RURAL MARKETING :
ISSUES AND CHALLENGES
BY :
Mahavir jain (M.B.A,MKTG.) 2005-2007
Faculty of management studies
Udaipur ,Rajasthan
Structure of the presentation
Rural India –an introduction
Importance of rural marketing
The rural market size
Factors driving the growth
Hurdles in rural marketing
Major challenges for an Indian MBA
Strategies for rural marketing
Examples from the Indian corporate
DEFINATION OF URBAN AREA
ACCORDING TO CENSUS-2001
1. All places falling within the administrative limits of a
municipal corparation,municipality,etc. and having a
population of at least 5000.
2. At least 75% male working population in outside the
primary sector.
3. The density of population should be at least 400 per square
k.m.
Rural marketing framework :
1. THE RURAL TO URBAN TRANSACTIONS
These mainly include agricultural products like
food grains ,oilseeds, cotton ,sugarcane [Link]
finished products like handlooms, textiles,
earthenware, brass- ware etc by rural industries,
craftsmen and artisans that find a market in the
urban areas.
2. THE RURAL TO RURAL TRANSACTIONS
Here production and consumption is limited to rural
areas. It includes agricultural tools,baskets,ropes,
household goods, earthenware etc produced by
artisans like blacksmiths ,carpenters and cobblers.
3. URBAN TO RURAL FLOW
It is the flow of manufactured traded goods
namely consumables ,durables and agricultural
inputs etc.
IMPORTANCE OF RURAL
MARKETING
1. Urban markets are becoming increasingly
complex, competitive and saturated.
2. Large size of rural markets –
742 million people (73 % of the population)
200 million households (70% of total
households)
FACTS SAYS IT ALL
The annual consumer durable market for products like colour t.v’s,washing
machines, refrigerators and air conditioners is growing at 7-10 %.
While the rural market is zooming at 25 % .
HAVE A LOOK…..
F.m.c.g – Rs.65000 crores (53 % share in total revenues)
Rs.5000 [Link] agri inputs
Rs.45000 [Link] tractors
Rs.8000 [Link] two and four wheelers.
50 % of India’s national income is generated in rural
India.
HLL,Colgate Palmolive ,Toyato – 50 % revenues
coming from rural areas.
Hero Honda- 40 %
Kinetic motors – 30 %
Godrej- 30%
Product penetration in terms of % of
rural households
PRODUCT YEAR 2003
AUDIO SYSTEM 22.3
MOTOR CYCLES 3.17
REFRIGERATERS 3.53
TELEPHONES 4.77
TELEVISION 24.91
WASHING MACHINE O.35
Rural share in market for consumer goods
Rural Share 1989-90 1992-93 1998-99 2004-2005
Over 75% Radio/ Transistors Bicycle. Bicycle. Bicycle.
Radio/Transistors Radio/Transistors, Radio/Transistors,
Mechanical Wrist Mechanical Wrist
1 2 4 Watch, B&W TV 6 Watch, B&W TV,
Pressure Cooker,
Cassette Recorder
50-75% Bicycle, Motor Cycle, Table Fan, Sewing Cassette Recorder, Table Fan, Ceiling Fan,
Table Fan, Sewing Machine, Mechanical Pressure Cooker, Sewing Machine, Motor
Mechanical Wrist Wrist Watch Table Fan, Ceiling Cycle, Quartz Wrist
5 Watch 4 7 Fan, Sewing Machine, 6 Watch, Moped
Motor Cycle, Quartz
Wrist Watch
30-50% Moped, B&W TV, Moped, Motor Cycle, Moped, CTV, CTV, Mixer/Grinder,
Cassette Recorder, B&W TV, Cassette Mixer/Grinder, Scooter, Electric Iron
Pressure Cooker, Recorder, Pressure Scooter, Electric Iron
7 Electric Iron, Ceiling 8 Cooker, Electric Iron, 5 4
Fan, Quartz Wrist Ceiling Fan
Watch
20-30% Scooter, Scooter, Refrigerator Refrigerator
2 Mixer/Grinder 2 Mixer/Grinder 1 1
10-20% CTV, Refrigerator Refrigerator VCR/VCP, Washing VCR/VCP, Washing
2 1 2 Machine 2 Machine
5-10% Washing Machine VCR/VCP, Washing - -
1 2 Machine 0 0
Below 5% 1 VCR/VCP 0 - 0 - 0 -
Income distribution (Million population)
400 400
352
305
312 288 272
300 2001-02 300 2009-10
200 153 200 170
130
90 79
100 41 100
17
0 0
2001-02
Low Low er middle Middle high Low Low er middle Middle high
Rural Urban Rural Urban
Distribution of Monthly Per Capita expenditure
Urban Rural
Food 51.5 63.7
Consumer goods 19.6 13.1
Fuel, clothing & foot wear 13.9 14.8
Medical 5.5 5.5
Education 5.1 2.5
Rent & taxes 4.5 0.4
Source: Household Consumer Expenditure
Survey, January–June 2004
Brand with
Category
CATEGORY Penetration
highest
penetration
Toilet Soap 91% Lifebuoy
Washing cakes/Bars 88% Wheel
Tea 77% Lipton Taaza
Washing powder / liquid 70% Nirma
Salt 64% Tata Salt
Biscuits 61% Parle G
CONTRIBUTING FACTORS
1. Agriculture revolution
Consistent good monsoons
Better procurement prices fixed for various crops.
Better yields due to many research programs (HYV
seeds provided by the government)
2. New improved tax structures
3. Spread of education
4. Improved infrastructure
5. Better banking facilities
(financial assistance given by NABARD)
6. Government schemes like IRDP,JRY.
7. Increased expenditure in plan outlay (from 14000
[Link] 7th plan to 30,000 [Link] 8 th plan.
8. Increased penetration of electronic media
9. Life style changes
50 % of today’s rural income is not coming
from the agriculture sector.
Up gradation from local brands to branded ones and from low
priced bands to premium ones.
Increasing influence of the youth in the buying decisions.
HURDLES IN RURAL MARKETING
1. High distribution costs
2. Low per capita disposable income that is half the
urban disposable income.
3. Large no. of daily wage earners
4. Acute dependence on the vagaries of the monsoons
5. Seasonal consumption linked to harvest and festivals
Contd.
6. Inaccessibility to conventional advertising media
7. Poor roads,power problems
8. Banking and credit problems
9. High initial market development expenditure
[Link] and dealer network problems
Contd.
11. Highly dispersed and thinly populated markets
12. Social and cultural backwardness of the rural
masses.
13. Low level of exposure to different product
categories and product brands.
14. Cultural gap between urban based marketers and
rural consumers.
MAJOR CHALLENGES
I. AVAILABLITY
First and the foremost challenge
India's 6,38,365 villages are spread over 3.2 [Link].
720 mn people-reaching them is not easy
Given the poor state of roads ,it is an even greater
challenge.
Companies like H.L.L has made strong distribution
Networks. To service remote villages stockiest use
Rickshaws, carts and even boats in the back waters of
Kerala.
II. AFFORDABLITY
With low disposable incomes, products need to be affordable
to rural consumers ,most of them are on daily wages.
Some companies have addressed the affordability problem by
introducing small unit packs :
GODREJ Introduced Cinthol and Fairglow in 50 gram
packs priced at rs.4
coca-cola introduced Sunfill ( a powdered soft drink
concentrate ) 25 gram pack priced at rs.2
III. ACCEPTABLITY
Next challenge is to gain acceptability for the
product or service.
Therefore there is a need to offer products that
suit the rural markets and conditions.
coca-cola is providing low cost ice-boxes
because of the lack of electricity and refrigerators
in the rural areas.
IV. AWARENESS
With large parts of rural India inaccessible to conventional
advertising media, building awareness is another
challenge.
Companies like H.L.L uses posters, banners and
Wall paintings to create awareness.
STRATEGIES FOR RURAL MARKETING
1. Being first on the shelf
It is very important because the brands rarely fight with
each other as the retailers generally stock a single brand
in a product category.
2. Different means of advertising
A. Haats and melas
A survey by MART (marketing and research
team revealed that 47000 haats and 25000
melas take place every year in India.
B. Performance arts including theatres,songs,dance
puppetry, magic shows etc.
Advantages
1. Large visitor turnaround.
2. These melas are held during post harvest season,
when the purchasing power of the people is more.
The companies provide touch and feel demonstrations and
distributed free samples.
Rural Markets advertising points
HLL has played a dominant role in exploring the
potential of rural India with its various projects-
1. PROJECT STREAMLINE
2. PROJECT BHARAT
3. PROJECT SHAKTI
CAVIN CARE
This company first come out with the concept of sachets and
it revolutionize the whole market, making the Chic
shampoo the 2nd largest selling shampoo in India
What followed was the flood of products in small packing
ranging from toothpaste,facecreams,soaps,hairoil etc.
NIRMA
This company introduced the innovative technique of
using video vans for marketing Nirma products .
Advantages
1. Reach to interior parts
2. Offer opportunity for personal interaction .
Similar strategies helped Ghadi to become the 3rd
largest selling detergent.
L.G
The top brass closed down on 2 points
1. The company figured that it needed new cheaper products to
lure the rural buyers .
The company did this by introducing a cheaper range of
TV's by the name of “ Sampoorna”.
2. More offices in small town was the need of the hour.
The company went on in a office opening spree and
currently it has 178 branch offices.
COCA-COLA
1. Increase in number of outlets from 80,000 in 2001 to
190,000 in 2005 resulting in increased market penetration
from 13 % to 28 %.
2. It also tapped the local form of entertainment like
annual haats and fairs and made huge investment in
infrastructure for distribution and marketing.
3. It brought down the average price of its products
from rs.10 to rs.5,therby bridging the gap between
soft drinks and other local options like tea,
buttermilk or lemon water.
4. It doubled the spend on doordarshan
5. It concentrated its entire advertising
towards the rural customer.
As a result the rural market accounts for 80 % of the
new coke drinkers and 30% of its total volumes.
I.T.C [Link]
The company’s e-chaupal initiative is a novel idea which
bypasses the brokers between the Company and the
farmers.
It is helping Indian agriculture to enhance its
competitiveness by empowering Indian farmers
through the power of internet .
This unique transformational strategy has
become the subject matter of a case study at
Harvard b school ,has created for I.T.C a huge
rural distribution infrastructure ,significantly
enhancing the company’s marketing reach.
Formed in 1946,it is a brand name managed by
an apex cooperative organization ,Gujarat co-
operative milk marketing federation limited
which today is jointly owned by some 2.41
million milk producers in Gujarat.
It has been a sterling example of right mix of
rural marketing and has established itself as a
uniquely appropriate model for rural
development.
Amul has spurred the white revolution in
India and it is today the world’s biggest cheese
brand.
parle [Link]
ONIDA
The company introduced its igo range of t.v’s
priced cheaply at rs.5000 for 14 inches particularly to
cater to the backward states like Bihar, Rajasthan and
Uttar Pradesh.
CONCLUSION
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.
