Innovation of Rural Marketing

8/8/2019 Innovation of Rural Marketing

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A

Seminar

Report

On

Innovation of

Rural Marketing


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Introduction

Rural Markets are defined as those segments of overall market of any

economy, which are distinct from the other types of markets like stock market,

commodity markets or Labor economics.

Rural Markets constitute an important segment of overall economy, for

example, in the USA, out of about 3000 counties, 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.

Marketing today has changed the dynamics of the business. As the

consumers are getting informative, the business is becoming competitive day -by-day.

Marketers are seeking fresher challenges everyday and are looking to increase their

realm. The urban consumer has been coddled till now but this market is shrinking,

prompting the marketer to now explore the rural consumers, which promises a

hugepotential. The market has enough scale to offer and enough desire to consume.

The consumaer in the Indian hinterland is ready and waiting to be served.

What Constitutes the Rural Market?

The census of India defines rural as any habitation where the population density is

less than 400 per sq. km, and where a t least 75 per cent of the male workingpopulation is engaged in agriculture, and where there isn't any municipality or board.

Having said that, there are about 600,000 -odd villages in India. Leaving aside

Hindustan Lever and ITC, most FMCG Sector would define rural as any place with a

population below 20,000. Similarly, durable and agri -input companies consider any

town with a population below rural, primarily because the adjoining villagers come to

shop there for say a television set.

The Rural Market PotentialThe rural market has been growing steadily over the past few years and is now even

bigger than the urban market. At present 53 per cent of all FMCGs and 59 per cent of

all consumer durables are being sold in rural India. The biggest FMCG Company in

India HLL derives more than half of its Rs. 12,000 crore revenues from the rural


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markets. Though there is a high component of sales in some particular product

categories like radios, watches, casette players, the penetration levels are abysmally

low, and therefore, offer tremendous potential for growth.

The rural market is an enigma for the companies. Due to the lack of deeper insights

into the psyche of the rural consumers, companies are hesitant to explore this

territory. But local brands, like "Ghadi" detergent in Kanpur, have been able to

successfully tap the opportunities presented by this market. A look at some facts,

which will clear the doubts of skeptics about the potential of rural markets in India: -

y About 285 million reside in urban India as compared to 742 million in rural

India.

y The number of middle income and high-income household in rural India is

expected to grow from 80 million to 111 million by 2007 while urban India is

expected to grow from 46 million to 59 million.

y 53 per cent of all FMCGs and 59 per cent of all consumer durables are sold in

rural India.

y Number of poor household is expected to shrink by half to 28 million in 2006 -

07 from 61 million in 1997-98, taking rural people from poverty to prosperity.

y Rural marketing involves addressing around 700 million potential consumers,

over 40 per cent of the Indian middle -class, and about half the country's

disposable income.

y The Indian rural market is almost twice as large as the entire market of USA or

Russia.

y The rural market for FMCG is Rs. 65,000 crore, for durables Rs. 5,000 crore,

for tractors and agri-inputs Rs. 45,000 crore and two- and four-wheelers, Rs.

8,000 crore. In total, a whopping Rs. 1,23,000 crore.

Thus, looking at 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.


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The Traditional Rural Market

Since ancient times, Indian villages had the concept of village m arkets popularly

known as the village "Haats". The "haats" are basically a gathering of the local

buyers and sellers. The barter system was quite prevalent, which is still continuing in

a number of places even today. Haats are basically a weekly event and are central to

the village economy.

Companies like Mahindra have devised their marketing plan keeping in mind the

importance of haats in villages. They set up stalls in the villages coinciding with the

village haats and promote their tractors. This serves a dual purpose - getting the

attention of a large number of their target market as well as getting critical insight

about the rural consumers behavior. The village mandis and the seasonal melas are

other important occasions for the marketers to tap.

What is happening in Rural Markets?

While the rural market provides tremendous opportunities to the marketers, it is not

easy for any company to enter this market and walk away with a sizeable share of

the market. In reality, the rural market suffers from a variety of problems including

that of distribution and marketing communication. Companies have been trying to

tackle these issues in a number of innovative ways. Be it the "e-choupal" initiative of

ITC or "Project Shakti" launched by HLL, the aim is to come cl oser to the rural

consumer. To capture the alluring rural market, companies need to formulate

strategies, which can deal with issues pertaining to consumer psychographics and

appropriate marketing mix.

For FMCG major HLL, around 50% of its revenues is coming from the rural market.

The company found from a study that in about 35% of FMCG products, the local

retailer is influencing purchases. Therefore, if the company was able to maintain the

supply of stock with the retailers, it would be able to control bra nd choice, volumes,

and in turn, market share. HLL's "Project Shakti" was aimed at creating opportunities

to increase rural family incomes, which puts more money in their hands to purchase

the range of daily consumption products from soaps to toothpastes.


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If we look at the traditional method of rural marketing in India, we can find that it is

basically comprised of: -

y Modifications in product (making it look rugged and durable) and sometimes

make it inferior to the product being sold in the urban markets

y Lower the price of the product

y Offer the products in small units (e.g. sachets)

y To advertise your product use the same commercial and simply dub it in the

region-specific language

y Using the traditional questionnaire method to get insights into the mind s of

rural consumer

However, companies tend to forget that the requirements of the rural market are

totally different. The companies need to develop special products and strategies for

the rural consumer. If a company wants to force cornflakes in the rural market place,

it is doomed for failure. Using generic advertising to attract the rural consumer is not

going to market. You have to go vernacular to effectively convey the message, just

like the advertisements of Coke featuring Aamir Khan.

Rural Consumers Buying Behavior

With the increase in the rural literacy levels and the exposure to media, people in

rural media are also becoming conscious about their buying decisions like their urban

counterparts. There has been a significant rise in the brand awareness among the

people. As a result they are becoming choosier and demanding than ever before, so

any company has to properly analyze the psychographics before entering this

market. Infact, if we look at the rural consumers shopping basket, we can see that of

the expenditure on consumer goods in rural household, approximately, 44% is on

food articles such as biscuits, tea, coffee and salt, 20% on toiletries, 13% on washing

material, 10% on cosmetics, 4% on OTC products, and 9% on other consumables.

Brand Awareness

Studies indicate that there has been a visible shift in the people's preference

for brands. People are upgrading from the use of tooth powders to tooth


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pastes, and from using traditional mosquito repellants to using mats and coils.

Also there is shift from low priced brands to semi-premium brands.

Rural consumers buy lowerpriced goods

This is one of the most prevalent myths about the rural market. However, what

rural consumers are looking for are not cheap goods but they want value for

money, and if a brand fits into this category, they are ready to pay for it. Also

when they can afford, they experiment with brands.

Rural consumers will buy what we sell to them

The brand loyalty for rural consumers is quite strong in some particular

segments and brands, like Colgate toothpastes and powders. However, if a

company becomes complacent and takes the rural consumers for granted it is

ultimately going to lose in the market. The companies have to constantly

innovate and make their products appealing to the consumers to succeed.

Rural Indiahas common tastes

Some companies have the misconception that the tastes and preferences of

the rural consumers are all same for the rural market. But it is not so. Infact, it

is more varied that the urban consumers. Mind you, we are not talking about

the differences due to geographies. Infact, in North India, the preferences of a

Punjabi farmer will be quite different from his counterparts in Bihar or Uttar

Pradesh. So the companies have to design strategies to tackle th is issue.

Innovative uses of the product

The rural market is quite innovative in the uses of products. Several products

are being used successfully for doing jobs what they are not meant for, like

using washing machines to make "lassi" in Punjab or using Iodex on animals

to relive them of muscular pain. The rural market is an enigma for the

marketer and he has to see that the marketing communication is done in the

relevant way.


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Heterogeneity in the Rural Market

One important question, which ails the marketer, is the heterogeneity of the rural

market place. The heterogeneity is mainly on account of the geography, varied

income levels, cultural differences of the consumers. In case of urban consumers,

the tastes are not that varied say between that of a youth in Delhi and a youth in

Chennai. To see this more clearly, we will segment the market into following

categories: -

The Villages in Punjab & Haryana

The Punjabi farmer is lively has a better standard of living as compared to

farmers in Bihar and U.P. The literacy rate is also at par with those in the

urban areas. The Punjabi farmer likes to spend a lot. Also the spending is

more during the harvesting season. He is quite aware about different brands

due to more penetration of television and also due to vi sits of family members

from abroad.

The Villages in Bihar, UP & MP

Theses villages are characterized by lower literacy rates and lack of

infrastructure, especially electricity.The people are quite religious and god -

fearing. The villages are divided on the basis of castes. The spending power is

also less as compared to rich northern states. These states are ideal markets

for products like radios, torches, lanterns, etc.

The Villages in Bengal & Orissa

The villages in these states are characterized by a lower literacy rates and a

sizeable amount of population is engaged in fishing. The average size of land

holdings is very small and the people are very possessive about their cultural

heritage. Their diet consists mainly of rice and fish.

The Villages in South India

The villagers in South India are better educated than those in North India.

Women occupy an important role in the society and more often than not are

responsible for a number of product decisions. People are quite aware about


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different brands in the market mainly on account of someone from family or

neighborhood commuting regularly between the cities.

The marketer has to understand that there is no shortcut to grab a share of the rural

market place. He has to formulate different strategies for di fferent regions, as there is

very little commonality between each of these segments.

Opportunities

Infrastructure is improving rapidly -

y In 62 years only, 40% villages have been connected by road, in next 10

years another 30% would be connected.

y More than 90% villages are electrified, though only 44% rural homes haveelectric connections.

y Rural telephone density has gone up by 300% in the last 10 years; every

1000+ pop is connected by STD.

Social indicators have improved a lot between 1981 and 2001 -

y Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses

halved (41% to 23%).

y Percentage of BPL families declined from 46% to 27%.

y Rural literacy level improved from 36% to 59%.

Proliferation of large format Rural Retail Stores, which have been successful also -

y DSCL Haryali Stores

y M & M Shubh Labh Stores

y TATA / Rallis Kisan Kendras

y Escorts Rural Stores

y Warnabazaar, Maharashtra (Annual Sale Rs. 40 crore)


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Why Different Strategies?

Rural markets, as part of any economy, have untapped potential. There are several

difficulties confronting the effort to fully explore rural markets. The concept of rural

markets in India is still in evolving shape, and the sector poses a variety of

challenges. Distribution costs and non-availability of retail outlets are major problems

faced by the marketers. The success of a brand in the Indian rural market is as

unpredictable as rain. Many brands, which should have been successful, have failed

miserably. This is because most firms try to extend marketing plans that they use in

urban areas to the rural markets. The unique consumption patterns, tastes, and

needs of the rural consumers should be analyzed at the product planning stage so

that they match the needs of the rural people.

Therefore, marketers need to understand the social dynamics and attitude variations

within each village though nationally it follows a consistent pattern. The main

problems in rural marketing are: -

Understanding the Rural Consumer

Poor Infrastructure

Physical Distribution

Channel Management

Promotion and Marketing Communication

Dynamics of rural markets differ from other market types, and similarly, rural

marketing strategies are also significantly different from the marketing strategies

aimed at an urban or industrial consumer.

Marketing Strategy

Marketers need to understand the psyche of the rural consumers and then act

accordingly. Rural marketing involves more intensive personal selling efforts

compared to urban marketing. Firms should refrain from designing goods for the

urban markets and subsequently pushing them in the rural area s. To effectively tap

the rural market, a brand must associate it with the same things the rural folks do.


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This can be done by utilizing the various rural folk media to reach them in their own

language and in large numbers so that the brand can be associat ed with the myriad

rituals, celebrations, festivals, "melas", and other activities where they assemble.

Distribution Strategy

One of the ways could be using company delivery van which can serve two purposes

- it can take the products to the customers in every nook and corner of the market,

and it also enables the firm to establish direct contact with them, and thereby

facilitate sales promotion.

However, only the bigwigs can adopt this channel. The companies with relatively

fewer resources can go in for syndicated distribution where a tie-up between non-

competitive marketers can be established to facilitate distribution. Annual "melas"

organized are quite popular and provide a very good platform for distribution because

people visit them to make several purchases. According to the Indian Market

Research Bureau, around 8000 such melas are held in rural India every year. Rural

markets have the practice of fixing specific days in a week as Market Days (often

called "Haats') when exchange of goods and services ar e carried out. This is another

potential low cost distribution channel available to the marketers. Also, every region

consisting of several villages is generally served by one satellite town (termed as

"Mandis" or Agri-markets) where people prefer to go to buy their durable

commodities. If marketing managers use these feeder towns, they will easily be able

to cover a large section of the rural population.

Promotional Strategy

Firms must be very careful in choosing the vehicle to be used for communication.

Only 16% of the rural population has access to a vernacular newspaper. So, the

audio visuals must be planned to convey a right message to the rural folk. The rich,

traditional media forms like folk dances, puppet shows, etc., with which the rural

consumers are familiar and comfortable, can be used for high impact product

campaigns.


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Some Live Examples

One very fine example can be quoted of Escorts where they focused on deeper

penetration. They did not rely on TV or press advertisements, but rather concentrate d

on focused approach depending on geographical and market parameters like fares,melas, etc. Looking at the 'kuchha' roads of village, they positioned their bike as

tough vehicle. Their advertisements showed Dharmendra riding Escort with the

punch line 'Jandar Sawari, Shandar Sawari'. Thus, they achieved whopping sales of

95000 vehicles annually.

HLL started 'Operation Bharat' to tap the rural markets. Under this operation, it

passed out low-priced sample packets of its toothpaste, fairness cream, Clinic plus

shampoo, and Ponds cream to twenty million households.

ITC is setting up e-Choupals, which offers the farmers all the information, products

and services they need to enhance farm productivity, improve farm-gate price

realization and cut transaction costs. Farmers can access latest local and global

information on weather, scientific farming practices as well as market prices at the

village itself through this web portal - all in Hindi. It also facilitates supply of high

quality farm inputs as well as purchase of commodities at their doorstep.

BPCL introduced Rural Marketing Vehicle (RMV) as their strategy for rural marketing.

It moves from village to village and fills cylinders on the spot for the rural customers.

BPCL considered low-income of rural population, and therefore introduced a smaller

size cylinder to reduce both the initial deposit cost as well as the recurring refill cost.

Conclusion

There is no doubt that the rural India offers tremendous opportunity for any company

to tap. However, companies face many challenges in tackling the rural markets.

Some of the important factors being an understanding of the rural customers' needs,

a reliable distribution channel, and an effective marketing communication strategy to

put their message across to the rural consumer.


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This calls for a paradigm shift in the thinking of the top management of the

companies, which have been reluctant to realize the potential of rural markets. The

mantra for success can be further augmented by the Four A Framework

(Affordability, Acceptability, Accessability & Awareness). These factors will go a long

way in providing the company with market value coverage along with a steady sourceof revenues. The companies which are going to keep in mind the above stated

factors are sure to emerge as winners in the rural markets.

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 market s and exploit them to their best advantage. A

radical change in attitudes of marketers towards the vibrant and burgeoning rural

markets is called for, so they can successfully impress on the 230 million rural

consumers spread over approximately six hundred thousand villages in rural India.

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Documents

Innovation of Rural Marketing