduced tariffs, call rates, lesser mobile handset prices
and private participation involvement has helped in increasing the level of competition,
continuous improvement in
technology and thus has resulted in the growth of the rural telecom market
5. Automobiles Services:
There has been a huge increase in the number of two wheeler, four wheeler and
Agricultural tools and vehicles in past few decades because of reduction in prices and
government support to the rural population. This has given rise to a new business for
providing maintenance and repair services to rural consumers.

6. T.V. Channels Services:

Due to the increased awareness, arenas of interest, leisure requirements, and number
of entertainment options like televisions and computers due to reduced & affordable
prices, the demand for entertainment services like T.V. entertainment channels have
increased. Many companies have already gained profits by targeting rural markets
which include Airtel (DISH TV), Reliance (BIG TV), and Tata (SKY).
7. Travel and reservation Services:

The travel and reservation booking and organizing services for booking train,
busses, taxies and tour consultancy has also been observed to create a huge
demand in last few decades as more and more rural population need to mobilize for
business and personal reasons.
8. Low Cost Hotels:

Due to increased mobilization because of business and personal needs, there is also
increased demand for hotel and lodging services to the travellers.
9. Event Managements:

The rural population are majorly involved in celebrating and organizing festivals,
which require lighting arrangements, venue decoration, food, lodging, transportation,
catering and event planning etc. for:
i. Family gatherings, Marriages, engagements, birthday parties,etc.

ii. Festivals like Diwali, Onam,Christmas, lohri, Eid, Dushera, Kannada


Rajamahotsava, Navratri, Garba and Dandia mahotsava etc.

10. Beauty Parlours:

As there has been major improvement in the quality of life style and increased
awareness among the rural customers (especially females), there has been great
demand observed for beauty products and services. This market is still dominated by
unorganized and local players who lack adequate tools, methods, skills, process,
technology and beauty products to meet the demand of rural population.
11. Affordable Movie theatres:

Till now the entertainment service providers for movie theatres at affordable prices in
rural markets are dominated by local and unorganized players who lack proper
facilities and infrastructure as well as quality delivered.
12. Educational and Career consultancy:

The rural markets lack adequate and quality educational services which are majorly
catered by government agencies and bodies. But due to lack of proper infrastructure,
expertise, knowledge, talent, funds and participation of the service provider, this
sector is

unable to meet the desired level of service expectation of the rural customer for
career building.
Answer 4. Major challenges/difficulties/limitations in the rural market.

ISSUES AND CHALLENGES IN RURAL MARKETING

(A) ISSUES India is ingenious with a good degree of ethnic, cultural and regional
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diversity. About 3/4 of the total population resides in the rural areas and majority
of them are dependent upon agriculture for their subsistence. Agriculture
contributes about 24.7% to the Gross Domestic Product (GDP) of the country. It
also contributes about 13.1% to the total Indian exports. This sector provides
employment to 58.4% of the countrys workforce and livelihood to more than 650
million people. Despite this fact, the condition of these people has not shown any
significant improvement. The development of the nation largely depends upon the
development of the rural population. Rural market witnesses a high demand and it
is the rural segment of market that contributes more profit than its urban
counterpart. Rural marketing broadly involves reaching customers, understanding
their wants, supply of goods and services, and ultimately satisfying consumers,
leading to more sales. The general impression is that only agricultural inputs like
seeds, fertilizers, pesticides, cattle feed and agricultural machinery has a potential
for growth in the rural market. However, there is a growing market for consumer
goods now. It has been estimated the rural market is growing at the rate of five
times its urban counterpart.
The problems of rural marketing are continuing in spite of efforts to improve in a
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9 five year plan. The position is improving but slowly the rural marketer has many
challenges. But the vast and expanding markets call for good marketing strangers
to create win situations to all parties in the chain of rural marketing. The problems
of rural marketing are as follows:-
1. Underdeveloped People:
Rural society is found by tradition, old customs, practices etc. The impact of
modern science and technology have made very less impact of the old beliefs which
are still continuing.
2. Underdeveloped Market:
Rural markets are not developing because of inadequate banking and credit
facilities. Rural market needs banks to enable remittance, to transact on credit basis
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and to obtain credit support from the bank. At present every 48 village in India
only has bank.
3. Poor or improper communication facilities:
Most villages even today largely depend on telegrams and phones for their
communication needs. Print media and visual media (Television cinema) etc.
reaches only about 20% of rural Indians.
4. Many languages:
India is a country of many languages. Language becomes a barrier in effective
communication in the marketing efforts. The languages vary from state to state,
place to place, and district to district. There are now 18 schedule national languages.
5. Vastness and unevenly spread:
India is a vast and approximately 3214 km from North to South and 2933 km from
East to West. Rural market consists of approximately 75 crores rural consumers
spread across approximately 638,365 villages. Despite the urban migration, the
rural areas continue to be the place of living for a vast majority Indians.
6. Low per capita income:
Most farmers have small lands and many villages are brought prone, this result in
low per capita income. Low per capita income results in low consumption pattern
as compared to the urban population. The marketers faces challenges in rural
marketing to decide about quantities, frequency of distributions, package size etc.
due to the low per capita income of the rural people.
7. Poor infrastructure facilities:
Infrastructure facilities like roads, warehouses, power etc. are inadequate in rural
areas. Infrastructural costs are very high and impact adversely in the rural market
activities.
8. Seasonal demand:
Rural economic is seasonal, Rural people have two seasonal demands namely,
khariff and rabi. Villages have money mostly in this seasons. As village incomes
are seasonal, demands are also.
CHALLENGES
Despite the fact that rural markets are a huge attraction to marketers, it is not easy to
enter the market and take a sizeable share of the market, in the short time due to the
following reasons:-
1. Low Literacy: There are not enough opportunities for education in rural areas. The
literacy level is as low (36%) when compared to all-India average of 52%.
2. Communication Problems: Facilities such as telephone, fax and telegram are rather
poor in rural areas.
3. Traditional Life: Life in rural areas is still governed by customs and traditions and
people do not easily adapt new practices. For example, even rich and educated class of
farmers does not wear jeans or branded shoes.
4. Seasonal Demand: Demand for goods in rural markets depends upon agricultural
situation, as agriculture is the main source of income. Agriculture to a large extent
depends upon monsoon and, therefore, the demand or buying capacity is not stable or
regular.
5. Transportation: Many rural areas are not connected by rail transport. Kacha roads
become unserviceable during the monsoon and interior villages get isolated.
6. Distribution: An effective distribution system requires village level shopkeeper,
Mandal/Taluka-level wholesaler or preferred dealer, distributor or stockiest at district
level and company-owned depot or consignment distribution at state level. The
presence of too many tiers in the distribution system increases the cost of distribution.
7. Career in Rural Market: While rural marketing offers a challenging career, a rural
sales person should require certain qualifications and specialized talent.
8. Buying Decisions: Rural consumers are cautious in buying and decisions are slow
and delayed. They like to give a trial and only after satisfying personally, they buy the
product.
9. Cultural Factors: Culture is a system of shared values, beliefs and perceptions that
influence the behavior of consumers. There are different groups based on religion,
caste, occupation, income, age, education and politics and each group exerts influence
on the behavior of people in villages. There is a belief among rural people that
experience is more important than formal education and they respect salespersons who
can offer practical solutions to their problems. Therefore, it is desirable that sales
persons, especially those who have been brought up in cities are given a through
training consisting of both theory and practical aspects of village life. The training will
help these sales persons to align themselves with the market retailers and settle down
smoothly in their jobs.

Question

A Durable company wants to sell its products in rural markets. What critical
factors in the socio-economic environment should it examine to design in
market entry strategy

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