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The Rural

Marketing
Environment

Evolution of Rural Marketing


Phase I (Before 60s)
Traditional farming methods
Focus on marketing of rural products in urban markets

and agricultural inputs in rural

Phase II (1960s to Early 90s)


The Green and the White Revolution
Demand for agricultural inputs
Domain of marketing of agricultural inputs added

Phase III(Mid 90s to present)


Higher development in rural sector
Marketers realised the potential of the vast rural market

RMB 02

Rural Market Structure


Demographic Environment
Share of rural population down from 80.1% in 1971 census
to 72.2% in 2001 census. The number at 741.6 million
indicates an increase of over 15%
Youth (20 to 34) 23.1% of rural population
Rural literacy up from 36% in 1981 to 59% in 2001 census
Rural households up by 26 million in last decade
Family size has gone down marginally due to migration
Joint families now breaking apart with over 77% going
nuclear in rural
Concept of individualised joint families staying in the
same house but having separate kitchens
RMB 02

Some Comparisons
Distribution of Population by age groups
(2001)
Lower due
to migration
factor

Age Groups

Rural

Urban

04

11.5

8.9

5 14

25.7

21.8

15 19

9.5

10.6

20 34

23.1

26.8

35 54

19.7

22.5

55+
10.5
Education in India (2001)

Lower due
to lack of
facilities

Source : 2001 Census

Education Level
Below Primary
Primary but below
Middle
Middle but below
Matric
Matric but below
Graduate
Graduate and above
RMB 02

9.4

Rural
31.7

Urban
18.0

29.5

22.9

16.9

16.3

18.4

29.6

3.5

13.2
4

Some Comparisons
Joint
Family
System
Breakdow
n

Family Structure
Type of Household
Joint

Rural
19.5%

Urban
15.2%

Nuclear without elders

60.2%

65.5%

Nuclear with elders

17.1%

15.4%

Others
Total (million)

3.2%
138

3.9%
54

Household Size
Size of Household
1 2 members

Rural
11.1%

Urban
10.7%

3 4 members

30.4%

38.8%

5 6 members

34.0%

32.8%

24.5%
5.36

17.7%
5.31

7 members Source
and above
: IRS 2005
Average Family Size

RMB 02

Occupational Pattern
Over 40% of rural population is in cultivation

followed by 35% wage earners


11% of the rural population are salary earners
and nearly 5% petty shopkeepers
3.4% are artisans
The cultivators disposable income is highly
seasonal being available at the time of
harvesting

RMB 02

Population Distribution Rural


Population

Number of
Villages

Less than 200

92,541

200-500

127,054

501-1,000

144,817

1,001-2,000

129,662

2,001-5,000

80,313

More than 5,000

18,758

Hardly any shops


in these villages

account for 50%


of rural
population &
60% rural wealth

Do not include uninhabited. Total

Source : MART

villages including these are 638,365

RMB 02

Total number of
villages

593,145

90 % of
durables
purchased
by rural
people from
these towns

Distribution of Towns in India


LPG
Working
Number Literacy penetration
population
Town Class Population Category
of Towns
(%)
(% of HHs) (% of pop)

Class I

1 lakh & above

423

82

47

32

Class II

50,000 99,999

498

79

44

31

Class III

20,000 49,999

1,386

77

36

32

Class IV

10,000 19,999

1,560

76

29

34

Class V

5,000 9,999

1,057

76

27

35

Class VI

Less than 5,000

237

80

37

34

5,161

80

48

32

All India

Source: Census 2001

*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354


8

Economic Environment
The rich and the very rich have doubled in the last ten years
The aspirers and the destitute have fallen by 50%
Increasing incomes are also changing expenditure patterns
Annual
Income

All figures in
%
19952006-

96

07

0.3

0.9

Rs 45,001- 215,000

13.5

25.0

Rs 22,001- 45,000

31.6

49.0

Rs 16,001 - 22,000

31.2

14.0

Rs 16,000 & Below

23.4

11.1

100.0

100.0

Above Rs 215,000

Projections Based on 7.2% GDP Growth

RMB 02

Changing Rural Consumers


Expenditure Pattern
Per Capita Consumption
Expenditure
(Rs. Per month)
YEAR

RURAL

URBAN

1983

112

166

1991

281

458

2001

486

855

Source: NSSO

Consumption Expenditure
Rural
Percentage
YEAR

FOOD

NONFOOD

1983

66

34

1991

63

37

2001

59

41

Source: NSSO

Per capita consumption expenditure has grown 4 times in the last two decades
Expenditure on non-food items is increasing
42 million rural households avail banking services in rural against 27 million in
urban
RMB 02

10

Social and Cultural


Environment
Variations between regions and sub-regions
In villages inward migration is insignificant while

outward migration to urban and foreign is


reasonably high
The settlement pattern is in clusters largely
around caste lines
Houses are largely semi-pucca and kacha
Land is the primary source of livelihood
Activities limited to smaller geographic areas
resulting in higher adherence to customs and
traditions
RMB 02

11

Village Community
Villages are self-sufficient and autonomous
Each village has a council of elders (panchayat)
Panchayats have the constitutional authority for

exercising self-governance
The panchayat structure has undergone change
with elections and reservation for underprivileged
families
Shift from subsistence farming to commercial and
mixed farming has made the village dependent on
external factors
RMB 02

12

Caste System
The rural society has a strong caste system:
Brahmins
Kshatriyas (Warriors)
Vaishyas (Business Class and traders)
Shudras (involved in odd jobs) Untouchables

The settlements of the lower castes are normally

on the outskirts of the village


Marketers have to be sensitive to the caste
system especially in the area of communication

RMB 02

13

Political Environment
The panchayats were dominated by upper castes
The panchayati raj system has introduced an

integrated and inclusive approach to governance


in the rural sector
Villages with 5000 population or a cluster of
villages with a combined population of 5000 form
a panchayat
Gram Sabhas are to be organised once a quarter
to bring in transperancy, accountability and
achievement
The sarpanch represents the village at the
tehsil/taluka/ block level
RMB 02

14

Tecnological Environment
Triggered by three major revolutions:
Green Revolution (1967 to 1978) to bring about food self-

sufficiency. Resulted in adoption of high yield seeds,


fertilisers, pesticides, and farm mechanisations
White Revolution Milk production through producer
cooperatives and moving processed milk to urbandemand centres. Milk production has gone up from 17
million tonnes in 1950-51 to over 100 million tonnes in
2007-08
The NGO movement has created grassroot level
assimilation of technological extensions in rural areas
NGOs have also been instrumental in providing health,
homes, hygiene, child care, education and other social
development programmes
RMB 02

15

Constitution of Rural Markets


Consumers Market
Constituents: Individuals and Households
Products:
Consumables: Food Products, Cosmetics
Durables: Watches, bicycles, radios.

Institutional Market
Constituents: Food processing,

poultry, fishery, animal


husbandry, cottage industries, health centers, schools
Consumables : Agri inputs (seeds and fertilizers) animal feed, fuel
Durables: Tractors, Pumpsets and threshers.

Services

Market
communication
RMB 02

Banking,

insurance

credit

cards,

16

Size of Rural Market


Particulars

Rural
Market
Crores

FMCG products

65,000

Consumer
Durables

5,000

Agri-inputs incl.
tractors

45,000

2/4 wheelers

8,000

TOTAL

1,23,000

Source Francis Kanoi


2002

RMB 02

In the FMCG market the size

of the pie is larger than the


urban pie. Problems of
logistics, supply and storage
Rural markets accounted for
54% of the durables sold in
the country
The decadal growth rate for
consumer durables is 100%
in rural against 40% in urban
17

Nature of Rural Market


The

big
question

transactional
or
developmental approach to the rural markets
Agri-input companies follow an extension
services approach to increase productivity
HPCL is promoting concept of community
kitchens to popularise cooking gas
HULs Project Shakti improves the income of
rural women
The rural marketing process needs to be
evolutionary and not revolutionary
RMB 02

18

Marketing Management in
Non-Profit Sectors
NGOs have started partnering with corporates
Corporates are facing saturation in the urban

segment and do not understand the rural


environment
The potential for a marriage between the two
to fulfill each others needs exists

RMB 02

19

In 20 years the rural Indian


market will be larger than the
total consumer markets in such
countries such as South Korea or
Canada today, and almost four
times the size of todays urban
market. The estimated size of
rural market will be USD 577
billion
- McKinsey Global Institute, May 2007

Successful Mantra in Rural


Business Mind, Social Heart