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A dissertation report to analyze the marketing of consumer products (both durable and non durable products) in rural areas.
A DISSERTATION REPORT <br />“To analyze the marketing of consumer products (both durable and non durable products) in rural areas.”<br /> SUBMITTED BY: <br /> <br /> <br /> <br /> <br />UNDER THE GUIDANCE OF:<br /> <br /> <br /> <br />Acknowledgement<br />I consider my proud privilege to express deep sense of gratitude to………………….. ………………… for his admirable and valuable guidance, keen interest, encouragement and constructive suggestions during the course of the project.<br /> <br /> I would also like to thank my father …………………………….,for their <br />insperation and moral support received in completing this work as for collecting t<br />the data i had to visit so many rural areas or villages.<br /> <br /> <br /> <br /> TABLE OF CONTENTS<br />TOPICPAGE NUMBEREXECUTIVE SUMMARY06RESEARCH METHODOLOGYO8REVIEW OF LITERATURE11INTRODUCTION15FINDINGS AND ANALYSIS129CONCLUSIONS147SUGGESTIONS AND RECOMMENDATIONS150APPENDIX151BIBLIOGRAPHY157<br />EXECUTIVE SUMMARY<br /> India’s way is not Europe’s. India is not Calcutta and Bombay. India lives<br />in her seven hundred thousand villages.....................Mahatma Gandhi, 1926<br /> Marketing in developing countries like India have often been borrowed from the western world. Concepts like Brand identity, Customer relationship management, 4 Ps of the marketing mix, Consumer behavior process; Segmentation, targeting and positioning etc. have often been lifted straight from the marketing intelligentsia abroad and adopted in Indian conditions, often with minimal success. Reason lies not in the fault of such concepts, but their integration with the Indian ethos and culture. <br /> The rural India offers a tremendous market potential. Nearly two-thirds of all middle-income households in the country are in rural India and represents half of India’s buying potential. Despite, the strong potential the rural markets are by and large less exploited. Consider the market, out of five lakhs villages in India only one lakh have been tapped so far. According to us if the rural market has to be adequately tapped, there has to be a change in the way marketing concepts learnt in B-schools with adequate adoption according to scenarios prevalent in rural India. The paper thereby present the modified version of Philip Kotler’s famous marketing mix consisting of 4Ps. The focus is on its modification and subsequent customization to Indian rural markets perspective. The 4Ps have to be modified to include 1P i.e. Packaging and 1R i.e. Retailer as special focus areas. Further to ensure the sustainability of the marketing mix two Es i.e. Education and Empowerment have to be at the core as they help in generating widespread participation from the rural clientele by enhancing their standard of living. The Products in the rural market should essentially operate at the basic and expected level of product classification. They should essentially meet the basic needs of the consumer and should be a no-frill product, as the consumer would not be valuing much any further addition to the product concept. Companies also face a daunting task in communicating about their products to the consumer due to lack <br />of literacy and failure of traditional media to penetrate in the rural households. <br />Hence, the advertising mix has to be more towards non-conventional yet effective <br />medium like Puppetry, Folk Theater Song, Wall Painting, Demonstration, Posters, Agricultural Games, NGOs network, etc. Thus overall either the product or communication or preferably both need to be customized to target the rural customer.<br /> In terms of physical distribution due to lack of infrastructure the costs are very exorbitant to reach the rural customer. Thus, mediums like rural marketing vehicles and melas and haats provide better opportunities to meet customer needs. Also the existing distribution would need a transformation to achieve the required penetration levels as success of Project Streamline of HLL has shown. Since, the value for money concept is more important rural customers, there has to be an approach of treating customer as budget seeking consumer. Here, fitting the consumer needs into an affordable price point is pursued first and then other features of product are fitted in. Similarly, packaging has to meet customer needs of better brand recall and introducing favorable price points. At the same time the importance of retailer has to be recognized where he is one of the most major influencer is customers decision making process. He acts as the friend and guide in this process and hence, needs to be managed effectively through promotion programmes and incentives to promote the brand of a company. In order to bridge the gap between Philip Kotler and countryside Indian what is needed the appreciation of unique features of rural India and thus, responding to them by making adequate improvements in the application of the marketing concepts learnt in the class.<br /> For achieving the desired results of capturing the rural customer a comprehensive approach to the traditional marketing concepts has to be taken. This marketing mix has to be responsive to customers needs and fit into his life as a tool of self-enhancement. To be successful the concept of marketing has to be taken in conjunction with its economic, psychological and social implications. <br /> <br />RESEARCH METHODOLOGY<br />OBJECTIVES OF THE STUDY:<br /> Any task without sound objectives is like Tree without roots. Similarly in case of any research study undertaken, initially the objectives of the same are determined and accordingly the further steps are taken on. A research study may have many objectives but all these objectives revolve around one major objective which is the focus of the study. In this study, the focus is on the emergence of Rural markets as the most happening market on which every marketer has an eye. And so this study will be based on studying the emergence of rural market in various contexts.<br /> The main objective of the study is to analyse and present the marketing of consumer products in rural areas. The following objectives have been set forth. They are to:<br /><ul><li>Present a rural marketing perspective.
Study and analyse the consumer behavior in rural areas.
Examine the product and brand penetration in rural markets.
Analyze marketing of consumer product in rural markets.
Present marketing strategy frame for marketing consumer products in rural areas.</li></ul>SCOPE OF THE STUDY:<br /> The study is restricted to selected districts of UTTAR PRADESH. Further, product and brand penetration is examined. As regards marketing of consumer products in rural areas, the study analyzes products from non durable category ( a bathing soap, detergents, tea, coffee, shampoo) and from durable category ( a wrist watch, television, refrigerator, fan and bicycle).<br />Data collection<br />Sample unit:<br />1. working people (including men &women), basically farmers.<br />2. college students<br />3. school students<br />4. senior citizen<br />Sample size:<br />1. working people:32%<br />2. college students:29%<br />3. school students:23%<br />4. senior citizens:16%<br />Sampling region:<br /><ul><li>I have selected uttar pradesh, of Uttar Pradesh as the area of study.
I have chosen BHOWAPUR, MORTI, SHAHPUR and ATTOR as areas of research. </li></ul> The population status of these areas can be shown in a tabulated manner, which is given as follows:<br />Area Population<br />BHOWAPUR2500MORTI3000SHAHPUR5000ATTOR4000<br />Data collection method:<br />1.Primary data: it will be collected with the help of a self administered questionnaire. This questionnaire aims to gather information related to various Branded products.<br />Questionnaire design:<br />As the questionnaire is self administrated one, the survey is kept simple and user friendly. Words Used in questionnaire are readily Understandable to all respondent. Also technical jargons are avoided to ensure that there is no confusion for respondents.<br />2.Secondary data: it will be collected with the help of books, research papers, magazines, news papers, journals, Internet, etc.<br />Review of Literature<br />Rural market is one of the best opportunities for the FMCG sector. In some sense we can say that rural market is future of FMCG.<br />1.Basu Purba (2004),suggested that the lifestyle of rural consumers is changing. Rural Indian market and the marketing strategy have become the latest marketing buzzword for most of the FMCG majors. She added the strategies of different FMCG companies for capturing rural market like Titan’s Sonata watches, Coco Cola’s 200mlbottle, different strategies of HUL and Marico etc. She takes into consideration the study of National Council for Applied Economic Research (NCAER).According to the NCAER<br />projections, the number of middle and high-income households in rural area is expected to grow from 140 million to 190 million by 2007.In urban India, the same is expected to grow from 65 million to 79 million. Thus, the absolute size of rural India is expected to be double that of urban India.<br />2.Tognatta Pradeep (2003),suggested that ,the economic growth in India's agricultural sector in last year was over 10%,compared with 8.5%in the industrial sector. This implies a huge market potentiality for the marketer to meet up increasing demand. Factors such as village psyche,<br />strong distribution network and market awareness are few prerequisites for making a dent in the rural markets. The model is of the stolid Anglo-Dutch conglomerate Unilever Group, which has enjoyed a century-long presence in India through its subsidiary Hindustan Lever Ltd. It was Hindustan Lever that several years ago popularized the idea of selling its products in tiny packages. Its sachets of detergent and shampoo are in great demand in Indian villages. Britannia with its low priced Tiger brand biscuits has become some of the success story in rural marketing.<br />.<br />3. Dr. N. Rajendhiran(MBA, PhD)/ Mr. S. Saiganesh(MBA, MA, M.Phil)/ Ms. P. Asha(MBA) <br /> Prime Minister Dr. Manmohan Singh recently talked about his vision for rural India: "My vision of rural India is of a modern agrarian, industrial and services economy co-existing side by side, where people can live in well-equipped villages and commute easily to work, be it on the farm or in the non-farm economy. There is much that modern science and technology can do to realise this vision. Rural incomes have to be increased. Rural infrastructure has to be improved. Rural health and education needs have to be met. Employment opportunities have to be created in rural areas." <br />'Go rural' is the slogan of marketing gurus after analyzing the socio-economic changes in villages. The Rural population is nearly three times the urban, so that Rural consumers have become the prime target market for consumer durable and non-durable products, food, construction, electrical, electronics, automobiles, banks, insurance companies and other sectors besides hundred per cent of agri-input products such as seeds, fertilizers, pesticides and farm machinery. The Indian rural market today accounts for only about Rs 8 billion of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total share. So clearly there seems to be a long way ahead. Although a lot is spoken about the immense potential of the unexplored rural market, advertisers and companies find it easier to vie for a share of the already divided urban pie.<br />The success of a br and in the Indian rural market is as unpredictable as rain. It has always been difficult to gauge the rural market. Many brands, which should have been successful, have failed miserably. More often than not, people attribute rural market success to luck. Therefore, marketers need to understand the social dynamics and attitude variations within each village though nationally it follows a consistent pattern 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. A radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is called for, so they can successfully impress on the 230 million rural consumers spread over approximately six hundred thousand villages in rural India.<br />RURAL INDIA…a new dawn<br />India needs creative solutions to start a revolution which can take its villages fast forward in time – converting them into economically viable units and growth engines, harnessing the power of the villagers, and opening up new horizons with the promise of a better tomorrow.<br />43434018415<br />INTRODUCTION<br />“India lives in her villages”.<br /> As described by Adi Godrej, Chairman , Godrej Group – “The rural consumers is discerning and the rural market is vibrant . At the current of growth , it will soon outstrip the urban market. The rural market is no longer sleeping but we are”.<br /> Before gamboling into issues like where the Indian rural market stands and the opportunities for corporate’s to explore there... let's look at the definition of urban and rural India. The Census defined urban India as - "All the places that fall within the administrative limits of a municipal corporation, municipality, cantonment board etc or have a population of at least 5,000 and have at least 75 per cent male working population in outside the primary sector and have a population density of at least 400 per square kilometer. Rural India, on the other hand, comprises all places that are not urban!"<br /> <br /> <br />In our country over 70%of the total population live in villages. There are states like U.P, M.P, Bihar, Rajasthan and Orissa where rural population varies form 8 to <br />9 percent. Agriculture and agriculture related activities contribute to about 75%of the income in rural areas. The general impression is that the rural markets have potential only for agricultural inputs like seeds, fertilizers and pesticides, cattle feed and agricultural machinery. More than 50%of the national income is generated in rural India and there are opportunities to market modern goods and services in rural areas and also market agricultural products in urban areas. Infact it has been estimated that the rural markets are growing at fives times the rate of urban markets. About 70% of bicycles, mechanical watches and radios and about 60%of batteries, sewing machine and table fans are sold in rural India. At the same time the sales of color television, washing machines, refrigerators, shampoos, face cream, mosquito repellent and tooth paste are very low and there is tremendous potential for such products in rural markets. <br /> 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) of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total share. So clearly there seems to be a long way ahead.<br />Time and again marketing practitioners have waxed eloquent about the potential of the rural market. But when one zeroes in on the companies that focus on the rural market, a mere handful names come to mind. Hindustan Lever Limited (HLL) is top of the mind with their successful rural marketing projects like 'Project Shakti' and 'Operation Bharat'. The lynchpin of HLL's strategy has been to focus on penetrating the market down the line and focusing on price point. Furthermore, activating the brand in the rural market through activities, which are in line with the brand itself, is what sums up HLL's agenda as far as the rural market is concerned informs MindShare Fulcrum general manager R Gowthaman. Amul is another case in point of aggressive rural marketing. Some of the other corporates that are slowly making headway in this area are Coca Cola India, Colgate, Eveready Batteries, LG Electronics, Philips, BSNL, Life Insurance Corporation, Cavin Kare, Britannia and Hero Honda to name a few.<br />Khaitan fans' ad on a horse cartWheel's wall painting<br />We can safely say that until some years ago, the rural market was being given a step-motherly treatment by many companies and advertising to rural consumers was usually a hit and miss affair. More often than not, the agenda being to take a short-cut route by pushing urban communication to the rural market by merely transliterating the ad copy. Hence advertising that is rooted in urban sensitivities didn't touch the hearts and minds of the rural consumer. While, this is definitely changing, the process is slow. The greatest challenge for advertisers and marketers continues to be in finding the right mix that will have a pan-Indian rural appeal. Coca Cola, with their Aamir Khan ad campaign succeeded in providing just that.<br />Lifebuoy's wall painting in rural India<br />Corporates are still apprehensive to "Go Rural." A few agencies that are trying to create awareness about the rural market and its importance are Anugrah Madison, Sampark Marketing and Advertising Solutions Pvt Ltd, MART, Rural Relations, O&M Outreach, Linterland and RC&M, to name a few. Also, the first four agencies mentioned above have come together to form The Rural Network. The paramount objective of the Network is to get clients who are looking for a national strategy in rural marketing and help them in executing it across different regions.<br />Interestingly, the rural market is growing at a far greater speed than its urban counterpart. "All the data provided by various agencies like NCAER, Francis Kanoi etc shows that rural markets are growing faster than urban markets in certain product categories at least. The share of FMCG products in rural markets is 53 per cent, durables boasts of 59 per cent market share. Therefore one can claim that rural markets are growing faster than urban markets," says Sampark Marketing and Advertising Solutions Pvt Ltd managing director R A Patankar.<br />"Yaara da Tashan..." McCann Erickson's ads with Aamir Khan created universal appeal for Coca Cola<br />Coca-Cola India tapped the rural market in a big way when it introduced bottles priced at Rs 5 and backed it with the Aamir Khan ads. The company, on its behalf, has also been investing steadily to build their infrastructure to meet the growing needs of the rural market, which reiterates the fact that this multinational has realised the potential of the rural market is going strength to strength to tap the same.<br />In 2000, ITC took an initiative to develop direct contact with farmers who lived in far-flung villages in Madhya Pradesh. ITC's E-choupal was the result of this initiative.<br />Clearly the main challenge that one faces while dealing with rural marketing is the basic understanding of the rural consumer who is very different from his urban counterpart. Also distribution remains to be the single largest problem marketers face today when it comes to going rural. "Reaching your product to remote locations spread over 600,000 villages and poor infrastructure - roads, telecommunication etc and lower levels of literacy are a few hinges that come in the way of marketers to reach the rural market," says MART managing director Pradeep Kashyap.<br />Citing other challenges in rural marketing, Patankar says, "Campaigns have to be tailor made for each product category and each of the regions where the campaign is to be executed. Therefore a thorough knowledge of the nuances of language, dialects and familiarity with prevailing customs in the regions that you want to work for is essential. The other challenge is the reach and the available means of reaching out to these markets, hence the video van is one of the very effective means of reaching out physically to the rural consumers."<br />The fact of the matter remains that when compared to the Indian urban society, which is turning into a consumerism society; the rural consumer will always remain driven by his needs first and will therefore be cost conscious and thrifty in his spending habits. "Decision-making is still conscious and deliberated among the rural community. But nevertheless, the future no doubt lies in the rural markets, since the size of the rural market is growing at a good pace. There was a time when market predictions were made on the basis of the state of the monsoon but this trend has changed over the years; there is a large non farming sector, which generates almost 40 per cent of the rural wealth. Hence the growth in the rural markets will be sustained to a large extent by this class in addition to the farmer who will always be the mainstay of the rural economy," affirms Patankar.<br />"Although the melting of the urban - rural divide will take a while, this is not for want of the availability of the means but for want of the rural consumer's mindset to change; which has its own logic, which is driven by tradition, custom and values that are difficult to shed," he points out.<br />Satellite dish antennas reach rural India<br />Fulcrum's Gowthaman says, "The biggest impending factor or deterrent on rural monies going up is that there is a general sense of trying to benchmark cost per contact (CPC). The television CPC is going to anyways be cheaper to rural CPC and unless and until the volume - value equation turns the other way round, you will not be able to spend disproportionate monies in the rural market."<br />Typical shop in rural India stocked with sachets, etc<br />For HLL, a one rupee or a five rupee sachet or the Kutti Hamam (the small Hamam) helps in giving the consumers a trial opportunity. While it does help in generate volume but not in terms of values. "Till the time that volume - value equation is managed better, the CPC is preventing anybody to look at rural at a large scale activation programme," reiterates Gowthaman.<br />Ultimately, the ball lies in the court of rural marketers. It's all about how one approaches the market, takes up the challenge of selling products and concepts through innovative media design and more importantly interactivity.<br />Anugrah Madison's chairman and managing director RV Rajan sums up, "There is better scope for language writers who understands the rural and regional pulse better. I also see great scope for regional specialists in the areas of rural marketing - specialists like Event Managers, Wall painters, folk artists, audio visual production houses. In fact all those people who have specialised knowledge of a region are bound to do well, thanks to the demands of the rural marketers."<br />So the fact remains that the rural market in India has great potential, which is just waiting to be tapped. Progress has been made in this area by some, but there seems to be a long way for marketers to go in order to derive and reap maximum benefits. Moreover, rural India is not so poor as it used to be a decade or so back. Things are sure a changing!<br />INDIA INFRASTRUCTURE<br />The best barometer of country’s economic standing is measured by its GDP. India, the second most populated country of more than 1100 million has emerged as one of the fastest growing economies. It is a republic with a federal structure and well-developed independent judiciary with political consensus in reforms and stable democratic environment .In 2008-09 India’s economy-GDP grew by 6.5% due to global recession. In the previous four years,economy grew at 9%.The Indian economy is expected sustain a growth rate of 8% for the next three years upto 2012. With the expected average annual compounded growth rate of 8.5%, India's GDP is expected to be USD 1.4 trillion by 2017 and USD 2.8 trillion by 2027. Service sector contribute to 50% of India‘s GDP and the Industry and agriculture sector 25% each.Investment Opportunities In Indian Infrastructure <br />The robust current growth in GDP has exposed the grave inadequacies in the country’s infrastructure sectors. The strong population growth in India and its booming economy are generating enormous pressures to modernize and expand India’s infrastructure. The creation of world class infrastructure would require large investments in addressing the deficit in quality and quantity. More than USD 475 bn worth of investment is to flow into India’s infrastructure by 2012. No country in the world other than India needs and can absorb so many funds for the infrastructure sector. With the above investments India’s infrastructure would be equal to the best in the world by 2017.<br />In the next five years planned infrastructure investment in India in some key sectors are (at current prices): Modernization of highways -US$ 75 billion, Development of civil aviation US$ 12 billion, Development of Irrigation system- US$ 18 billion, Development of Ports-US$ 26 billion, Development of Railways- US$ 71 billion, Development of Telecom- US$ 32 billion, Development of Power -US$ 232 billion. Thus in the eleventh five year plan ,investment in the above sectors (Aviation infrastructure ,Construction infrastructure, Highway infrastructure ,Power infrastructure, Port infrastructure ,Telecom infrastructure ) will be US$ 384 billions(Rs 17,20,000 Crores) considering the huge infrastructure market potential in India. In addition to the above, investments to the tune of US$ 91 billions have been planned in other infrastructure sectors like Tourism infrastructure ,Urban infrastructure ,Rural infrastructure, SEZs ,and water infrastructure and sanitation infrastructure thus making the total infrastructure investments in the eleventh plan period 2007-08 to 2011-12 as US$475 billions. Domestic and global infrastructure funds have exposure to Indian infrastructure sectors.<br /> Rural Marketing<br />Rural marketing involves the process of developing, pricing, promoting, distributing rural specific product and a service leading to exchange between rural and urban market which satisfies consumer demand and also achieves organizational objectives.<br />URBANRURAL<br />RURALRURALURBANRURAL<br />It is a two-way marketing process wherein the transactions can be:<br />Urban to Rural: A major part of rural marketing falls into this category. It involves the selling of products and services by urban marketers in rural areas. These include: Pesticides, FMCG Products, Consumer durables, etc.<br />Rural to Urban: Transactions in this category basically fall under agricultural marketing where a rural producer seeks to sell his produce in an urban market. An agent or a middleman plays a crucial role in the marketing process. The following are some of the important items sold from the rural to urban areas: seeds, fruits and vegetables, milk and related products, forest produce, spices, etc.<br />Rural to Rural: This includes the activities that take place between two villages in close proximity to each other. The transactions relate to the areas of expertise the particular village has. These include selling of agricultural tools, cattle, carts and others to another village in its proximity.<br />Rural marketing requires the understanding of the complexities. Indian agricultural industry has been growing at a tremendous pace in the last few decades. The rural areas are consuming a large number of industrial and urban manufactured products. The rural agricultural production and consumption process plays a predominant role in developing the Indian economy. This has designed a new way for understanding a new process called Rural Marketing. <br /> The concept of rural marketing has to be distinguished from Agricultural marketing. Marketing is the process of identifying and satisfying customers needs and providing them with adequate after sales service. Rural marketing is different from agricultural marketing, which signifies marketing of rural products to the urban consumer or institutional markets. Rural marketing basically deals with delivering manufactured or processed inputs or services to rural producers, the demand for which is basically a derived outcome.<br /> Rural marketing scientists also term it as developmental marketing, as the process of rural marketing involves an urban to rural activity, which in turn is <br />characterised by various peculiarities in terms of nature of market, products and processes. Rural marketing differs from agricultural or consumer products marketing in terms of the nature of transactions, which includes participants, products, modalities, norms and outcomes. The participants in case of Rural Marketing would also be different they include input manufacturers, dealers, farmers, opinion makers, government agencies and traders. <br />Rural marketing needs to combine concerns for profit with a concern for the society, besides being titled towards profit. Rural market for agricultural inputs is a case of market pull and not market push. Most of the jobs of marketing and selling are left to the local dealers and retailers.<br />The market for input gets interlocked with other markets like output, consumer goods, money and labour. <br />INDIAN RURAL MARKET:<br />Rural marketing in India is not much developed there are many hindrances in the area of market, product design and positioning, pricing, distribution and promotion. Companies need to understand rural marketing in a broader manner not only to survive and grow in their business, but also a means to the development of the rural economy. One has to have a strategic view of the rural markets so as to know and understand the markets well. In the context of rural marketing one has to understand the manipulation of marketing mix has to be properly understood in terms of product usage. Product usage is central to price, <br />distribution, promotion, branding, company image and more important farmer economics, thus any strategy in rural marketing should be given due attention and importance by understanding the product usage, all elements of marketing mix can be better organised and managed.<br />Evolution of Rural Marketing<br />PhaseOriginFunctionMajorProductsSourceMarketDestinationMarketIBefore Mid-1960 (from independence to green revolution)Agricultural MarketingAgriculturalProduceRuralUrbanIIMid- Sixties (Green revolution to Pre-liberalization period)Marketing OfAgricultural InputsAgriculturalInputsUrbanRuralIIIMid- Nineties (Post-liberalization period on 20th century)RuralMarketingConsumables AndDurables ForConsumption & ProductionUrban & RuralRuralIV21st centuryDevelopmental marketingAll products & servicesUrban & RuralUrban & Rural<br />Phase I ( from Independence to Green Revolution): <br />Before the advent of the Green revolution, the nature of rural market was altogether different. Rural marketing then referred to the marketing of rural products in rural & urban products.<br />Phase II (Green Revolution to Pre-liberalization period):<br />During these times, due to the advent & spread of the Green Revolution, rural marketing represented marketing of agriculture inputs in rural markets & marketing of rural produce in urban areas.<br />Phase III (Post-liberalization period on 20th century):<br />The third phase of rural marketing started after the liberalization of the Indian economy. In this period, rural marketing represented the emerging, distinct activity of attracting & serving rural markets to fulfill the need & wants of rural households, peoples & their occupations. <br />Phase IV (21st century):<br />Learning from its rural marketing experiences after the independence, the corporate world has finally realized the quick-fix solutions & piecemeal approaches will deliver only limited results in the rural markets. And, if an organization wants to tap the real potential of the rural market, it needs to make a long-term commitment with this market. Its approach & strategies must not focus in just selling products & services, but they should also aim at creating an environment for this to happen. <br />The objective of rural marketing in the current phase is the improvement of the quality of life by satisfying the needs & wants of the customers, not through atand-alone products or services, but by presenting comprehensive & integrated solutions which might involve a set of inter-related products & services. <br />Till recently, the focus of marketers in India was the urban consumer and by large number specific efforts were made to reach the rural markets. But now it is felt that with the tempo of development accelerating in rural India, coupled with increase in purchasing power, because of scientific agriculture, the changing life style and consumption pattern of villagers with increase in education, social mobility, improved means of transportations and communication and other <br />penetrations of mass media such as television and its various satellite channels have exposed rural India to the outside world and hence their outlook to life has also changed. Because of all these factors, rural India is now attracting more and more marketers.<br />Increase in competition, saturated urban markets, more and move new products demanding urban customers, made the companies to think about new potential markets. Thus, Indian rural markets have caught the attention of many companies, advertisers and multinational companies. According to a recent survey conducted by the National Council for Applied Economic Research (NCAER), the purchasing power of the rural people has increased due to increase in productivity and better price commanded by the agricultural products. By and large this rise in purchasing power remains unexploited and with the growing reach of the television, it is now quite easy for the marketers to capture these markets.<br />Rural marketing has become the latest mantra of most corporate. Companies like Hindustan Lever, Colgate Palmolive, Britannia and even Multinational Companies (MNCs) like Pepsi, Coca Cola, L.G., Philips, and Calvin kare are all eyeing rural markets to capture the large Indian market.<br />Coming to the frame work of Rural Marketing, Rural Marketing broadly involves reaching the rural customer, understanding their needs and wants, supply of <br />goods and services to meet their requirements, carrying out after sales service that leads to customer satisfaction and repeat purchase/sales.<br />The Indian growth story is now spreading itself to India's hinterlands. Rural India, home to about two-thirds of the country’s 1 billion population, is not just witnessing an increase in its income but also in consumption and production. The union budget for 2009-10 hiked the allocation for the National Rural Employment Guarantee Act (NREGA) to US$ 8.03 billion, giving a further boost to the rural economy. This is in addition to the farmer loan waiver of US$ 13.86 billion and the ambitious Bharat Nirman Programme with an outlay of US$ 34.84 billion for improving rural infrastructure. Additionally, the rural economy has not been impacted by the global economic slowdown, according to a recent study by the Rural Marketing Association of India (RMAI). The study found that the rural and small town economy which accounts for 60 per cent of India’s income has remained insulated from the economic slowdown. Moreover, rural incomes are on the rise driven largely due to continuous growth in agriculture for four consecutive years. According to a McKinsey survey conducted in 2007, the rural India market would grow almost four times from its existing size in 2007, which was estimated at US$ 577 billion. <br />RURAL INFRASTRUCTURE:1) 46 percent of villages are connected by all weather roads.<br />2) 84 percent of villages are electrified.<br />3) 5700 regulated markets.<br /> In the early 2000s, around 700 million people, i.e. 70% of the Indian population lived in 6,27,000 villages, in rural areas. Of this, 90% were concentrated in villages with population less than 2000. HYPERLINK "http://www.icmrindia.org/casestudies/catalogue/Marketing1/Unilever%20-%20Rural%20Marketing.htm" l "b3" 3 According to a study <br />conducted in 2001 by the National Council for Applied Economic Research (NCAER), there were as many "middle income and above" households in rural areas as there were in urban areas. <br />There were almost twice as many "lower income households" in rural areas as in urban areas. There were 2.3 million "highest income" households in urban areas as against 1.6 million in rural areas. NCAER projections indicated that the number of "middle income and above" households was expected to grow to 111 million in rural India by 2007, compared to 59 million in urban India. Gone were the days when a rural consumer had to go to a nearby town or city to buy a branded product. The growing power of the rural consumer was forcing big companies to flock to rural markets. At the same time, they also threw up major challenges for marketers.<br />FMCG<br />There was a time when the FMCG companies ignores rural market,they took no any interest to produced or sell products in rural market in India.It was the initial stage of FMCG companies in India.As per as the time had<br />passed,the strategy and marketing style of FMCG companies had been changed. <br />The rural market is the one of the best opportunity for the FMCG sector in the India.It is wider and less competitive market for the FMCG.As the income level of the rural consumers increasing,the demand of FMCG is<br />increasing continuously. <br />Top Players in FMCG Sector<br />1.Hindustan lever limited (HLL)<br />2.ITC (Indian Tobacco Company)<br />3.Nestle India<br />4.GCMMF (AMUL)<br />5.Dabur India<br />6.Asian Paints (India)<br />7.Cadbury India<br />8.Britannia Industries<br />9.Procter &Gamble Hygiene &Health Care<br />10.Marico Industries <br />Secondary Players<br />1.Colgate-Palmolive (India)Ltd.<br />2.Godrej Consumers Product Ltd.<br />3.Nirma Ltd.<br />4.Tata Tea Ltd.<br />5.Parle Agro<br />Rural consumers spend around 13 per cent of their income, the second highest after food (35 per cent), on fast moving consumer goods (FMCG), as per a RMAI study. <br />The FMCG industry in India was worth around US$ 16.03 billion in August 2008 and the rural market accounted for a robust 57 per cent share of the total FMCG market in India. <br />The FMCG sector saw rural markets post 20 per cent growth, ahead of the 17-18 per cent growth from urban India, aided by three years of good monsoon, higher prices of farm produce and farm-loan waiver. <br />Most FMCG companies are now working on increasing their distribution in smaller towns and focussing on marketing and operations programme for semi-urban and rural markets. <br />For instance, Godrej Consumer Products intends to increase revenue from rural areas from 38 per cent to 55 per cent in the next three years by increasing its distribution network substantially. The products will reach out to 50,000 villages in the next couple of years from the present 18,000 villages while the number of towns covered will double from 3,300 to almost 6,500 in a year. <br />Retail<br />The rural retail market is currently estimated at US$ 112 billion, or around 40 per cent of the US$ 280 billion retail market. Major domestic retailers like AV Birla, ITC, Godrej, Reliance and many others have already set up farm linkages. Hariyali Kisan Bazaars (DCM) and Aadhars (Pantaloon-Godrej JV), Choupal Sagars (ITC), Kisan Sansars (Tata), Reliance Fresh, Project Shakti (Hindustan Unilever) and Naya Yug Bazaar are established rural retail hubs. <br />Pharmaceuticals<br />According to a report by McKinsey, the rural and tier-II pharma market will account for almost half of the growth till 2015. The tier-II market will grow to 44 per cent by 2015, amounting to US$ 8.8 billion. <br />This growth will be further augmented with the government increasing the allocation under National Rural Health Mission (NRHM) by US$ 424.3 million over interim budget estimate 2009-10 of US$ 2.49 billion. <br />Elder Pharmaceuticals is increasing its focus on the rural market. The company that largely makes active pharmaceutical ingredients, plans to increase its sales by 8-9 per cent mainly from rural areas and has allocated US$ 8.26 million to strengthen the sales force for this segment. <br />Telecommunication <br />A Gartner forecast revealed that Indian cellular services revenue will grow at a compound annual growth rate (CAGR) of 18.4 per cent to touch US$ 25.6 billion by 2011, with most of the growth coming from rural markets. Also, a joint Confederation of Indian Industries (CII) and Ernst & Young report reveals that of the next 250 million Indian wireless users, approximately 100 million (40 per cent) are likely to be from rural areas, and by 2012, rural users will account for over 60 per cent of the total telecom subscriber base in India. <br /> <br />In a bid to acquire rural subscribers, most Indian telecom operators have started investing in infrastructure to roll out their services in these areas. Realising this as a huge potential, small Indian handset manufacturing companies, including Micromax, Intex Technologies and Karbonn, have lined up a marketing spent of around US$ 21.02 million for the financial year 2009-10. <br /> <br />Automobiles<br />For the auto industry, semi-urban and rural markets contribute close to 40 per cent of sales, led by demand for two-wheelers, entry-level cars and tractors. Significantly, car sales grew 8.3 per cent in June 2009, aided by rising demand in semi-urban and rural markets. Mahindra & Mahindra is bullish on the rural and semi-urban markets, with its utility vehicle, Scorpio clocking 60-65 per cent sales <br />from the rural markets as against 20 per cent earlier. TVS Motor also registered around 50 per cent of its sales from the rural and semi-urban markets. <br />Consumer durables<br />A survey carried out by RMAI has revealed that 59 per cent of durables sales come from rural markets. <br />Presently, around 50 per cent of sales in the US$ 5.14 billion consumer electronics industry come from the urban markets, 30 per cent from tier-II and -III towns and balance 20 per cent from rural India. <br />Many leading consumer durable companies are now increasing their presence in rural India. Recently, LG has set up 45 area offices and 59 rural and remote-area offices. Moreover, it has outlined plans to invest around US$ 40 million towards development of entry-level products targeted at rural markets. <br />Samsung has also rolled out its 'Dream Home' road show which was to visit 48 small towns in 100 days in an effort to increase brand awareness of its products. Samsung expects that its rural revenues would increase to US$ 287.7 million in 2009 from US$ 164.4 million last year. The company also plans to expand its sales channel by 25-30 per cent in rural India. <br />Whirlpool, is eyeing rural markets in India for its next phase of growth. The company is set to tap markets with a population between 100,000 and 500,000 in the first phase, and in the next phase, will look at expanding the base in villages with a population of 50,000. <br />Nature of Rural Market<br />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.<br />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.<br />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, <br />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.<br />Traditional Outlook: Villages develop slowly and have a traditional outlook. Change is a continuous process but most 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.<br />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.<br />Diverse socioeconomic background: Due to dispersion of geographical areas and uneven land fertility, rural people have disparate socioeconomic background, which ultimately affects the rural market.<br />Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution is a challenge to marketers who have found innovative ways to market their products.<br />Some Myths:<br /><ul><li>Myth-1: Rural Market Is a Homogeneous Mass</li></ul>Reality: It’s a heterogeneous population. Various Tiers are present depending on the incomes like Big Landlords; Traders, small farmers; Marginal farmers: Labors, artisans. State wise variations in rural demographics are present viz. Literacy (Kerala 90%, Bihar 44%) and Population below poverty line (Orissa 48%, Punjab 6%).<br /><ul><li>Myth-2: Disposable Income Is Low</li></ul>Reality: Number of middle class HHs (annual income Rs 45,000- 2, 15,000) for rural sector is 27.4 million as compared to the figure of 29.5 million for urban sector. Rural incomes CAGR was 10.95% compared to 10.74% in urban between 1970-71 and 1993-94.<br /><ul><li>Myth-3: Individuals Decide About Purchases</li></ul>Reality: Decision making process is collective. Purchase process- influencer, decider, buyer, one who pays can all be different. So marketers must address brand message at several levels.Rural youth brings brand knowledge to Households (HH).<br />Is rural marketing transactional or developmental in its approach? <br />It is true, rural markets have become an attractive proposition for commercial business organizations.<br />The role of rural marketing as such is more developmental than transactional. It is more a process of delivering better standard of living and quality of life to the rural environment taking into consideration the prevailing village milieu.<br />Transactional Vs Developmental: For better comprehension of this role let us distinguish development marketing and transactional marketing. Table brings out the differences in brief.<br />Transactional Vs Development Marketing<br />S.NoAspectTransactionalDevelopment1.ConceptConsumer orientation, Marketing conceptSociety orientation, societal concept2.RoleStimulating and conversional marketingCatalytic and transformation agent3.FocusProduct-market fitSocial change4.Key taskProduct innovations and communicationsSocial innovations and communications5.Nature of activityCommercialSocio-cultural, economic6.ParticipantsCorporate enterprises, SellersGovernment, voluntary agencies, corporate enterprises, benefactors7.OfferProducts and servicesDevelopment, projects/schemes/programs8.Target groupBuyersBeneficiaries and buyers9.CommunicationFunctionalDevelopmental10.GoalProfits, Customer satisfactionBrand imageMarket developmentCorporate Image11.Time-FrameShort-mediumMedium-Long12.MotivationProfit-motiveBusiness policyService-motiveIdeological or Public policy<br />Model: The model of rural marketing represents a combination of the transactional and developmental approaches.<br />Rural marketing process is both a catalyst as well as an outcome of the general rural development process. Initiation and management of social and economic change in the rural sector is the core of the rural marketing process. It becomes in this process both benefactor and beneficiary.<br />Innovation is the essence of marketing. Innovative methods of social change for successful transformation of traditional society are virtual. Such a change narrows the rural-urban divide.<br />The process of transformation can be only evolutionary and not revolutionary. The growth of the rural market can be a planned evolutionary process based on strategic instruments of change rather than constitute just short-term opportunities for commercial gains.<br />The exposure of ruralites to a variety of marketing transactions during the change process puts them in the role of beneficiaries than of just `buyers' of modern inputs and infrastructural services.<br />Communication is the vital element of rural marketing. It should serve to resolve social conflicts, encourage cooperation and strengthen competitive spirit during interactions between rural and urban as well as within rural <br />areas. Another critical point for communication is the point of conversion of ruralite from an "induced beneficiary" to an "autonomous buyer".<br />Classification of rural consumers<br />The rural consumers are classified into the following groups based on their economic status:<br />The Affluent Group: They are cash rich farmers and a very few in number. They have affordability but not form a demand base large enough for marketing firms to depend on. Wheat farmers in Punjab and rice merchants of Andhra Pradesh fall in this group.<br />The Middle Class: This is one of the largest segments for manufactured goods and is fast expanding. Farmers cultivating sugar cane in UP and Karnataka fall in this category.<br />The Poor: This constitutes a huge segment. Purchasing power is less, but strength is more. They receive the grants from government and reap the benefits of many such schemes and may move towards the middleclass. The farmers of Bihar and Orissa fall under this category.<br />Roadblocks of Indian Rural Market<br />There are several roadblocks that make it difficult to progress in the rural market. Marketers encounter a number of problems like dealing with physical distribution, logistics, proper and effective deployment of sales force and effective marketing communication when they enter rural markets. The major problems are listed below.<br />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.<br /> 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.<br /> 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.<br />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 <br />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.<br /> 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.<br /> 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.<br /> 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.<br />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.<br />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.<br /> Dispersed markets: Rural population is highly dispersed and requires a lot of marketing efforts in terms of distribution and communication.<br />Attractiveness of rural market<br /> Large Population: The rural population is large and its growth rate is also high. Despite the rural urban migration, the rural areas continue to be the place of living majority of Indians.<br />Rising Rural Propensity: <br />Income Group2000-012005-062008-09Above Rs. 100,0001.63.85.6Rs. 77,001-100,0002.74.75.8Rs. 50,001-77,0008.313.022.4Rs. 25,001-50,00026.041.144.6Rs.25,000 & below61.437.420.2<br />Thus we see that population between income level of Rs. 25,000- 77,000 will increase from 34.3% in 1994-95 to 67.0% in 2006-07. The rural consuming class is increasing by about 3-4% per annum, which roughly translates into 1.2 million new consumers yearly.<br />Growth in consumption:<br />Per capita household expenditure (in Rs.)<br />LevelNo.StatesExpenditureHigh (Above Rs 382/-)7Punjab614Kerala604Haryana546Rajasthan452Gujarat416Andhra Pradesh386Maharashtra384Average (Rs. 382/-)5West Bengal382Orissa381Tamil Naidu381Uttar Pradesh373Karnataka365Low (Below Rs. 382/-)3Assam338Madhya Pradesh326Bihar289<br />Distribution household’s income wise (projection in Rs Crore)<br />Income groups2001 – 022006 – 07RuralRuralTotalNo.%TotalNo.%High0.260.0726.90.520.1223.1Middle12.047.7364.216.7210.3261.8Low5.75.0988.73.683.5295.7Total18.0412.8971.420.9013.9666.7<br />Spending pattern (Rural Household’s in Rs.)<br />Item%RichPoorAverageFood Articles441477395Toiletries20673343Washing Material13432228Cosmetics10331721Otc Products41369Others9301519Total333166215<br />Average rural household spends on consumables excluding food grains, milk & vegetables are Rs. 215/-.<br />Life style changes:<br />Income vs. usage of packed consumer goods (% of household using)<br />GoodsMonthly household income (Rs.)Up to 350351 – 750751 – 15001501 +Washing Cakes/Bars60788691shampoos57728993Tooth Paste/Powder22366585bathing soaps20254163Tea (Packaged)22304864<br />Life cycle advantage:<br />Stages in life cycle<br />ProductUrbanMarket Growth Rate %RuralPopular soapsMaturity2GrowthPremium soapsLate growth11Early growthWashing powderLate growth6Early growthSkin creamsMaturity1.1GrowthTea Maturity4Growth<br /> 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.<br />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. According to one research it costs roughly Rs.1 Crore to promote a consumer durable inside a state. 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.<br />Remoteness is no longer a problem: Remoteness in a problem but not insurmountable. The rural distribution is not much developed for the reasons,<br />Lack of proper infrastructure such as all-weather roads, electrification and sanitation, and<br />Lack of marketer’s imagination and initiative.<br />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.<br /> <br />Rural Vs Urban Marketing<br />No.AspectUrbanRural1PhilosophyMarketing & Societal Concepts & Relationship MarketingMarketing & Societal Concepts, Development Marketing & Relationship Marketing2MarketDemandHighLowCompetitionAmong Units In Organized SectorMostly From Unorganized UnitsConsumersLocationConcentratedWidely SpreadLiteracyHighLowIncomeHighLowExpenditurePlanned, EvenSeasonal, VariationNeedsHigh LevelLow LevelInnovation/AdoptionFasterSlow3ProductAwarenessHighLowConceptKnownLess KnownPositioningEasyDifficultUsage MethodEasily GraspedDifficult To GraspQuality PreferenceGoodModerate4PriceSensitiveYesVery muchlevel desiredMedium-highMedium-low5distribution channelsWholesalers, stockists, retailer, supermarket, specialty stores, & authorised showroomsVillage shops, “Haats”Transport FacilitiesGoodAverageProduct AvailabilityHigh Limited6PromotionAdvertisingPrint, audio visual media, outdoors, exhibitions etc. few languagesTV, radio, print media to some extent. More languagesPersonal SellingDoor-to-door, frequentlyOccasionallySales PromotionContests, gifts, price discountGifts, price discountsPublicityGood opportunitiesLess opportunities<br />Special Products for Rural Markets:<br />Rural Transporter: Mahindra & Mahindra is busy developing the prototype of what it calls a ‘Rural Transporter’ – basically a hybrid between a tractor and a rural transport vehicle. The product at 20-25 HP will be targeted at those who cannot afford a normal tractor and would also fulfill the need of family transporter that could take in the rural roughs but would be much more comfortable and safer than the conventional tractor-trolley.<br />Sampoorna TV: LG Electronics, the Korean firm has rejigged the TV to appeal to local needs. It spent Rs. 21 Lacs to develop a set that would have on-screen displays in the vernacular languages of Hindi, Tamil and Bengali. The logic, rural consumers unfamiliar with English would still be able to use the TV without being intimidated.<br />Titan Watches: A recent NCAER study revealed that there is a great potential for watches in rural areas. In fact it is considered to be a high priority list. It was also found that a rural consumer looks for the ruggedness of the watch more than the urban consumer does. He prefers thick watches than slim watches.<br />The biggest problem that the Marketers are facing in the Rural Markets is Of IMITATIONS. Imitations may result in two types of goods depending upon the purpose, commitment, and competence of imitator. A poor imitator will end up in <br />producing deceptive, spurious, fake, copycat products. He dupes the gullible customer by offering products having close resemblance with the original. In quality, it is poor cousin to the original. On the other hand, a poor imitator may even produce an improved version of the original product.<br /> In this scenario the job of the Marketer becomes even more difficult in the sense that he has not to fight other competitors but also the imitated products.<br /> The advantages that these products enjoy in the rural markets are that the Imitators who are in the villages are making these and they are offering More Margins & Better credit Facilities. <br /> To solve this problem the Marketer has to educate the consumer about his product and show him the benefits of his products over the imitated ones.<br />Need-Product Relationships and the changes happening in Rural India<br />NeedsOld ProductsNew ProductsBrushing TeethNeem sticks, Charcoal, Rocksalt, HuskToothpaste, tooth powderWashing VesselsCoconut fiber, Earthy materials, Brick Powder, AshWashing Powders, soaps and liquidsTransportBullock Cart, Horses, DonkeysTractors, LCVs, Mopeds, Scooters, Motor cyclesIrrigationWells, Canals, Water lifters, Wind MillsBore-wells, Motors, Power Generators, Pump SetsHair WashShikakai powder, Retha, BesanShampoos and hair care soaps<br />CONSUMER BEHAVIOR IN RURAL MARKETS:<br /> Promotion of brands in rural markets requires the special measures. Due to the social and backward condition the personal selling efforts have a challenging role to play in this regard. The word of mouth is an important message carrier in rural areas. Infect the opinion leaders are the most influencing part of promotion strategy of rural promotion efforts. The experience of agricultural input industry can act as a guideline for the marketing efforts of consumer durable and non-durable companies. Relevance of Mass Media is also a very important factor. <br />The Indian established Industries have the advantages, which MNC don't enjoy in this regard. The strong Indian brands have strong brand equity, consumer demand-pull and efficient and dedicated dealer network which have been created over a period of time. The rural market has a grip of strong country shops, which affect the sale of various products in rural market. The companies are trying to trigger growth in rural areas. They are identifying the fact that rural people are now in the better position with disposable income. The low rate finance availability has also increased the affordability of purchasing the costly products by the rural people. Marketer should understand the price sensitivity of a consumer in a rural area. This paper is therefore an attempt to promote the brand image in the rural market. <br />Indian Marketers on rural marketing have two understanding (I) The urban metro products and marketing products can be implemented in rural markets with some or no change. (ii) The rural marketing required the separate skills and techniques from its urban counter part. The Marketers have following facilities to make them believe in accepting the truth that rural markets are different in so many terms.(i) The rural market has the opportunity for.(ii) Low priced products can be more successful in rural markets because the low purchasing, purchasing powers in rural markets.(iii) Rural consumers have mostly homogeneous group with similar needs, economic conditions and problems.(iv) The rural markets can be worked with the different media environment as opposed to press, film, radio and other urban centric media exposure. <br />How does reality affects the planning of marketers? Do villagers have same attitude like urban consumers? The question arises for the management of rural marketing effects in a significant manner so than companies can enter in the rural market with the definite goals and targets but not for a short term period but for longer duration. The Research paper will discuss the role of regard. The strategy, which will be presented in the paper, can be either specific or universally applicable.<br /> The ultimate objective of all production is consumption. A free market economy provides freedom to the consumers to buy and consume goods of their choice. The buying preferences of consumers send signals to producers to produce various commodities in required quantities. Producers, therefore, produces only those commodities which are desired by the consumers. In India, consumer behavior has changed in recent years owing to enhanced awareness, information technology, and, more importantly, governmental intervention through legislations. India's rural consumers account for about 73 percent of the total consumers. In recent years, the lifestyle of a large number of rural consumers in India has changed dramatically and continues to do so. The buying behavior of the rural consumers is influenced by several factors, such as socio-economic conditions, cultural environment, literacy level, occupation, geographical location, efforts on the part of sellers, exposure to the media, etc. This book examines the buying behavior of India's rural masses and the diverse factors which influence their choices. The work is useful for understanding the Indian rural consumer psyche in order to formulate an appropriate marketing strategy. It includes:<br /><ul><li>Media
From the shop of nearby town.</li></ul>Factors influencing buying behavior<br />The various factors that affect buying behavior of in rural India are:<br />Environmental of the consumer - The environment or the surroundings, within which the consumer lives, has a very strong influence on the buyer behavior, egs. Electrification, water supply affects demand for durables. <br />Geographic influences - The geographic location in which the rural consumer is located also speaks about the thought process of the <br />consumer. For instance, villages in South India accept technology quicker than in other parts of India. Thus, HMT sells more winding watches in the north while they sell more quartz watches down south. <br />Family – it is an important buying decision making organization in consumer markets. Family size & the roles played by family members exercise considerable influence on the purchase decisions. Industry observers are increasingly realizing that at times, purchase of durable has less to do with income, but has more to do with the size of the family & that’s where rural India with joint family structures, becomes an attractive proposition.<br />Economic factors – The quantum of income & the earning stream are one of the major deciding factors, which determine to a great extent, what the customer will be able to buy. Many people in the rural market are below poverty line & for large number of people, agriculture is the primary occupation. More than 70% of the people are in small-scale agricultural operation. These factors affect the purchase decision.<br />Place of purchase - (60% prefer HAATS due to better quality, variety & price) Companies need to assess the influence of retailers on both consumers at village shops and at haats.<br />Creative use of product - ex Godrej hair dye being used as a paint to colour horns of oxen, Washing machine being used for churning lassi. <br />The study of product end provides indicators to the company on the need for education and also for new product ideas. <br />Brand preference and loyalty - (80% of sale is branded items in 16 product categories) <br />Cultural factors influencing consumer behavior<br />Cultural factors exert the broadest and deepest influence on consumer behaviour. The marketer needs to understand the role played by the buyer’s culture. Culture is the most basic element that shapes a person’s wants and behaviour. In India, there are so many different cultures, which only goes on to make the marketer’s job tougher. Some of the few cultural factors that influence buyer behaviour are:<br />Product (colour, size, design, and shape): There are many examples that support this point. <br />For example, the Tata Sumo, which was launched in rural India in a white colour, was not well accepted. But however, when the same Sumo was re-launched as Spacio (a different name) and in a bright yellow colour, with a larger seating capacity and ability to transport good, the acceptance was higher.<br />Another good example would be Philips audio systems. Urban India looks at technology with the viewpoint of ‘the smaller the better’. However, in rural India, the viewpoint is totally opposite. That is the main reason for the large acceptance of big audio systems. Thus Philips makes audio systems, which are big in size and get accepted in rural India by their sheer size.<br />Social practices: There are so many different cultures, and each culture exhibits different social practices. <br />For example, in a few villages they have common bath areas. Villagers used to buy one Lifebuoy cake and cut it into smaller bars. This helped lifebuoy to introduce smaller 75-gram soap bars, which could be used individually.<br />Decision-making by male head: The male in Indian culture has always been given the designation of key decision maker. <br />For example, the Mukhiya’s opinion (Head of the village), in most cases, is shared with the rest of the village. Even in a house the male head is the final decision maker. In rural areas, this trend is very prominent. <br />Changes in saving and investment patterns: From gold, land, to tractors, VCR’s, LCV’s <br />4 A’s approach of Indian Rural Market<br />The rural market may be appealing but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media. <br />However, the rural consumer is not unlike his urban counterpart in many ways. <br />The more daring MNC’s are meeting the consequent challenges of availability, affordability, acceptability and awareness (the so-called 4 A’s) <br />Availability <br />The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of <br />more than 5,000. Marketers must trade off the distribution cost with incremental market saturation. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system which helps its brands reach the interiors of the rural market. <br />To service remote village, stockiest use autorickshaws, bullock-carts and even boats in the backwaters of Kerala. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. 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. <br />Affordability <br />The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of who are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Most of the shampoos are available in smaller packs. Fair and lovely was launched in a smaller pack. Colgate toothpaste launched its smaller packs to cater to the travelling segment and the rural <br />consumers.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. <br />Hindustan Lever, among the first MNC’s 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. The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and multi serve sachet of 200 gm priced at Rs 15. <br />Acceptability <br />The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. One company which has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customized TV for the rural market and christened it Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice boxes — a tin box for new outlets and thermocol box for seasonal outlets. <br />The insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crores in total premium. The company tied up with non-governmental organizations and offered reasonably-priced policies in the nature of group insurance covers. With large parts of rural India inaccessible to conventional advertising media — only 41 per cent rural households have access to TV — building awareness is another challenge. Fortunately, however, the rural consumer has the same likes as the urban consumer — movies and music — and for both the urban and rural consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or luxury. <br />Awareness <br />Brand awareness is another challenge. Fortunately, however, the rural consumer has the same likes as the urban consumer — movies and music — and for both the urban and rural consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or indulgence. <br />Hindustan Lever relies heavily on its own company-organized media. These are promotional events organized by stockiest. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language. <br />Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. It doubled it’s spend on advertising on Doordarshan, which alone reached 41 per cent of rural households. It has also used banners, posters and tapped all the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media. LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising. Philips India uses wall writing and radio advertising to drive its growth in rural areas. <br />The key dilemma for MNC’s ready to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. <br />Evolving a New Marketing Mix for Selling to Rural Indians<br />The marketing mix in the case of Indian rural markets consists of 4P’s i.e.<br />Product, Price, Promotion, Place combined with 1 P that is Packaging and one R i.e. Retailer as special focus areas. However, at the base of this marketing mix will be 2 E’s of Education and Empowerment.<br />EMPOWEREMENTEDUCATIONCUSTOMIZATIONN<br />The traditional marketing hypothesis tends to ignore the requirement of a developing country’s rural needs. The concept of marketing has to be taken in conjunction with economic, psychological and social implications. Hence, the concept of Mega-Marketing where all such factors are taken into consideration while developing the Marketing Mix is more relevant to succeed and build enduring brands. In rural India’s case the two most important considerations are Education and Empowerment opportunities which traditional approaches of marketing fail to acknowledge. Then only the opportunity provided by the rural market can be fully tapped. <br />12.2% of the world lives in Rural India. Put in a different context, this works out to 1 in 8 people on Earth. Being able to successfully tap this growing market is every marketer’s dream. However, myths abound. India’s rural markets are often misunderstood. A clear distinction needs to be made with regard to the reality versus the image of rural India. If such a distinction is not made, we will be unable to distinguish between the serpent and the rope and the rope and the serpent. <br />The rural market is not homogeneous. Though the aggregate size is very large, individual subsets of this market tend to be rather small and disparate. Geographical, demographical, statistical, logistical differences are very apparent. Positioning and realities regarding the potential of each of these market segments differ and lie at the very core of forming the strategy for the rural markets.<br />The face of Indian agriculture is changing from dry land and irrigated agriculture into high-tech and low-tech agriculture. Farmers in states like Maharashtra and Andhra Pradesh have reaped the benefits of adopting new age farming practices, including green house cultivation, fert-irrigation and hydroponics. This has radically changed the economics of farming, with the investment in these systems lowering the cost of cultivation, increasing yields due to integrated crop management practices and reducing the dependence on rainfall. As a result, disposable income has grown sharply. The aspirants are becoming climbers showing a sustained economic upturn as purchasing power is increasing in the rural markets. The proportion of very rich has increased five- fold. The growing incomes have modified demand patterns and buyer behaviour. Moreover, the <br />need for a product or service is now adequately backed up with the capacity, ability and willingness to pay.<br />However, the market still remains largely unexploited. At most times, potential markets need to be found and at times, even created. Such creation of demand needs efficient management of the supply chain. To increase market share, behavioural change needs to be at the forefront of any strategy. Further, due to the diversity of this market, marketers need to think, plan and act locally.<br /> It is therefore essential to develop an accurate Marketing Mix for selling to rural Indians.<br />Product <br />“Authentic marketing is the art of identifying and understanding customer needs and creating solutions that deliver satisfaction to the customers, profits to the producers and benefits for the stakeholders.” ................... Philip Kotler<br /> <br />The product offerings have to be not only customized but also at a different plane altogether in case of rural markets. The various product levels as outlined by Philips Kotler, namely Core Benefit, Basic Product, Expected product, augmented product and Potential Product should be adequately taken into consideration and the product offerings should be henceforth customized according to the needs.<br /> The Rural market is not a homogenous set of customers with preferences frozen in time. When developing products in any category, marketers must identify the typical rural specific needs. Urban products cannot be dumped onto rural markets without modifications. Tailor-made products are better received by <br />the rural audience as the consumers feel empowered and tend to dentify with the offering.<br />Most of the times in the urban market the product is offered at the augmented product level where the objective of the product offering is to exceed the customer expectation. But in the rural markets of India which have been till date characterized by the absence of the choice, sub-standard products and cheap clones of their urban counterparts; the immediate level to be operated is the Expected product where his expectations are met. Also, due to the low level of incomes and literacy levels, it is imperative that the basic needs of the consumer are met.<br />For instance, shampoos or soaps with distinctive, strong rose or jasmine perfumes are very popular with the rural women in South India. The urban women do not identify as strongly with these perfumes. Sachetization is also a distinctly rural-driven phenomenon. As demand in several categories is being created, intensity of use is quite low. On average, rural folk would use a shampoo only once a week. Habits take time to change and making unit sachet packs affordable is the key to inducing trial and purchase.<br />Systematic, in-depth research that can help understand the depths of the mind of the villagers, their buying criteria, purchase patterns and purchasing power are an essential input while developing rural specific products or services.<br />A common error has been to launch a completely stripped down version of the urban product in the rural market, with the objective of offering the lowest possible price. This is not what a rural consumer wants. What is required is to introduce a product with ‘essential’ features, whose needs are recognized and for which the consumer is willing to pay (value-adding features). Product developers should aim at eliminating all the cost-adding features, i.e., features which a consumer is unwilling to pay for as he sees no obvious utility. This would “redefine value” in the minds of the consumer and tremendously increase product acceptability.<br />Product development is severely constrained by legislation in the case of agricultural inputs like fertilizers, insecticides and pesticides. In the case of fertilizers for instance, though levels of deficiency of nutrients have increased significantly over the past decade, no significant changes in formulations notified under the Fertilizer Control Order have taken place. This has severely restricted the availability of cost effective specialty fertilizers of global standards to Indian farmers. Technological know-how for manufacture of such fertilizers exists within the country. However, farmers using modern farming practices are unable to get an assured supply of such farm inputs due to draconian legislation. A move to liberalize the sector could perhaps consider the accepted worldwide norm of allowing manufacturers with a strong R&D base to decide their own formulations with the government machinery conducting checks on market samples of finished products to ensure that they live up to the labelled specifications. This would be a <br />major policy initiative that would give a huge impetus to innovative product development in the farm sector.<br />Product life cycles as are becoming shorter and these are having their impact on company life cycles. Thus for any company wishing to develop its product portfolio, allegiance to the classic American P-A-L Principle of Partnership - Alliances - Linkages is a basis for survival.<br />Pricing<br />A significant portion of the rural population is paid in daily wages. Daily wage earners tend to have little stock of money, and therefore tend to make purchases only to meet their daily needs. The implication is that pack sizes and price points are critical to sales, and importantly, that rural consumers view the purchase-tradeoff dilemma across a much wider range of product categories. As a result, the nature of competition is much greater; a beverage manufacturer is not only competing with other manufacturers in its category, but also other products that consumers may consider one-off luxury purchases such as shampoo. So marketer will have to examine method by which he can make the product more affordable. In the case of consumer durable one way is to work through rural bank and offer higher purchase terms to consumer. In short, the Value for money is the most important concept that will differentiate the successful brand from the rest.<br />BUDGET CONSCIOUS CONSUMERSTATUS SEEKING CONSUMERS<br /> <br />Every marketer must realize that the rural consumer is not a miser. He is not simply looking for the cheapest product in every category. He understands and demands value for money in every purchase that he makes. Pricing therefore is a direct function of factors including cost-benefit advantage and opportunity cost. Pricing offered to consumers should be for value offerings that are affordable. Price sensitivity is extremely high and comparison with competitive prices is common. Consumers seem to create narrow psychological price bands in their <br />minds for product groups and price elasticity beyond the extreme price points is very high. The perceived utility or value of the product or service is the ultimate decision making factor.<br />It is certain however, that buying cheap is not the primary objective. Rather, it is “buying smart”. A study revealed that the average rural consumer takes approximately 2 years to decide on buying a watch! He will not do so unless he is totally convinced that he is getting value for Money. Impulse buys and purchases for conspicuous consumption are also extremely few and far Between considering the “value for money” factor that reigns supreme in most rural purchase decisions.<br />It must be remembered that the rural consumer does not have a budget problem. He has a cash flow problem. This is because the village folk receive funds only twice a year. At these times, he is capable of making high volume purchases. At all times, however, the unit price is critical and so is the pack size. Because of this, in the lean season when there is a cash flow crunch, marketers need to provide financial products, schemes or solutions that suit the needs of the rural population.<br />Promotions & Advertising<br />There are a lot of barriers that militate against homogenous media and message delivery. These barriers stem from the fact that rural markets vary immensely in <br />terms of tastes, habits and preferences leading to different expectations of every segment of the population.<br />However, one fact is certain across all areas. The rural consumer likes to touch and feel a product before making a choice. Demonstrations are undoubtedly the most effective promotional tool that shapes purchase decisions of the rural population. Demonstrations establish the credentials of any new technology used in developing the product.<br />In today’s information era, it is very important for companies to wise-up on emerging technologies. It has in fact become a medium to attract larger audiences for a product demonstration. Technology must be used to prepare a database of customers and their requirements. The use of video using mobile vans and even large screen video walls at events should be arranged.<br />The classic conundrums of reach and coverage of the media are shattered. Several creative communication media have been used by various companies to tackle the problem of having to use visual communication and non-verbal communication to reach the rural audience. This is required because a large proportion of the rural population cannot read or write. Alliances with cottage industries, dharmsalas, panchayats, post offices and police stations for advertising have also helped immensely. More importantly, in rural India, experience has proved time and time again that word of mouth is the key influencer.<br />Intermediaries are the foundation to rural distribution. If the intermediary understands and is constantly reminded about your product, then the end user will not be allowed to forget. The companies must reinforce this highly effective medium and use all their innovation and money tom develop more dramatic point of sale and point of contact material. This becomes all the more important when in rural India, more often than not, the overlap between the product categories sold in a single outlet in tremendous. For instance, a store may call itself as a grocery store but will stock everything from groceries to vegetables to fertilizers and may at times even stock medicines. In such cases, the point at which the customer actually comes in contact with a product may not be the point at which the sale is affected.<br />The re-use capacity and colour of the container in which the product is packed is also a crucial factor. In fact, reusable packaging is considered a major aid in promoting sales for products in the rural market. Consumer and Trade schemes that Incentivise Spending using discount coupons, off season discounts, free samples, etc. encourage spending. Lucky draws and gift schemes are a major hit in most states.<br />The use of local idioms and colloquial expressions are an excellent way to strike a rapport with the rural consumer and must be borne in mind when developing media plans and public relations programmes. No high voltage publicity is required. The rural consumer is very down to earth but equally discerning and <br />marketers need to step into the shoes of the rural folk while creating product promotion campaigns. Another unique feature of rural markets is that the Decision making process is collective. The persons involved in the purchase process - influencer, decider, buyer, one who pays can all be different. So marketers must address brand messages in their campaigns at several levels. Apart from regular household goods, several agribusiness companies have also started providing gift schemes with offers for free jewellery that influences the ladies to pressure the farmers to purchase agricultural inputs from select companies. This promotion strategy thus makes women influence purchase decisions that they would ordinarily not be involved in.<br />Youth power is becoming increasingly evident in villages. Rural youth bring brand knowledge to the households. This has forced several companies to change the focus and positioning of their products and services towards this segment that is growing in absolute number and relative influence.<br />There are other attributes in the promotion strategy which are explained as under:<br />1. Mass media: In the present world mass media is a powerful medium of communication. The following are the mass media generally used:<br />Television. <br />Cinema. <br />Radio <br />Print media: Handbills and Booklets, posters, stickers, banners, etc. <br />2. Personal selling and opinion leaders: In personal selling it is required that the potential users are identified and awareness is created among them about the product, its features, uses and benefits. This can be achieved only by personal selling by highly motivated sales person. In fact the word of mouth information holds lot validity in rural areas even today. This is the reason why opinion leaders and word of mouth are thriving among rural consumers. An opinion leader in rural areas can be defined as a person who is considered to be knowledgeable and is consulted by others and his advice is normally followed. The opinion leaders may be big landlords or politicians or progressive farmers. <br />3. Special campaigns: During crop harvest and marketing seasons it is beneficial to take up special promotion campaigns in rural areas. Tractor owners (tonee) conducted by MRF Limited is one such example. Brooks Bond carries out marches in rural areas with band, music and caparisoned elephants to promote their brand of tea. <br />Mandi and Mela magic<br />At last count, India witnessed over 50,000 melas. Of these 25,000 meals are held to signify religious, cultural festivals as well as local fairs and events. On an average, visitors at these melas spend between Rs. 5,000 to Rs. 50,000 a day. For <br />example, 3 lakh people visited the annual mela at Navchadi which lasts for 7 days in Meerut. The largest such mela is the Maha Kumbh Mela which is visited by an average of 12 crore people.<br />There is however, a caveat when an organization is considering using mela for marketing their products. Is the audience at this mela fit for promotion of the product at hand? What are the psychographics of this audience? What is the motivational and behavioural impetus that brings visitors to each of these melas. On considering these questions, it has been observed that melas are fit to generate product exposure, package familiarity, brand reminder and word of mouth. However, for products that need concept marketing and those that have high prices, such melas are not suitable promotion media. This is because the time and the mood of the people that visit these melas are not right to digest technical information or for making large purchases. People come to melas to have a good time and are not reminded of such high technology or high priced products when they return home. In the words of Mr. Neville Gomes, Managing Director of Multimedia Aquarius, promotion at melas is like a “one night stand”. There will be no reminder later. Thus, a large amount of qualitative judgment is indeed in planning promotions at melas by media planners.<br />Place <br />place is the major reason behind the evolution of rural marketing as a distinct discipline. A village as a place for promotion, distribution & consumption is very <br />different from a town or city, thus the general marketing theories can’t be applied directly in rural markets. Reaching the right place is the toughest part in today’s rural marketing, as most of the products reach up to the nearest townships of any village, but due to higher distribution costs, these products fails to reach the village as the distribution channel fails to put in the required efforts. Most of the times, the rural retailers themselves go to the urban areas to procure these goods. Rural markets imply complex logistical challenges that show up as high distribution costs.<br />Significance of Distribution<br />No matter how well devised a company’s product, pricing or promotion strategy, the most crucial link in ensuring the success of rural marketing efforts is distribution. Distribution must be strengthened and this would raise investment cost barriers for new entrants. In Rural India, the selection and use of distribution channels is a nightmare. The reason for this is very clear when we consider that on an average, Urban and Rural India both have approximately 3 million retail outlets. However, Urban India has only 4,000 towns where these outlets are located. On the other hand, Rural India’s 3 million outlets are located in 6.3 lakh villages. Thus, marketers are faced with the problem of feeding 3 million shops located in vastly diverse areas each of which records an average sale of only Rs.5,000 per outlet. Further compounding this problem is the fact that even this <br />meagre sale is mostly on credit. The diversity in the distribution of shops is the self-limiting factor in terms of servicing the rural distribution network.<br />The distribution of outlets however shows that a marketer need not be present in all markets at all times. Being present in 6 lakh villages is virtually impossible for an organization of any size. Rural wealth and demand is concentrated typically at satellite towns, district headquarters, assembly markets and such central <br />locations. Rural distribution has a rigid hierarchy of markets that make channel decisions relatively structured. <br />It is essential for rural marketing companies to understand this hierarchy. Rural folk are habituated to travelling once a week for their weekly purchases to a satellite town. They do not expect such items to be present in every village. For durables where the outlay involved is typically large, the purchase would be made in an assembly market for reasons of choice and availability of adequate cash flow. This is due to the fact that it is at assembly markets that auction yards are present where the farmers congregate to sell their output. After such sale of produce, they are cash rich and can afford to make such purchases. It is therefore not necessary for a marketer of TV sets to take their distribution channel all the way down to the village shop. A TV will not be sold there as the cash flow does <br />not exist at that point in the hierarchy of markets. A television distributor must be present at assembly markets which are much smaller in number, more controllable, easier to reach and service. Keeping the hierarchy in mind will help decide the optimum level of penetration required to reach a critical mass of rural consumers.<br />Haats<br />Haats are the nerve centre of Rural India. They are a readymade distribution network embedded in the fabric of rural society for over 1000 years. They have been held on a regular basis across the length and breadth of the country for over 1000 years. Right from the time of Chandragupta Maurya, Haats are seen as a place for social, cultural and economic interchange.<br />One in every five villages with a population of over 2000 has a haat. In villages with less than 2000 people this figure reduces to 1 in 20 villages. Typically, an average haat will have close to 300 stalls. A haat usually serves around 5000 visitors. Considering that the average population of an Indian village is ap