UNIT-1

INTRODUCTION

With the liberalization of Indian economy, we have witnessed changes on

all the fronts. On the marketing front, the major change has been the
arrival of many well-known Multinational Corporations. Initially they
tapped the well-developed urban markets. This brought tough competition
in those markets and eventually the companies started focusing on the
large untapped market. Services Marketing and Emerging issues segment.
Needless to mention, it was the very promising segment “the rural
markets of India. The government initiative to strengthen the rural India
resulted in the rapid growth of rural income which increased the
purchasing power of the rural population, the (“prospective consumers” in
the language of marketing). The vast size of the rural markets and their
demand offers enormous opportunities to the marketers. As the saying
goes, if there is opportunity, there has to be challenges as well. In rural
marketing there are lots of challenges. Marketers, who are looking at the
challenges and opportunities, offered by rural India and understand the
dynamics of the rural markets, are trying to take the advantage of it.
Hence, it has become necessary for us to understand the overall concept
of rural marketing, its importance and the opportunities offered, the
challenges posed by rural markets and the emerging trends of rural
marketing in India.

RURAL MARKETS The census of India defines rural area “as any habitation
with a population density of less than 400 per sq. km., where at least 75
percent of the male working population is engaged in agriculture and
where municipality or board does not exist”. There are nearly 6.4 lakh
villages in India of which only 20,000 have population of more than 5000.
Most companies in fast moving consumer goods (FMCG) sector define
rural market as any place with a population upto 2,000. Understanding
and managing rural market is not an easy affair, as it is full of challenges.
If we study the Indian rural society, there are different villages, each being
different in terms of geographical, economic, cultural, moral and other
structures. The behavior patterns of the habitants and their beliefs, ideas,
faiths etc are different. A few challenges of rural markets are:
understanding rural consumers, making availability of the products and
services in remote rural locations, and communicating with vastly
heterogeneous rural consumers etc.

Features of Rural Markets

There are certain specific features of rural market that need to be
considered before going for rural marketing. These are as follows:

1) Population is large and scattered. In India around 65 percent of

population lives in rural areas. Rate of increase in population is also
higher. This large population is scattered in over six lakh villages.
Although it poses some difficulty to the marketers but also gives them a
huge and promising market.

2) Rising purchasing power. Gone are the days when income level of rural
people was low. With the green revolution and opening up of the Rural
Marketing economy after 1990, India has seen an overall growth. This has
raised the income level of rural consumers as well. It is needless to
mention that higher the income level, higher shall be the purchasing
power and demand.

3) Steady market growth. Rural market is growing steadily over the years.
Consumption pattern and preference is also changing. Unlike the past
years, rural market has demand for branded products along with the
traditional products such as bicycles, mopeds and agricultural inputs. IT
and media has further increased the awareness amongst the rural
consumers and there is a surge in demand of cosmetics, FMCGs,
consumer durables etc. over the years.

4) Development of infrastructure facilities. Infrastructure facilities have

developed in the rural areas. This has reduced the distance of villages to
the cities. With the construction of roads and transportation,
communication network, rural electrification and several public service
projects run by the government, connectivity of villages to cities has
increased. This has increased the scope of rural marketing.

5) Low standard of living. Although many developments are taking place

in rural areas in India, still the fact remains that the standard of living in
villages is relatively lower for people who comes under the second and
third groups of consumers (see section on rural consumers, discussed
above in this unit. People who have sizeable land holdings but they are
not very rich farmers (second group) and the people who are daily
laborers (third group) who mostly demand the goods and services which
are necessities, in small quantities more frequently.

6) Traditional outlook. Rural consumers value their old values, culture,

customs and tradition. This influences their demand pattern. However,
their demand pattern is changing gradually and demand for cosmetics
and branded goods are gradually seeping in the rural markets.

7) Separate marketing mix is required. Considering the features of the

rural market, it becomes essential for the companies to prepare a
separate marketing mix for the rural markets to tap its potential to the
fullest.

Importance of Rural Markets India is one of the largest markets in the

world. The real India lives in villages. Due to various reasons such as
globalization, glocalisation, economic liberalization, IT revolution and
improving infrastructure; rural India has been emerging as significant
attraction for the marketers. The size of rural market in India is so vast
that the companies aspiring for growth cannot afford to overlook this
segment of market. The future of companies greatly depends upon
understanding the dynamics of the rural markets. The increasing focus on
farm sector has been boosting the income level of rural consumers. This
provides enormous opportunities to the marketers. Services Marketing and
Emerging issues Infrastructure facilities are becoming better which in turn
will help in improving the supply chain operations. The consumption
pattern of rural consumers is also witnessing a change. 18.2.3 Factors
affecting Growth of Rural Market The various factors that have led to the
growth of rural market in India can be summarise as follows: a) Increased
demand due to increase in population; b) Agriculture sector is prospering
which has risen the rural income; c) Increased Standard of living; d)
Government and non-government organizations are taking keen interest
in rural development; e) Increased literacy rate and educational level; f)
Inflow of foreign remittances and foreign made goods into rural areas; g)
Improved Rural Infrastructure; h) Increasing awareness of rural consumers
about new products; and i) Growing urban-rural interaction.

Challenges of Rural Markets: The various challenges faced by firms in

India in respect of rural markets are as follows: 1) In many remote
locations even today the barter system exists. This is one of the major
obstacles in the way of development of rural marketing in India. 2) 3) 4)
Impact of information technology is not experienced uniformly across the
nation. The advantage of it has been experienced primarily by the farmers
with big land holdings. Farmers with small land holdings are not able to
enjoy the advantage. This inequality has made the markets
underdeveloped even today. In terms of facilities related to physical
communication, it is not equally good for all the corners across the nation.
Most villages in eastern part of the country are inaccessible during
monsoons. They do not have all weather roads. This makes the physical
communication very expensive. Demand in rural markets depends
primarily on the agricultural situation as agriculture is the main source of
their livelihood. Agriculture in some of the large states of India such as
Uttar Pradesh, Bihar, and Madhya Pradesh depends heavily on monsoon.
This means the purchasing power of the customers is dependent upon the
monsoon and it varies from one year to the other. Hence, demand
forecasting becomes difficult for the marketers. 5) Rural Marketing
Traditional outlook of the rural consumers also poses threats to the
marketers. As a result of traditional thought process their buying decision
may be delayed. 6) 7) 8) Difference in language and dialects also poses
problems to the marketers. The language and dialects differ not only from
state to state but also from one region to the other. This makes the
formulation of marketing strategy very difficult. At the same time , the
decision of the extent of coverage of the market may be very complex.
There are several other factors that pose threats to the rural marketers
such as natural calamities, pests and diseases, drought or excess of rain
fall (for instance the situation of monsoon this year has greatly devastated
the rural consumers), lack of proper storage facility, transportation,
Insurance etc. Besides, there are certain other challenges related to rural
warehouse, supply chain operations, rural infrastructure and fluctuation in
the price of agricultural products etc. As a marketer, you cannot afford to
overlook these problems and challenges in handling the rural markets.
The only catch here is how well you are able to understand the dynamics
of rural markets and how efficient you are as a marketer to catch hold by
the nerves of the rural consumers. Hence it becomes utmost important to
understand the rural consumers and their buying behavior.

Rural Consumers In marketing, it is always emphasized that the foremost

important thing is to understand the target customers. Hence a brief idea
about rural consumers in India who are different from the urban
customers in terms of taste, preference, education level, socio economic
status etc. In the record most of them are illiterate and have low
education levels. Their income levels are also low. The principal
occupation of most of them is farming and some happen to be craftsmen.
Rural consumers differ from region to region and state to state. A
consumer in rural areas of Punjab is considerably different from their
counterparts in states like Uttar Pradesh and Bihar. Similarly the
consumers of Kerala and Karnataka are more educated than their
counterparts in other states. There is a difference in the prosperity of
consumers of different regions and states. There are distinct segments in
rural markets in India. These can be grouped in three different categories.
In the first group, there are rich farmers who have bigger pieces of land
and have huge surplus income with high purchasing power. Their
consumption pattern matches with the urban consumers. They lead
luxurious and urban type lifestyles. In the second group (category), there
are farmers who have enough land but their economic status is not as
prosperous as the first group. However in terms of rural standards they
have a respectable life style and are self Services Marketing and Emerging
issues sufficient to a great extent. Their purchasing power is good but less
than that sufficient to a great extent. Their purchasing power is good but
less than that of the first category. sufficient to a great extent. Their
purchasing power is good but less than that of the first category. The third
groups of consumers are farm labourers or daily wage earners. Their
purchasing power is very lim The third groups of consumers are farm
labourers or daily wage earners. They buy the required products The third
groups of consumers are farm labourers or daily wage earners. Their
purchasing power is very limited. They buy the required products
frequently and that low in small quantities. frequently and that low in
small quantities. The buying process of rural consumers also varies. Unlike
urban markets, their buying decision is influenced by males of the family.
It has also been noted that in urban mark The buying process of rural
consumers also varies. Unlike urban markets, their buying decision is
influenced by males of the family. It has also been noted that in urban
markets, people make independent decision, whereas, in rural areas
decision may be influenced by the family members and the community.
However the scenario in rural market is also witnessing change. Marketers
have to keep a breast of the changes that are takin The buying process of
rural consumers also varies. Unlike urban markets, their buying decision is
influenced by males of the family. It has also been ets, people make
independent decision, whereas, in rural areas decision may be influenced
by the family members and the community. However the scenario in rural
market is also witnessing change. Marketers have to keep a breast of the
changes that are taking place in the rural markets. These need to be
closely monitored. Despite such heterogeneity, there is some kind of
commonality too. On an average, rural consumers are reluctant
consumers. They prefer liquidity and do not want to ly. Selling very
expensive products and services may be difficult. Price sensitivity is much
higher in their case. rural areas decision may be influenced by the family
members and the community. However the scenario in rural market is also
witnessing change. Marketers have to keep a breast of the changes that
are takin rural markets. These need to be closely monitored. Despite such
heterogeneity, there is some kind of commonality too. On an average,
rural consumers are reluctant consumers. They prefer liquidity and do not
want to part with their money ease may be difficult. Price sensitivity is
much higher in their case. rural markets. These need to be closely
monitored. Despite such heterogeneity, there is some kind of commonality
too. On an average, rural consumers are reluctant consumers. They prefer
liquidity and do not want to part with their money easily. Selling very
expensive products and services may be difficult. Price sensitivity is much
higher in their case.

Definition Services Marketing and Emerging issues

“Rural marketing is a function of all efforts made by the companies to
move their already marketed goods and services to the rural consumers
that gives them satisfaction, enhances their standard of living and thereby
attains the organizational goal”.

It can be defined as “the process of assessing the region-specific

demands of goods and services for the rural markets and making the
availability of the demanded goods and services to the rural consumers
that can satisfy their demand, enhance their standard of living and
achieve organizational objectives”.

In fact, rural marketing is a two way communication process. There is

inflow of products into rural markets for production or consumption and
there is also outflow of products to urban areas. The urban to rural flow
consists of agricultural inputs, fast moving consumers goods such as
soaps, detergents, cosmetics, textiles and so on. The rural to urban flow
consists of agricultural produce such as rice, wheat, lentils, sugar, cotton
etc. There is also a movement of rural products within rural areas for
consumption. Thus, it is a two-way marketing process which includes
movement of goods and services from rural areas to urban areas and vice-
versa. It also includes movement of goods and services within the rural
areas for consumption.

Rural Marketing Mix You have learnt about various aspects of rural
markets and rural marketing. You are also aware about the marketing mix.
Let us now learn about rural marketing mix. In order to make their goods
and services acceptable to the rural consumers, the companies need to
design their marketing mix very carefully. Their goods and services have
to suit the existing life conditions of the rural consumers. Current models
of electronic gadgets may not be of much use to them as the basic
infrastructure required to use these products is either not present or not
enough. Companies have to consider this fact and they need to come up
with a different model of the same products for the rural consumers.
Likewise, they need to customize their product pricing, distribution and
promotion decisions (4Ps of marketing mix) to make it best suited for the
rural consumers. Let us have a look on each of them. Product and
services Decisions: Most of the households in rural areas still may not
have consumer durable products such as television, washing machine,
refrigerator, gas stoves etc. This can be viewed as the rural market
potential. The companies dealing with consumer durables can look up to
these as markets for selling their products. Various studies have shown
that rural markets are laggards in picking up new products outdated in
urban markets. They think that those outdated products can be sold in the
rural markets. For example, demand for semi-automatic washing
machines is decreasing in urban markets but it may have a high potential
in rural markets as it can be used even without taps of running water.
However, the companies dealing with FMCGs cannot jump into the rural
markets blind folded or the same way they operate in urban markets as
the consumption pattern of rural consumers is different from urban
consumers. People in villages use jaggery or gur in place of sugar. They
mostly use mustard oil and pure ghee which they can produce or make on
their own. Therefore, FMCG companies will have to make slow and
conscious efforts to deliver their products to the rural consumers. They
need to communicate with them in a different way. As far as services are
concerned, the rural markets are very promising. The traditional service
providers such as Nayee (barber) etc are migrating to cities in search of
better opportunities which creates a vacuum that can be tapped by the
service providers. Villages also offer a huge market for services like
telecommunication, health, education etc. It needs to be kept in view that
demand for agriculture inputs is quite large in the rural markets. Pricing
Decisions: You must be knowing that the rural consumers prefer liquidity.
They do not want to part away with their money. Especially they do not
wish to spend their money on the products and services that they can
grow or make themselves. They are also very price sensitive. Not only that
their source of income may not be very steady and regular. They have
income only when they sell their agricultural produce. But the money is
controlled by the eldest male member of the family. For the other
members the only medium of exchange is the grains available in the
house. This is one of the reasons why few organised retailers have started
accepting grains in place of cash in exchange of their goods and services.
Alternatively, they should be ready to sell their products on credit and get
the payments only when the harvested crops are sold by the farmers.
Distribution Decisions: The next thing for the marketers to understand is
to where from and how do the rural consumers buy their goods and
services? Rural consumers go to their nearest cities to buy products like
tractors, televisions and other consumer durables. For daily household
needs such as tea, sugar, soaps, detergent powder etc. they go to local
markets near their villages. However, there is no fixed time and schedule
for their purchases unlike their urban counterparts. They buy these goods
as and when required and not necessarily on a regular basis. Hence, the
companies have to decide whether they can afford to make availability of
their products in local markets or to have a retailer in each village. A
common retailer can be promoted in each village who can stock all types
of goods in his shop. Promotion Decisions: Buying behavior and pattern of
rural consumers is highly influenced by the communities. Hence word- of-
mouth promotion can prove to be really workable and useful. Therefore,
the companies need to identify the influential people in the villages and
convince them about their goods and services. Promotion through radio
can also prove to be useful as people in villages use radio for news and
other entertainment programmes. TV is also being popular these days and
therefore can also be used for the purpose. A few promotion strategies
specific to the rural marketing have also been suggested by researchers
to marketers. These are as follows. • Promotion should be client and
location specific. • Several related items should be bundled and sold to
the rural consumers along with after sales services. • Granting Credit
facility to the rural consumers can also be extremely helpful market
potential • A mix of both traditional and modern media can be used for
promotion

Rural markets refer to areas outside major urban centers,

characterized by a predominantly agricultural population and
lifestyle. The growth of rural markets is driven by several factors,
including rising incomes, improved infrastructure, increased
literacy, and changing consumer preferences. However, rural
markets also present unique challenges for marketers due to
factors like low awareness, limited access to distribution
networks, and diverse cultural dynamics. Understanding the
different components and classifications of rural markets, as well
as the changing patterns in rural demand, is crucial for successful
marketing strategies in these areas.

Factors Contributing to the Growth of Rural Markets:

 Increased Income:

The Green Revolution, favorable government policies, and rising

agricultural productivity have led to higher incomes for rural
households. This increased purchasing power enables them to purchase
more goods and services.

 Improved Infrastructure:

Investments in rural infrastructure, such as better roads, transportation

facilities, and communication networks, have improved connectivity and
access to goods and services.

 Rising Literacy and Education:

Higher literacy rates and improved access to education have enhanced

rural consumers' awareness of new products and services, and their ability
to make informed purchasing decisions.

 Government Initiatives:
Government programs and policies focused on rural development, such as
subsidies, credit facilities, and skill development initiatives, have
contributed to the growth of rural markets.

 Spread of Media and Technology:

The increasing penetration of television, internet, and mobile phones has

exposed rural consumers to new trends and products, fostering awareness
and demand.

 Urban-Rural Migration:

Migration from urban areas to rural areas has led to increased demand for
goods and services in rural regions.

Challenges and Opportunities in Rural Markets:

 Low Awareness and Accessibility:

Reaching rural consumers can be challenging due to geographical spread,

low literacy levels, and limited access to information networks.

 Fragmented Market:

Rural markets are often fragmented geographically and demographically,

requiring tailored marketing strategies for different segments.

 Seasonal Demand Fluctuations:

Agricultural income and spending patterns can vary significantly

depending on seasons, posing challenges for consistent demand.

 Limited Infrastructure:

Inadequate infrastructure, such as poor roads and transportation facilities,

can hinder the efficient delivery of goods and services.

 Cultural Differences:

Understanding and adapting to local customs, traditions, and preferences

is essential for effective marketing in rural areas.

Opportunities in Rural Markets:

 Large and Untapped Market:

Rural areas represent a vast and largely untapped market with significant
potential for growth.

 High Brand Loyalty:

Rural consumers often exhibit strong brand loyalty, presenting

opportunities for new entrants to establish a significant market share.
  Growing Demand for Quality Products:

While price sensitivity remains a factor, rural consumers are increasingly

demanding quality products and services.

 Digital Penetration:

The increasing penetration of digital technologies in rural areas offers

opportunities for online marketing and reaching a wider audience.

Components and Classification of Rural Markets:

 Geographic Classification:

Rural markets can be classified based on their geographical location, such

as proximity to urban centers, size of villages, and region.

 Demographic Classification:

Segmentation based on demographic characteristics like age, gender,

education level, and income provides insights into consumer preferences
and buying behavior.

 Psychographic Classification:

This classification considers lifestyle, occasions, benefits sought, and

brand loyalty.

Rural vs. Urban vs. Rurban Markets:

 Rural Markets:

Characterized by a predominantly agricultural population, lower income

levels, and a slower pace of life.

 Urban Markets:

Defined by high population density, industrial activity, and a modern

lifestyle.

 Rurban Markets:

These are transitional areas that exhibit characteristics of both rural and
urban environments, often experiencing rapid growth and development.

Changing Patterns in Rural Demand:

 Shifting Consumption Patterns:

Rural consumers are increasingly demanding higher quality products,

more diverse options, and branded goods.
  Increased Spending on Education and Healthcare:

Investments in education and healthcare are growing in rural areas,

reflecting a shift in priorities.

 Growing Influence of Technology:

Digital technologies are transforming rural consumption patterns, enabling

access to information and online shopping.

Distinction between Rural and Urban Markets

Rural markets have many unique features which make quite different from
urban markets. In this section the importance difference between rural
markets and urban markets are discussed.

1. Population Density It is low in the rural market. The population density

in the urban area is high. Nowadays a lot of rural people are migrating to
urban areas. Therefore, the population density in the urban areas is
constantly increasing.

2. Occupation The main occupation in the rural areas is agriculture.

Agriculture is considered as a major source for living in the rural areas. On
the contrary trade, industry and service are considered as main
occupation in the urban areas.

3. Economy The rural economy is closed and less monetized, whereas the
urban economy is open and monetized.

4. Infrastructure The infrastructure facilities in the rural areas are poor

and week. Governments give least importance for infrastructure facilities
in the rural areas. In the urban areas infrastructure facilities are better.
Nowadays urban areas becoming highly populated. Therefore
governments must also improve the infrastructure facilities
correspondingly.

5. Attitude to Modernization The attitude of rural people towards

modernization is traditionally bound one. Urban people have more
exposure. They are ready for adaptation and change.

6. Family Structure In rural economy people follow the joint family

system. In urban nuclear family system is followed. The influence of urban
family system seriously affect the joint family system of the rural markets.

7. Possession of Household Assets It is low in rural markets. In urban

markets the possession of household asset is high.
 8. Mobility People in the rural areas carry out their traditional occupation.
Therefore, the mobility in the rural markets is low. In the urban the
mobility is high. Nowadays the life time employment concept has gone in
the private companies. People often change their companies. So the
mobility in urban is constantly increasing.

9. Literacy The literacy level in the rural market is low. In urban the
literacy rate is high.

10. Exposure The level of exposure of people in the rural market is low. As
their education level is low they get less opportunity for having exposure.
Urban people have high level of exposure. High literacy level, access to
various medias gives them more advantage for getting good exposure.

11. Attitude of Life People in the rural markets have fatalistic attitude.
The attitude of people in the urban markets is more scientific. 12.
Manufacturing Activity It is low in the rural markets. In the urban markets
a lot of manufacturing activities are going on. 13. Distribution Outlets
Rural markets have fewer outlets and urban markets have more outlets.