Introduction to Rural Marketing

Why should we do this course? Agriculture’s share in GDP is going down, but, India still lives in her villages Agriculture’s share in GDP is going down, but, India still lives in her villages Urban markets are crowded and saturated Urban markets are crowded and saturated The understanding of “rural” is diffused and sometimes confusing The understanding of “rural” is diffused and sometimes confusing Is “rural marketing” different from “urban marketing” ? Is “rural marketing” different from “urban marketing” ?

Objectives of Rural Marketing Conceptual clarity about fundamental Rural Marketing concepts: Rural and Rural Marketing. Conceptual clarity about fundamental Rural Marketing concepts: Rural and Rural Marketing. Learn about evolution of Rural Marketing in India Learn about evolution of Rural Marketing in India Comprehend the Rural Marketing process as Rural Marketing Model Comprehend the Rural Marketing process as Rural Marketing Model Comparative analysis of Rural vs. Urban Marketing Comparative analysis of Rural vs. Urban Marketing Marketing strategies Marketing strategies

Defining Rural India Organisatio n DefinitionLimitations NSSO (Census) Population density < 400 / Sq Km Population density < 400 / Sq Km 75 percent of the male working population is engaged in agriculture 75 percent of the male working population is engaged in agriculture No Municipal corporation / board No Municipal corporation / board rural not defined Planning Commissi on Towns upto 15,000 population are considered rural Towns upto 15,000 population are considered rural Town characteristics not defined

Contd… LG Electronics All places other than the 7 metros Only clarifies what are the cities NABARD All locations with a population upto 10, 000 considered “ rural” Village & town characteristics not defined Sahara Commercial establishments located in areas servicing less than 1000 population Population characteristics unknown Source: The Rural Marketing Book- Text & Practice, Kashyap. P and Raut. S ( 2007)

Rural Marketing Planning and implementation of marketing function for the rural areas. Planning and implementation of marketing function for the rural areas. It is a two way marketing process, which encompasses the performance of business activities that direct the flow of goods from urban to rural areas (for manufactured goods) and vice- versa (for agriculture produce) and also within the rural areas (Gopalaswamy, 2005). It is a two way marketing process, which encompasses the performance of business activities that direct the flow of goods from urban to rural areas (for manufactured goods) and vice- versa (for agriculture produce) and also within the rural areas (Gopalaswamy, 2005).

Contd… It is a distinct specialization of marketing discipline, which encompasses customized application of marketing tools and strategies to understand the psyche of rural consumer in terms of needs, tailoring the products to meet such needs and effectively delivering them to enable profitable exchange of goods and services to and from the rural market. It is a distinct specialization of marketing discipline, which encompasses customized application of marketing tools and strategies to understand the psyche of rural consumer in terms of needs, tailoring the products to meet such needs and effectively delivering them to enable profitable exchange of goods and services to and from the rural market.

Marketing perspective in Rural Market

Key Concepts Marketer : one who seeks response to an offer which he makes to a person Marketer : one who seeks response to an offer which he makes to a person Consumer : a person who uses a product to derive satisfaction Demand : willingness to buy, supported by ability to pay.

Contd… Competition : Competition : existence of actual and potential rival companies, which manufacture perfect or close substitute product offerings to attract consumers. existence of actual and potential rival companies, which manufacture perfect or close substitute product offerings to attract consumers. Generic – product vs. product Generic – product vs. product Form – different products with similar benefits Form – different products with similar benefits Industry – different companies with same products Industry – different companies with same products Brand- brand vs. brands of same product Brand- brand vs. brands of same product

TypesProduct GenericFormIndustryBrand All durables and consumables All vehicles, 4 wheelers and 2 wheelers Automobiles –passenger car industry Maruti- 800

Goals of Marketing  Profitability- Revenue maximization, cost minimization  Growth – sales growth, product /market development product /market development Market penetration Market penetration Diversification Diversification  Market standing – Innovation, leadership, leadership, consumer satisfaction consumer satisfaction  Image- Brand image, company image

Aspects to be considered to achieve the goals Organizational structure : designed by function, by territory, by market, by customer, by project or by matrix Leadership skills : provides vision and secures creative follower ship and integrated operation Strategic management : Competition, market, product and consumer.

Organizational structure By function M.D G.M Product Finance H.R Marketing Market research Marketing planning Advertising Promotions Sales Public relations

Organizational structure By Territory M.D G.M Product Finance H.R Marketing Western Region Southern region Central region Eastern Region Northern region

Organizational structure By Product M.D G.M Product Finance H.R Marketing Detergents/toiletries Chemicals Foods Animal feed

Organizational structure By markets M.D G.M Product Finance H.R Marketing DomesticExport Institution Households Government

Organizational structure By customers M.D G.M Product Finance H.R Marketing Men wear Women wear Kids wear

Organizational structure By project M.D G.M Product Finance H.R Marketing Project A Project B Project C

Organizational structure By matrix M.D G.M Product Finance H.R Marketing Project A Project B Project C Advertising Market research Sales

Leadership skills In the quest of good leadership Leadership : clear theme Structure : suitable for operation and goal Functional efficiency : peoples skilled and trained Coordination : coordination and interaction

Strategic Management Marketers are in four battle situations  Competition : gaining victory over competitive firms  Market: Operating through market life cycle  Product : evolving strategies through product life cycle  Consumer: Tracking customers, value expectations and satisfactions

Market life cycle : market crystallization –a latent market comes into light with consumer preferences market expansion- grows with first entrant and late comers market fragmentation –attains maturity due to intense competition

market consolidation -during fragmentation one or two introduces new product and will emerge as winners. Markets get consolidated with few big players with stable market shares market dissolution - market dissolves as the existing technology and product becomes obsolete.

stagesStrategy Introduction basic product, heavy sales promotion selective distribution Growth Product extension, warranty offer, penetration pricing, moderate sales promotion Product life cycle

Contd… Maturity Diversify brands, competitive pricing, intensive distribution, moderate sales promotion Decline Phase out weak items, lower price, selective distribution, minimal sales promotion Maturity Diversify brands, competitive pricing, intensive distribution, moderate sales promotion Decline Phase out weak items, lower price, selective distribution, minimal sales promotion

Challenges to Indian Marketer  The gradual opening up of Indian economy to foreign companies  The increasing number of cross-border corporate alliances  The growth of global brands in Indian Markets  The rapid dissemination of global life styles  The emergence of attractive rural markets

Rural India A Promising Market place

India

India

Definitions Rural and Urban Areas Rural and Urban Areas The conceptual unit for urban areas is a 'town', whereas for the rural areas it is a 'village.' The classification of an area as an urban unit in Census of India 2001 is based on the following definition: The conceptual unit for urban areas is a 'town', whereas for the rural areas it is a 'village.' The classification of an area as an urban unit in Census of India 2001 is based on the following definition: 1. All places declared by the state government under a statute as a municipality, corporation, cantonment board or notified town area committee, etc. 1. All places declared by the state government under a statute as a municipality, corporation, cantonment board or notified town area committee, etc.

2. All other places which simultaneously satisfy or are expected to satisfy the following criteria: A minimum population of 5,000A minimum population of 5,000 At least 75 per cent of the male working population engaged in non-agricultural economic pursuits: andAt least 75 per cent of the male working population engaged in non-agricultural economic pursuits: and A density of population of at least 400 per square kilometer (1,000 per square mile)A density of population of at least 400 per square kilometer (1,000 per square mile) 3. Any area, which is not covered by the definition of urban, is rural.

Demographic profile Rural India is generating more than half of national income. Rural India is generating more than half of national income. 41% of Indian middle class homes and 58% of disposable income exist in rural India. 41% of Indian middle class homes and 58% of disposable income exist in rural India. Income contribution of 55.6% to the national income by rural population of 74.6 crore is higher than urban India’s with 25.4 crore people contributing 44.6%. Income contribution of 55.6% to the national income by rural population of 74.6 crore is higher than urban India’s with 25.4 crore people contributing 44.6%.

Contd… 75% of the households in the country had an electricity connection. The majority of rural households are not having electricity. 75% of the households in the country had an electricity connection. The majority of rural households are not having electricity.  India’s infant mortality rate of 75 per thousand live births is one of the highest in the world.  Access to potable water, health care, sanitation and shelter are a far cry, particularly in the rural sector.

contd… Largely working as farmers or agricultural workers Largely working as farmers or agricultural workers Have limited education, may well be illiterate Have limited education, may well be illiterate This leads to linear and simple thinking, abstract logic tends to go over their heads Either live in joint (extended) families or have only recently formed nuclear families Either live in joint (extended) families or have only recently formed nuclear families

The ground realities! The Rural Consumer

Why rural?

Rural consumers constitute about 72% of India’s population Rural consumers constitute about 72% of India’s population 1. Huge business opportunities…

Marketers have, so far, concentrated on the top-end consumer Marketers have, so far, concentrated on the top-end consumer Therefore, this segment is largely dominated by proxy products and local/regional/duplicate/fake brands Therefore, this segment is largely dominated by proxy products and local/regional/duplicate/fake brands 2. No single-national competitor

Who is the rural consumer?

Shopping behaviour Buy small quantities - more frequently Buy small quantities - more frequently Unit price is critical, particularly as many of them are daily-wage earners Unit price is critical, particularly as many of them are daily-wage earners Look for ‘acceptable performance’/ functional benefits / paisa vasool paradigm (good in relation to current product) at a reasonable price Look for ‘acceptable performance’/ functional benefits / paisa vasool paradigm (good in relation to current product) at a reasonable price “Tran creation” of packaging critical “Tran creation” of packaging critical Flash price of pack wherever feasible Flash price of pack wherever feasible

Shopping behaviour In their own way, good at arriving at a cost per dose (or cost per month) equation: even if not expressed mathematically In their own way, good at arriving at a cost per dose (or cost per month) equation: even if not expressed mathematically More sensitive and alert to ‘value’ More sensitive and alert to ‘value’ Make high-volume purchases at weekly village markets Make high-volume purchases at weekly village markets Haats Haats Build personal acquaintance with neighbourhood retailer Build personal acquaintance with neighbourhood retailer Often trust the retailer who does influence brand choice Often trust the retailer who does influence brand choice Frequently get ‘credit’ from the retailer Frequently get ‘credit’ from the retailer

Shopping behaviour Word-of-mouth, very important and credible Word-of-mouth, very important and credible Mass driven Mass driven Buy products that are perceived to be popular: the ‘bandwagon’ effect Buy products that are perceived to be popular: the ‘bandwagon’ effect Try to minimise their risk: tend to be stronger creatures of habit Try to minimise their risk: tend to be stronger creatures of habit

Shopping behaviour High awareness of range of consumer brands - but propensity to actually purchase premium performance brands is low High awareness of range of consumer brands - but propensity to actually purchase premium performance brands is low Still influenced by popular idols/role models such as movie stars, famous sportsmen, etc Still influenced by popular idols/role models such as movie stars, famous sportsmen, etc

Adhere to prevailing social norms: the community they live in is very important and their behaviour is usually consistent with the community’s shared beliefs and norms Adhere to prevailing social norms: the community they live in is very important and their behaviour is usually consistent with the community’s shared beliefs and norms Enjoy social gatherings: women’s associations, celebrations, events, etc Enjoy social gatherings: women’s associations, celebrations, events, etc Collectivism (As opposed to individualistic)

Spend a lot of their free time chatting and gossiping with neighbors: both as a source of entertainment and information Spend a lot of their free time chatting and gossiping with neighbors: both as a source of entertainment and information Tend to be suspicious about people outside the community Tend to be suspicious about people outside the community Follow opinion leaders: school teachers, priests, religious leaders, urbanized relatives, local politicians, the village head Follow opinion leaders: school teachers, priests, religious leaders, urbanized relatives, local politicians, the village head

Other beliefs Strong belief in ‘fate’ and ‘luck’, religion and God Strong belief in ‘fate’ and ‘luck’, religion and God Active participation in religious activities Active participation in religious activities “Cleanliness is next to Godliness” “Cleanliness is next to Godliness”

Rural India Myths & Reality

Myth One family, one brand - there's one brand for the whole household. One family, one brand - there's one brand for the whole household. Rural consumers aren't worth bothering about since they buy loose, unbranded products rather than the branded variety. In branded they buy only inexpensive brands. Rural consumers aren't worth bothering about since they buy loose, unbranded products rather than the branded variety. In branded they buy only inexpensive brands.

Reality The ORG study shows a high preference for branded products. In 18 categories, branded consumption accounts for 80% of sales. The ORG study shows a high preference for branded products. In 18 categories, branded consumption accounts for 80% of sales. eg: toilet soaps, washing powders, analgesics, safety razor blades, toothpastes, shampoos, batteries, rubs and balms, skin creams, toothpowders, toothbrushes, antiseptic creams, antiseptic liquids, digestives, mosquito repellants, shaving preparations, tube lights.

Reality Penetration of premium products is being reported, even to the lowest socio-economic classification. Although the percentages may be very small, given the large universe, the actual figures may be quite significant. Penetration of premium products is being reported, even to the lowest socio-economic classification. Although the percentages may be very small, given the large universe, the actual figures may be quite significant.

Reality In many categories, multiple-brand usage is a fact. Rural households are not completely homogeneous. In many categories, multiple-brand usage is a fact. Rural households are not completely homogeneous.

Unchanged characteristics of rural consumers

Continued existence of an oppressive and rigid caste system, particularly in rural areas Continued existence of an oppressive and rigid caste system, particularly in rural areas High illiteracy levels: often incapable of reading or pronouncing a brand name High illiteracy levels: often incapable of reading or pronouncing a brand name E.g. Lifebuoy is referred to as ‘the red soap’ E.g. Lifebuoy is referred to as ‘the red soap’

Phases in Rural Marketing Phase One( Pre 1960’s) : Marketing rural products in rural and urban areas Marketing rural products in rural and urban areas Agricultural inputs in rural areas Agricultural inputs in rural areas “Agricultural marketing” “Agricultural marketing” Farming methods were primitive and mechanization was low Farming methods were primitive and mechanization was low Markets unorganized Markets unorganized

Phase Two ( 1960s to 1990s) Green Revolution Green Revolution Companies like Mahindra and Mahindra, Sri Ram Fertilizers, Escorts and IFFCO emerge Companies like Mahindra and Mahindra, Sri Ram Fertilizers, Escorts and IFFCO emerge Rural products were also marketed through agencies like KVIC Rural products were also marketed through agencies like KVIC Phase Three( 1990s to Present) Demand for consumables and durables rise Demand for consumables and durables rise Companies find growth in urban markets stagnating or falling Companies find growth in urban markets stagnating or falling

Phased Evolution of Rural Marketing Phas e Time period Purpose Major Products Source Market Target Market I Since independence but before Green Revolution Agricultural Marketing Agricultural produce RuralUrban II Green Revolution to Pre- liberalisation period Marketing of Agri-inputs Agricultural inputs UrbanRural III Post- liberalisation period in 20 th century Rural Marketing Consumables & durables for consumption & production Urban & Rural RuralRural IV 21 st century Development al Marketing All Products and Services Urban & Rural

Scope of Rural Marketing Keenly debated topic Keenly debated topic Definitions based on organisational/ institutional vision, mission & goals Definitions based on organisational/ institutional vision, mission & goals Need for a comprehensive and modular understanding Need for a comprehensive and modular understanding Rural Marketing is a “ work in progress” Rural Marketing is a “ work in progress” Multi – disciplinary approach is necessary for sharper understanding Multi – disciplinary approach is necessary for sharper understanding

Transitions In Rural India Food Grain Crops On land activities Farm Activities Non –food, cash crops Livestock & fisheries Manufacturing & services

Rural Employment Patterns Sector Year – 1987 ( % share in employment) Year ( % share in employment) Agriculture Transport & Communication 28 Trade & Hotels 57 Construction47 Manufacturing78 Source: NSSO data, Mckinsey Global Institute Study,

Rural India – Population Trends Total Population (in million) Rural Population (in million) As a proportion of total population Decadal Variation Source: Census 2001

Rural Income Trends Annual Income ( at prices) Income Class ( % Households) ( % Households) <= 35,000 Low , ,000 Low Middle ,001 – 1,05,000 Middle1018 1,05,001- 1,40,000 Upper Middle 46 > 1,40,000 High36 Source: National Council for Applied Economic Research,

Transactional Vs. Development Marketing S.No. Aspect Transactional Development 1. Concept Consumer Society orientation orientation, 2 Role Stimulating & Catalytic & conversional transformation marketing agent 3. Focus Product-market fit Social change 4. Key-task Product innovations & Social innovations communications communication 5. Nature Commercial Socio-cultural

S.No. AspectTransactional Development 6. Offer Products & services Development projects/schemes/ projects/schemes/ programs programs 7. Target group Buyers Beneficiaries & buyers & buyers 8. Communication Functional Developmental 9. Goal Profits Market development Customer satisfaction Corporate Image Customer satisfaction Corporate Image Brand image Brand image 10. Time-Frame Short-medium Medium-Long 11. Motivation Profit-motive Service-motive Business policy Ideological/ Business policy Ideological/ Public policy Public policy

Rural Marketing Model Research Segment rural market Study lifestyle of rural population of different segments region Develop profile of rural consumers of different market segments Define and prioritize their needs in general terms A

Develop specific need profile for a product category in that region Select target markets Develop/Modify Marketing Mix Implementation Control A

Factors Differentiating Rural Marketing from Urban Marketing Sr. List of Factors 1. Infrastructure Availability: electricity supply, media reach, availability of finance facility, education level, roads, connectivity, presence of organized markets; in rural market is very different from that of urban markets. 2. Income Streams: The pattern of income generation in rural areas based on agriculture is seasonal and highly unreliable unlike the fixed monthly income in the urban areas. This creates a consumption pattern, which is different from urban one. 3. Lifestyle: The lifestyle and daily routine of consumers in two markets is markedly different. This creates significantly different profile of consumers for the same product in these two markets.

Factors Differentiating Rural Marketing from Urban Marketing Sr. List of Factors 4. Context: Because of variation of infrastructure and income streams, the context in which an individual exists in rural areas is very different from the one in urban areas. This creates difference in nature and priorities of needs in two markets. 5. Socio-cultural Background: Value system and thus perception toward goods /services and consumption is different in two markets 6. Accessibility: The cost and logistics of accessing consumers in a highly widespread and heterogeneous rural market are very different from those involved in reaching urban consumers, concentrated in good number in single location. Thus, demanding two different types of approaches.

Factors Differentiating Rural Marketing from Urban Marketing Sr. List of Factors 7. Media Reach & Habits: The reach of media vehicles and the media habits are very different in rural and urban markets. Requiring very different type of promotional strategy in these two markets. 8. Nature of Competition: The nature and intensity of competition amongst the brands is very different in the two markets. 9. Consumer Behaviour: The response of consumers to marketing stimuli is very different in two markets. Rural consumer’s behaviour is quite different from that of urban buyer’s behaviour.

DISTINCTION BETWEEN RURAL AND URBAN Societies Rural Society Urban Society Culture Conservative approach Progressive & reasonable Traditional outlook Scientific outlook Social perceptions Family controls the society Economy & economic institutions controls Occupation Depend on nature Depend on man madeconditions Jobs hereditary & custom oriented Modern & result oriented

Specialization No specialization urban is full of specialties No division of labour, division of labour Mobility in Society No change in occupation, religion, place all will change Social tolerance Social changes not tolerated changes frequently Changes very slow very fast Family is dominant Individuality is dominant Joint family is norm Single family is norm Individuals depend economically on family Individuals live by themselves

Social relationship Rural society based on these aspects are cooperation & Relationship absent Social change No competition Large competition Traditional values no traditional values Social uniformity Due to castes occupations are fixed jobs will change irrespective of caste Status of women No independent status mostly independent Considered sub servant & given equal status low status

Social stratification Society divided on traditional divided on basis of system economic social political Density of population Small population densely populated Size of society Small with one occupation large with many occupation Social disorganization Agencies to control society no agency

Diagnosis of the failures in order to identify the gaps to be bridged by government & development agencies

Low priority to agriculture : Importance to agriculture in total economy has declined but it still maintain first with other sectors like manufacturing, transport, banking and administration. Subsistence orientation of agriculture Increasing input cost made agriculture less and less profit. This lead to inefficient use of land & water resources. Hence farmers have low incomes & suffer from unemployment & under employment.

Contd… Failure of land reforms: Failure of land reforms: Land reforms both in the form of redistribution of land in favor of the poor and tenancy reforms are largely failures, except in Kerala and West Bengal. Shrinking of operational land due to splitting of families. Inadequate food supplies: Although India is self-sufficient in food grains at the national level, it continues to be inadequate at the household level.

Contd… Slow down of rural Industrialization: Even though Government took enough steps to improve cottage industries, the allocation of fund to village industries is not sufficient. Slow growth of infrastructure: About 40% of villages are without proper roads, 1.8 lakhs villages do not have primary schools, lack of waters and health centers

contd… Inadequate inputs : The research and extension systems are very weak and suffer from lack of adequate funds and organizational weaknesses. There is no direct link between scientists, extension personnel and farmers. Information about the technology and marketing of farmers are yet to reach the farmers.

Policy Interventions

 Agriculture needs proper attention  Focus has been more on cropping system research than farming system research  There should be effective linkage between agricultural research system, administration and farmers to develop and transfer technologies suited to local conditions.

contd…  Higher investment in farm operations and related rural infrastructure is necessary condition for speedier farm growth.  A shift in policy to focus on production, especially in dry lands  Credit and insurance systems need to be revitalized to respond to the changing needs