RURAL MARKETING

Before getting into issues like whether the Indian rural market stands and the
opportunities for corporate’s to explore it or not ... let's look at the definition of
rural India According to the census of India, villages with clear surveyed
boundaries not having a municipality, corporation or board, with density of
population not more than 400sq.km and at least 75 per cent of the male working
population engaged in agriculture and allied activities would qualify as rural. So,
from the above stated conditions, there are 638,000 villages in the country. Of
these, only 0.5 cent has a population above 10,000 and 2 per cent have
population between 5,000 and 10,000..

Now for some facts and figures The Indian rural market today accounts for only
about Rs 8 billion (53 per cent - FMCG sector, 59 per cent durables sale, 100 per
cent agricultural products) So clearly there seems to be a long way ahead.

Prospects for companies planning to enter rural market or what is the

potential of rural market

Seventy percent of India's population, or approximately 700 million people, live

in rural areas. 75 percent of the population is agrarian. With such a large
number of potential consumers, it is clear why multinational corporations would
like to successfully penetrate the rural Indian market.

 Large, Diverse and Scattered Market: Rural market in India is large,

and scattered into a number of regions. There may be less number of
shops available to market products.
 Major Income of Rural consumers is from Agriculture: Rural
Prosperity is tied with agriculture prosperity. In the event of a crop failure,
the income of the rural masses is directly affected.
 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 per capital income, societal
backwardness, low savings, etc. But the new tax structure, good
monsoon, government regulation on pricing has created disposable
incomes. Today the rural customer spends money to get value and is
aware of the happening around him.
 Changing Outlook: Villagesvhave a traditional outlook. Change is a
continuous process but most rural people accept change gradually.
 Rising literacy levels: It is documented that approximately 45% of rural
Indians are literate. Hence awareness has increases and the farmers are
well-informed about the world around them. They are also educating
themselves on the new technology around them and aspiring for a better
lifestyle.
 Infrastructure Facilities: The infrastructure facilities like cemented
roads, warehouses, communication system, and financial
facilities,transportation facility are inadequate in rural areas. Hence
 physical distribution is a challenge to marketers who have found
innovative ways to market their products.

1 Large population
2 Rising prosperity
3 Growth in consumption
4 Life cycle changes
5 Life cycle advantages
6 Market growth rate higher than urban
7 Rural marketing is not expensive
8 Remoteness is no longer a problem

1. Growth in consumption:

2. Life style changes:

3. Market growth rates higher: Growth rates of the FMCG market

and the durable market are higher in rural areas for many products. The
rural market share will be more than 50% for the products like toilet soaps,
body talcum powder, cooking medium (oil), cooking medium (vanaspati),
tea, cigarettes and hair oil.

4. Rural marketing is not expensive: Conventional wisdom dictates that

since rural consumers are dispersed, reaching them is costly. However, new
research indicates that the selling in Rural India is not expensive.This
includes the expenses of advertising in vernacular newspapers, television
spots, in-cinema advertising, radio, van operations and merchandising and
point of purchase promotion. Campaign like this, which can reach millions,
costs twice as much in urban area.

5. Remoteness is no longer a problem: Remoteness in a problem but not

insurmountable. The rural distribution is not much developed for the
reasons,

 Lack of proper infrastructure such as all-weather roads,

electrification and sanitation, and
 Lack of marketer’s imagination and initiative.
Marketers have so far, failed in analyzing the rural side and exploiting rural
India’s traditional selling system- Haats & Melas.Their near obsession with just
duplicating the urban-type network and that too with very limited success, has
kept them blind to the potential of these two outlets.

Consumption pattern of rural india

The total number of rural households is expected to rise from 135 million in
2001-02 to 153 million in 2009-10. Thus, this is likely to result in rural India
becoming the largest potential market in the world
An increase in the education level and media exposure has led to significant
changes in the consumption pattern of rural India.

the share of milk and milk products, egg, fish, meat, fruits and nuts has
increased by about one percentage point each, vegetables by 2.5 percentage
points while that of beverages, refreshments and processed food has increased
by two percentage points since 1972-73 whereas it has decreased for cereals.

In rural India, expenditure on cereals forms 18 per cent of the total consumption
expenditure at present compared with 40 per cent in 1972-73, according to the
report.

According to the National Council of Applied Economic Research (NCAER), an

independent, non-profit research institution, rural households form 71.7% of the
total households in the country. Spending in this segment is growing rapidly and
consumption patterns are closing in on those of urban India.

"No consumer goods company today can afford to forget that the rural market is
a very big part of the Indian consumer market. You can't build a presence for a
brand in India unless you have a strategy for reaching the villages."

however, the penetration is still low .the low penetration rates can be attributed
to three major factors:
low income levels,
inadequate infrastructure facilities and
different lifestyles.
But income levels are going up, infrastructure is improving and lifestyles are
changing. Almost a third of the rural population now uses shampoo compared
with 13% in 2000,

Indians have a very low disposable income. Most rural homes have minimal
storage space and no refrigeration. Very few people own or have access to cars.
As a result, rural Indian purchasing habits tend to be of an "earn today, spend
today" mentality.

Rather than buying in bulk, which would mean paying more for a large quantity
upfront, rural Indians tend to buy what they need for short segments of time.
These factors result in consumers buying products locally, as well as on a daily
basis. In addition to the fact that income levels are low, rural incomes also vary
greatly depending on the monsoons. When a monsoon hits, this devastates the
livelihood of most rural consumers because they are dependent on agricultural
work for income. Corporations are also directly affected because this makes it
difficult to predict demand.

Before a company considers entering the rural market, understanding the types
of products and packages that rural Indians typically use is crucial.
For example, urban Indian consumers would typically use toothpaste for
brushing their teeth, while most rural Indians prefer using tooth powder .
As a company seeking to enter India's market with an oral care product, this
would be an important fact to know and consider during both the product and
package development stages. Similarly, Hindustan Unilever Ltd. (HUL), the
Indian subsidiary of Dutch-based Unilever, discovered that rural Indians tend to
use the same soap for washing everything from hair to their bodies to clothing (if
they use any soap at all). Because HUL manufactures products including various
soaps and detergents, HUL product and packaging development processes have
taken this rural habit into account by designing all-in-one soaps. By taking into
account the low disposable incomes and the unique product and package needs
of this market, consumer products that are designed and packaged for this
market have great potential.

Any company starting to venture in rural Indian market must have to look into
these aspects and after that, schedule their next steps, because one-step wrong
from their side can ruin their whole brand image in other parts of the country
also.

marketing to rural customers often involves building categories by persuading

them to try and adopt products they may not have used before. "A company like
Colgate has to build toothpaste as a category, which means convincing people to
change to toothpaste instead of using neem twigs to clean their teeth, which was
the traditional practice," he says. "This is difficult to do and requires patience
and investment by companies. It's not like getting someone to switch brands."

Companies that have figured this out are doing better in the villages than in the
cities. Soft drinks giant Coca-Cola is growing at 37% in rural markets, compared
with 24% in urban areas. According to Hansa Research, a market research firm
that has published a Guide to Indian Markets 2006, the penetration of consumer
durables has risen sharply in India's in recent years. In color TVs, sales are up
20%; in motorcycles, 77%. In absolute numbers, however, the penetration is
still low. Coke, for instance, reaches barely 25% of the rural market. This means
the upside potential is huge for companies that develop effective rural marketing
strategies.

rural India already accounts for the lion's share. According to MART, a New
Delhi-based research organization that offers rural solutions to the corporate
world, rural India buys 46% of all soft drinks sold, 49% of motorcycles and 59%
of cigarettes. This trend is not limited just to utilitarian products: 11% of rural
women use lipstick.

Challenges for entering Indian Rural Markets

There are several challenges that make it difficult to progress in the rural
market. Marketers encounter a number of problems like :-

1. Standard of living: The number of people below the poverty line is more
in rural markets. Thus the market is also underdeveloped and marketing
strategies have to be different from those used in urban marketing.
2. Low literacy levels: The low literacy levels in rural areas leads to a
problem of communication. Print media has less utility compared to the
other media of communication.
 3. Low per capita income: Agriculture is the main source of income and
hence spending capacity depends upon the agriculture produce. Demand
may not be stable or regular.
4. Transportation and warehousing: Transportation is one of the biggest
challenges in rural markets. As far as road transportation is concerned,
about 50% of Indian villages are connected by roads. However, the rest of
the rural markets do not even have a proper road linkage which makes
physical distribution a tough task. Many villages are located in hilly
terrains that make it difficult to connect them through roads. Most
marketers use tractors or bullock carts in rural areas to distribute their
products. Warehousing is another major problem in rural areas, as there
is hardly any organized agency to look after the storage issue. The
services rendered by central warehousing corporation and state
warehousing corporations are limited only to urban and suburban areas.
5. Ineffective distribution channels: The distribution chain is not very
well organized and requires a large number of intermediaries, which in
turn increases the cost and creates administrative problems. Due to lack
of proper infrastructure, manufacturers are reluctant to open outlets in
these areas. They are mainly dependent on dealers, who are not easily
available for rural areas. This is a challenge to the marketers.
6. Many languages and diversity in culture: Factors like cultural
congruence, different behaviour and language of the respective areas
make it difficult to handle the customers. Traits among the sales force are
required to match the various requirements of these specific areas.
7. Lack of communication system: Quick communication is the need of
the hour for smooth conduct of business, but it continues to be a far cry in
rural areas due to lack of communication facilities like telegraph and
telecommunication systems etc. The literacy rate in the rural areas is
rather low and consumer’s behaviour in these areas is traditional, which
may be a problem for effective communication.
8. Spurious brands: Cost is an important factor that determines purchasing
decision in rural areas. A lot of spurious brands or look-alikes are
available, providing a low cost option to the rural customer. Many a time
the rural customer may not be aware of the difference due to illiteracy.
9. Seasonal demand: Demand may be seasonal due to dependency on
agricultural income. Harvest season might see an increase in disposable
income and hence more purchasing power.
10. Dispersed markets: Rural population is highly dispersed and requires a
lot of marketing efforts in terms of distribution and communication.

Factors that will decide the success of rural marketing initiative

1. Research: A research should be conducted before launching the business.

The research may be Primary or Secondary one. If it is primary then it
sounds good, as there will be more clarity about the Business and
Opportunities. This is about studying the market before entering.
2.Segmentation:The most important factor is the segmentation , as the rural
market consists of different groups and socio economic class. They have different
lifestyles, Cultures, Economy, and Demography backgrounds. So the company
should think of this and make the segmentation in a perfect manner. Depending
upon the product and business the company should keep some parameters to
make the segmentation. The parameters should be selected in such a way that it
effects the demand of the product.

3. Lifestyle Analysis: The people will be from different cultures and demographic
background. So they will be having different lifestyles and needs. Depending
upon their way of thinking and Lifestyle the company need to understand to
think of their product. The lifestyle of the consumer makes an impact on the
demand of the product . So by this analysis the company can draw their
strategies to market the product.

4. Profile Study: The company should develop a profile for the rural consumers.
The profile helps the company while designing the marketing mix . The profile
should be in a proper manner which impacts the designing and marketing of the
product. For developing such profiles local organizations/players can help out.

5. Defining Needs: The main theme of the company should look for the needs of
the consumer. As from the above factors the marketer can be able to identify the
needs which are suitable to their lifestyles. After that they should define the
exact need of the customer. In general terms they should define the needs so as
to work out on the target market.

6. Target Market: After so many steps of work flow process the company can
easily identify that their product is going to match or not that is The way of
matching in their marketing Mix / Business Strategy with the rural market. So by
doing all this the company can target a market from the segmented market . So
by selecting a segment they can target the group with their strategies and
Marketing Mix.

7. Marketing Mix: As we know that marketing mix of the company is the main
component to reach the customers. As there is a heterogeneous lifestyles and
Geographically diverted market so the company should design or modify the mix
depending upon the customer needs. There should be a proper work out of 4A's
of Marketing Mix. From the above steps company can easily identify and can
design their marketing mix to reach the market. So by doing this the company
can attain the success.

8. Implementation: Most of the companies feel that implementation is the major

problem in rural market , due the factors influences the market. So for
implementation the channel players are important. They reach the last mile of
rural market. So for the Implementation there should be a full focus from the
organization point of view. The planning and working should be in parallel, by
which the implementation cannot be a failure
 .

9. Control: Last but not least, the important factor to think for the model. As
there is a huge competition in the market, it will grow in a speedy manner.
So there will be a lot of things that companies should always get to update .
The R&D should be strong for those areas. There should be a systematic
process for the up to date communications, so that they cannot miss the
feedback from the customers and work on those things. The timing for the
analysis and action is very important here. The regional and local players can
easily move in the market and modify their strategies, so that is why
companies need to be with their channel partners to work their strategies . if
they can implement it and control the things then the company can reach the
customers easily and can attain the success rate.

So, from the above steps if the company does a work out on each step and
implements perfectly then they can mark their success in the rural market.

Some successful examples of rural marketing

Hindustan Unilever Limited (HUL) to tap the rural market conceived of Project
Shakti. This project was started in 2001 with the aim of increasing the
company’s rural distribution reach as well as providing rural women with income-
generating opportunities. This is a case where the social goals are helping
achieve business goals.

The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the
executives of HUL identifying the uncovered village. The representative of the
company meets the panchayat and the village head and identify the woman who
they believe will be suitable as a SA. After training she is asked to put up Rs
20,000 as investment which is used to buy products for selling. The products are
then sold door-to-door or through petty shops at home. On an average a Shakti
Amma makes a 10% margin on the products she sells.

An initiative which helps support Project Shakti is the Shakti Vani programme.
Under this programme, trained communicators visit schools and village
congregations to drive messages on sanitation, good hygiene practices and
women empowerment. This serves as a rural communication vehicle and helps
the SA in their sales.

The main advantage of the Shakti programme for HUL is having more feet on the
ground. Shakti Ammas are able to reach far flung areas, which were
economically unviable for the company to tap on its own, besides being a brand
ambassador for the company. Moreover, the company has ready consumers in
the SAs who become users of the products besides selling them.

Although the company has been successful in the initiative and has been scaling
up, it faces problems from time to time for which it comes up with innovative
solutions. For example, a problem faced by HUL was that the SAs were more
inclined to stay at home and sell rather than going from door to door since there
is a stigma attached to direct selling. Moreover, men were not liable to go to a
woman’s house and buy products. The company countered this problem by
hosting Shakti Days. Here an artificial market place was created with music and
promotion and the ladies were able to sell their products in a few hours without
encountering any stigma or bias.

This model has been the growth driver for HUL and presently about half of HUL’s
FMCG sales come from rural markets. The Shakti network at the end of 2008
was 45,000 Ammas covering 100,000+ villages across 15 states reaching 3 m
homes. The long term aim of the company is to have 100,000 Ammas covering
500,000 villages and reaching 600 m people. We feel that with this initiative,
HUL has been successful in maintaining its distribution reach advantage over its
competitors. This programme will help provide HUL with a growing customer
base which will benefit the company for years to come

2. 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.

Unsuccessful rural marketing examples

Kellogg's' is an excellent example of a company that has struggled in the Indian

market. Kellogg's entered the Indian market in the mid-1990's. They intended to
find a new market, which would consist of over a million people, many of whom
did not eat cereal. What Kellogg's discovered was that they were introducing a
completely new product category. This meant they would have to invest large
sums of money to create new eating habits in consumers. The most common
Indian breakfast consists of biscuits and tea.

While Kellogg's was busy creating new eating habits, local competitors were able
to snatch away portions of India's already small cereal market by introducing
local cereal flavors at lower prices. The unimpressive sales that followed in their
first three years resulted in Kellogg's needing to completely realign their
marketing to meet local needs as well as introduce a line of inexpensive
breakfast biscuits. Disappointments like this have caused companies who seek to
enter the rural Indian market to reevaluate their entire approach.
 Conclusion
Indian rural marketing has always been complex to forecast and consist of
special uniqueness. However many companies were successful in entering the
rural markets. They proved that with proper understanding of the market and
innovative marketing ideas, it is possible to bag the rural markets. It is very
difficult for the companies to overlook the opportunities they could from rural
markets. As two-thirds of the Indian population live in rural areas, the market is
vast than expected. For the companies to be successful in rural markets, they
have to overcome certain challenges such as pricing and distribution.

However, the success of the product in the rural market is as predictable as rain.
But by overcoming the challenges and looking into the opportunities which rural
markets offers to the marketers it is said that the future is very promising for
those who understand the dynamics of rural markets and exploit them to their
best advantage.

examples of two companies who were successful in rural areas with their
innovative marketing strategies. They found the way-out for the challenges to
become successful. They believed that it is patience which is important to gain
loyal customers than entering the rural with aggressive marketing. By
introducing the products in to rural markets, companies are not changing
customers' tastes and preferences but their habits which is most challenging and
in which case if the customer is dissatisfied, it will become more difficult to
regain the trust or may be never possible.