1. Rural Market - An Introduction

7/29/2019 1. Rural Market - An Introduction

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Rural Quotes

The future lies with those companies who see thepoor as their customers.

CK Prahalad to Indian CEO's, Jan 2000.

To get rich, sell to the poor.Pradeep Kashyap.


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Lecture Plan

Course Plan

Nature of Assignments

Rural Marketing Issues, Opportunities& Challenges


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RURAL MARKETING

Course Plan


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Rural Marketing Course Plan Details

Issues, Opportunities & Challenges Rural Marketing Environment

Defining Rural India

Evolution of Rural Marketing Rural Market Structure

Size of Rural market

The Rural Economic Scenario

Rural Economic Structure Incomes & Consumption

Physical Infrastructure

Marketing Infrastructure

Commercial Infrastructure and Govt. policies


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Consumer Behaviour Cultural Factors

Technological Factors

Economic Factors

Characteristics of the Rural Consumer

Buying Behaviour Patterns Customer Relationship Management and the Trade role

Rural Market Research Planning Rural Research

Field Procedures & Rural realities

Understanding the Rural Market Research Industry

Segmenting, Targeting & Positioning Demographic/Psychographic & Behavioural Segmentation

Targeted/Differentiated Marketing

Identifying/Selecting/Developing & Communicating the positioning

concept


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Product Strategy Product Concepts & Classification

Rural Product Categories

New Product Development

Consumer adoption process

The Role of Fakes

Pricing Strategy Pricing Influences

Pricing Strategies

Role of Retailer & Schemes/Margins

Distribution Strategy Coverage challenges & dilemma

Channels of Distribution

Existing Distribution Models

Emerging Distribution Models


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Communication Strategy Challenges in Rural Communication

The Communication Process

Developing Effective Communication

Rural Media

Role of Innovative Media

Innovation in Rural Markets Role of Innovation in Rural India

IT Interventions

Emergence of Organised Retailing

Financial Services in Rural India Need for Credit Sources of Credit

Other Financial Products

Future of Rural Marketing


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Rural Marketing Nature of Assignments

Case Studies from Indian experiences

Visits to different rural markets, haats &

melas Interviewing Rural Practitioners

Conducting Rural Market Research

Attachments with strong ruralmarketing organisations


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RURAL MARKETINGIssues, Opportunities & Challenges


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Rural Market Has Arrived

742 million people

Rural consumption is bigger than urban FMCG's 53%

Durables 59%Source: NCAER

Estimated annual size of the rural market FMCG Rs 65,000 Crore

Durables Rs 5,000 Crore

Agri-inputs (incl. tractors) Rs 45,000 Crore 2 / 4 wheelers Rs 8,000 Crore

Total Rs 1,23,000 CroreSource: Francis Kanoi

Latest McKinsey Report estimates that by 2020, Rural Consumer Market

Will be worth Rs. 250,000 crores


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Some impressive facts about the rural sector. In the first 6 months of 2005-06, rural India bought

30 lakh Life Insurance policies

Of two million BSNL mobile connections, 50% in

small towns/villages. Of the six lakh villages, 5.40 lakh have a Village

Public Telephone (VPT). Additionally there are 2 lakhPCOs 90% of villages covered.

By end 2007, there are likely to be 11.05 crore ruralphone subscribers

For every Re.1/- per quintal increase in theProcurement Price for grains, Rs. 170 crores added torural economy


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55.6 million Kisan Credit Cards issued (against 60million credit-plus-debit cards in urban) resultingin tremendous liquidity.

Of HHs earning Rs. 20 lakh + per year, 34% in

rural India. Also 15% of Indias crorepatis 42 million rural HHs availing banking services in

comparison to 27 million urban HHs.

Investment in formal savings instruments: 6.6million HHs in rural and and 6.7 million in urban

Over 50% of HLLs Rs. 11700 crore sales turnoveris from rural markets


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0.81.6

26.8

54.7

25.0

20.9

2001 - 02

41.3

63.3

14.7

12.2

2006-7

Very RichConsumingClass

Climbers

Aspirants

Destitutes

RURAL TARGET MARKETS - CLASSIFICATION


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Rural Income DispersalProjection

ConsumerClass

Annual

Income1995-96 2006-07

Very Rich Above Rs 215,000 0.3 0.9

Consuming

Class

Rs 45,001-

215,000

13.5 25.0

Climbers Rs 22,001- 45,000 31.6 49.0

Aspirants Rs 16,001 - 22,000 31.2 14.0

Destitutes Rs 16,000 & Below 23.4 11.1

Total 100.0 100.0

> Projections Based on 7.2% GDP GrowthConsuming class households in rural nearly equal to urban. Rural Purchasing Power higher due to lower expenses on food, shelter, education & health

All figures in %

Source : NCAER Indian Market Demo ra hics Re o


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Issues In Rural

Distribution

Understanding the rural consumer

Communication

Poor infrastructure


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Distribution of Villages

Source: Census 2001

Population No of villages % of totalvillages

Less than 200 92,541 15.6

200-500 127,054 21.4

501-1000 144,817 24.4

1001-2000 129,662 21.9

2001-5000 80,313 13.5

5001-10000 18,758 3.2

Total no of villages 593,154* 100.0

17% of villagesaccount for 50%

of ruralpopulation &60% rural

wealth

Hardly any shopsin these 2.2 lac

villages

*Inhabited villages, total number of villages is 638, 691


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Distribution of Towns in India

Town Class Population No of towns % of total

towns

Class I 1 lac and above 423* 8.2

Class II 50,000-99,999 498 9.6

Class III 20,000- 49,999 1386 26.9

Class IV 10,000- 19,999 1560 30.2

Class V 5,000- 9,999 1057 20.5

Class VI less than 5000 237 4.6

Total no of

towns

5161 100.0

Source: Census 2001

90 % of

durablespurchased byrural people

are fromthese 1900

towns

*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354


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Rural Consumer Insights

In rural India, brands rarely fight with eachother, they just have to be present at the rightplace.

Many brands are building strong rural basewithout much advertising support. Chik shampoo, second largest shampoo brand.

Ghadi detergent, second largest brand.

Fewer brand choices in rural : number of FMCGbrands in rural are half that of urban.

Buy value for money, not cheap products


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MYTH 1: Rural Market Is aHomogeneous Mass

REALITY

Heterogeneous population

16 languages, 800+ dialects

State wise variations in rural demographics Literacy (Kerala 90%, Bihar 44%)

Population below poverty line (Orissa 48%, Punjab6%)

BigLandlords

Traders,Small Farmers

Marginal Farmers

Laborers, Artisans

Source: Planning Commission, GoI


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MYTH 2: Disposable Income Is Low

REALITY Number of middle class HHs (annual income Rs

45,000- 2,15,000)

Rural 27.4 million

Urban 29.5 million

Per Capita Annual Income (not Purchasing Power)

Rural Rs 9,481

Urban Rs 19,407Total Rs 12,128 Source: NCAER

Rural incomes CAGRnow estimated @ 15% vs10% in urban


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MYTH 3: Individuals Decide AboutPurchases

REALITY

Decision making process is collective

Purchase process- influencer, decider, buyer, onewho pays can all be different. So marketers mustaddress brand message at several levels

Rural youth brings brand knowledge to HH


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Infrastructure ImprovingRapidly

In 50 years only 40% villages connected by road,in next 10 years another 30%.

More than 90 % villages electrified, though only44% rural homes have electric connections.

Rural telephone density has gone up by 300% inthe last 10 years, every 1000+ pop is connectedby STD.


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Media Reach Improving Rapidly

70% of R1,R2, R3 can be reachedthrough mass media.

14

21

41

26

53

70

Satellite

TV

Radio Press Cinema TV All Media


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Climbing Social Indicators

Between 1981 to 2001

Number of pucca houses doubled from 22% to 41%and kuccha houses halved (41% to 23%)

Percentage of Below the Poverty Line familiesdeclined from 46% to 27%

Rural Literacy level improved from 36%to 59%


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Opportunity & Challenges


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Marketing Opportunities

Low penetration rates in rural

% of rural HH

Durables Urban Rural Total

CTV 30.4 4.8 12.1

Refrigerator 33.5 3.5 12.0

Mobile Phones 40.0 12.0 18.0

FMCGs Urban Rural Total Shampoo 66.3 35.2 44.2

Toothpaste 82.2 44.9 55.6

Source: NCAER


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Marketing Opportunities

R1 - 4% R2 - 11%

R3 - 37%

R4 - 48%

Low rural consumption in FMCGs (rich HHs)urban rural

Annual consumption Rs 13,000 Rs 9,400

Rural consumption volumes (R1+R2+R3) Toothpaste 88%

Toothpowder 79%

Shampoo 88%

So this half ofthe populationconsumes over75% of FMCG

volumes

Key Features of the Rural Market


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Key Features of the Rural MarketAggregate Rural Consumption

0

5000

10000

15000

20000

25000

30000

3.9%

5.1%

1985 1995 2005 2015 2025

(Source : MGI India Consumer Demand Model)

Rural Consumption will accelerate

By 2025, rural consumption would

have tripled

Rural market will be worth Rs.

28,85,000 crores

Larger than todays consumer

markets in Canada & South Korea

4 times the size of the Indian

urban market


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0%

10%20%

30%

40%

50%

60%

70%

80%

90%

100%

Key Features of the Rural MarketShare of Rural Population by Income Class

Household Income Brackets

(Indian Rupees Thousands)

Global (>1000) + Strivers (500 -1000)

Seekers (200 500)

Aspirers (90 200)

Deprived (< 90)

1985 1995 2005 2015 2025

(Source : MGI India Consumer Demand Model)

R l C Cl ifi ti


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Rural Consumer Classification

Classification Description

The Globals Households owning personal car/jeep with other

products

The Strivers HHs owning any/all of these : A/C, scooter/motorcycle,

washing machine, fridge, colour TV etc. but no car/jeep

The Seekers HHs owning any of these: moped/VCR/ mixer grinder,sewing machine, audio equipment, B/W TV, geyser etc

but not those in 2 cats. above

The Aspirers HHs owning any of these : bicycle, electric fan, electric

iron etc but not those mentioned in 3 cats. above

The Deprived HHs other than those classified in Cats 1-4 above, but

own any of : wrist watch, pressure cooker, transistor

radio etc.



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2005: Ram Khilawan is a weaver, born in the foothills of theHimalayas. He lives with his wife, 5 children and a sick mother.They live in a mud house on 4 acres land which they own. Butthe plot has no irrigation so there is low yield. He is well skilledin weaving, but has to rely on commission agents andmiddlemen to market his weaves. He is often in debt.

2015 : Ram Khilawan is still a weaver, but life has changed forthe better. The village was connected to the National Highwaywith an all-weather road some years ago. So, traders come tohis village and buy from the small market he has created withhis fellow weavers. A subsidized irrigation scheme has meant

better yield for his produce and his sons have convinced him torotate with herbs which he directly sells on contract with apharmaceutical company. With electricity available, he has alsobought some electrical & electronic items.

Key Features of the Rural MarketA Tale of Two Times


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Changing Attitudes of the Rural Consumer

From Pre-Liberization To Post Liberization

Willing to Settle for less Willing to Stretch for More

Reluctance, Avoidance Seeking Experiences

Not for us attitude Affordable Indulgence

Destiny driven & resigned to

fate

Struggling & Aspiring for a

better life

Simple Needs State Need of the Hour

Source : Rama Bijapurkar : We are like that only


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Changing Attitudes of the Rural Consumer

Assumptions Reality

Why pay for access totechnology etc ?

Value all kinds of productivity devicesMore Public Transport means more 2wheelers

N Logue Kiosks

E Choupal

Simple Financial Thinking Complicated Value processing

Cable/DTH vs going out

Not Innovative Making their own Value-Right Innovations

Missed Call

Community Lighting

Smaller Glasses at weddings

Source : Rama Bijapurkar : We are like that only


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Challenges in the Future

Making effective use of the largeavailable infrastructure

Post offices 1,38,000 Haats (periodic markets) 42,000

Melas (exhibitions) 25,000

Mandis (agri markets) 7,000

Public distribution shops 3,80,000

Bank branches 32,000


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Using Technology to transform markets ITCs e-choupal

N Logue communications - IIT Madras

EID Parry Inagriline in Tamil for farm inputs, Gyandoot by M.P. Govt.

Amul dairy information system kiosk

Rural Telemedicine Project I-Shakti

Telecom


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Proliferation of large format rural retailstores

DSCL Haryali stores M & M Shubh Labh stores

TATA/Rallis Kisan Kendras

Escorts rural stores Warnabazaar, Maharashtra (annual sale Rs

120 crore)


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An interesting Option - RURBAN

Describes the clusters of migrants from ruralto urban geographies

Rural psychography living in an Urbandemography

Strong purchasing power because despitelower incomes, low wasteful expenditures

Become carriers and promoters of brands intorural geographies on their annual trip backhome

1. Rural Market - An Introduction

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