Shri Mansukhbhai J. Medani B.B.A College, Kalol
Advance Marketing Management-II
READING MATERIAL
BBA (6th SEM)
(UNIT III: Rural Marketing)
Prepared By:
Prof. Mayur.Patel
Advance Marketing Management By: Proff. Mayur Patel
UNIT III: Rural Marketing
Introduction: Rural Marketing is defined as any marketing activity in which the one
dominant participant is from a rural area. This implies that rural marketing consists of
marketing of inputs (products or services) to the rural as well as marketing of outputs
from the rural markets to other geographical areas.
•
Villages are the heart of India, 75% of population lives in 6,38,365 villages.
•
90% is concentrated in the village having population less than 2000.
•
Rural segment comprises 13.5 crore households which constitute 72% of total
households in India.
•
55.6% contribution to the national income by 74.6 crore rural population.
•
The annual household income for rural areas in 2002 was Rs 56,630 as
compared to Rs 1, 02,963 in urban area.
•
Per capita monthly expenditure worked out to Rs 49.09 rural and Rs 56.64 for
urban (1973-74).
•
As of December 2005, monthly family expenditure is Rs 1,840 for a family of five
in rural areas and Rs 2,795 in urban areas.
•
32.5 crore Indians lived below poverty line -1/3 of the country population.
•
The percentage of BPL population varies significantly from one state to other (ex)
Orissa 48%, Punjab 6%.
•
Rural consumption in FMCG Rs 65,000 crore ,
•
Urban spend twice on health compare to rural.
•
42 million, rural, - 27 million, urban – avail banking services.
•
The agriculture sector’s average annual growth fell to 1.94%, but the FMCG
growth was around 12%.
Advance Marketing Management By: Proff. Mayur Patel
•
The rural literacy level has improved in the recent past from 36% to 59%
•
55%reported at least secondary education
•
Almost 56% had an electricity connection in 2005
•
90% of rural households in Punjab and goa are electrified
•
25% Jharkhand, 10.3% in Bihar
•
Bringing down the poverty level from 55% to 36%, Ranked 138th as per the
human development report.
•
Number of Towns and Villages in India
No. of towns 2001 (5,161), No. of villages 2001 *(640,000)
Source: Census of India, 2001. Note: * Approximate
Meaning of Rural: Collin’s co build dictionary describes the word rural as “places for
away from towns or cities”. Sociology point of view rural is defined as a group of
people who are traditionalists input look, rooted in the land and who resist change.
Meaning: Planning & Implementation of marketing function for Rural Areas.
Definition Rural marketing:
“Rural marketing has been defined as the process of developing, pricing,
promoting, distributing, rural specific goods & service leading to exchange
between urban & rural markets, which satisfies consumer demand & also
achieves organizational objectives.”
“Rural Marketing has also been defined as the process of developing, pricing,
promoting, distributing rural specific goods and a service leading to exchange
between urban and rural markets, which satisfies consumer demand and also
achieves organizational objectives”. (Iyer)
Advance Marketing Management By: Proff. Mayur Patel
Nature of Rural market:
1. Large, diverse and scattered market: Rural marketing in India is large, and
scattered into a number of regions. There may be less number of shops available to
market products.
2. Major income of rural consumers is from agriculture: Rural prosperity is tied with
agriculture prosperity. In the event of crop failure, the Incomes of masses are directly
affected.
3. Traditional outlook: Villages develop slowly and have a traditional outlook. Change
is a continuous process but rural people accept change gradually. This is gradually
changing due to literacy especially in the youth who have begun to change the
outlook in the villages.
4. Standard of living and rising disposable income of the rural customers: It is
known that majority of the rural population lives below poverty line and has low
literacy rate, low savings etc. Today the rural customers spend money to get value
and are aware of the happening around him.
5. Rising literary levels: It is documented that approximately 45% of rural Indians are
literate. Hence awareness has increase and the formats are well informed about the
world around them. They are also educating themselves on the new technology for a
better lifestyle.
6. Diverse socio economic background: Due to differences in geographical areas
and uneven land fertility, rural people have different socio economic background,
which ultimately affects the rural markets.
7. Infrastructure
facilities:
The
infrastructure
facilities
like
warehouses,
communications systems and financial facilities (or) inadequate in rural areas
physical distribution are a challenge to marketers who has found innovative ways to
market their products.
Advance Marketing Management By: Proff. Mayur Patel
Characteristic of Rural market:
1. Large population: A/c to 2001 census, rural population constitutes about 73% of
the Indian population.
Year
1901
1951
1971
1981
1991
2001
Rural Population
89%
83%
80%
76%
74%
73%
2. Occupation pattern:
Agriculture and related activities are the major source of income for majority of the
rural population. More than 60% of rural income is from agriculture. In the event of
crop failure, the income of the rural masses is directly affected.
3. Large, diverse and scattered market:
Though large, the rural market is geographically scattered. There may be less
number of shops available to market products. Diverse and heterogeneous market in
terms of religious, linguistic, social and cultural factors. About 700 million Indians live
in 6 38 365 villages across India.
4. Socio-economic position:
Majority of rural people have low purchasing power and per capita income. More
than 60% have income less than 25000 rupees. About 14% have income greater
than 50000 rupees. Low disposable income.
5. Low literacy level:
It is estimated that rural India has a literacy level of 36% as compared to 62% in the
urban areas.
6. Low standard of living:
Low income, low purchasing power, overall social and economic backwardness lead
to low standard of living. In general a rural consumer
7. Distance:
Villages nearer to towns have elements of the urban life. Interior villages are more
traditional.
Advance Marketing Management By: Proff. Mayur Patel
8. Inadequate infrastructure facilities:
Infrastructure facilities like cemented roads, warehouses, and communication
system are inadequate in rural areas. About 20% of the six lakh villages are without
telephone facility even today. About 50% of the markets are not connected by road.
Most of the roads are kachha and become unusable during rainy season.
9. Traditional outlook:
Villages develop slowly and have a traditional outlook. They accept changes
gradually.
10. Diverse socio-economic background:
Due to dispersion of geographical areas and uneven land fertility, rural people have
diverse socio-economic background.
11. Medical facilities:
Medical facilities are quite inadequate and the villagers have to travel long distances
for getting medical treatment. The media reach in rural household is low. Statistics
indicates that the reach of Print media is 10%, followed by TV 31%, Radio 32% and
Cinema 36%.
Advance Marketing Management By: Proff. Mayur Patel
Importance of Rural Marketing:
1. Large population: 742 million Indians constituting 138 million households reside in
6,38,365 villages. The size of rural market itself speaks of its potential
2. Growth in market: The market has been growing at 3-4% per annum adding more
than one million new consumers every year.
3. IT penetration in rural India: Today's rural children and youth will grow up in an
environment where they have 'information access' to education opportunities, exam
results, career counseling, job opportunities, government schemes and services,
health and legal advice and services,
worldwide news and information, land
records, mandi prices, weather forecasts, bank loans, livelihood options.
4. Impact of globalization: Globalization will have its impact on target groups like
farmers, youth and women. Farmers, today 'keep in touch' with the latest information
and maximize both ends. On youth its impact is on knowledge and information and
while on women it still depends on the socio-economic aspect. The marketers who
understand the rural consumer and fine tune their strategy are sure to reap benefits.
5. Increasing income and purchasing power: The agricultural development
programs of the government have helped to increase income in the agricultural
sector. These in turn have created greater purchasing power in rural markets.
6. Accessibility of markets: The attraction of a market depends not only on its
potential but also on its accessibility. The road network has facilitated a systemized
product distribution system to villages. An increasing number of companies are
supplying village markets directly. Increasing direct contacts to villages helps
product promotion and availability of the product in the village shop.
7. Consumer behavior changes: Increased literacy and greater awareness in rural
markets create new demands and discriminating buyers. This is observed more in
the younger generation. In villages today, this segment of buyers consumes a large
variety of products, both durables and 12 non-durables. There is a visible increase in
the consumption and use of a variety of products, which is easily observed.
Advance Marketing Management By: Proff. Mayur Patel
8. New employment opportunities: Government schemes like IRDP (Integrated
Rural Development Programme), JRY (Jawahar Rozgar Yojana) and TRYSEM
(Training Rural Youth for Self Employment) have created new employment
opportunities in Rural India. Co-operative banks and Public sector banks are
extending loans to rural people, thereby creating job opportunities for them.
9. Green revolution: The vision of Dr. Swami Nathan, the father of the green
revolution to achieve self-sufficiency in food grain production in 1995, gave a major
breakthrough in food grain production by the use of scientific methods in agriculture.
At present, Rural India generates 299 million tons annually.
10. Various government policies: The government stress on self-sufficiency resulted
in various schemes like Operation Flood (White Revolution), Blue Revolution, Yellow
Revolution, etc. resulted in the production of 15 million tons of milk per annum.
11. Better credit facilities through banks: With co-operative banks taking the lead in
the rural areas, every village has access to short, medium, long-term loans from
these banks. The credit facilities extended by public sector banks through Kisan
Credit Cards help the farmers to but seeds, fertilizers and every consumer goods on
installments.
12. Green card / credit card for farmers: The government initiated credit cards for
farmers through public sector banks. The farmer had a choice to take short or
medium term loans through these credit cards to buy seeds, fertilizers, etc. This
enabled him to produce more and thereby increase his income.
13. Improved exports due to export policy: The new Export Policy 2000 paves the
way for open market status for agriculture. WTO Policy for agro-exports has
increased exports of Indian agricultural produce thereby increasing incomes of the
rural population.
14. Increased demand for products: The role cable television has been noteworthy in
bringing about the change in rural people’s mindset and influencing their lifestyles.
Advance Marketing Management By: Proff. Mayur Patel
Rural Marketing Mix ( 4A’s of rural marketing mix):
The Indian rural market contributes 50% in the total sales of durable and nondurable
products. The rural consumer is not unlike his urban counterpart in many ways. The
Indian rural market is growing faster than the urban market. The four as of rural
marketing is similar to marketing mix. The four A’s of rural marketing are as follows.
1. Product (Acceptability): Implies that a product should be readily acceptable by
rural customers. Marketing mix should be properly designed to suit the rural
customers.
Example: Philip develops a TV ‘Vardaan’ for rural markets. This TV work on the
voltage 90-270 volts.
Philips developed ‘Free Power radio’ this radio do not require power and battery
also. It run on simple winding of level provided in the set.
2. Price (Affordability): Refers to the ability of customers to pay for the product. The
price of products should be set to match the income level of rural customers.
Affordability does not mean that the marketer should provide cheaper products but
the product should be brought into the range of ability to pay. The income of rural
population is less than urban population so they cannot invest a large sum on a
single product. Therefore, rural population prefers to buy small quantity of products,
which are affordable for them.
Example: Hindustan Lever, among the first MNCs to realize the potential of India's
rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs
2 for 50 gm. Godrej recently introduced three brands of Cinthol, Fair Glow and
Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh,
Bihar and Uttar Pradesh the so-called `Bimaru' States.
3. Place (Availability): Refers to the reach of a distribution channel in the rural market.
Distribution is the biggest problem of the rural market due to lack of transportation
facilities. In rural areas, retailers maintain good relationships with customers;
Advance Marketing Management By: Proff. Mayur Patel
therefore, it takes less time to sell a new product. An organization should adopt the
best distribution channel to reach the rural market with minimum cost possible.
Example: LG Electronics defines all cities and towns other than the seven metros
cities as rural and semi-urban market. To tap these unexplored country markets, LG
has set up 45 area offices and 59 rural/remote area offices.
4. Promotion (Awareness): Refers to promotional activities to provide information to
customers. The best media to reach the rural market are TV and radio. The
organization should conduct awareness programs in local languages to convey the
message.
Example: new promotional scheme titled - ‘Ghar Ghar Ki Pehchaan'. In this first of
its kind initiative, Hyundai Motor would extend special schemes for government
employees in rural areas and members of Gram Panchayats on the purchase of the
Hyundai Santro
Launched on May 1, the ‘Ghar Ghar Ki Pehchaan' scheme will continue till July 31,
2008. Through this special rural scheme Hyundai Motor India plans to touch base
with at least 58 per cent of Indian villages with a population of 500 or more.
Advance Marketing Management By: Proff. Mayur Patel
Reasons for Rural Market boom:
 Increase in population and hence increase in demand.
 A marked increase in the rural income due to agrarian prosperity.
 Standard of living is also increasing in rural areas.
 Large inflow of investment for rural development programmes from government and
other sources.
 Increased contact of rural people with their urban counterparts due to development
of transport and wide communication network.
 Increase in literacy and educational level and resultant inclination to sophisticated
lives by the rural folks.
 Inflow of foreign remittances and foreign made goods into rural areas.
 Change in the land tenure systems causing a structural change in the ownership
patterns and Consequent changes in the buying behavior.
 Rural markets are laggards in picking up new products. This will help the
companies to phase their marketing efforts. This will also help to sell inventories of
products out dated in urban markets.
Advance Marketing Management By: Proff. Mayur Patel
Problems and Challenges in Rural Marketing:
1. Understanding the rural consumer: The biggest challenge is to understand the
perceptions, viewpoints and actual needs of the rural people, which is dramatically
different from urban people.
2. Low per capita income: India is the fourth largest economy in the world due to a
strong economic growth but still has a low per capita income of Rs. 53331. It results
in low consumption pattern as compared to the urban population.
3. Low literacy levels: There are not enough opportunities for education in rural
areas. The literacy level is as low (36%) when compared to all-India average of
52%.
4. Seasonal Demand: Demand for goods in rural markets depends upon agricultural
situation, as agriculture is the main source of income. Agriculture to a large extent
depends upon monsoon and, therefore, the demand or buying capacity is not stable
or regular.
5. Lack of proper infrastructure and other physical facilities: Nearly 50 percent of
the villages do not have all weather roads. Physical communication to these villages
is highly expensive. Even today, most villages in eastern part of the country are
inaccessible during monsoon season. Many rural areas are not connected by rail
transport. About 20% of the six lakh villages are without telephone facility even
today.
6. Availability of duplicate and cheap brands: Customers in rural India are very cost
sensitive. Therefore the existence of duplicate brands, which are quite common in
rural parts, at lesser prices gives considerable competition to the firms.
7. Traditional outlook: Due to the traditional outlook of rural consumers, they are
resistant to change. Life in rural areas is still governed by customs and traditions and
people do not easily adapt new practices. For example, even rich and educated
class of farmers does not wear jeans or branded shoes. There is a lack of desire of
new things and styles.
Advance Marketing Management By: Proff. Mayur Patel
8. Many language and Dialects: The number of languages and dialects vary from
state to state and region to region. The Indian constitution recognizes 18 official
languages. Hindi only has more than ten variations. Hindi spoken in Rajasthan is
different from Hindi spoken in Bihar or Hindi of Himachal Pradesh.
9. Barter system: It means exchange of goods for goods. This system is practiced in
the developing country like India, even today. This is a major obstacle in the way of
development of rural marketing.
10. Inadequate Media coverage for Promotions: Television has made a great impact
and large audience has been exposed to this medium. Radio reaches large
population in rural areas at a relatively low cost. Reach of formal media is low in
rural households.
11. Slow purchasing decision: Rural consumers are cautious in buying and decisions
are slow and delayed. They like to give a trial and only after being personally
satisfied, do they buy the product.
12. Problems
in
Transportation
and
Distribution: The
poor
state
of
rural
infrastructure is one of the major concerns of most of the companies planning to
invest in this sector. Though the rural population is vast it is not possible to form an
effective distribution system and reach out to a considerable number of target
consumers. The presence of too many tiers in the distribution system increases the
cost of distribution. On availability of dealers and poor viability of outlets add to the
challenges.
13. Cultural Factors: Culture is a system of shared values, beliefs and perceptions that
influence the behavior of consumers. There are different groups based on religion,
caste, occupation, income, age, education and politics and each group exerts
influence on the behavior of people in villages.
Advance Marketing Management By: Proff. Mayur Patel
Difference between Rural & Urban Marketing:
Although rural marketing offer immense potential marketers used to recognize the fact
That there are considerable differences in many aspects including the nature,
characteristics, using patterns & behaviors of rural consumer when compared with their
urban counter parts.
The consumer demand and consumption patterns also differ across rural and urban
areas, in many products rural consumption now accounts for a large share then urban.
In washing Soaps the rural share is over 60%. In popular both soaps it is more than
50% and in batteries it is more than 56% similarly is the case with packed tea & hair
oil’s
Urban marketing
Rural marketing
Crate relationship by offering integrated
innovation in product or service.
Crate relationship by inclusive growth of
product or service.
Buyer looks for style, quality &novelty.
Buyer looks for quality products that offer
value for money.
Internet, TV channels, mobile, are used for
research.
Interactive approaches, observation, rating
scale are used for research.
Psycho graphic, usage based
segmentation is the main base of divide
the market.
Demographic & geographic segmentation
can be the base of divide the market.
Marketing goal is capture market share,
image, and profitability.
Create a brand name then capture the
market with enough profitability.
Sophisticated technology can be used to
create product.
Primarily appropriate technologies can be
used for rural innovation.
Consumers take purchasing decision
emotionally &rationally
Consumers are too much emotional to
take purchasing decision.
Advance Marketing Management By: Proff. Mayur Patel