Rural Marketing

Focusing on the poor represents an opportunity rather than a problem. C K Prahalad

There's incredible potential in rural markets. That's where the growth will come from. Sharat Dhall Diretor HUL

What is Rural
Any habitation with a population density of less than 400 sq. km., where at least 75% of the male population is engaged in agriculture and where there exists no municipality or board (Census 2001). The rural and semi urban area is defined as all other cities other than the 7 Metros (LG India). Locations having shops or commercial establishments with up to 10,000 people are treated as rural (Sahara, ITC, HUL)

1.3 Statistical Approach to Rural Marketing:

Government agencies like IRDA (Insurance Regulatory and Development Authority) and NCAER (National Council for Applied Economic Research) define rural as villages with a population of less than 5,000, with 75% of the male population engaged in agriculture, etc. Two-thirds of the country s consumers live in rural areas, which are around 700 million people, and almost 26% of the National income is generated there. 10 consecutive monsoons have led to 26% of GDP as returns from agriculture. This has increased their purchasing power. India is divided into 597 districts, and has 6,38,667 villages, of which 32% can be reached as they are connected by pucca roads.

However, 68% of the rural market lies untapped due to various reasons ranging from inaccessibility to lack of awareness. In all there are more than 3.8 million retail outlets in rural India, averaging 5.8 shops per village The rural market has been growing at 3-4% per annum, adding more than 1 million new consumers every year. It now accounts for close to 50% of the volume of consumption of fast-moving consumer goods in India. As a result Rural India is becoming an important part of the market development strategies of all FMCG and consumer durables companies as well as service companies

ABOUT INDIAN RURAL MARKET

47% of the total population.(Urban- 28%, Semi urban- 25%). More than 570 Million people. The annual rural household income of Rs 56,630 (as per NCAER, IMDR 2005) Changing consumption patterns and lifestyles Unfold tremendous opportunities for rural marketing.

Evolution Of Rural Marketing

Phase 1 (Before 1960s) Phase 2 (1960s-1990s) Phase 3 (1990s to present)

The Glorious Past

In 1949, Asian Paints was the first company to enter rural markets. In 1960 HLL saw rural markets as an opportunity and entered with lifebuoy soap. Today HUL dominates rural markets and have its presence in more than 1 lakh villages. Major players like Colgate and Dabur followed in. in 80 s companies like Nirma, Cavinkare, and Marico entered rural markets . MNC s in rural markets like P&G (Proctor & Gamble) also found potential in rural markets

The Pulse of the Present

Around 70% of the population lives in rural India, which is almost 700 million in number. A 1% increase in their purchasing power can lead to an increase of Rs.10,000 crores in the government revenues. Cos. are launching a range of products to cater to the changing lifestyles in rural India. MNC s like LG, Samsung, Revlon and insurance biggies like Birla Sun life, Max New York Life and Prulife are entering rural markets in a big way. But till today these have altogether tapped only 1-lakh villages out of the 6-lakh odd villages

Size of the Rural Market

The total size of the rural market is estimated at Rs. 1,23,000 crore, which includes FMCGs, Durables, Agri products and 2/4 wheelers. Estimated Annual Size : Rural Market FMCG Rs.65000 crore Durables Agri-Inputs 2/4 Wheelers Total Source: Francis Kanoi Rs.5000 crore Rs.45000 crore Rs.8000 crore Rs.123000 crore

Rural customer . Understand them Illiterate but not fools

The Reasons to Prefer Rural Areas

Presently, companies operating in India are left with only two options, I .e. either to go Global or to go Rural. The cost of going global is very high and also it s tough to penetrate markets in other countries. Rural India is emerging as a large market for a number of goods and services. So, it s better to target the rural market. Marketers find a similarity between the criticality of rural as well as urban markets. Some reasons for the same are listed below: a) Saturation of urban markets: There is cutthroat competition in urban markets. Due to the wide variety of choices of products, it becomes difficult for existing companies to maintain their market share. Compared to urban markets, the rural markets provide better opportunities.

One very fine example can be quoted of Escorts where they focused on deeper penetration .In September-98 they established rural marketing sales. They did not rely on T.V or press advertisements rather concentrated on focused approach depending on geographical and market parameters like fares, melas etc. Looking at the 'kuchha' roads of village they positioned their mobike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punchline 'Jandar Sawari, Shandar Sawari'. Thus, they achieved whopping sales of 95000 vehicles annually

b) A huge untapped market: With a rural population of more than 700 million, it has a huge potential and market areas as only around 1-lakh villages are tapped out of the 6-lakh odd villages. c) Rising disposable incomes: Good monsoons during the past 10 years have raised farmers incomes. Non-farm sectors now account for almost 50% of the total rural incomes. It is a market that corporatists cannot afford to ignore. Another reason for the rising disposable incomes of the villages is that Agricultural income is non-taxable. d) Remittances from abroad: Many households in rural India have one of their family members abroad, mostly in Gulf countries. People working there send their savings to their families in India, which is an additional source of income . .

e) Impact of the media: The growing reach of the electronic media has created a huge change in the lifestyles of rural consumers because of TV programmes . Rural people are spending more on lifestyle products these days . Modi, Revlon, for instance sells more lipsticks in the rural market than in urban areas. Last year rural sales were Rs.25 crores; only Rs.12 crores came from the urban market

Characteristics of Rural Marketing:

India is a big country and its rural markets have varied characteristics that change from people to people, region to region. Some of the main features of India s rural markets are: -

1) Diverse Nature: There are 6,38,667 Indian villages in all.

Out of these 50% share a very small population of less than 500 and a limited purchasing power. Many of these villages don t even have a single shop. In the second category there are 2,50,000 villages with a population between 500-2000. There are at least 5 shops per village Lastly there are 60,000 villages with a population of more than 2000. Companies should try and focus on the last two categories more as they have high potential. Regional disparities heavily influence economic development, social interaction patterns, mobility patterns and awareness levels. .

2) Urban Market Saturation

There is a cut-throat competition in urban markets, which have reached a stage of saturation As a result, marketers are shifting focus to greener pastures in rural markets, as there is equal number of households in rural areas as in urban areas.

3) Rising Disposable Income of Rural Customers

New tax structures, good monsoons, the green revolution and the Administered Pricing Mechanism (APM) have raised disposable incomes in rural areas It is ironic that rural people spend so lavishly on weddings, ceremonies and festivals amidst deficiency. Today the rural consumer shop for value . It is this income that the companies are going to tap in the near future.

4) Rising Literacy Levels

4) Rising Literacy Levels

Nearly 45% of rural Indians are literate out of which 59% are men and 31% are women. Around 12 crore people in villages are literate as compared to 12.5 crore in urban India. Every year produces 60 lakh literate people. Farmers are remarkably well informed about the changing world around them. The increased enrolment in schools has also generated a wave of rural demand for lifestyles and aspiration products.

5) Spread of Cable Television

The growth of satellite TV channels has had a major impact on villagers. It has led to a change in lifestyle and consumption patterns Television has high capacity to raise interest levels as it has greater accessibility compared to other media. Rural consumers now aspire to buy brands rather than to just purchase commodities.

Classification of Rural Marketing:

URBAN ---------- RURAL RURAL ------------ URBAN RURAL------------- RURAL

Personality & Psychological Factors Perception & Brand belief Characteristics of Rural Consumer Age & Stages of Lifestyle Economic Circumstances Personality & Self-concept Lifestyle

Occupation & Income

RURAL

BELOW 12 YRS

URBAN

RURAL

13-19 Yrs

URBAN

RURAL

20-40 Yrs

URBAN

RURAL

40-60 Yrs

URBAN

CONSUMPTION BY AGE & STAGES OF LIFE CYCLE

AGE LIFE-CYCLE STAGE RURAL URBAN Video games, chocolates, beverages/health drinks Cell phones, motorcycle, internet Car, PC, branded clothing, alcohol, stores/malls

Below 12

Child

Toys, ice candy, daliya

13-19

Teenage

Bicycle, television, cinema Motorcycle, telephone, LPG, Tailored/unbranded clothes, local liquor, haat Tractor, kisan-credit card, postal savings, mela Chaupal, playing cards, pilgrimage

20-40

Young

40-60

Middle Aged

Luxury car, credit cards, house, health insurance, holiday trips Clubs, theatre, parks

Above 60

Old

Personality
Sum total of unique individual characteristics that determine how a person responds to the environment. Tendency to buy the products which suit our personality. Self image is the way we perceive ourselves in a society. In the rural market, purchase depends on situation and person.eg. Pan Masala in rural, Popcorn in urban

 The rural customer is content to satisfy basic needs. Persuasion necessary to convince a customer. Peer pressure not very relevant High esteem but content with everyday life.

Perception and Brands

Perception plays a major role in purchase behavior for the rural consumer. Quality and price influence the perception of the consumer. Barrier to level of trial and acceptance of products Rural customer trusts government services

. A year back HUL started 'Operation Bharat' to tap the rural markets. Under this operation it passed out lowpriced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million households. Thus looking at the challenges and the opportunities which rural markets offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage.

Project Shakti/Operation Bharat

(HUL) and its constituent companies have been in India since 1931. Over these decades, while HUL has benefited from the developments in the country, it has contributed equally to these developments. HUL has consciously woven India's imperatives with the company's strategies and operations. The company s main contributions include developing and using relevant technologies, stimulating industrialization, boosting exports, adding value to agriculture and generating productive employment and income opportunities.

 HUL has been proactively engaged in rural development since 1976 with the initiation of the Integrated Rural Development Programme in the Etah district of Uttar Pradesh, in tandem with the company s dairy operations. This Programme now covers 500 villages in the district. Subsequently, the factories that HUL continued establishing in less-developed regions of the country have been engaged in similar programmes in adjacent villages .These factory- centered activities mainly focus on training farmers, animal husbandry, generating alternative income, health, hygiene and infrastructure development . The company has acquired a wealth of experience and learning from these activities

The principal issue in rural development is to create income-generating opportunities for the rural population. Such initiatives are successful and sustainable when linked with the companys core business and is mutually beneficial to both the population for whom the programme is intended and for the company.

Based on these insights, HLL launched Project Shakti in the Year 2001, in keeping with the purpose of integrating business interests with National interests.

In 2002 2003, LIC sold 50 percent of its policies in rural India by doing street plays

3 A s of rural marketing- Coca Cola

Affordability Acceptability Availability.

the traditional village.. where life stands still waiting..