Rural Marketing

1. Rural MarketingRural Marketing –– Issues Opportunities &Issues Opportunities &
ChallengesChallenges

2. Indian RuralIndian Rural
The Macro Scenario

3. Rural Market Has Finally ArrivedRural Market Has Finally Arrived
• 742 million people
• Rural is bigger than urban
• FMCG's 53%
• Durables 59%
• Estimated annual size of the rural market
• FMCG Rs 65,000 Crore
• Durables Rs 5,000 Crore
• Agri-inputs (incl. tractors) Rs 45,000 Crore
• 2 / 4 wheelers Rs 8,000 Crore
• Total Rs 1,23,000 Crore
Source: Francis Kanoi, 2002

4. Rural Market Has Finally ArrivedRural Market Has Finally Arrived
• Some impressive facts about the Rural market
• In 2001-02, LIC sold 55 % of its policies in rural India.
• 50% of BSNL mobile connections in small
towns/villages.
• 482 crorepatis in rural Haryana, only 137 in
Bangalore, similar number in Kolkata or Hyderabad.
• 55.6 million Kisan Credit Cards (KCC) issued (against
60 million credit-plus-debit cards in urban) resulting
in tremendous liquidity.

5. Rural Market Has Finally ArrivedRural Market Has Finally Arrived
• Some impressive facts about the Rural market
• Of 20 million Rediffmail signups, 60 % are from small
towns. 50% transactions from these towns on Rediff
online shopping site.
• No of HHs saving in formal financial instruments
(banks, mutual funds, shares etc) same in rural and
urban at 6.2 million in 2002-03
• Electricity consumption
Sector 1980 2000
Agriculture 17.6% 29.2%
Industry 58.0% 34.8%

6. Rural Income DispersionRural Income Dispersion
Consumer
Class
Annual Income 1995-96 2006-07
Very Rich Above Rs 215,000
Rs 45,001- 215,000
Rs 22,001- 45,000
Aspirants Rs 16,001 - 22,000 26.0 44.6
Destitutes Rs 16,000 & Below 61.4 20.2
Total 100.0 100.0
5.6
Consuming Class
1.6
2.7 5.8
Climbers 22.48.3
NCAER Projections Based on 7.2% GDP Growth

7. Rural Housing PatternRural Housing Pattern
House Type 1981 1991 2001
Pucca 22
37
41
41
Semi- Pucca
31
36 36
Kuccha 33 23
(percentage)
Source: Census of India

8. Distribution of VillagesDistribution of Villages
Source: Census 2001
Population No of villages % of total villages
Less than 200 96,855 15.7
200-500 1,36,454 21.4
501-1000 1,56,737 24.6
5001-1000 20,363 3.2
1001-2000 1,40,751 22.0
2001-5000 87,206 13.7
Total no of villages 6,38,365 100.0
17% of villages
account for 50%
of rural
population &
60% rural wealth
Hardly any
shops in these
2.3 lac villages

9. Distribution of TownsDistribution of Towns
61
34
23
27 26
72
25
14
11
30
9
11
0
10
20
30
40
50
60
70
80
Top 8 Other 1 Mn+ 0.5-1 Mn 0.2-0.5 Mn 0.1-0.2 Mn < 0.1 Mn
Town With Pop
Millions
0
5
10
15
20
25
30
35
Towns
Percentage
Mn
%
Source: NRS 2005

10. Distribution Of Towns ContinuedDistribution Of Towns Continued……
Town Class Population No. Of Towns % of Total
Class I 1 Lac above 423* 8.2
Class II 50,000 – 99,999 498 9.6
Class III 20,000 – 49,999 1386 26.9
Class IV 10,000 – 19, 999 1560 30.2
Class V 5000 – 9,999 1057 20.5
Class VI Less than 5000 237 4.6
Total 5161 100.0
90 % of durables
purchased by
rural people are
from these 1900
towns
* 10 Lac +: 27, 5 – 10 Lac: 42, 1 – 5 Lac: 354 Source: Census 2001

11. Issues In Rural DistributionIssues In Rural Distribution
Large number of small
markets
Poor road connectivity Large number of
intermediaries leading
to higher costs
Low density of shops
per village and high
variation in their
concentration
Inadequate banking
and credit facilities for
retailers, poor viability
of outlets
Poor storage system,
leading to inadequate
stocking of products
Highly credit-driven
market and low
investment capacity of
retailers
Dispersed population
and trade
Issues In
Distribution
Issues In
Distribution

12. InsightsInsights
The Rural Consumer

13. Rural Consumer InsightsRural Consumer Insights
• Rural India buys
• FMCG's more often (mostly weekly).
• Buys small packs, low unit price more important
than economy.
• Distribution and pricing are the mantras to success
in rural India.
Even expensive brands like Close up, Marie biscuits, Clinic
shampoo are doing well because of deep distribution

14. Rural Consumer InsightsRural Consumer Insights
• In rural India, brands rarely fight with each
other
• They just have to be present at the right place
Average Number of Brands Per Retailer
Category11
Rural Urban
Toothbrush 3 7
Toothpaste 3 6
Biscuits 3 9
Hair Oil 3 7
Source: ORG 2002

15. Rural Consumer InsightsRural Consumer Insights
Details Rural Urban
Average monthly sale / outlet Rs 3,000 Rs 12,500
No. of product categories
stocked per outlet
19 27
No. of brands / outlet 42 92
Average Stock Keeping Units /
outlet
62 154
Source: ORG 2002

16. Rural Consumer InsightsRural Consumer Insights
• Many brands are building strong rural base
without much advertising support.
• Chik shampoo, the second largest shampoo brand.
• Ghadi detergent, fourth largest brand.
• Brand recognition not through name but.
• Color (Lal Dant Manjan, Red battery)
• Numeric (555 detergent bar)
• Visual (Ghari detergent, Katchua Chaap)
• Buy value for money not cheap products.

17. Rural MythsRural Myths
Perception vs. Reality

18. Myth 1 : Rural a Homogeneous MassMyth 1 : Rural a Homogeneous Mass
• The reality
• Heterogeneous population
• 16 languages
• State wise variations in rural demographics
• Literacy (Kerala 90%, Bihar 44%)
• Population below poverty line (Orissa 48%, Punjab
6%)
Big Land Lords
Traders & Small Farmers
Marginal Farmers
Laborer’s & Artisans
RuralPyramid
Source: Planning Commission, GOI

19. Myth 2 : Disposable Income is LowMyth 2 : Disposable Income is Low
• The Reality
• Number of middle class HHs (annual income Rs
45,000- 2,15,000)
• Per Capita Annual Income
Rural 15.6 Million
Urban 16.4 Million
Rural Rs 9,481 (Punjab- Rs 16.5 K, Haryana- Rs 14.8 K)
Urban Rs 19,407
Source: NCAER, 2002

20. Myth 3 : Individual Decide About PurchasesMyth 3 : Individual Decide About Purchases
• The Reality
• Decision making process is often collective
• Purchase process- influencer, decider, buyer, one
who pays can all be different.
• Marketers must address brand message at several
levels
• Rural youth brings brand knowledge to House Hold

21. IndiaIndia’’s Rurals Rural
What’s Changing

22. Infrastructure Improving RapidlyInfrastructure Improving Rapidly
• In 50 years only 40% villages connected by
road, in next 10 years another 30%.
• > 90 % villages electrified, though only 44%
rural homes have electric connections.

23. Infrastructure Improving RapidlyInfrastructure Improving Rapidly
• Rural telephone density has gone up by 148% in
the last 5 years, every 500+ pop is connected by
STD.
• 18.8 million individual phone connections.
• Levels of literacy are up.
Rural Tele-density (phones per 100)
Division 2000 2005 % increase
Rural 0.7 1.74 148%
Urban 8.2 26.2 220%
All 2.9 9.08 213%
Source: TRAI, 2005 & Census 2001

24. Infrastructure Improving RapidlyInfrastructure Improving Rapidly
• 70% of R1,R2, R3 can be reached through mass
media.
Source: IRS 2001 & 2005
14
21
41
26
53
70
Satellite
TV
Radio Press Cinema TV All Media
SEC wise Rural HH
R1 - 4%
R2 - 11%
R3 - 39%
R4 - 46%

25. Rural MarketRural Market
Opportunities & Challenges

26. Marketing OpportunitiesMarketing Opportunities
• Low penetration in rural
FMCG’s Urban Rural Total
Toothpaste 749 376 486
Soft Drinks 370 122 198
Mosquito Repellent 541 152 267
Coffee 232 79 125
Skin Cream 315 178 220
Health Beverage 188 47 88
Per 1000 HH
Source: IRS 2005

27. Marketing OpportunitiesMarketing Opportunities
• Low penetration among lower pop strata
villages and SEC R3/R4
Source: IRS 2005
Penetration of Durables and FMCG (% of HH)
Product Category Pop Strata (Villages) SEC
5K+ 1K-5K <1K R1/R2 R3/R4
Radio 14.1 14.5 14.4 24.4 12.7
CTV 18.5 9.7 7.1 30.1 7.8
Telephone 12.7 5.3 3.7 23.6 3.6
Toilet Soap 92.4 88.2 87.2 96.0 87.7
Shampoo 35.3 33.1 24.6 47.5 29.2
Toothpaste 49.5 36.0 29.1 69.1 32.1
Soft Drinks 16.0 12.3 7.8 22.7 10.4
Mosquito Repellents 22.4 14.8 8.4 31.2 12.4

28. Marketing OpportunitiesMarketing Opportunities
• Rapidly growing product categories and largest
rural brands in rural markets
Rural Growth of FMCG and Durables (% of HH)
Product Category 2000 2005
11.1
5.3
4.2
2.3
Shampoo 13.3 31.9 213.7
Packaged Biscuits 39.1 54.2 38.6
13.7
12.2
Growth (%)
CTV 3.7 217.6
Tractor 1.8 27.8
Motorcycle 3.0 76.7
Refrigerator 3.2 31.3
Packaged Edible Oil 8.7 57.5
Soft Drinks 9.8 24.5
Base: All Rural Households Source: IRS,2005
Largest Rural Brands
-13.1W. PowderNirma
21.5
5.6
6.4
8.2
Growth (%)
W. PowderGhari
BiscuitsParle-G
Toilet SoapLux
Toilet Soap
Lifebuoy
Active
CategoryBrand
Figures are year-on-year growth for MAT
July 2004 by Value
Source: AC Nielsen Retail Store Audit

29. Marketing OpportunitiesMarketing Opportunities
• SEC wise rural households
• R1 - 4%
• R2 - 11%
• R3 - 39%
• R4 - 46%
• Rich HHs FMCGs Annual Consumption
Urban Rural
Rs 13,000 Rs 9,400
• Rural consumption volumes (R1+R2+R3)
• Toothpaste 88%
• Toothpowder 79%
• Shampoo 88%
So this half of the
population consumes
over 75% of FMCG
volumes

30. ChallengesChallenges
In future

31. ChallengeChallenge
• Reaching the product to remote rural locations
and entering more rural homes (penetration)
• Increasing rural incomes (market growth)

32. ChallengesChallenges
• Making effective use of the large available
infrastructure
• Post offices 1,38,000
• PCOs 2,00,000
• Haats (periodic markets) 42,000
• Melas (exhibitions) 25,000
• Mandis (agri markets) 7,000
• Public distribution shops 3,80,000
• Bank branches 32,000

33. New WaveNew Wave
• Proliferation of large format rural retail stores
• DSCL Haryali stores
• M & M Shubh Labh stores
• TATA/Rallis Kisan Kendras
• Escorts rural stores
• Warna bazaar, Maharashtra (annual sale Rs 50 crore)
• ITC Choupal Sagar

34. Corporates Need To DoCorporates Need To Do
• Long term commitment to rural. Create a dedicated
rural vertical
• Grow size of rural pie: Public-Private partnerships
• Hire professionals from rural management institutes –
IRMA, IIRM, XIM etc
• Create rural specific products and communication
• Explore new Distribution models – mobile traders, NYKS
volunteers etc
• Commission MR studies to profile Rural Consumers
• Organize rural sensitization training for managers
• Industry Associations should glamorize Rural Marketing.

35. QuoteQuote -- UnquoteUnquote
• The future lies with those companies who see
the poor as their customers.
C K Prahalad
• To get rich, sell to the poor.
Pradeep Kashyap

36. ThatThat’’s Alls All
Thanks