Ch 02 Rural Marketing Environment

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Chapter 2


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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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Evolution of Rural Marketing Phase I (Before 60s)

Traditional farming methods

Focus on marketing of rural products in urban markets and

agricultural inputs in rural

Phase II (1960s to Early 90s) The Green and the White Revolution

Demand for agricultural inputs

Domain of marketing of agricultural inputs added Phase III(Mid 90s to present)

Higher development in rural sector

Marketers realised the potential of the vast rural market

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Rural Market Structure Demographic Environment

Share of rural population down from 80.1% in 1971 census to72.2% in 2001 census. The number at 741.6 million indicates

an increase of over 15% Youth (20 to 34) 23.1% of rural population

Rural literacy up from 36% in 1981 to 59% in 2001 census

Rural households up by 26 million in last decade

Family size has gone down marginally due to migration

Joint families now breaking apart with over 77% going nuclearin rural

Concept of individualised joint families staying in the samehouse but having separate kitchens

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Some Comparisons

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Education in India (2001)

Education Level Rural Urban

Below Primary 31.7 18.0

Primary but below Middle 29.5 22.9

Middle but below Matric 16.9 16.3

Matric but below Graduate 18.4 29.6

Graduate and above 3.5 13.2

Distribution of Population by age groups (2001)

Age Groups Rural Urban

0 4 11.5 8.9

5 14 25.7 21.8

15 19 9.5 10.6

20 34 23.1 26.8

35

54 19.7 22.5

55+ 10.5 9.4

Source : 2001 Census

Lower due tolack of

facilities

Lower due tomigration

factor


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Some Comparisons

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Family Structure

Type of Household Rural Urban

Joint 19.5% 15.2%

Nuclear without elders 60.2% 65.5%

Nuclear with elders 17.1% 15.4%

Others 3.2% 3.9%

Total (million) 138 54

Household Size

Size of Household Rural Urban

1

2 members 11.1% 10.7%

3 4 members 30.4% 38.8%

5 6 members 34.0% 32.8%

7 members and above 24.5% 17.7%

Average Family Size 5.36 5.31

Source : IRS 2005

Joint FamilySystem

Breakdown


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Occupational Pattern

Over 40% of rural population is in cultivation followedby 35% wage earners

11% of the rural population are salary earners and

nearly 5% petty shopkeepers 3.4% are artisans

The cultivators disposable income is highly seasonalbeing available at the time of harvesting

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Population Distribution - Rural

16%

21%

24%

22%

14%3%

5000

PopulationNumber of

Villages

Less than 200 92,541

200-500 127,054501-1,000 144,817

1,001-2,000 129,662

2,001-5,000 80,313

More than 5,000 18,758

Total number ofvillages

593,145

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Source : MARTDo not include uninhabited. Total villages includingthese are 638,365

Hardly any shops in

these villages

account for 50%

of ruralpopulation &60% rural wealth


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Distribution of Towns in India

Town Class Population CategoryNumberof Towns

Literacy(%)

LPGpenetration(% of HHs)

Workingpopulation(% of pop)

Class I 1 lakh & above 423 82 47 32Class II 50,000 99,999 498 79 44 31

Class III 20,000 49,999 1,386 77 36 32

Class IV 10,000 19,999 1,560 76 29 34

Class V 5,000 9,999 1,057 76 27 35

Class VI Less than 5,000 237 80 37 34

All India 5,161 80 48 32

9

Source: Census 2001

*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354

90 % ofdurables

purchased byrural people

from thesetowns


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Economic Environment

AnnualIncome

1995-96 2006-07

Above Rs 215,000 0.3 0.9

Rs 45,001- 215,000 13.5 25.0

Rs 22,001- 45,000 31.6 49.0

Rs 16,001 - 22,000 31.2 14.0

Rs 16,000 & Below 23.4 11.1

100.0 100.0

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All figures in %

Projections Based on 7.2% GDP Growth

The rich and the very rich have doubled in the last ten yearsThe aspirers and the destitute have fallen by 50%Increasing incomes are also changing expenditure patterns


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Changing Rural Consumers Expenditure

PatternPer Capita Consumption

Expenditure(Rs. Per month)

YEAR RURAL URBAN

1983 112 166

1991 281 458

2001 486 855Source: NSSO

Consumption Expenditure RuralPercentage

YEAR FOODNON-

FOOD

1983 66 34

1991 63 37

2001 59 41Source: NSSO

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Per capita consumption expenditure has grown 4 times in the last two decadesExpenditure on non-food items is increasing42 million rural households avail banking services in rural against 27 million inurban


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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 outwardmigration to urban and foreign is reasonably high

The settlement pattern is in clusters largely around castelines

Houses are largely semi-pucca and kacha

Land is the primary source of livelihood

Activities limited to smaller geographic areas resulting inhigher adherence to customs and traditions

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Village Community Villages are self-sufficient and autonomous

Each village has a council of elders (panchayat)

Panchayats have the constitutional authority for exercisingself-governance

The panchayat structure has undergone change withelections and reservation for underprivileged families

Shift from subsistence farming to commercial and mixedfarming has made the village dependent on external factors

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Caste System The rural society has a strong caste system:

Brahmins

Kshatriyas (Warriors)

Vaishyas (Business Class and traders)

Shudras (involved in odd jobs) Untouchables

The settlements of the lower castes are normally on theoutskirts of the village

Marketers have to be sensitive to the caste system especiallyin the area of communication

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Political Environment The panchayats were dominated by upper castes

The panchayati raj system has introduced an integratedand inclusive approach to governance in the rural sector

Villages with 5000 population or a cluster of villages with acombined population of 5000 form a panchayat

Gram Sabhas are to be organised once a quarter to bring intransperancy, accountability and achievement

The sarpanch represents the village at the tehsil/taluka/block level

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Tecnological Environment Triggered by three major revolutions:

Green Revolution (1967 to 1978) to bring about food self-sufficiency.Resulted in adoption of high yield seeds, fertilisers, pesticides, andfarm mechanisations

White Revolution Milk production through producer cooperativesand moving processed milk to urban-demand centres. Milkproduction has gone up from 17 million tonnes in 1950-51 to over 100million tonnes in 2007-08

The NGO movement has created grassroot level assimilation oftechnological extensions in rural areas

NGOs have also been instrumental in providing health, homes,hygiene, child care, education and other social developmentprogrammes

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Constitution of Rural Markets Consumers Market

FMCG

Durables

Institutional Market Food processing, poultry, fishery, animalhusbandry, cottage industries, health centres, schools Consumables

Durables

Services Market Banking, insurance credit cards, communication

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Size of Rural Market

ParticularsRural Market

Crores

FMCG products 65,000

Consumer Durables 5,000

Agri-inputs incl.tractors

45,000

2/4 wheelers 8,000

TOTAL 1,23,000

Source Francis Kanoi 2002

In the FMCG market the size ofthe pie is larger than the urbanpie. Problems of logistics, supplyand storage

Rural markets accounted for54% of the durables sold in thecountry

The decadal growth rate forconsumer durables is 100% inrural 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 servicesapproach to increase productivity

HPCL is promoting concept of community kitchens topopularise cooking gas

HULs Project Shakti improves the income of ruralwomen

The rural marketing process needs to be evolutionaryand not revolutionary

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Marketing Management in Non-ProfitSectors

NGOs have started partnering with corporates

Corporates are facing saturation in the urban segmentand do not understand the rural environment

The potential for a marriage between the two to fulfilleach others needs exists

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- McKinsey Global Institute, May 2007


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Documents

Ch 02 Rural Marketing Environment