406acRural Marketing

8/7/2019 406acRural Marketing

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6. RURAL MARKETING

Introduction to rural marketing: Concept and the EmergingScenario of Rural markets. Opportunities and Challenges

of rural marketing.Strategies for Rural Marketing: Product Adaptation, Pricing Strategies for Rural Markets. Distribution: Challenges and

Strategies for Rural Markets. Communication Strategies for Rural Markets .


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WH AT IS RURAL?

Government agencies like IRDA (InsuranceRegulatory And Development Agency andNCAER (National Council for applied Economic

Research) define Rural as villages with a population


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RURAL MARKETING

It can be defined as a function that manages allactivities involved in assessing, stimulating, andconverting the purchasing power of rural

consumers into an effective demand for specificproducts and services and moving theseproducts and services to the people in ruralareas to create satisfaction and a betterstandard of living and thereby achieving

organizational goals.


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It is a two-way marketing process wherein thetransactions can be:

1. Urban to Rural : It involves the selling of products andservices by urban marketers in rural areas. Theseinclude: Pesticides, FMCG Products, Consumer durables,etc.

2 . Rural to Urban : Here, a rural producer (involved inagriculture) sells his produce in urban market. This may not be direct. There generally are middlemen, agencies,government co-operatives, etc who sell fruits, vegetables,

grains, pulses and others.3 . Rural to rural : These include selling of agricultural tools,cattle, carts and others to another village in its proximity.


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MYTH REALI TY

Rural people do not buy brands

Branded consumptionaccounts for 80% salefor FMCG

Rural consumers buy cheap products

They seek value formoney

Rural market is ahomogeneous market

It is heterogeneous


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P H ASES IN RURAL MARKETING

Sr .No

Time F ra me Key Ev ents &T r ends

1 Phase One ( Pre 1960s)

Marketing ruralproducts in ruraland urban areas

Agricultural inputsin rural areas

Agriculturalmarketing

Farming methodswere primitive andmechanisation waslow

Markets

unorganised


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2 Phase Two ( 1960s to 1990s)

Green RevolutionCompanies like

Mahindra andMahindra, Sri Ram

Fertilisers andIFFCO emergeRural products

were also marketedthrough agencies

3 Phase Three ( 1990s to Present)

Demand forconsumables anddurables rise

Companies findgrowth in urbanmarkets stagnatingor falling


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F ACTORS RES P ONSIBLE F OR BOOM INT H E RURAL MARKET :

1. Increase in population and hence increase indemand.

2. A marked increase in the rural income due toagrarian prosperity.

3. Standard of living is also increasing in ruralareas.

4. Large inflow of investment for ruraldevelopment programmer from government

and other sources.5. Increased contact of rural people with their

urban counterparts due to development of transport and wide communication network.


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6. Increase in literacy and educational level andresultant inclination to sophisticated lives by therural folks.

7. Inflow of foreign remittances and foreign made

goods into rural areas.8. Change in the land tenure systems causing astructural change in the ownership patterns andconsequent changes in the buying behaviour.

9. Rural markets are laggards in picking up newproducts. This will help the companies to phasetheir marketing efforts. This will also help to sellinventories of products out dated in urbanmarkets.


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EMERGING TRENDS IN RURAL MARKETS

1. ON LI N E RURAL M ARKE T ( I N T ER- N E T): Rural people can use the two-way communication through on lineservice for crop information, purchases of Agri-inputs, consumerdurable and sale of rural produce online at reasonable price. Farminformation online marketing easily accessible in rural areas because of spread of telecommunication facilities all over India. Agriculturalinformation can get through the Internet if each village has smallinformation office.

2 . I NFO R M A T I ON TH R O UG H L OC AL AGRI C UL T URE I NP U T D EALERS Most of the dealers have direct touch with the local farmers; thesefarmers need awareness about pests, decease, fertilizers, seeds,technology and recent developments. For this information, farmersmostly depend on local dealers. For development of rural farmers thegovernment may consider effective channel and keep information atdealers, for farmer education hang notice board and also train thedealer recent changes and developments in agriculture.National Chain Stores: large number of stores set up in different ruralareas throughout the country by the same organization for marketingits products. Thus national chain stores can serve large number of

customers in rural area.


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3 . CO S T B E N E F I T A N AL Y SIS Cost benefit can be achieved through development of informationtechnology at the doorsteps of villagers; most of the rural farmersneed price information of agri-produce and inputs. If theinformation is available farmers can take quick decision where tosell their produce, if the price matches with local market farmer noneed to go near by the city and waste of money & time it meansfarmers can enrich their financial strength.

4 . N EE D B ASE D P R O D U C T I ON Supply plays major role in price of the rural produce, most of thefarmers grow crops in particular seasons not through out the year,it causes oversupply in the market and drastic price cut in theagricultural produce. Now the information technology has beenimproving if the rural people enable to access the ruralcommunication, farmers awareness can be created about crops andforecasting of future demand, market taste. Farmers can equatestheir produce to demand and supply, they can create farmersdriven market rather than supply driven market. If the need basedproduction system developed not only prices but also storage costcan be saved. It is possible now a days the concept of global village.


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5 . M ARKE T D RIVE N EX T E N SI ON Agricultural extension is continuously going through renewalprocess where the focus includes a whole range of dimensionsvarying from institutional arrangements, privatization,decentralization, partnership, efficiency and participation. Themost important change that influences the extension system ismarket forces. There is a need for the present extension systemto think of the market driven approach, which would cater thedemands of farmers.

6 . P R OC ESSI N G I N D US T R Y India is the second largest producer of fruits and vegetables inthe world with an annual production of more than 110 milliontones of fruit and vegetable only 1.3 percent of the output isprocessed by the organized sector commercially, the reasonhigher consumption in fresh form. However, as the packaging,transportation and processing capacities increase, the market forprocessed fruits and vegetables is projected to grow at the rate of about 20 % per annum. 100 % export oriented units (EOU) and

Joint venture units required improving the processing industry.


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7 ) A P A N A M A N D I / KISA N M A N D I / R YTH U B AZAAR There is a need to promote direct agricultural marketingmodel through retail outlets of farmer's co-operatives inurban areas. The direct link between producers andconsumers would work in two ways: one, by enabling

farmers to take advantage of the high price and secondly,by putting downward pressure on the retail prices.

8 ) RURAL AGRI- EX PO R T Rural produce, raw fruits and vegetable, processinggoods, have the potential market in Asian, Europe and

western countries. Particularly soudhy countries havecommendable potential for Indian rural produce.

9 ) I N T EGRA T E D M ARKE T I N G Under this concept, both the supply of inputs andservicing of inputs are undertaken at the same point orby the same company.


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C H ALLENGES IN RURAL MARKETING

1. Low Literacy- There are not enough opportunities foreducation in rural areas. The literacy level is as low (36%)when compared to all- India average of 52%

2 . Seasonal D emand- Demand for goods in rural marketsdepends upon agricultural situation, as agriculture is the

main source of income. Agriculture to a large extentdepends upon monsoon and, therefore, the demand orbuying capacity is not stable or regular.

3 . T ransportation- Many rural areas are not connected by rail transport. Kacha roads become unserviceable duringthe monsoon and interior villages get isolated.

4 . D istribution- An effective distribution system requiresvillage-level shopkeeper, Mandal/ Taluka- levelwholesaler or preferred dealer, distributor or stockiest atdistrict level and company-owned depot or consignmentdistribution at state level. The presence of too many tiersin the distribution system increases the cost of distribution.


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5 . C ommunication P roblems- Facilities such as telephone,fax and telegram are rather poor in rural areas.

6 . T raditional Life- Life in rural areas is still governed by customs and traditions and people do not easily adaptnew practices. For example, even rich and educatedclass of farmers does not wear jeans or branded shoes.

7 . B uying D ecisions- Rural consumers are cautious inbuying and decisions are slow and delayed. They like togive a trial and only after being personally satisfied, dothey buy the product.

8 . M edia for P romotions- Television has made a greatimpact and large audience has been exposed to thismedium. Radio reaches large population in rural areasat a relatively low cost. However, reach of formal mediais low in rural households; therefore, the market has to

undertake specific sales promotion activities in ruralareas like participating in Melas or fairs


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O PP ORTUNITIES

1. Infrastructure is improving rapidly - In 50 years only,40% villages have been connected by road, in next 10

years another 30% would be connected.2. More than 90% villages are electrified, though only 44%

rural homes have electric connections.3. Rural telephone density has gone up by 300% in the last

10 years; every 1000+ pop is connected by STD.4. Social indicators have improved a lot between 1981 and

2001 -5. Number of "pucca" houses doubled from 22% to 41%

and "kuccha" houses halved (41% to 23%).6. Percentage of BPL families declined from 46% to 27%.7. Rural literacy level improved from 36% to 59%.8. Low penetration rates in rural areas, so there are many

marketing opportunities .


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The 4Ps of Rural Marketing

1. P r o ductProduct for rural market must be built ormodified to suit the lifestyle and needs of therural consumers .

Product Strategies followed in Rural market:New/Modified Product.Utility Oriented ProductAvoiding Sophisticated PackagingApplication of value Engineering.Small unit packaging

Often ,they identify FMCG by three things:1. Color,

2. Visuals of animals and birds and3. Numbers.


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So a 555, 777, hara goli, pila hathi, lal saboon, sapheddantmanjan are the kind of terms with which they identify brands. Hence it is very important for us tounderstand that a lot needs to be done in terms of communications, media, marketing and branding. Thefollowing have to be kept in mind while the marketermakes a decision on the product.

1. The product for the rural markets has to be simple, easy to use and provide after sales service or maintenance.

2. The product has to be packed for low price andconvenient usage.

3. The pack has to be easily understood by the ruralconsumer. The information on the pack is preferred inlocal language communicating the functional benefit of the product.


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2. Pricing

A rural customer is price sensitive and shops forvalue.This is mainly because of his lower incomelevels than his urban counterparts. Hence the

marketer has to find ways of making theproduct affordable to the rural consumer.Banks offer loans for tractors, pump sets,television sets and so on to make the productaffordable to a rural consumer.Smaller unit packs are preferred in the case of FMCG products to offer at lower prices.The product packaging and presentation offersscope for keeping the price low.Reusable packs or refills are also preferred andare seen as value addition.


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Pricing Strategies followed in Ruralmarket:Large Volume low mergingOverall Efficiency And passing onbenefits to consumers.low cost/ value for money product

Low volume-low price.


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Pricing Examples:

Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs,priced at Rs 4-5 meant specifically for MadhyaPradesh, Bihar and Uttar PradeshHindustan Lever, among the first M NCs torealise the potential of India's rural market, haslaunched a variant of its largest selling soapbrand, Lifebuoy at Rs 2 for 50 gmCoca-Cola has also introduced Sunfill, apowdered soft-drink concentrate. The instantand ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 andmutiserve sachet of 200 gm priced at Rs 15.


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3 . Place

A village as a place for promotion, distribution,and consumption is very different from town orcity.

Place Strategy suggested for Rural market:SegmentationCoverage of villages with 2,000 and abovepopulationDistribution up to feeder markets/ Mandi

towns.Direct Contact with rural Retail


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Placement or Distribution

Distribution of products is one of thebiggest challenges of rural marketing.

There are CWC (Central Warehousing

Corporation) and SWCS (StateWarehousing Corporations) set up inrural areas to store and distributeproducts. A three tier rural warehousingsetup exists:

CWC/SWCsCo-operatives

Rural Godowns


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There are some problems of rural distribution:Transportation has not been fully developed.Lack of proper channels of communication like telephone,postal services, and so on pose a lot of problem tomarketer to service the retailer as it is difficult to theretailers to place order for goods.Storage of goods in rural areas is also a problem for themarketers.Multiple tiers push up the costs and channelmanagement is a major problem for marketers due to

lot of middlemen in the process.Availability of suitable dealersPoor viability of rural outletsThere are a lot of private shops in the rural sector.


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4 . Promotion

Promotion aspect always creates achallenge in rural markets because of thefact that village have thin population

density and are widely spread over largeremote areas.


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Various promotional tools/Media Vehicles for rural Indiaare: -TelevisionRadio

Print mediaCinemaHoarding/Wall PaintingFolk mediaCultural shows and events

Video van/ RathsHaatsMelasMandis


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Examples of rural marketing mix

IC IC I BANK customized their ruralATMs, according to the rural needs.IC IC I rural ATMS are battery operated so

that power failure is not issue.BP energy sells smoke less, biomass runstoves (Oorja) for rural markets, pricedattractively Rs.675.

Bank of India introduced Bhumiheencredit cards for providing credit cardfacilities to landless farmers.


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Noika has developed affordable Mobilephones for rural markets with uniquefeatures such as local language

capabilities, present time/ call limits etc.Philip has developed a TV Vardaan forrural markets. This TV work on thevoltage 90-270 volts.

Philips has introduced Free Power radio. This radio do not require power andbattery also. it run on simple winding of level provided in the set. The price of this

attractive set is Rs. 995.


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LG developed CTV called CinePlus was launchedin rural markets price Rs.5000Hyundai increases focus on Rural India. Its newpromotional scheme titled - Ghar Ghar Ki

Pehchaan'. In this first of its kind initiative,Hyundai Motor would extend special schemes forgovernment employees in rural areas andmembers of Gram Panchayats on the purchase of the Hyundai SantroLaunched on May 1, the Ghar Ghar Ki Pehchaan'scheme will continue till July 31, 2008. Throughthis special rural scheme Hyundai Motor Indiaplans to touch base with at least 58 per cent of Indian villages with a population of 500 or more


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PRODUCT STRATEGY

Rajdoot 223Escorts laun ched: Raj doot 223 p riced a t Rs . 33300 to meet the needs an d ex pect a tions of the r ur al ma rket . It is che ap er thanmost motorbikes an d is preferred over mopeds an d scooters bec au se of its st urdiness an d its weight ca rrying capa bility Moreover r ur al folks know tha t it is e a sy to ma inta in (s pa res a re e a si ly ava ilab le) . Tod ay Escorts ha s abo ut 2000 au thorised service points To tack le the young village . Escorts laun ched: Ace with 175 cc e ngine . It is mu ch s leeker an d priced just ma rginally high a t As . 37560. T ho ugh not man y mode ls a re see n in the urban a re a s, it ha s do ne qu its we ll in the r ur alma rket de man ding 15 p er ce nt of the prod uctio n capa city of Rajdoot .


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Sampoorna TVLG E lectro nics, the Japan ese fir m ha s re-

jigged the TV to app e al to loc al n eeds . It s pe nt $50 ,000 (R s . 21 la khs) to deve lop a set tha t would have on-scree n dis plays in the ver na cula r langua ges of Hindi, Tam il and Be ngali. The logic, r ur al co ns um ers un f am ilia r with English would sti ll be able to use the TVwitho ut bei ng intimida ted .


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G reen Cards Andhr a Ban k an d Allahabad Ban k iss ued credit ca rds known a s G ree nCa rds to the f a r mers . The ca rds iss ued by

Allahabad ban ks a re:Dam ond Ca rd (for f a r mers having more than

9 a cre land)G o ld Ca rd (for f a r mers having 7-9 a cre land)Si lver Ca rd (for f a r mers having 5-7 a cre land)

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406acRural Marketing