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Advanced Consumer Behaviour

- Rural India accounts for around 70% of India's population and generates over half of India's income, expenditures, and savings. - The rural market remains largely untapped and offers significant potential for growth, as rural consumers have increasing incomes but purchase needs remain unmet. - FMCG companies are recognizing the size and potential of rural markets and customizing their products, pricing, distribution, and communications to better serve rural consumers.

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0% found this document useful (0 votes)
132 views19 pages

Advanced Consumer Behaviour

- Rural India accounts for around 70% of India's population and generates over half of India's income, expenditures, and savings. - The rural market remains largely untapped and offers significant potential for growth, as rural consumers have increasing incomes but purchase needs remain unmet. - FMCG companies are recognizing the size and potential of rural markets and customizing their products, pricing, distribution, and communications to better serve rural consumers.

Uploaded by

IMRAN ALAM
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Predominantly India is dominated by rural population.

Roughly around 12 percent of the


world’s population is living in rural India. The Indian rural market has immense potential that
is still largely untapped. Rural market's importance arises out of the fact that majority of India
lives in villages. Both literally and metaphorically, this is true. There are about 6,27,000
villages in India with a population more than 830 million. More than 65 percent of the
villages have less than 1,000 people. A NCAER (National Council of Applied Economics
and Research) study reveals that 60% of value of Indian market lies with lower and lower-
middle income group and 10% with upper income or at the upper class end. But when we
compare rural and urban, little under half the value of market lies in lower and lower middle
in urban India. While in rural India, 75% of value of market lies in these two income groups.
In the year 2010, Indian rural population was about 70 percent. After 2010, there has been a
gradual decline in the rural population in India. Rural India accounts for 64 percent of total
expenditure and 1/3 of total savings. On the one hand, Fast Moving Consumer Goods
industry is growing. On the other hand many companies feel that the urban markets are
saturated. Most of the leading companies are now trying to target rural markets.

Consumers of rural markets are spread throughout the country side with low income levels,
lack of education where income comes in seasonal basis during harvesting time.
They are also scared to try out new or innovative products.
For high tech products village buyer finds in difficult to understand its usage, and buys only
after peers who have seen the products in action buy the same.
Because of low income, price becomes extremely important and rural demand is highly price
sensitive.
Rural populations 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.

What comes from rural India:


70% of India’s population
56% of income
64% of expenditure
33% of savings
54% FMCG sales
59% durables sales
Companies have responded by customizing products for rural consumers like smaller packs
(Sachets), coinage pricing etc. Some companies such as HUL, ITC, Tata, Godrej, Eveready
etc have innovated new communication and distribution channels. The development of
infrastructure leading to better connectivity by road, by phone and access to mass media
through television and increased electrification of households has opened up the rural markets
for consumer durables. All of these factors have increased purchasing power and the demand
for new products. Government focus on poverty alleviation and the rural population has led
to significant spending on initiatives.
Fast moving consumer goods (FMCG) is the fourth largest sector in the Indian economy.
There are three main segments in the sector – food and beverages, which accounts for 19 per
cent of the sector; healthcare, which accounts for 31 per cent of the share; and household and
personal care, which accounts for the remaining 50 per cent share.

FMCG market was expected to grow 5-6 per cent in 2020. FMCG’s urban segment grew by 8
per cent, whereas, its rural segment grew 5 per cent in the quarter ending September 2019,
supported by moderate inflation, increase in private consumption and rural income.

FMCG companies are looking to invest in energy efficient plants to benefit the society and
lower cost in the long term. Dabur had plans to invest Rs 250-300 crore (US$ 38.79-46.55
million) in FY19 for capacity expansion and possible acquisitions in the domestic market.
The sector witnessed healthy FDI inflow of US$ 16.28 billion during April 2000-March
2020. Investment intentions related to FMCG sector arising from paper pulp, sugar,
fermentation, food processing, vegetable oils and vanaspati, soaps, cosmetics, and toiletries
industries worth Rs 19,846 crore (US$ 2.84 billion) was implemented until December 2019.

The size of the rural India is almost three times the size of the urban, yet more attention is
devoted towards the urban market. The markets are highly contrasting in nature. The
challenge for a marketer is to create a different marketing plan for the rural market then for
the urban market. The reason behind it are several for starters, rural segment lacks the
organized distribution, the class of audience for a marketing plan has low exposure, they are
on the concept of culture, the literacy and awareness level varies significantly and last but not
the least is the economic backwardness.
It made the rural market unattractive for many brands. Another reason is the lack of
infrastructure; this also makes it difficult for the brand to operation their product line at times
at such places. Then there are companies like HUL that has shown great interest in rural
segment of the nation. they call rural India as greater India. They understand that the value of
the larger part of the nation for them as their 65% of the revenue is generated from the rural
India. Many FMCG companies like HUL understands the concept, so big multinational brand
are coming up with a product line that is light on pocket for the rural India.
They understand the factor that the money is in masses rather than competing for the classes.
This was bound to happen after a report from NCAER (National Council of Applied
Economics and Research) in 2003, which provided the fact that a rural household is spending
an average amount of Rs 3384 on 22 non durables annually. The companies understand the
difference of classes Vs masses, therefore all the companies in the FMCG segment especially
the ones that in the area of personal care products wants to get the masses game running.
If a countries three fourth of population is residing and generating an average makes the
amount big. Growth in cosmetics and toiletries has been observed in this market in the last
decade. The companies have also sited and noticed the same. The introduction of a smaller
and affordable less quantity packaging has done wonders for the companies, understanding
the rural consumer behavior related to personal care products.

Share of Rural in Total Population

2001(In Crore) 2011(In Crore) Difference (Crore)


India 102.9 121.0 18.1
Rural 74.3 83.3 9.0
Urban 28.6 37.7 9.1

The table shows the share of rural and urban population out of the total population of India.
Rural population has been increased by 9% from 2001 to 2011 and comprises of 833 million
people as compare to 377 million people in urban area which shows greater opportunities for
marketers. Rural India, home to 830 million consumers across 627,000 villages, offers a huge
consumer base for the companies to capture.
The difference between rural and urban consumers always exists in India. Most of Indian
rural consumers are illiterate and poor. Illiteracy leads to inability to identify brand
differences and read basic text on packages. Moreover, products are sold lose, giving high
competition to branded sealed products. Irregular income, induce the rural consumers to buy
in small quantities. It is important for rural marketers to provide products in small quantities
as well as good credit system for larger products. Rural market status the market scenario in
the rural areas today is changing very rapidly. Rural consumers demand branded products
mainly because of increase in disposable income and literacy level. Rural families do not like
to cut their expenditure on weddings, pilgrimages, constructions and consumptions. Rural
consumers have more aspirations, today this segment of buyers consumes large variety of
products, both durable and non-durables and willing to pay right price for right products.
Higher disposable surplus among consumers in these markets is leading to smart buying,
especially in categories including apparels and durables. Most companies are looking at the
huge potential offered by the rural markets and shifting their focus from the already saturated
urban markets.

There are myriad assumptions about the consumer behavior of rural consumers. The
objective might be any, it is weather to gain more market share, or to convert the rival
company buyer’s, may be to increase sale among the existing buyer class or just to increase
the sale by making the brand name stronger. The marketing plans work on assumptions about
the buyer psychology. The aim is to explore the factors that influence the buying of personal
care products among the rural consumer.

…………………………………………………………………………
Characteristics of Rural Consumer
Rural consumers purchase a product as a result of certain physical, social and economical
forces creating a desire or a want for the products. A producer can be successful in selling his
products only when he identified the need and wants of the consumers. Important
characteristics of the rural consumer denoting his/her peculiar buying behavior include the
following.
1. Pattern of Purchase and Consumption
The purchasing power of the people in rural areas is dependent on several direct and indirect
factors related to the rural economy. Older generation and male members of rural households
have decisive role in the purchase decisions as they are the frequent visitors of near-by, urban
markets. However, this phenomenon is changing as the youth in rural households, who are
more educated and better informed have increasingly influenced the buying decisions. The
members of family involve in the process of purchasing and the level of involvement depends
upon the nature, importance and preferences. There are some important factors which
influence the rural customers in the process of buying. Factors like quality, price, easy
availability, advertising, use by neighbour and experience of family members were treated as
important factors.
2. Influence of Perception and Attitudes
Perception and attitudes are the integral part of consumer behavior. Perception is the process
by which the mind receives, organizes and interprets physical stimuli. Perception depends
upon stimulus factors such as products, packages, brand names, etc. The nature of physical
stimulus itself intensity, price, frequency and movement of the product affect the consumer
perception. Again perception depends upon the personal factors. According to the Howard
and Sheth model of buying behavior, the most significant stimuli affecting buying behavior
are the information cues about the characteristics of the product. Cues may be significative if
it comes from the product itself when the consumer is involved in a shopping activity.
Consumer attitudes are a composite of a consumer beliefs, feelings and behavioral intention
toward the context of marketing.
3. Degree of Brand Loyalty
Sparing a few product categories and brands, rural consumers have a fairly recent significant
exposure to the products, thus they do not have historical quality associations with brands.
Moreover, rural buyers take a long time to decide on a particular brand, but once they are
satisfied with its functional utility, he becomes a staunch supporter and a loyal customer of
that brand.
4. Reference Groups
Rural consumers are influenced by information received and opinions formed from various
sources in making their buying decisions. Mass media may act as reinforcing agent but for
conversion, personal influence is most effective (Murthy and Swamy 1995).
Typically, in a rural area the reference groups are primary health workers, doctors, teachers,
rural students and panchayat members. The village traders may also be an important
influence in decision making of rural customers. This is because the traders extend credit to
the farmers. Also the Opinion leaders in the village, the individuals who happen to be
influential in approving or disapproving new ideas and their adoption in the community. The
opinion leaders and the people they influence are very much alike and typically belong to the
same primary groups. Their influence is broadly related to their social position, competence
and their social location (Anand, 1974).

……………………………………………………………………………………

 Portfolio of over 300 ayurvedic products

 More than 4.0 million outlets

 3,150 distributors

 Total income of Rs 2,654.88 crore (US$ 376.63 million) in FY20

 Leading and fastest growing personal and healthcare businesses in India

 Entered hand sanitiser segment under its flagship skincare brand, BoroPlus

Emami Limited is one of the leading and fastest growing personal and healthcare businesses
in India, with an enviable portfolio of household brand names such as BoroPlus, Navratna,
Glow and Handsome, Zandu Balm, Mentho Plus Balm, Fast Relief and Kesh King.
Established in 1974, they have a portfolio of over 300 products based on ayurvedic
formulations. Its current operations comprise more than 60 countries including GCC, Europe,
Africa, CIS countries and the SAARC. Over 121 Emami products are sold every second
somewhere around the world. It employs nearly 3,200 people, reach out to 4.5 million plus
retails outlets through a network of 3,200 distributors and have invested in eight plants, four
regional offices, one overseas unit, eleven overseas subsidiaries and 31 distribution centres
and one associate across India.

Company website: www.emamigroup.com
 Directly employs more than 34,000 people

 Consolidated total income stood at Rs 53,991.36 crore (US$ 7.66 billion) in FY20

 Leading Fast-Moving Consumer Goods company in India

 Ranked No. 3 globally in Foods Industry for Environmental, Social, and Governance
(ESG) Performance

ITC is one of India's foremost multi-business enterprise with a market capitalisation of Rs


3,64,388 crore (US$ 52.69 billion) and gross sales value (includes all taxes) of Rs 75,309.36
crore (US$ 10 billion) in FY19. ITC is rated among the World's Best Big Companies, Asia's
'Fab 50', and the World's Most Reputable Companies by Forbes magazine. It is also rated as
'India's Most Admired Company' in a survey conducted by Fortune India magazine and Hay
Group. ITC also features as one of the world's largest sustainable value creator in the
consumer goods industry in a study by the Boston Consulting Group. ITC has been listed
among India's Most Valuable Companies by Business Today magazine. The Company is
among India's '10 Most Valuable (Company) Brands' according to a study conducted by
Brand Finance and published by the Economic Times. ITC also ranks among Asia's 50 best
performing companies compiled by Business Week.

Company website: www.itcportal.com

2020-
ITC launched Savlon Germ Protection wipes.
ITC acquired 100 per cent equity share capital of Sunrise Foods Private Limited.

 Portfolio of over 250 Herbal/Ayurvedic products.


 Across 100 countries.

 Network covering 6 million retail outlets.

 Consolidated total income from operations stood at Rs 9,008.88 crore (US$ 1.28
billion) in FY19.

 World leader in Ayurveda.

Dabur India Ltd. is one of India’s leading FMCG Companies with revenues of over Rs 8,533
crore (US$ 1.22 billion) in FY19. Building on a legacy of quality and experience of over 132
years, Dabur is today India’s most trusted name and the world’s largest Ayurvedic and
Natural Health Care Company. Dabur India is also a world leader in Ayurveda with a
portfolio of over 250 Herbal/Ayurvedic products. Dabur's FMCG portfolio today includes
five flagship brands with distinct brand identities -- Dabur as the master brand for natural
healthcare products, Vatika for premium personal care, Hajmola for digestives, Real for fruit
juices and beverages and Fem for fairness bleaches and skin care products. Dabur today
operates in key consumer product categories like Hair Care, Oral Care, Health Care, Skin
Care and Home Care. The ayurvedic company has a wide distribution network, covering 6
million retail outlets with a high penetration in both urban and rural markets.

Company website: www.dabur.com

2020- Dabur expands ayurvedic medicines portfolio with launch of 2 new products.
For excellence in Corporate Governance, Dabur wins the ICSI National Award.
…………………………………………………………………………
The major players in the FMCG category in rural markets are HUL, P&G, Dabur, Marico.
Colgate-Palmolive, Nirma, Cavinkare and Godrej.
(ii) The FMCGs: Categories like Personal Care, Oral Care, Hair Care, Skin Care, Personal
Wash (soaps); Cosmetics and toiletries have been discussed in the beginning of the
presentation, so basically I will talk about facts and figures.
The FMCGs may be classified under the following heads. deodorants, perfumes, feminine
hygiene, paper products; Household care fabric wash including laundry soaps and synthetic
detergents; household cleaners, such as dish/utensil cleaners, floor cleaners, toilet cleaners,
air fresheners, insecticides and mosquito repellents.
a. Personal Wash (Soaps)
The products meant for personal wash can be segregated into, Premium products, Economy
products and Popular products. The price of the premium segment products is twice that of
economy segment products. The economy and popular segments are 4/5ths of the entire soaps
market. The penetration level of toilet soaps is 88.6%. However, the per capita consumption
of soap in India is at 460 gms per annum, while in Brazil it is at 1,100 gms per annum. In
India, soaps are available in five million retail stores, out of which, 3.75 million retail stores
are in the rural areas.. The major players in personal wash (Soap) market are HLL, Nirma and
P&G.
b. Hair care
The hair care market in India is valued at $200 million. It has registered a growth of 3.8%
over the previous year. The hair care market can be segmented into hair oils, shampoos, hair
colorants & conditioners, and hair gels. The shampoo market is valued at Rs 4.5 billions and
has the penetration level of only 13% in India. The market is expected to increase due to
increased marketing by players, lower duties, and availability of shampoos in affordable
sachets. Sachet makes up to 40% of the total shampoo sale. The Indian shampoo market is
divided in two parts, cosmetic and anti-dandruff.

c. Oral care
The oral care market can be segmented into: toothpaste - 60%, toothpowder - 23% and
toothbrushes - 17%. The penetration level of toothpowder/toothpaste in urban areas is three
times that of rural areas. Neem tree, salt, ash, and tobacco are some traditional materials that
are still popular for cleaning teeth in rural areas. According to a survey, only 15% of
toothpaste users brush their teeth twice a day in India. The per-capita consumption is very
low in India.
Table 1 shows Per Capita Consumption of Tooth Paste

SI. No. Country Consumption in gms

1 India 70

2 Europe 300

3 Thailand 150

About 50 % of India's population uses tooth pastes, 27 % uses tooth powder while 23% in the
rural areas are yet to use products meant for oral care. Mouth freshening washes, dental floss
and teeth whitening products are at a primary stage in India. The use of these products is
limited to urban areas. To increase the penetration level of oral care products, HLL and
Colgate in tandem with Dental Associations have launched nationwide informative
commercials on oral health and community dental health programs to inculcate hygienic
practices in rural area. Industry sources expect an increase in penetration level of oral care
products to 70% from current level of around 49% because of increase in advertising
campaigns and awareness. This Segment is characterized by high entry barriers, a few major
players, high advertisement spending, and frequent product variant launches. The major
players in this segment are: Colgate Palmolive, Hindustan Lever Ltd. and SmithKline
Beachim. Some of the small Indian brands in this segment are: Anchor, Babool, Neem and
Vicco. Colgate-Palmolive is the market leader in oral care segment. Colgate and HLL
together account for 85% of organized toothpaste market. In toothpowders market, Colgate
and Dabur are the major players.
Table 2 shows Growth of FMCG Sector

Year Market Size (Rs. Billion)

Urban Rural Total

1998-99 371.3 415.5 786.8

2008-09 818.9 649.4 1468.3

2018-19 1780.7 1325.8 3106.5

*source: NCAER, Indian market demographics

The rural market has grown consistently in the 1990s (except for a decline between 1998 and
1999 due to low growth in agriculture and allied activities). After 1995-96, there was a boom
in rural markets, which was mainly because of increased levels of awareness and aspirations
to consume. A spatial distribution of the FMCG rural market shows that four states, namely
Uttar Pradesh, Maharashtra, Andhra Pradesh and West Bengal, account for a 50 per cent
share of this market. . It contributes around 36 per cent to the overall FMCG spending.
FMCG urban segment witnessed growth rate of 8 per cent, whereas, rural segment grew at 5
per cent in the quarter ended September 2019.

Table 3 shows the distribution of FMCG market by income for urban and rural market.

On examination of market distribution by income groups reveals that the spending by high-
income households on FMCGs is 3.6 times that of the lower-income groups. But the two
lowest-income groups account for 69 per cent of consumption, unlike urban where this
segment accounts for 35 per cent only. The dominance of low-income-group consumption is
a clear signal that marketers need to address the bottom of the pyramid with cost-effective
value-for-money products. To understand the overall FMCG market, it is important to assess
the market growth scenario of specific products in rural. The following table shows that
though the rural share of most products has gone up, high growth was registered by products
like shampoos and toothpastes.
In fiscal year 2018, the size of the rural FMCG market in India amounted to about 23.6
billion U.S. dollars. This sector had recorded significant growth rates in recent years and
accounted for 45 percent of the country's FMCG market.

Table 4 shows the per capita consumption of key product categories in urban and rural
markets for the period 2012 - 2013.

The fact that 70 per cent of the population accounts for only 50 per cent of even relatively
well-penetrated categories such as soaps and detergents indicates the enormous scope for
consumption-led growth in these categories. Per capita consumption of soap in rural India is
just about one-third that of urban consumption. Such categories will drive growth through
increased frequency of usage. In categories that are relatively less penetrated (several
personal-care products), rural India offers an even bigger growth opportunity through greater
penetration and then consumption. Only 'three out of ten' consumers in rural markets use-
shampoo or skincare products. Growth in such categories will emerge only when more
consumers purchase these products and continue to use them regularly.
*The sources for secondary information was from published reports, census data (2001), NCAER
research reports, CII reports, study conducted by IRMA (Anand) and various renowned national
and international journals

//////////////////////////////////////////////////////////////////////////////////////////////

Characteristics of the Rural Consumer


Age and stages of the life cycle
• The purchase of products and services is influenced by age and life cycle stage of the
consumer.
• In India 85% of the population is below the age of 45 and 55% of its population is below 25
years of age.
• 70% of this potential lies in rural India.
Occupation and Income
• In rural sector, Products beyond the very basic ones are bought by a consumer influenced by
his occupation and income.
• Occupation leads to the income which effects the consumption pattern.

Economic Circumstances
• Purchasing power of an individual plays an important role in choice of product.
• The fact that majority rural sector are self employed increases the risk of stability of
income.
• His urban counter part enjoys a stable monthly inflow of income.
• The saving habits in the rural sector include fixed deposits and small savings in the bank
and post office.
• Villagers are still reluctant to go for credit purchase as is hampers their reputation in village.
• In a very real terms, a rural consumer has more buying power than urban counterpart.

Lifestyle and Culture


• Activities – work, hobbies, social events • Interests – food ,fashion, family, recreation •
Demographics – Age, education, geography

Personality and Self concept


• Personality is the sum total of unique individual characteristics that reflect how a person
respond to his environment. • There is a natural tendency to buy those products which we
think match with our personality.

Psychological factors
• Rural consumer is quite content to satisfy his basic needs.
• They are less adventurous to take risk. • They are not driven by Status symbols, in order to
upgrade a better lifestyle.
Information search and Pre purchase evaluation
Rural consumer gets his information from opinion leaders and influencer, rather than media. •
In the case of high involvement products, this needs to b supplemented by an ‘out of village’
visit to a company outlet.

UNDERSTANDING THE FACTORS FROM RURAL


CONSUMER POINT OF VIEW
CULTURE
Culture is one of the significant determinants of a person‘s behavior in rural area. As a child
grows up in the rural atmosphere, he acquires a set of values, perception, preferences and
behaviors through the family and other key association involved at each stage of his life. The
time tested true behavior exhibited by a collective group is determined by culture. However
the degree of impact that culture will have on behavior will depend on the narrowness of a
culture or its merger with other cultures. The rural Bihar‘s culture is quite different from the
urban areas. Rituals, festivals, harvesting seasons and inhibition to buy new things are some
of the key features of rural consumers. Management researchers have traditionally used
Hofstede's (1980, 1997) definition of culture, which equates culture to ``the collective
programming of the mind which distinguishes the members of one group or category of
people from another‖(Hofstede, 1997, p. 5). Culture influences behavior through its
manifestations: values, heroes, rituals, and symbols (Hofstede, 1997). These are the forms in
which culturally determined knowledge is stored and expressed. Thus, each cultural group
possesses different cultural manifestation.
PRODUCT PACKAGING
Packaging plays a major role in the product offering for rural markets as it is related with
affordability, the ability to identify, ease to users and the appeal of the product. Packaging at
the primary level involves protecting the product, whereas at the secondary level, it adds to
the aesthetics and sales appeal of the product. Packaging for rural markets needs a special
focus because of various troubles like poor transport system, difficulties of safe storage due
to poor cold storage and insufficient power supply in the rural areas of Bihar. Over the years
packaging materials have undergone a great deal of change. Tetra packs has become
omnipresent. The use of tetra packs has ensured longer shelf life even in the absence of
refrigeration. FMCG products like shampoos, tea, confectionaries, detergents etc have plastic
packaging. Rural consumers appreciate bright colors. Lifebuoy is identified as red soap.
Other examples include Dabur lal Dant manjan, Eveready red battery, Brooke Bond red
Label tea etc. Distinct lettering, use of local languages on the pack and images or symbols
that convey the product benefit influence consumer perception about the brand. The social
and cultural differences in rural areas of Bihar demand packaging variations for products.
Consumers recognize and remember brands by colors, visuals or numbers like Godrej No.1
soap,555 detergent bar, Ghari detergent, cycle agarbatti etc.
PRICE
It is the amount of money a consumer must pay to obtain the right to use a product (Hawkins,
Best and Coney 2001).The right price influences the quantities of various products or services
that the rural consumers will buy. Marketers often erroneously perceive price as their only
bludgeon when targeting rural consumers. In reality rural consumers are driven by value for
money and not price alone. Different development schemes by the state and central
government has increased the flow of money in Bihar. It means an increase in their
purchasing power of the rural buyer. Rural consumers still do not perceive the premium value
of brands. They are happy to deal with products especially consumer durables which offer
basic functions. High priced products with difficult to handle features is generally not liked
by rural consumers. Gillette Guard was launched to provide high quality shave at an
affordable price for men in the rural areas. Rural consumers generally compare a products
price to a reference price considered reasonable for a certain type of product. The reference
price is based on either the memory of past prices or on the price of other products on the
same shelf or the same product line. Based on the reference price the consumer judges
whether prices are too high, too low or on target. Rural consumers are deeply involved in the
purchase of agricultural products and wedding items. Here price plays an important role, but
not at the cost of quality.
FAMILY SIZE
Rural consumer behavior is also influenced by family size and structure. As the family size
increases so does the consumption of products. In such a case, the demand for family pack or
the economy refill pack increases. Likewise large families have more bread earners which
mean higher family income and thus more consumption of products. This often leads to multi
brand consumption of a product category among different family members. Rural Bihar is
gradually moving from the large joint family system to the individualized joint family
system(families staying together but using separate kitchens).This is ensuing in greater
demands, particularly for consumer durables, as every new family unit living separately
needs soaps, shampoo, hair oil refrigerator, pressure cooker, TV,DTH etc.
AGE
The purchase of products and their forms are influenced by age. Like urban areas this is
highly visible in case of rural areas. For instance in the age group of twenty to forty the
consumption of motorcycle, mobile, readymade clothes is more as compared to a person
above sixty. For example, in rural area, young adults exhibit a marked preference for mobile
handsets with the latest features and technology whereas elders are content with second hand
mobiles with simple and basic features. The Greenpeace ―Oorja Kranti‖Yatra in Bihar
sensitized key opinion leaders and stakeholders on the benefits of decentralized renewable
energy.
ADVERTISING
Low literacy level, poor media reach and exposure and the huge and diverse rural audience
characterized by variations in language, culture and lifestyle poses multiple challenges for
communicating with the rural audience. For rural consumers the message has to be simple
and logical. The use of education with entertainment and slice of life appeals gets more
acceptances. Dabur has used Bhojpuri film star Ravi kishan, to endorse its chyawanprash
with consumers, dealers and stockiest in Bihar. The FM radio station has truly matured radio
as a medium of rural communication. Television is the fastest growing and most popular
mass medium in rural areas. Conventional outdoor media includes wall paintings which is a
widespread form of advertising in rural Bihar. Wall paintings are important as they remind
rural people constantly of the brand name and logos, in addition to highlighting the key brand
promise. Haats(weekly market) held across Bihar also provides marketers with great
opportunity to communicate their message to a large audience who gather at a single point
week after week.
METHODOLOGY
Analytical Hierarchy Process is used to know the factors that have impact on the rural
consumer buying behavior with respect to rural Bihar. The selection methodology is based on
the characteristics of the problem. The consumer judges the significance of each criterion in
pair wise comparisons. A survey of 300 persons which included both male and female was
conducted in the rural areas of Bihar to know the effect of these factors on buying behavior.
On the basis of participants‘ response a matrix was formulated and AHP technique was
utilized. For this reason all six factors i.e. price, family size, product packaging, age, culture,
and advertising have been prioritized by assigning them a specific number after receiving the
feedback from survey. The result of AHP is a prioritized ranking or weighting of each
decision by intermediate levels. Finally the selection choices are arranged at the last level of
the hierarchy.

Consumer Behaviour: Rural Vs Urban Customer


Abstract 
People, whether located in city or village, buy products and consume them. They are all
consumers. However, the locale has influence on their buying behaviour and some
dissimilarities have been noticed in their purchase, decision making process and use of the
products. This article dwells on the differences between the rural and the city customers.
Irrespective of the kind, the customers are of equal importance to the marketers and it is
imperative that one understands the differences between the two categories of customers to
serve them well and for the effective use of the resources. 
Introduction 
. What is not clear is the term ‘rural’. The term ‘rural’ is defined differently by different
people. Government of India has defined rural area as that which is not urban and urban area
is defined as:  
*All locations within a municipality/corporation, cantonment board or a notified town area
committee, 
*All other locations satisfying all of the following criteria: 
 Minimum population of 5,000, 
 At least 75% of male workforce engaged in non-agricultural activities, and a population
density of over 400 persons per sq.km
However, this definition of rural area does not meet the requirements of marketers. Most of
the companies have their own interpretation of what is rural. Companies, depending on the
products they sell, have classified places ranging from below 20,000 to 50,000 population as
rural. There is yet another classification of India, as Urban, Rural and Rurban (Jha, 2003) in a
continuum from urban and rural. With the rapid strides in economy, technology and
population, a large number of settlements have grown larger to be a typical rural area.
However, they are not yet urban. These areas which have a population of more than 5,000 are
now called as Rurban areas. Rurban is an area which rural in nature and has some urban
amenities. It may have basic sewerage, drainage, health care unit, water supply and transport
facilities. It might have more people involved in non-agricultural activities. In a marketing
sense, they neither behave like a rural market or an urban market. 
Marketers who have been long ignoring the uneducated, dhoti clad poor, have now realized
that – “The real India lives in the villages”. As described by Adi Godrej, Chairman of Godrej
Group, “The rural consumer is discerning and the rural market is vibrant. At the current rate
of growth, it will soon outstrip the urban market. The rural market is no longer sleeping. We
are.” The silent metamorphosis that the Indian countryside is undergoing has not gone
unnoticed by the marketers. They have realized the importance of understanding the rural
consumers and their behaviour. 
The biggest mistake a FMCG company can make while entering the rural India is to treat it as
an extension to the existing urban market. But there is a vast difference in the lifestyles of the
rural and urban consumers. The rural Indian consumer is economically, socially, and
psychographically different from his urban counterpart. The kind of choices that an urban
customer takes for granted is different from the choices available to the rural counterparts.
The difference in consumer behavior in essence stems from the way of thinking with the
fairly simple thought process of the rural consumer in contrast to a much more complex
urban counterpart. On top of this there has hardly been any research into the consumer
behavior of the rural areas, whereas there is considerable amount of data on the urban
consumers regarding things like - who is the influencer, who is the buyer, how do they go and
buy, how much money do they spend on their purchases, etc. On the rural front the efforts
have started only recently and will take time to come out with substantial results. So the
primary challenge is to understand the buyer and his behavior. Even greater challenge lies in
terms of the vast differences in the rural areas which severely limits the marketer’s ability to
segment, target and position his offerings. The population is dispersed to such an extent that
90% of the rural population is concentrated in villages with population of less than 2000. So
the geographical spread is not as homogeneous as it is with the urban areas owing to vast
differences culture and education levels. Also with agriculture being the main business of
rural sector the purchasing power of rural consumer is highly unpredictable which can lead to
high variations in demand patterns. One more gray area that needs to be probed into is the
importance of retailer in rural trade. Rural consumer’s brand choices are greatly restricted and
this is where the retailer comes into the picture. The rural customer generally goes to the
same retailer to buy goods. Naturally there’s a very strong bonding in terms of trust between
the two. Also with the low education levels of rural sector the rural buying behavior is such
that the consumer doesn't ask for the things explicitly by brand but like "laal wala sabun
dena" or "paanch rupey waali chai dena". Now in such a scenario the brand becomes
subservient to the retailer and he pushes whatever brand fetches him the greatest returns.
Thus, as there is a need to understand the rural consumer, similarly need is there to study the
retailer as he is a chief influencer in the buying decision.

The Differences 
The economic growth experienced in India may have reduced the absolute number of poor
(depending on which report one refers to) and lifted millions out of poverty, however, income
disparities and regional imbalances persist. The variations in the level of development in a
region have resulted in tremendous heterogeneity. The success of marketing lies in
understanding these differences. 
1. Although there are more literate people in rural India (49.3 crore) than in urban India
(28.54 crore), the rural literacy level is only 68.9% compared to 85% in urban area. A rural
customer may not be very educated but has lot of common sense. He is as intelligent if not
more and sharper in many ways than his urban counterpart. This is bought out by an incident
where in an aggressive farmer held out a cut section of a tyre in his hand and complained to
the tyre company executive that though the tyre companies claimed that the tyres had ’8 plys’
and he could see only 4 plys in the tyre. The executive had to explain in detail about the
process of tyre making to convince the farmer that not all the 8 layers used in making the 8
ply can be seen.
2. A rural customer is very conscious of “value for money”, and may not always go for cheap
products or premium or image products. As he may not afford high price, he does not fancy
products with features that do not enhance the basic functions of the product. 
3. Rural customers do not trust the outsiders easily. It is not very easy to convenience a rural
customer. It is a challenge to introduce anything new to rural customers. 
4. Rural customers are more brand loyal than urban customers. However, as the literacy level
is low they recognize the brand more through colour, symbol and logo. 
5. The rural customer’s involvement in purchase of any product is high. In some cases such
as buying TV, he consults a number of people. Both rural and urban consumers experience
significant influence of their families for buying the select products. However the rural
consumers experience greater influence of their families as compared to their urban
counterparts.
6. Another important difference is that the rural customer’s life is highly routinised and laid
back. Sunday is not a holiday in the village and the he cannot be made to hurry through. 
7. The rural income mostly depends on the agriculture and hence income and purchase
reaches greater heights after harvest time. Hence, the disposable income varies across the
nation depending on the area, crop, weather etc. Consequently, the buying patterns vary with
urban buying patterns. 
8. Traditional values, customs and perceptions have a stronger hold on the rural customers
than urban customers. This impacts developing common communication programme for
entire country. 
Keeping the differences between the two class of customers in mind, Hindustan Unilever’s
started a unique multi-brand rural marketing programme called ‘Khushiyon Ki Doli’ in 2010
in three states namely Uttar Pradesh, Andhra Pradesh and Maharashtra. Through this
initiative more than one crore consumers were contacted directly in more than 28,000 villages
across these three states in 2010. Through this initiative about 1,70,000 retailers were also
contacted in these villages in 2010. This programme, which turned out to be a success, is
being extended to other parts of India. 
nother marketing giant ITC, is coming out with an advanced version of e-Choupal.
“Distribution of FMCG products in rural markets through the e-Choupal network gained
traction with throughput during the year 2009-10 recording an increase of 44%,” said S
Sivakumar, ITC’s chief executive (agri-business). ITC has recently come out with ‘Choupal
Pradarshan Khet’, in order to help the small and marginal farmers. 
Godrej, very innovatively and bravely introduced a nano refrigerator – Chotu Kool –
especially for the rural market. It was priced at Rs. 3,200 and was designed to withstand the
erratic power supplies in the rural areas. This too has proved to be a success. 
Road Ahead
Rural consumption has increased, led by a combination of increasing income and higher
aspiration levels. There is an increased demand for branded products in rural India. The rural
FMCG market in India is expected to grow to US$ 220 billion by 2025 from US$ 23.6 billion
in FY18.
On the other hand, with the share of unorganised market in the FMCG sector falling, the
organised sector growth is expected to rise with increased level of brand consciousness,
augmented by the growth in modern retail.
Another major factor propelling the demand for food services in India is the growing youth
population, primarily in urban regions. India has a large base of young consumers who form
majority of the workforce, and due to time constraints, barely get time for cooking.
Online portals are expected to play a key role for companies trying to enter the hinterlands.
Internet has contributed in a big way, facilitating a cheaper and more convenient mode to
increase a company’s reach. It is estimated that 40 per cent of all FMCG consumption in
India will be made online by 2020. The online FMCG market is forecast to reach US$ 45
billion in 2020 from US$ 20 billion in 2017.
It is estimated that India will gain US$ 15 billion a year by implementing GST. GST and
demonetisation are expected to drive demand, both in the rural and urban areas, and
economic growth in a structured manner in the long term and improved performance of
companies within the sector.
Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123
References: Media Reports, Press Information Bureau (PIB), Union Budget 2019-20,
Firstpost

Market Size

The retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion
in 2017, with modern trade expected to grow at 20-25 per cent per annum, which is likely to
boost revenue of FMCG companies. Revenue of FMCG sector reached Rs 3.4 lakh crore
(US$ 52.75 billion) in FY18 and is estimated to reach US$ 103.7 billion in 2020. FMCG
market is expected to grow at 9-10 per cent in 2020.
Rise in rural consumption will drive the FMCG market. It contributes around 36 per cent to
the overall FMCG spending. FMCG urban segment witnessed growth rate of 8 per cent,
whereas, rural segment grew at 5 per cent in the quarter ended September 2019.

CONCLUSION
The findings suggest that for rural consumers the consumption pattern is very much
influenced by family size and structure. After arriving at the choice set in the evaluation stage
of the buyer decision process, all the selected brands are acceptable to the rural consumer.
However in this situation the final choice is guided by the perceived risk associated with the
product as well as by the key influencers like opinion leaders, family and friends. Perceived
risk is high among rural consumers as they find it difficult to gather and process relevant
information. Due to this reason they make a collective decision. Marketers need to address
the perceived risk of rural buyers by showcasing the experience of users and ensuring service
delivery close to the consumer‘s doorstep. Quality and value are vital for the success of a new
product as they bring improvement to consumer lives in terms of productivity. For products
that generate the perception of providing comfort or improving the quality of everyday life,
the price is not questioned and the role played by additional features is not significant in
influencing choice. The rural consumer also depends upon observed source like exhibitions
and road shows because they provide an opportunity to evaluate the product personally and
absorb relevant information at their own relaxed pace. Marketers need to focus on
plummeting the information search time by inducing product trials and successfully reaching
out to the consumer through ideal information channels. Marketers also need to understand
the product specific evaluation process from primary research to mapping the succession of
their brand from consideration set to choice set. This deal with the product deficiencies in
relation to competition and improves its chances of selection during evaluation. Customer
satisfaction is the key to building a profitable and sustainable relationship with rural
customers.
The rural market (68.84%) is larger than urban market (31.16%) and the marketers cannot
afford to ignore studying the rural consumer behavior. Dipanker Gupta writes, in an
insightful article. “The Changing Villager” in Seminar. “Clearly the village is not what it
used to be. When one reads accounts of rural India of the 1950s and 1960s, it appears as if we
are describing another country. Where are all those landlords? Those bonded laborers? They
are difficult to find even in Bihar or east UP. But this should not be startling. If 80% of the
landholdings are below 5 acres, where is the scope to hire workers on the farm? In fact, there
is an excess of family labor in most agrarian households. This is why villagers hope to send
as many of their boys as they can to the city.” This is reflected in the increased level of
urbanization from 27.81% in 2001 Census to 31.16% in 2011 Census. With so much of
changes happening in the major part of market – with the fortune lying at the bottom of
pyramid – it is vital that the marketers understand the rural customers well.  The present
study has thrown light on the fact that the companies need to rethink their marketing
strategies and give demographics importance. There are various platforms available to a
company today for marketing a product to the rural consumer. The company needs to go
niche on the bifurcation of the audience to their marketing. The company has focus on each
segment accordingly and multiple marketing strategies need to be formulated to attract the
rural consumer. Female consumers are putting greater emphasis on their lifestyles, self-
image, health and economic considerations while purchasing personal care products. Hence,
it is highly recommended that cosmetic dealers develop a deeper understanding of the factors
influencing the purchase decisions of females. The marketers needs to favorably shape the
marketing to ensure the fact that its attractive enough to start a social publicity of the product.
The biggest factor that came out in the study is social that impacts the buying decision.

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