Rural Marketing Environment

Why Rural Marketing

is a New Discipline?

Rural Marketing is a new discipline because:-

 India is a predominantly agrarian society.

 Western Marketing has no experience to
manage it.
 Urban markets are saturating in India.
 There are immense opportunities at the
bottom of the pyramid.
 R. M. can change rural business.
 Retail boom will also expedite the growth
of rural marketing.
 What is Rural?
Definitions of Rural

Census Village: Basic Unit for rural areas is the revenue village, might
comprise several hamlets demarcated by physical boundaries.

Town: Towns are actually rural areas but satisfy the following criteria.
• Minimum Population >=5,000
• Population density>= 400/ sq. km.
• 75% of the male population engaged in non- agri activity.

RBI Locations with population up to 10,000 will be considered as rural

and 10,000 to 100,000 as semi-urban.

Nabard All locations irrespective of villages or town, up to a population of

10,000 will be considered as ‘rural’.

Planning Towns with population up to 15,000 are considered as rural.

Commission

Sahara Locations having shops/ commercials establishments’ up to 10,000

are treated as rural.

LG Electronics The rural and semi urban area is defined as all other than the seven
metros.
 What is Rural
Marketing?
 According to the National Commission on Agriculture:
‘Rural Marketing is a process which starts with a decision
to produce a saleable farm commodity and it involves all
the aspects of market structure or system, both
functional and institutional, abase on technical and
economic considerations and includes pre and post
harvest operations, assembling, grading, storage,
transportation and distributions’.
 “Rural Marketing can be defined as a function that
manages all activities involved in assessing, stimulating,
and converting the purchasing power of rural consumers
into an effective demand for specific products and
services and moving these products and services to the
people in rural areas to create satisfaction and a better
standard of living and thereby achieving organizational
goals.”

-Pradeep Kashyap
 Why Rural Marketing
is hot?
 Rural Push Policy of UPA Government
 Four Consecutive years of positive growth
in rural GDP
 40% hike in MSP ( minimum support
prices) of Crops over last two years
 Farm Loan Waiver & NREGS
 Growing Industry Demand for land
(Overnight Wealth)
 Big rise in remittances from Cities
 Slowing urban demand forcing corporate
to rural markets
 NREGS
 The Mahatma Gandhi National Rural Employment
Guarantee Act aims at enhancing the livelihood
security of people in rural areas by guaranteeing
hundred days of wage-employment in a financial
year to a rural household whose adult members
volunteer to do unskilled manual work.
 Website: nrega.nic.in
 Budget is likely to make a provision of Rs 64,000
crore (Rs 640 billion) for the NREGS in 2011-12,
against Rs 40,100 crore (Rs 401 billion) in the
current fiscal.
 That is a 60% rise
 The huge increase in outlay will be mainly on
account of two factors:
 Linking wages under the scheme with the consumer
price index for agriculture labour.
 A marginal increase in the number of working days
guaranteed under the programme.
Farm Loan Waiver
 India raised the net amount available for the
ambitious farmer loan waiver scheme to Rs.716.8
billion from the Rs.600 billion in 2008
 Against the original estimate of 30 million small
and marginal farmers and 10 million others who
were to benefit from the scheme, the current
estimates are 36.9 million and 5.97 million,
respectively, the finance minister said
 In the case of a small and marginal farmer, the
entire eligible amount would be waived, while for
other farmers, there would be a one-time
settlement scheme and a 25 percent rebate of the
eligible amount would be extended.
 Scope of
Rural Marketing

The Rural Marketing Matrix

Brand Consumables
Urban and durables
(Organized)
(Market)

Farm & Non-Farm Handicrafts, Handloom

Rural and services Textiles, Leather
(Unorganized Sector) products (Semi-
organized)

Rural Urban

(Production)
 Evolution of Rural
Marketing
Phase Origin Function Major Source Destination
Products Market Market

I Since Agricultural Agricultural Rural Urban

independence marketing produce

II Mid-Sixties Marketing Agricultural Urban Rural

of inputs
agricultural
inputs

III Mid-Nineties Rural Consumables Urban/ Rural Rural

marketing and durables
for
consumption
and production

IV 21st Century
 Nature of Rural
Marketing
(Transactional Vs Development Marketing)
S. No. Aspect Transactional Development

1 Concept Consumer orientation, Society orientation, societal concept

Marketing concept

2 Role Stimulating and conversional Catalytic and transformation agent

marketing

3 Focus Product-market fit Social change

4 Key task Product innovations and Social Innovations and communications.

communications

5 Nature of activity Commercial Socio-cultural, economic

6 Participants Corporate enterprises, Sellers Government, voluntary agencies, corporate

enterprises, benefactors

7 Offer Products and services Development Projects/Schemes/Programmes

8 Target group Buyers Beneficiaries and buyers

9 Communication Functional Development

10 Goal Profits Customer satisfaction Market Development Corporate Image

Brand image

11 Time-Frame Short-Medium Medium-Long

12 Motivation Profit-motive Business policy Service-motive Ideological or Public policy

% Annual Change
in Rural GDP
Year Change

2003-04 10%

2004-05 -6.7%
51% 49%
Rs. 13,65,000 Rs 13,17,018
2005-06 5.8%
Crore Crore

2006-07 4%

2007-08 4.9%

2008-09 2.6%
(Estimates)
 Taxonomy of Rural
Markets
(Classification of Rural Markets)
Constituents Products Durables Services
Consumer Individuals and Consumables: Foods Watches, Bicycles, -------
Market households products, Toiletries, Radio, T.V., Kitchen
Cosmetics, Textiles and appliances,
Garments, Foot Wear Furniture, Sewing
etc. machines, Two
Wheelers etc.

Industrial Agricultural and Consumables: Seeds, Tillers, Tractors, -------

Market allied activities, Fertilizers, Pesticides, Pump sets,
Poultry farming, Animal feed, Fishnets, Generators,
Fishing, Animal, Medicines, Petrol/Diesel Harvesters, Boats
Husbandry cottage etc. etc.
industries, Health
Centre, School,
Cooperatives,
Panchayat office etc.

Services Individuals, House ------- ------- Repairs,

Market holds, Officers, and Transport,
Production firms Banking, Credit,
Insurance Health
care, Education,
Communication,
Power etc.
 Are Rural Markets
Attractive?

 Large population
 Rising prosperity
 Growth in consumption
 Life-style changes
 Life-cycle advantages
 Market growth rates higher than Urban
 Rural marketing is not expensive
 Remoteness is no longer a problem.
 Rural Vs Urban
Marketing
S. No. Aspect Urban Rural

1 Philosophy Marketing and societal Marketing and societal

concepts, Green concepts, development
marketing marketing, and
and relationship relationship
marketing marketing.

2 Market
(a) Demand High Low
(b) Competition Among units in organized Mostly from unorganized
sector units
(c) Consumers
o Location Concentrated Widely spread
o Literacy High Low
o Income High Low
o Expenditure Planned, Even Seasonal variations
o Needs High level Low level
o Innovation Faster Slow
adoption

3 Products
o Awareness High Low
o Concepts Known Less known
o Positioning Easy Difficult
o Usage method Easily grasped Difficult to grasp
o Quality preference Good Moderate
o Features Important Less Important

Contd.
 Rural Vs Urban Marketing –
Contd.

S. No. Aspect Urban Rural

4 Price
o Sensitive Yes Very much
o Level desired Medium-High Low-Medium

5 Distribution
o Channels Wholesalers, Stockists Village shops
Retailers, Supermarkets, Shandies Haats and
Specialty stores and Jatras
authorized show rooms

o Transport facilities Good Average

o Product availability High Limited

6 Promotion
o Advertising Print audio-visual media, TV, Radio, Print Media to
out doors, exhibitions etc. some extent. More
Few languages languages

o Personal Selling Door-to-door frequently Occasionally

o Sales promotion Contests, Gifts, Price Gifts, Price discounts

Discounts
o Publicity Good opportunities Less
 Value Added Rural
Marketing
HOW TO ADD VALUE THROUGH RURAL MARKETING

Identify unique Study Study Segment Provide Build special Communicat

characteristics of demographic product rural functional brands for e unique
rural customer patterns ownership customers benefits rural customers proposition
patterns

Are the Ensure

clusters large increase in
Are relevant
enough? customer
needs being
value
met?

No No No Yes
Rural Marketing Environment
& Rural Economy
Introduction
Rural marketing environment leads the scope of many
system. The points for improving scope are
 Due importance to co-operative institutions
 Coordinating with procurement agencies
 Demand side management- DSM is the implementation of those
measures that help the customers to use electricity more efficiency and it
doing so reduce the customers to use the utility costs.

 Price Policy: Based on computerized data, price to

consumers can be calculated
 Market studies and market intelligence: The details
like daily arrivals, quality, market surpluses average
prices and demand for different varieties of data can
be collected for strategic decision-making.
 Education to farmers
 Structure of Rural
Markets

Demographic
Environment1971 1981 1991 2001

Total population (million) 548.2 683.3 848.3 1026.9

Rural population (million) 524.0 628.8 741.6

Rural Proportion to total population (%) 80.1 76.7 74.3 72.2

Decadal Variation - 19.8 16.7 15.2

Source: Census of India 2001

•Forms major portion of Indian population

•70% of Indian people reside in rural areas
•School children and yound adults( between 20 and 35
years) define the consumption patterns of consumables
and lifestyle products
 Education and the
Level of Demand

Rural Literacy 1981 1991 2001

% of literates 36 45 59

Source: Census of India 2001

 Household Pattern
Family Structure

Particulars 1991 2001

Rural Urban Total Rural Urban Total

Households (Million) 112 40 152 138 54 192

Family Size (Number) 5.55 5.32 5.36 5.31

Source: Census of India 2001

 Rural Housing Pattern

House Type 1981 1991 2001

Pucca (%) 22 31 41

Semi-Pucca (%) 37 36 36

Kuccha (%) 41 33 23

Total 100 100 100

Source: Census of India 2001

Occupational Pattern
Distribution of Households by Occupation of the
Head, 1999-2000
Head’s Occupation Distribution of households (%)

Urban Rural All

Housewife 0.84 1.01 0.96
Cultivator 3.45 40.86 29.99

Wage earner 20.93 35.28 31.12

Salary earner 40.72 11.28 19.84

Professional 3.59 0.73 1.56

Artisan 6.90 3.41 4.42
Petty Shopkeeper 16.05 4.97 8.19
Businessman 3.68 0.46 1.40
Other 3.85 1.98 2.52
Total 100.00 100.00 100.00

Source: NCAER 2002

 Physical Environment
Rural and Urban Life:
Distinguishing Features

Population Density (Urban + Rural) (Per Sq. Km.)

1971 1981 1991 2001

Popu. Density (Total) 177 216 267 312

Rural 171 214 253

Distribution of Towns and Villages

1991 2001

No. of Towns 3,697 5,161

No. of inhabited Villages 580,779 593,154
Total no. of Villages 634,321* 638,588*
* The total number of Villages also includes non-inhabited Villages.
Source: Census of India 2001
•Villages comprise of homestead land
(abadi) and cultivated land.
•Settlement pattern is either in cluster in
the abadi or in individualized land-
holdings or a combination of the two.
•Houses found according ot kinship, caste,
religious groups etc
•Sometimes the entire villages classified
on the basis of dominant caste groups
 Settlements
(Scattered and Clustered)

Town Population No. of % of total % of Decadal

class Towns Towns Population Growth
(1991-2001)
Class-I 1 Lakh and above 423 8.2 61.5 24
Class-II 50,000 – 99,999 498 9.6 12.3 15

Class-III 20,000 – 49,999 1,386 26.9 15.0 16

Class-IV 10,000 – 19,999 1,560 30.2 8.1 7

Class-V 05,000 – 09,999 1,057 20.5 2.8 8

Class-VI Less than 5,000 237 4.6 0.3 -22

Total 5,161 100.0 100.0

* 10 Lakh + : 27; 5-10 Lakh: 42; 1-5 Lakh:354

Source: Census 2001
Economic Environment

80 --

70 --
67.3
60 --
% Households

50 --
42.7 42.5
40 --
39.5 36.9
30 --
23.9
20 --
17.8 20.6
10 --
8.8
0--
1989 -90 2001 -02 2009 -10
_________ Low (<Rs.45K p.a) ________ Middle (Rs.45K -90K p.a)
_________ Hig h (>Rs.90k p.a)
Source: Market Information Survey of Households, NCAER
 Changing Rural
Consumers Expenditure
Pattern

Per capita consumption expenditure Composition of rural per capita

(Rs. Per month) consumption expenditure

Rural Urban Food Non-Food

1983 112 166 1983 66 34

1991 281 458 1991 63 37

2001 486 855 2001 59 41

Source: NSSO Source: NSSO

Technological
Environment
 Size of Rural Market

Estimated Annual Size : Rural Market

FMCG Rs. 65000 Crore

Durables Rs. 5000 Crore

Agri-inputs (incl. tractors) Rs. 45000 Crore

2/4 Wheelers Rs. 8000 Crore

Total Rs. 1,23,000 Crore

Source: Francis Kanoi 2002

II-The Rural Economy:
The Economic Scenario
in Rural India

Human Development Index

(HDI) The HDI is a composite of
variables capturing attainments in
Year Rural Urban Total three dimensions of human
development, viz., economic,
educational and health.
1981 0.26 0.44 0.30

1991 0.34 0.51 0.38

2001 ------ ------ 0.47

Source: Human Development

Report, 2001
 The Changing Face of
Rural Development

Population below the poverty line (Rural)

Period No. of Persons % of Persons Poverty line

(Million) (Rs.)

1983 252 46 89.5

1993-94 244 37 206

1999-2000 193 27 328

Source: Human Development Report, 2001

 The Development Exercise:
The Five-Year Plans
Sectoral allocations during the five-year plans (Rs. Billion)
Head of Seventh Eighth Plan Ninth Plan Tenth Plan
Development Plan

(1985-90) (1992-97) (1997-2002) (2002-07)

1. Agriculture 105 225 372 589

2. Rural Development 89 344 890 1,219
Source: Planning Commission 2002

Percentage share of the different sectors in GDP (at 1993-94 prices)

Year Primary Secondary Tertiary Total

(Agri and Allied) (Manufacturing) (Services)

1950-51 57.2 14.8 28.0 100.0

1980-81 39.7 23.7 36.6 100.0

2001-02 23.9 26.6 49.5 100.0

Source: National Account Statistics, 1951-2001

 Transition of the
Rural Economy

1. Non-food grain crops, cash

1. Food grain crops crops

2. Off-land allied activities like

2. On-land activities livestock and fisheries

3. Non-farm activities, including

3. Farm activities manufacturing and services.
 The Rural Economic
Structure
Rural Economy

Farm Sector Non-Farm Sector

(Agri & Allied) (Formal & Informal Sector)

Agriculture Rural Industries Rural Services

Animal Husbandry Agro Processing Retailing & Trading

(Dairy, Goat, Poultry) (Sugarcane, Oilseed etc)

Horticulture Manufacturing Community & Social

(Handloom, Handicrafts etc) Service

Forestry Mining & Quarrying Transport & Storage

Fishing Construction Communication

 Income Disparity

Rural-Urban Income Comparison

Sector Bottom (30%) Middle (40%) Top (30%) All Classes

Rural Urban Rural Urban Rural Urban Rural Urban

Average 3,270 4,580 5,110 8,150 9,400 18,720 5,830 10,260

Consumption
Expenditure
(Rs./Annum)
Population 223 86 297 114 223 86 742 285
(Million)
Source: NSS 55th Round (1999-2000), Census 2001
The Rural Infrastructure
Road Connectivity

Road Connectivity at the Village level (%)

Population Population Population

less than between more than
1,000 1,000 and
1,500

1991-92 36.52 72.32 89.82

1994-95 37.45 76.54 91.72

1996-97 49.18 74.58 78.04

Source: National Human Development Report 2001

Telephone Services

Telecom Density (Phone per 100)

2000 2005 Increase

Urban 8.2 26.2 220%

Rural 0.7 1.74 148%

All 2.9 9.08 213%

Source : Telecom Regulatory Authority

of India Report, 2005
 Why Agriculture Growth
has been slow & tardy?
1. Low priority to Agriculture
2. Subsistence Orientation of Agriculture
3. Failure of Land Reforms
4. Low size of operational Landholdings
5. Inadequate Food Supplies
6. Sluggish Infrastructural Growth
7. Disconnect between Research &
Farmers
8. Insufficient Availability of Credit
9. Inadequate Inputs
10. Slowdown of Rural Industrialization
 Policy Interventions
Required

1. Thrust on Land Reforms

2. Strengthening the Panchayat Raj Institutions
3. Financial Inclusion (Innovative Credit Delivery)
4. Development of Rural Infrastructure
5. Expansion of Kissan Credit Card Scheme
6. Protection of Farmers from natural calamities
7. Extensive use of ICT(information communication
technologies )
8. Higher Investment in Agriculture & Rural Development.
9. Focus on High Value Crops & Non-farm Incomes.
10. Bridging the Gap Between Agri-Research & Farming.
 Development
Programmes
 Intensive Agricultural District Programme
 Intensive Agricultural Area Programme
 High Yielding Varieties Programme
 Drought Prone Areas Programme
 Small Farmers Development Agency
 Hill area development programme
 Infrastructural facilities

 Rural electrification- central government credited an

organisation called “Rural Electrification Corporation“ for
financing electrification projects. Result is 88% of the villages
have electricity. 100% to be achieved through PMGY scheme by
2010.
 Rural communication- road network( golden
quadrilateral project is on, a central sponsored scheme PMGSY is
launched which aims to provide connectivity to all rural areas,
rail network , cinema houses, television, postal system
 Rural Credit
Institutions
•Primary Agricultural Credit Cooperative Societies – 1 lakh
•Regional Rural Banks – 196
Objective is developing the rural economy through the promotion of
agriculture, trade and commerce and industry and by extending credit,
particularly to small and marginal farmers, agricultural labourers and
small entrepreneurs.
•SARDB- 90% loans provided to buy tractors
•Scheduled Commercial Banks
Are those banks that are included in the second schedule of the
Reserve Bank of India Act, 1934. Out of 65,413 branches of
scheduled commercial banks, 37,098 are in rural areas
 Cooperative Banks
There is a three-tier pyramidal cooperative credit
structure in the rural cooperative banking sector,
with the state cooperative bank (SCB) at the apex
(state) level, the district central cooperative bank
(DCCB) at the intermediate (district) level and the
primary agricultural cooperative society (PACS) at
the grass-roots (village) level, essentially to ensure
flows of short-term credit for production purposes.
Print Media

 Reach in rural areas is very poor

 Hardly 5% of news paper copies
reach rural areas
 Ex: Samyukta Karnataka in
Karnataka, Malayala Manorama in
Kerala , Lok Satta in Maharastra etc
 Rural Area
requirements
– Rural house hold consumption
goods
– Hosehold durable goods
– Construction materials
– Consumable Agricultural inputs
– Transportation Equipments
– Services
 Problems in Rural
Marketing

 Underdeveloped people and

underdeveloped market
 Lack of proper physical
communication facilities
 Media for rural communication
 Many languages and dialects
 Vastness and Uneven Spread
 Low per capita incomes
•Logistics, Storage, Handling and
Transport
•Market Organization and Staff
•Product Positioning
•Hierarchy of markets
•Low levels of literacy
•Seasonal demand
Rural market Index

The indicators considered for Rural

market Index proposed by Thompson
are
 Area of the district in sq kms
 Demographics
 Occupation pattern
 Agriculture related data
 Agricultural inputs data
 Rural electrification data
 Commercial Bank data