11 11 Final Rural Mrketing

8/6/2019 11 11 Final Rural Mrketing

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RURAL MARKETING

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

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

Prospects for companies planning to enter rural market or what is thepotential of rural market

Seventy percent of India's population, or approximately 700 million people, livein rural areas. 75 percent of the population is agrarian. With such a largenumber of potential consumers, it is clear why multinational corporations wouldlike to successfully penetrate the rural Indian market.

Large, Diverse and Scattered Market: Rural market in India is large,and scattered into a number of regions. There may be less number of shops available to market products.Major Income of Rural consumers is from Agriculture: Rural

Prosperity is tied with agriculture prosperity. In the event of a crop failure,the income of the rural masses is directly affected.Standard of Living and rising disposable income of the ruralcustomers: It is known that majority of the rural population lives belowpoverty line and has low literacy rate, low per capital income, societalbackwardness, low savings, etc. But the new tax structure, goodmonsoon, government regulation on pricing has created disposableincomes. Today the rural customer spends money to get value and isaware of the happening around him.Changing Outlook: Villagesvhave a traditional outlook. Change is acontinuous process but most rural people accept change gradually.Rising literacy levels: It is documented that approximately 45% of ruralIndians are literate. Hence awareness has increases and the farmers arewell-informed about the world around them. They are also educatingthemselves on the new technology around them and aspiring for a betterlifestyle.Infrastructure Facilities: The infrastructure facilities like cementedroads, warehouses, communication system, and financialfacilities,transportation facility are inadequate in rural areas. Hence


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physical distribution is a challenge to marketers who have foundinnovative ways to market their products.

1 Large population2 Rising prosperity3 Growth in consumption4 Life cycle changes5 Life cycle advantages6 Market growth rate higher than urban7 Rural marketing is not expensive8 Remoteness is no longer a problem

1. Growth in consumption:

2. Life style changes:

3. Market growth rates higher: Growth rates of the FMCG marketand the durable market are higher in rural areas for many products. Therural market share will be more than 50% for the products like toilet soaps,body talcum powder, cooking medium (oil), cooking medium (vanaspati),tea, cigarettes and hair oil.

4. Rural marketing is not expensive: Conventional wisdom dictates thatsince rural consumers are dispersed, reaching them is costly. However, newresearch indicates that the selling in Rural India is not expensive.Thisincludes the expenses of advertising in vernacular newspapers, televisionspots, in-cinema advertising, radio, van operations and merchandising andpoint of purchase promotion. Campaign like this, which can reach millions,costs twice as much in urban area.

5. Remoteness is no longer a problem: Remoteness in a problem but notinsurmountable. The rural distribution is not much developed for thereasons,

Lack of proper infrastructure such as all-weather roads,electrification and sanitation, and

Lack of marketers imagination and initiative.Marketers have so far, failed in analyzing the rural side and exploiting ruralIndias traditional selling system- Haats & Melas. Their near obsession with justduplicating the urban-type network and that too with very limited success, haskept them blind to the potential of these two outlets.

Consumption pattern of rural india

The total number of rural households is expected to rise from 135 million in2001-02 to 153 million in 2009-10. Thus, this is likely to result in rural Indiabecoming the largest potential market in the world


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An increase in the education level and media exposure has led to significantchanges in the consumption pattern of rural India.

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

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

According to the National Council of Applied Economic Research (NCAER), anindependent, non-profit research institution, rural households form 71.7% of thetotal households in the country. Spending in this segment is growing rapidly andconsumption patterns are closing in on those of urban India.

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

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

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

Rather than buying in bulk, which would mean paying more for a large quantityupfront, rural Indians tend to buy what they need for short segments of time.These factors result in consumers buying products locally, as well as on a dailybasis. In addition to the fact that income levels are low, rural incomes also varygreatly depending on the monsoons. When a monsoon hits, this devastates thelivelihood of most rural consumers because they are dependent on agricultural

work for income. Corporations are also directly affected because this makes itdifficult to predict demand.

Before a company considers entering the rural market, understanding the typesof products and packages that rural Indians typically use is crucial.For example, urban Indian consumers would typically use toothpaste forbrushing their teeth, while most rural Indians prefer using tooth powder .As a company seeking to enter India's market with an oral care product, thiswould be an important fact to know and consider during both the product and


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package development stages. Similarly, Hindustan Unilever Ltd. (HUL), theIndian subsidiary of Dutch-based Unilever, discovered that rural Indians tend touse the same soap for washing everything from hair to their bodies to clothing (if they use any soap at all). Because HUL manufactures products including varioussoaps and detergents, HUL product and packaging development processes havetaken this rural habit into account by designing all-in-one soaps. By taking intoaccount the low disposable incomes and the unique product and package needsof this market, consumer products that are designed and packaged for thismarket have great potential.

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

marketing to rural customers often involves building categories by persuadingthem to try and adopt products they may not have used before. "A company likeColgate has to build toothpaste as a category, which means convincing people tochange to toothpaste instead of using neem twigs to clean their teeth, which wasthe traditional practice," he says. "This is difficult to do and requires patienceand investment by companies. It's not like getting someone to switch brands."

Companies that have figured this out are doing better in the villages than in thecities. Soft drinks giant Coca-Cola is growing at 37% in rural markets, comparedwith 24% in urban areas. According to Hansa Research, a market research firmthat has published a Guide to Indian Markets 2006 , the penetration of consumerdurables has risen sharply in India's in recent years. In color TVs, sales are up20%; in motorcycles, 77%. In absolute numbers, however, the penetration isstill low. Coke, for instance, reaches barely 25% of the rural market. This meansthe upside potential is huge for companies that develop effective rural marketingstrategies.

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

Challenges for entering Indian Rural Markets

There are several challenges that make it difficult to progress in the rural

market. Marketers encounter a number of problems like :-1. Standard of living : The number of people below the poverty line is more

in rural markets. Thus the market is also underdeveloped and marketingstrategies have to be different from those used in urban marketing.

2. Low literacy levels : The low literacy levels in rural areas leads to aproblem of communication. Print media has less utility compared to theother media of communication.


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3. Low per capita income : Agriculture is the main source of income andhence spending capacity depends upon the agriculture produce. Demandmay not be stable or regular.

4. Transportation and warehousing : Transportation is one of the biggestchallenges 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 makesphysical distribution a tough task. Many villages are located in hillyterrains that make it difficult to connect them through roads. Mostmarketers use tractors or bullock carts in rural areas to distribute theirproducts. Warehousing is another major problem in rural areas, as thereis hardly any organized agency to look after the storage issue. Theservices rendered by central warehousing corporation and statewarehousing corporations are limited only to urban and suburban areas.

5. Ineffective distribution channels : The distribution chain is not verywell organized and requires a large number of intermediaries, which inturn increases the cost and creates administrative problems. Due to lackof proper infrastructure, manufacturers are reluctant to open outlets inthese areas. They are mainly dependent on dealers, who are not easilyavailable for rural areas. This is a challenge to the marketers.

6. Many languages and diversity in culture : Factors like culturalcongruence, different behaviour and language of the respective areasmake it difficult to handle the customers. Traits among the sales force arerequired to match the various requirements of these specific areas.

7. Lack of communication system : Quick communication is the need of the hour for smooth conduct of business, but it continues to be a far cry inrural areas due to lack of communication facilities like telegraph andtelecommunication systems etc. The literacy rate in the rural areas israther low and consumers behaviour in these areas is traditional, which

may be a problem for effective communication.8. Spurious brands : Cost is an important factor that determines purchasingdecision in rural areas. A lot of spurious brands or look-alikes areavailable, providing a low cost option to the rural customer. Many a timethe rural customer may not be aware of the difference due to illiteracy.

9. Seasonal demand : Demand may be seasonal due to dependency onagricultural income. Harvest season might see an increase in disposableincome and hence more purchasing power.

10. Dispersed markets : Rural population is highly dispersed and requires alot of marketing efforts in terms of distribution and communication.

Factors that will decide the success of rural marketing initiative

1. Research: A research should be conducted before launching the business.The research may be Primary or Secondary one. If it is primary then itsounds good, as there will be more clarity about the Business andOpportunities. This is about studying the market before entering.


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2.Segmentation:The most important factor is the segmentation , as the ruralmarket consists of different groups and socio economic class. They have differentlifestyles, Cultures, Economy, and Demography backgrounds. So the companyshould think of this and make the segmentation in a perfect manner. Dependingupon the product and business the company should keep some parameters tomake the segmentation. The parameters should be selected in such a way that iteffects the demand of the product. 3. Lifestyle Analysis: The people will be from different cultures and demographicbackground. So they will be having different lifestyles and needs. Dependingupon their way of thinking and Lifestyle the company need to understand tothink of their product. The lifestyle of the consumer makes an impact on thedemand of the product . So by this analysis the company can draw theirstrategies to market the product.

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

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

6. Target Market: After so many steps of work flow process the company caneasily identify that their product is going to match or not that is The way of matching in their marketing Mix / Business Strategy with the rural market. So bydoing all this the company can target a market from the segmented market . Soby selecting a segment they can target the group with their strategies andMarketing Mix. 7. Marketing Mix: As we know that marketing mix of the company is the maincomponent to reach the customers. As there is a heterogeneous lifestyles andGeographically diverted market so the company should design or modify the mixdepending upon the customer needs. There should be a proper work out of 4A'sof Marketing Mix. From the above steps company can easily identify and candesign their marketing mix to reach the market. So by doing this the companycan attain the success.

8. Implementation: Most of the companies feel that implementation is the majorproblem in rural market , due the factors influences the market. So forimplementation the channel players are important. They reach the last mile of rural market. So for the Implementation there should be a full focus from theorganization point of view. The planning and working should be in parallel, bywhich the implementation cannot be a failure


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

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

Some successful examples of rural marketing

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

The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with theexecutives of HUL identifying the uncovered village. The representative of thecompany meets the panchayat and the village head and identify the woman whothey believe will be suitable as a SA. After training she is asked to put up Rs20,000 as investment which is used to buy products for selling. The products arethen sold door-to-door or through petty shops at home. On an average a ShaktiAmma makes a 10% margin on the products she sells.

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

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

Although the company has been successful in the initiative and has been scalingup, it faces problems from time to time for which it comes up with innovativesolutions. For example, a problem faced by HUL was that the SAs were more


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inclined to stay at home and sell rather than going from door to door since thereis a stigma attached to direct selling. Moreover, men were not liable to go to awomans house and buy products. The company countered this problem byhosting Shakti Days. Here an artificial market place was created with music andpromotion and the ladies were able to sell their products in a few hours withoutencountering any stigma or bias.

This model has been the growth driver for HUL and presently about half of HULs FMCG sales come from rural markets . The Shakti network at the end of 2008was 45,000 Ammas covering 100,000+ villages across 15 states reaching 3 mhomes. The long term aim of the company is to have 100,000 Ammas covering500,000 villages and reaching 600 m people. We feel that with this initiative,HUL has been successful in maintaining its distribution reach advantage over itscompetitors. This programme will help provide HUL with a growing customerbase which will benefit the company for years to come

2. ITC is setting up e-Choupals which offers the farmers all the information,products and services they need to enhance farm productivity, improve farm-gate price realization and cut transaction costs. Farmers can access latest localand global information on weather, scientific farming practices as well as marketprices at the village itself through this web portal - all in Hindi. It also facilitatessupply of high quality farm inputs as well as purchase of commodities at theirdoorstep.

Unsuccessful rural marketing examples

Kellogg's' is an excellent example of a company that has struggled in the Indianmarket. Kellogg's entered the Indian market in the mid-1990's. They intended tofind a new market, which would consist of over a million people, many of whomdid not eat cereal. What Kellogg's discovered was that they were introducing acompletely new product category. This meant they would have to invest largesums of money to create new eating habits in consumers. The most commonIndian breakfast consists of biscuits and tea.

While Kellogg's was busy creating new eating habits, local competitors were ableto snatch away portions of India's already small cereal market by introducinglocal cereal flavors at lower prices. The unimpressive sales that followed in their

first three years resulted in Kellogg's needing to completely realign theirmarketing to meet local needs as well as introduce a line of inexpensivebreakfast biscuits. Disappointments like this have caused companies who seek toenter the rural Indian market to reevaluate their entire approach.
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Conclusion

Indian rural marketing has always been complex to forecast and consist of special uniqueness. However many companies were successful in entering therural markets. They proved that with proper understanding of the market and

innovative marketing ideas, it is possible to bag the rural markets. It is verydifficult for the companies to overlook the opportunities they could from ruralmarkets. As two-thirds of the Indian population live in rural areas, the market isvast than expected. For the companies to be successful in rural markets, theyhave to overcome certain challenges such as pricing and distribution.

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

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

11 11 Final Rural Mrketing

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