RURAL DEMAND

EXPLORING THE GROWING RURAL MARKETS

FAVOURABLE GOVERNMENT POLICIES Investment in agriculture and rural development through five year plans

Green revolution Agriculture education, research and extension

White revolution: Milk production increased from 47 mio tonnes(1950) to 150 mio tonnes (2009). Still only 20% of the milk is processed

RURAL DEVELOPMENT

VISION (2020) BY Dr Abdul KalamFocus on PURA i.e. providing urban facilities in rural areas- education, health care, sanitation, roads, communication, employment opportunities- for development of rural sector.

RURAL DEVELOPMENT

Adi Godrej, Chairman of Godrej has observed The rural consumer is discerning and rural market is vibrant. At the current rate of growth, it will soon outstrip the urban market. The rural market is no more sleeping- but we are.

RURAL DEVELOPMENT

Govt measures for rural developmentTotal sanitation campaign in operation in 590 districts in the countryKuti Jyoti programme to provide single point light connection to rural householdsMid day meal scheme: 14 crore children covered under the programmeNational health mission to prove health care facilities to remotest househols

RURAL DEVELOPMENT

At present only 300 out of 604 districts have medical colleges. To overcome acute shortage of doctors in rural areas, the Government has plans to start a unique three-and-a-half-year bachelor course in medicine for students from villages. Doctors have to work only in rural areas

RURAL DEVELOPMENT

National Rural Employment Guarantee scheme started in 2007-2008. Provided employment for 100 days a year for 3.5 crore households in rural areas.Pradhanmantri Gram Sadak Yojana to provide road connectivity to villages above 2000 populationNational Food Security Mission to increase production of wheat, rice and pulses

RURAL DEVELOPMENT

HDFC & SKS Micro Finance : Housing loanProject to provide loans for improvement of dwellings primarily to low income women clients in Andhra Pradesh. The loans will be in the range of Rs 50,000-1.5 lakhs for a tenure of 3-5 years.

RURAL DEVELOPMENT

Transition in Rural SocietyDue to increase in literacy level, income, reach of mass media, more employment opportunities , rural people are leaving caste based occupations, traditional belief, traditional life, joint family life and servant master relationship and moving to towns for a better living.

RURAL DEVELOPMENT

Rural people want to replicate the life style of urban people.Agricultural development contributes towards self sufficiency in food production as well export of agricultural commodities to earn foreign exchange. There is mobility of labour from agriculture to industrial sector. This has lead to shortage of labour in villages particularly during peak agricultural season

RURAL DEVELOPMENT

About 70 crore population continue to live in villages and industries cannot absorb such a huge population. Therefore development of agriculture industries, handicrafts, institutional credit, minimum wages, infrastructure, social security etc have to be taken up for over all development of rural sector.

EXPLORING THE GROWING RURAL MARKET

PRIVATE INITIATIVESAgricultural input companiesConsumer goods companies Software for land records, community certificate, commodity prices e-choupal

EXPLORING THE GROWING RURAL MARKET

MEDIA EXPLOSIONExpansion of regional TV, e-seva( AP), Bhoomi project (Karnataka), Project I shakti (HUL)ASPIRATIONS OF RURAL PEOPLE AND ATTRACTION OF HIGH STANDARD OF LIVING: Rural youth forms a distinct segment of the population. They are modern, knowledgeable and receptive to changes than their elders. They value material comforts like TV, two wheelers, ready made garments, cosmetics etc

EXPLORING THE GROWING RURAL MARKET

GROWTH IN INCOME: Modern farming methods Cultivation of cash crops Poultry, dairy, small scale industries Movement of people to cities and remittance of money from NRIs etc Cotton and Village Industries Hotels, Transport, Insurance, Banking, BPO, Education Centres, Traders Government Welfare Schemes Service Class working in nearby towns

EXPLORING THE GROWING RURAL MARKET

NEED FOR EXPLORING THE GROWING RURAL MARKETSSevere competition in urban marketsTo treat agriculture as a businessCreates employment opportunities Example: Fisheries, Insurance, BPO operations, development of industriesRural tourism: Example: Rural areas of Rajasthan, Plantations in South and East, Wine tourism in Maharashtra

EXPLORING THE GROWING RURAL MARKET

Over 70% of the population lives in rural areasIncrease in disposable incomeLess foreign competitionBrand loyalty, Product life cycle advantage ( Washing powder growth 6% in urban and 20% in rural)

EXPLORING THE GROWING RURAL MARKET

HOW TO IDENTIFY POTENTIALMain occupation is Agriculture for about 70% of rural population. Potential of the rural market depends onIrrigation facilitiesTypes of crops/varieties grownSize of the farmCultivation practicesUse of agri inputs and agri machinery

EXPLORING THE GROWING RURAL MARKET

URBAN ORIENTATION denotes the degree to which a rural consumer would like to replicate the life style of urban consumer. Examples: Villages close to towns and centres , villages connected by public transport facilities.FEEDER MARKETS/MANDISRural consumers by durables from class 2 towns (50,000 to one lakh population) and class 3 towns(20,000 to 50,000): There are 500 class 2 towns and 1500 class 3 towns

EXPLORING THE GROWING RURAL MARKET

THOMSON RURAL MARKET INDEXHTA has identified the relative potential of 355 districts in our country based on 26 parametersPopulation, number of villages, literacy, no of cultivators/agricultural labourers/non cultivators, cropped area, irrigated area, area under food crops/non foods crops, average size of the farm, fertiliser consumption, no of tractors, electrification, no of rural branches of banks, deposits, advances,

EXPLORING THE GROWING RURAL MARKET

THOMSON RURAL MARKET INDEX Classification of Potential Markets

Class of markets

No of districts

%

A

22

17.80

B

39

20.50

C

54

20.40

D

86

23.00

E

154

18.30

total

355

100

EXPLORING THE GROWING RURAL MARKET

RURAL CONSUMERSThe landlordsAffluent farmersSmall farmers ( 1-2 ha of land)Marginal farmers( upto 1 ha of land)Tenant farmersAgricultural labourersTraders( Agri produce/merchants) Petty traders/artisans Service classUnemployed /underemployed people

EXPLORING THE GROWING RURAL MARKET

QUALITIES OF OPINION LEADERSCredibilityPositive and Negative informationInformation and adviceCategory specificExamples: Rural educated youth, village president, teachers, painters, mistry etc

RURAL DEMAND

Rural market is growing since 1980sBigger than urban market for FMCG and Durables with 53% and 59% respectively of the total marketMarket size: 1,23,000 crores consisting of about 70,000 crores for FMCG/durables, 45,000 crores for agriinputs and 8000 for 2/4 wheelers.

RURAL DEMAND

LIC sold 55% of the policies in rural IndiaAbout 30% of the mobile users in rural areas41 million kisan credit cards issued exceeds 22 millions credit/debit cards issued in urban India

RURAL DEMAND

The number of middle and higher income group ( Rs 70,000 plus income) in rural (21.7 million) and urban (24.2 million) are nearly the same. Many companies are active in rural market: Example: HUL 50%, Colgate 40%, Hero Honda 40%, LG 40%, Cavin care 40%, Godrej 30%, Cadbury 30%, Bharti Airtel/Vodafone(30%) ( 2008)

RURAL DEMAND

Products that are well established in Rural market: Bicycles, motor-cycles, agri inputs, tractors, radio, coffee, tea, tobacco, bathing and washing soap and textiles.Products that have entered the markets in recent years: Ready made garments, baby care products, packaged food stuffs, consumer durables, cosmetics and toiletries, mobile phones, computers

RURAL DEMAND

Rural consumption is more compared to urban market: Bicycles, mechanical watches, tailoring machines.Products where rural consumption growth rate is higher than urban markets: Packed tea, bathing and washing cake

RURAL/URBAN MARKET SHARE

PRODUCTBicyclesRadioMechanical watchWashing cakeBlack and white TV

Colour TVWashing machineRefrigeratorNail polishToothpasteShampooFace creamTooth powder

RURAL78%79766863

2915242339252879

URBAN22%21243237

7185767761757221

RURAL DEMAND

HIERARCHY OF NEEDSCategory A( Immediate use to the family): Bicycles, wrist watches, radio, electric fans

Category B(Breaks the monotony of house work and source of entertainment): Sewing machines, stereo set, B & W TV

Catergory C (Supplement income, entertainment and comfortable house hold working) : Colour TV, Moped, Motor cycles, Refrigerators

RURAL DEMAND

SOCIAL CLASS The rural society consists of a hierarchy of classes or grades of people. Social class is determined by a combination of factors such as education, occupation, income, wealth etc The type of durable owned by a household gives an indication of the grades of people

RURAL DEMANDClassification of consumer

Category

Products

1995-96

2006-2007

The affluent

Jeep/Car

1.6%

5.6%

The well-off

Motor cycles, AC,Colour TV. Refrigerator

2.7

5.8

The climbers

Moped,B&W TV, Audio, Grinder

8.3

22.4

The aspirants

Bicycle, fans,iron

26

44.6

The destitute

Watches, radio

61.4

21.6

CONSTRAINTS IN RURAL MARKETING

Physical distribution Transportation, warehousing, communicationChannel management Multi-tier system: Example Depot/C&F agent>distributor in major town, Stockist at taluk level, wholesaler in agricultural centres/block level and retailers in villages

CONSTRAINTS IN RURAL MARKETING

Channel management Limited availability of retailers Poor viability of dealers Fewer brands Inadequate banking and credit facilities

CONSTRAINTS IN RURAL MARKETING

Rural retailer

Average daily turnover (2000 & below population)

South

Rs 562.00

West

Rs 404.00

EastNorth

Rs 371.00Rs284.00

CONSTRAINTS IN RURAL MARKETING

AVERAGE NUMBER OF BRANDS PER DEALER

Products

Rural

Urban

Toothpaste

3

7

Tooth brush

3

6

BiscuitsHair oils

33

97

CONSTRAINTS IN RURAL MARKETING

SALES FORCE MANAGEMENTFluency in local languagesKnowledge of product, market and competitionBasic knowledge of agricultureKnowledge of cultural factors: Preference for experience, look for value for money, dont make impulse purchases, prefers sturdy products, greeting elders with folded hands etc

CONSTRAINTS IN RURAL MARKETING

SALES FORCE MANAGEMENTKnowledge of different type of customersSelling skillsCapacity to work extended hoursAbility to put up with inadequate boarding and lodgingTrust and understanding while dealing with customers

CONSTRAINTS IN RURAL MARKETING

RURAL PROMOTIONUNDERDEVELOPED MARKETS AND CONSUMERSLow incomeSeasonal incomeLow literacyTraditional belief/ occupation/ life

MOTIVATING RURAL CONSUMERS

PRODUCT Examples: Small Unit pack, Sturdy products, No frills product etcPRICING Examples: Post harvest schemes, Extension of credit to channel members

MOTIVATING RURAL CONSUMERS

BRAND PROMOTION THROUGH RURAL YOUTHRURAL COMMUNICATIONExamples: Farm to farm visit, Group meeting of rural consumers, AVP vans OPINION LEADERSDISTRIBUTION Availability of products with village retailers for FMCG goods