The Rural Marketing Environment

Chapter 2

87,320 villages, 4466 Union, 130 million people, myriad of

languages, many traditions and a rich culture. A vibrant land

with a long history. Rural Bangladeshi people are known as

much for their warmth as their diversity. Welcome to the

land of mysticism. The Real Bangladesh”.

EXPLORE THE RURAL MARKETS, DONOT EXPLOIT

THEM

Chapter Objectives

• The facts and figures of rural• Evolution of rural marketing in India• Holistic view of the marketing environment• The household, institutional and service sectors in rural• The need for business-social sector partnerships

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• Internationally the standard determinant of rurality is population density. Hence the rural areas are defined as those with low numbers of people living on any given area of land. It is this approach that underpins the official definition of rural areas within England and Wales.

• Much has been written on the concept of “rural.” The treatises of alternative views are numerous and varied. One of the longstanding debates concerns whether “rural” is a geographical concept, a location with identifiable boundaries on a map, or whether it is a social representation, a community of interest, a culture and way of life.

Definition of 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)

“Village with a population of less than 5000 with 75%

of the male population engaged in agriculture”

--- IRDA & NCAER

Definition of Rural Market

Rural markets have:

– Population density less than 400 per sq. Km.– At least 75% of the male working population engaged in

agricultural activities– No municipality or board

Most FMCG companies consider towns with population less than 20,000 as rural

For durable companies cut-off point is 50,000

LG

• A rural market can be defined as any market that exists in a

area where the population is less than

10, 000. The rural market in India is scattered and spread

over a wide geographical area. Indian market is divided into

urban and rural markets.

• Rural Markets constitute an important segment of overall economy, for example, in the USA, out of about 3000 countries, around 2000 counties are rural, that is, non-urbanized, with population of 55 million. Typically, a rural market will represent a community in a rural area with a population of 2500 to 30000

• Rural market is the set of consumers who are located in

rural area and who exhibit behavior that is different from

the behavior of consumers in urban areas. The marketing

issues and, therefore, the marketing decisions in serving the

rural markets vary considerably compared to marketing for

the urban consumers.

Phases In Rural Marketing

Sr. No Time Frame Key Events & Trends

1 Phase One( Pre 1960’s) •Marketing rural products in rural and urban areas •Agricultural inputs in rural areas •“Agricultural marketing”•Farming methods were primitive and mechanisation was low•Markets unorganised

Phases In Rural Marketing

2 Phase Two ( 1960s to 1990s) •Green Revolution•Companies like Mahindra and Mahindra, Sri Ram Fertilisers and IFFCO emerge•Rural products were also marketed through agencies like KVIC

3 Phase Three( 1990s to Present) •Demand for consumables and durables rise•Companies find growth in urban markets stagnating or falling

Definition of Rural Marketing

National Commission on Agriculture

NGOs Corporate Rural Marketing Definition

Decisions to produce saleable farm commodities involving all the aspects of

the market system or structure, both functional and

institutional, based on technical & economic

considerations and includes the pre & post harvest

operations.

Marketing products produced in rural areas to urban areas

Marketing products produced in rural areas in rural markets

Function that manages all activities involved in

assessing, stimulating and converting the purchasing power of rural consumers into effective demand for

specific products and services to create satisfaction & a

better standard of living for achieving organisational

goals.

Definition of Rural Marketing

• Rural marketing involves the process of developing, pricing,

promoting, distributing rural specific product and a service

leading to exchange between rural and urban market which

satisfies consumer demand and also achieves

organizational objectives. --Ramkishen.Y

Definition of Rural Marketing

Function that manages all activates involved in assessing,

stimulating and converting the purchasing power of rural

consumers into effective demand for specific products and

services to create satisfaction & a better standard of living

for achieving organizational goals.

Definition of Rural Marketing

Rural marketing involves delivering manufactured or

processed inputs or services to rural producers or

consumers so as to soak up the huge size of the untapped

rural market.

Rural marketing is marketing to a rural mindset ; not a rural market

It is all about understanding the mind rather than manipulating it or adapting marketing

theory to a rural environment.

Differences between Rural & Agricultural Marketing

• Agricultural Marketing which signifies marketing of rural products to the urban consumer or institutional markets.

• Rural Marketing basically deals with delivering manufactured or processed inputs or services to rural producers, the demand for which is basically a derived outcome.

Rural vs Urban Marketing

Rural vs Urban Marketing

Rural vs Urban Marketing

Rural vs Urban Marketing

Rural vs Urban Marketing

Rural Market Structure

• Demographic Environment

– Share of rural population down from 84.33% in 1981 census to

76.1% in 2001 census. The number at 130.6 million indicates an

increase of over 15%

– Youth (20 to 34) 22.2% of rural population

– Rural literacy up from 17% in 1981 to 33% in 2001 census

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Rural Market Structure

– Rural households up by 15% in last 7 years

– Family size has gone down marginally due to migration

– Joint families now breaking apart.

– Concept of individualised joint families staying in the same house

but having separate kitchens

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Some Comparisons

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Distribution of Population by age groups (2001)

Age Groups Rural Urban

0 – 4 12% 10.6%

5 – 14 26% 22.3%

15 – 19 10.1% 11.6%

20 – 34 22.2% 25.2%

35 – 54 21.6% 22.8%

55+ 10.2% 7.5%

Source : 2001 Census

Lower due to migration factor

Some Comparisons

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Education in Bangladesh (2005)

Education Level Rural Urban

Not passed class I 55.39 34.97

Class I-V 19.03 20.78

Class VI-IX 17.97 21.75

SSC, HSC equivalent 8.09 16.08

Graduate and equivalent 1.59 3.20

Post Graduate 0.07 1.88

Doctor/Engineer 0.00 0.20

Diploma/ Vocational 0.01 0.01

Others 0.00 0.02

Source : 2001 Census

Lower due to lack of facilities

• Number of Household by size (in million)

Rural Housing Pattern

• Housing Structure (head of households) Roof material pattern

• Housing Structure( head of households) Wall material percent)

Occupational Pattern

• Over 28.7% of rural population is in cultivation followed by

28.1% wage earners• 17.3% of the rural population are involved in Business and

commerce and nearly 12% in gift & remittance.• 5.1% in Housing Services.• The cultivator’s disposable income is highly seasonal being

available at the time of harvesting

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• Expenditure TK ( per month)

• Share of Food Expenditure TK ( per month)

Percentage share of food expenditures by residence & major food items

35

Food Expenditure in Bangladesh (2005)

Food Items Rural Urban

Cereals 42.25 31.30

Pulses 2.39 3.28

Fish 11.46 14.11

Meat & Eggs 7.64 10.56

Vegetables 8.34 8.48

Milk/Milk Products 3.46 4.41

Edible Oil 4.07 4.67

Spices 7.18 8.31

Fruits 2.97 3.83

Sugar/gur 1.54 1.62

Beverages 0.45 1.21

Miscellanies 8.25 8.23

Physical Environment

• Rural and Urban Life: Distinguishing Features

• Settlements ( scattered and clustered)

Average monthly expenditure and consumption expenditure per household by residence

Year Residence Avg. Expenditure per

month

Avg. Consumption

per month2005 Rural 5319 5165

Urban 8533 8315

2000 Rural 4257 3879

Urban 7337 7125

1995-96 Rural 3473 3426

Urban 7274 7084

1991-92 Rural 2721 2690

Urban 4377 4280

Social and Cultural Environment

• Variations between regions and sub-regions

• Distinct socio-cultural regions cutting across political/administrative

boundaries exist

• In villages inward migration is insignificant while outward migration

to urban and foreign is reasonably high.

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Social and Cultural Environment

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DirectionMigration Per 1000 Population

2002 2003 2004

Rural to Rural 10.30 10.34 13.80

Rural to Urban 11.00 17.37 6.00

Urban to Rural 2.70 2.78 13.10

Urban to Urban 39.80 34.34 38.10

Village Community

• Villages are self-sufficient and autonomous.

• Each village has a council of elders (Union)

• Unions have the constitutional authority for self-governance

• The Union structure has undergone change with elections and

reservation for underprivileged families.

• Shift from subsistence farming to commercial and mixed farming has

made the village dependent on external factors.

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Caste System

• Islam is the basis of social organization.• Society in Bangladesh, with the exception of the

Hindu caste system, was not rigidly stratified rather,

loose because most Hindus belonged to the lower

castes. • About 75 percent of the Hindus in Bangladesh

belonged to the lower castes, notably namasudras

(lesser cultivators).

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Caste System

• Traditional Muslim class distinctions had little

importance in Bangladesh. • The prohibition against marriage between individuals

of high-born and low-born families, once an indicator

of the social gap between the two groups, had long

ago disappeared; • Most matrimonial alliances were based on wealth

and power and not on the ties of family distinction.

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Political Environment

• Local Government in Bangladesh

• Rural System • Zila Parishad (None)

• Upazila (481) • Thana (499)

• Union Parishads (4,498) • Gram Sarkar (1,92,348)

• Urban System • City Corporations (6) ,

• Paurashavas (286) 43RMB 02

Political Environment

• Union Parishad is the lowest tier of administrative unit in Bangladesh.

• The Union Parishad consists of a chairman, nine members, and three

women members. The voters of the Union Parishad directly elect all.

• An average village in the late 1980s contained 1,300 to 1,400 people.

• An average union contained about 15 villages and a population of

about 20,000, and an average subdistrict had 8 to 10 unions with

about 200,000 people.

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Technological Environment

• Triggered by three major revolutions:

– Green Revolution to bring about food self-sufficiency. Resulted in adoption of high yield seeds, fertilisers, pesticides, and farm mechanisationes

– Poultry and Fisheries

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NGO Movement

– The NGO movement has created grass root level

adjustment of technological extensions in rural areas.

– NGOs have also been instrumental in providing health,

homes, hygiene, child care, education and other social

development programmes also

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Constitution of Rural Markets

• Consumers Market– FMCG

– Durables

• Institutional Market – Food processing, poultry, fishery,

animal husbandry, cottage industries, health centres, schools– Consumables

– Durables

• Services Market – Banking, insurance credit cards,

communication.

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Size of Rural Market

• In the FMCG market the size of the pie is larger than the urban pie. Problems

of logistics, supply and storage

• Rural markets accounted for 54% of the durables sold in the country

• The decadal growth rate for consumer durables is 100% in rural against 40%

in urban.

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Nature of Rural Market

• The big question – transactional or developmental approach to the rural

markets

• Agri-input companies follow an extension services approach to increase

productivity

• HPCL is promoting concept of community kitchens to popularise cooking

gas.

• HUL’s Project Shakti (Joyita) improves the income of rural women

• The rural marketing process needs to be evolutionary and not

revolutionary.

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Marketing Management in Non-Profit Sectors

• NGOs have started partnering with corporates

• Corporates are facing saturation in the urban segment and

do not understand the rural environment

• The potential for a marriage between the two to fulfill each

other’s needs exists

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Successful Mantra in Rural

Business Mind, Social Heart