Rural Markets: Untapped Treasure

International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 Volume 4, No. 5, May 2015

i-Explore International Research Journal Consortium www.irjcjournals.org

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Rural Markets: Untapped Treasure

Tamanna Goel, M.com., Student, Hansraj College, Delhi University, Delhi

ABSTRACT

In these times of cut-throat competition and saturated

urban markets, companies have failed to achieve the

desired growth rate for their brands. With thousands of

products available to the urban man at their door steps,

brands have lost their loyalty. Thus in these times of

global meltdown, rural markets have become the last

resort for these companies. With huge consumer base, this

market has a great potential. But these markets are far too

complicated than urban markets. They need to be studies

and understood thoroughly. Companies have been trying

to launch their products in these markets but still have not

been able to completely tap them. Where 4P’s of

marketing mix provide a good picture, as to how to go

about the market, rural marketing mix is a little

complicated one. We merge these 4P’s of marketing along

with the challenges that one faces in the rural market, also

called the 4A’s of marketing. Also we try to identify the

solution for these challenges, known as the 4C’s, thereby

creating a complete picture for the ‘Rural Marketing Mix’.

Keywords: PAC Model, Project Shakti, ITC e-chaupal, Rural

Marketing Mix, Acceptability, Affordability, Accessibility,

Awareness

INTRODUCTION:

Rural India today is not only limited to agricultural sector.

Gone are those days when it was considered as remote

areas and people living an isolated life, in ignorance of

what is happening in the world. Rural India is the buzz

word for the corporate sector today. Witnessing a decline

in the growth rate of sales in the urban market due to

market saturation. Corporate are moving to explore a

huge, untouched and untapped consumer base in rural

India. When we talk of the huge consumer base, the

current size of the rural market indeed speaks for itself.

With more than 630,000 villages, two-third of the

country‟s consumers, which is whopping figure of about

742 million people, this market definitely offers a

tremendous opportunity for the companies struggling to

increase their sales. India rural market is bigger than the

entire European market. It has around 47000 hats which is

more than the super markets in USA. Almost half of the

country‟s National Income is generated here. Due to

increase in the level of the education and opportunity for

earning rural markets offer a great scope for a

concentrated marketing effort. Where Indian urban market

is growing at the rate of 13%, its rural counterpart is

growing at the rate of 17%.the average rural income has

gone up to 63% to 64% by 2001-02 and touched almost

66% in 2004-05. The rural population is nearly three times

that of the urban market. Rural market today represents a

market whopping $27 billion which takes into account for

sales of $1.7 billion of cars, scooters, bikes and over one

billion dollars of durables.

But with such mouth watering opportunities and lucrative

consumer base, why is this market still untapped? Where

do these marketers lack, that they are unable to reap the

fruits of this giant tree. Here‟s the reason : When we talk

of rural India, we are talking about more than 6 lakh

villages, more than 700 million population, spread over

3.2 million sq. Km, finding them is not easy. The majority

of rural India is still dependent upon agriculture, hence

their income and consequently purchasing power, to a

large extent still depends on monsoon and therefore is not

stable.

With literacy level as low as 36%, it is difficult to bring

about change in taste and preferences of people. Other

factors such as transportation, traditional life, lack of

infrastructure, diversity in the markets, culture or

languages, low per capita income, socio-economic

backwardness, this market is definitely not a cake walk for

the companies.

This article tries to identify the challenges faced by the

marketers in the rural markets and how can they be

overcome by taking a deeper look in the market of the

successful brands, which are also known as the „Rural

Masters‟.

REVIEW LITERATURE:

There have been quite a few studies on rural marketing in

India. I have come across a few of them such as Alka Rani

(2014) recognises that rural marketing is different from the

urban marketing in many ways. If the business wants to

flourish and expand, it has to give equal consideration to

rural market. Anil Kalotra (January 2013) conducted an

analytical study of rural marketing potential in India. He

identified that the rural market exhibits linguistic, regional

and cultural diversities and economic disparities. He stated

that marketers can benefit the most if they can make the

rural people feel that they value them as their customers.

Dr. Ashfaq Ahmed, clearly stated that how companies like



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HUL/ ITC/ Colgate/ Godrej have been successful by use

of stockist and their staff for affecting direct sales to rural

consumers. He says that every marketer must realise that

rural consumer is not a miser; he is not just looking for the

cheapest product, but demands value for money in every

purchase that he makes.

ANALYSIS:

Today rural India is ruled by HUL, ITC, and Samsung etc.

These rural masters sell around 1000 of brands worldwide.

With their perfect strategies, correct timings and perfectly

customised products, they have been able to dominate

rural consumers.

With the urban market reaching its saturation point,

Unilever identified the need to move its operations to rural

market. But rural market was certainly not a cakewalk

with huge number of challenges coming across their way.

The first and the foremost challenge being, what to offer to

their new target. Simply dumping the urban products

would definitely not work.

Hence the company started an extensive research by using

the company‟s internal tracker called the Living Standard

Measure (LSM). LSM can range anywhere between 0-18,

higher score explaining the higher standard of living. The

research revealed that India has over 200 million

undernourished people, who are deficient in irons,

vitamins and minerals. Thus to suit the needs, HUL came

up with the idea of tea as a health supplement. But why

tea? Because in a country like India, tea is a widely

consumed product with 95% penetration. Since iron was

not fit for tea, HUL decided to take the vitamin route.

HUL differentiated its tea from the competitors with the

help of technology. With the help of their R&D arm in

Bangalore, they fused vitamin in each granule of tea. Thus

drinking three cups of Sehatmand tea, the company

promises, will ensure 50% reference daily intake of

important B vitamins.

Next challenge was the price. Rural consumer is more

price sensitive than its urban counterpart. To tackle this,

HUL has launched smaller packs of Rs.5 and Rs. 10 as

well. This makes Sehatmand affordable.

Even a great product may pose a big marketing challenge

for the company. So to reach the target audience there was

a heavy advertisement on All India Radio as well as

extensive on ground activation. HUL also tied up with the

non-government organisations. It also launched an

intensive campaign called „Sehatmand Parivar, Sehatmand

Bharat‟, which was led by major NGO‟s and civil groups

in UP, MP, Bihar, Jharkhand and Chhattisgarh.

As we move along the marketing mix the next is the

distribution phase that is how to make the product

accessible to the target. Here HUL taps on its Project

Shakti, an initiative HUL started in 2001. This project

aims at empowering the women in villages and giving

them a source of income while they distribute HUL‟s

products in the villages. Hereby, a Shakti Amma (SA) is

recruited and trained to sell the products door to door or

through petty shops at home. The biggest advantage being

that SAs are able to reach far flung areas, which were

economically unviable otherwise. Also the company has

ready consumers in SA‟s who become the users of the

products also. The project today expands across15 states in

India and 45000 SAs reaching 3 million homes. Hence

Unilever has been successful in overcoming the

distribution challenge by creating a mutually beneficial

relationship.

Citing another example of the rural success story is the

ITC‟s e-chaupal. Fragmented farms, weak infrastructure

and involvement of numerous intermediaries are some of

the unique features of Indian agriculture that pose huge

challenges on rural dealings. Under this scheme, a

computer with internet connection is installed in the

farmer‟s house, who is also „the Sanchalak‟. He acts as a

mediator to an average of 600 farmers in 10 surrounding

villages within 5km radius. E-chaupal has been successful

in abolishing the unwanted mediators, who unnecessarily

raise the price of the farm products. This e-hub has given

access to a wide range of information including market

price, weather, scientific farming practices, farmer peer

groups, soil testing and market trends.

But how is this helping ITC? This web based e-chaupal

has now become a key driver for the FMCG business that

comprises brands like Sunfeast, Aashirwaad, Vival and

Fiama Di Wills. Because ITC has been able to source its

raw materials at a much lower cost than its competitors as

it buys directly from its farmers. ITC has also started to

capitalise on its network by selling its FMCG products

through e-chaupal. According to ITC estimates e-chaupal

today serves around 20 million rural consumers.

Apart from this success story there have been a few

failures as well. Henko detergent powder, a popular brand

from Henkel SPIC India, failed in the rural market, due to

its name, it sounds like „Hey Nako‟, which means „No‟ in

Maharashtra, giving it a negative connotation. Dabur heath

toothpaste tulsi powder, too failed to impress our rural

consumer, the reason being, that tooth powder is meant to

be spit out and with tulsi, that holds sacred position in

India values, it was considered to be disrespectful.

As we see from the above cases, rural marketing requires a

deeply researched study before it is targeted. Where 4P‟s

of marketing mix, namely Product, Price, Place and

Promotion has given a good insight model for requisites of

the marketing, this model definitely does not suit the

purpose of rural markets. It requires a deeper insight.



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Rural marketing is marketing to the rural mindset and not

rural market. Rural mindset is way different from its urban

counterpart. These men and their needs are different and

complex.

Thus apart from focussing on the components of

marketing mix, marketers need to know the challenges and

consumer mindset related to each of the component of

marketing mix.

As we see in Diagram 1, which is also known as PAC

Model, each component of Marketing Mix is associated

with its corresponding challenge. We go step by step to

understand the problems of the rural markets and the ways

to resolve it. The inner most circle, which are the

4P‟srepresent the components of the marketing mix. The

second circle which are the 4A‟s, represent the challenges

that are faced by the marketers, while making a move

towards the rural market. And, at last the outermost circle,

which are the 4C‟s, help the marketers to think from the

consumer‟s point of view, so that they are forced to look

deeper into the mindset of the rural consumer.

A) PRODUCT – ACCEPTABILITY –

CONSUMER NEEDS AND WANTS

Before initiating the efforts towards the rural market, the

first and foremost step is what you want to offer to your

customers. Thus a good research on your consumers needs

and wants would give a better insight as to what is

acceptable to your target market. What HUL concluded

from its research was that the rural man is vitamin

deficient and they came up with a product that is easily

acceptable and satisfies their needs as well, tea, that is a

rich source of vitamin. Thus there is a great need to offer

products and services that suit the rural consumer in order

to obtain their acceptability. Cultural values play a major

role in deciding what to buy. Furthermore rural people are

more emotional and sensitive.

To state a few examples, LG electronics developed a

customised TV, „Sampoorna‟ for the rural markets. The

company managed to sell 100,000 sets in first year. Even

mobile device companies are tailoring their products for

rural markets, like Nokia launched a basic handset with a

torch and an alarm clock. Because of the lack of electricity

and refrigerators in rural areas, coca cola provided low

cost ice-boxes, a tin box for new outlets and thermocol

box for seasonal outlets.

Not to forget rural markets are heterogeneous. Conditions

vary from state to state. Therefore it is very important to

invest some time and money before producing a plan of

action. For e.g. a leading FMCG company when tried to

promote its hair dye, through barber shops, it failed,

research showed that rural man do not want others to

know that they dye their hair.



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The efforts of ITC are also not to be forgotten in this case.

They have been increasing the acceptability of the product,

the other way around. By increasing the income generation

capacity of the rural farmer through ITC‟s e-chaupal. They

have positively influenced their purchasing power.

B) PRICE – AFFORDABILITY – COST TO

THE USER:

Rural consumer might be price sensitive but they prefer

only cheap products, is a myth. They are ready to pay a

premium for the product if it offers some extra utility.

Pricing, therefore is a direct function of factors like cost-

benefit advantage and opportunity cost. Thus consumers

are value – conscious and a lot savvier.

A rural man does not have budget problem, but they have

a cash flow problem. Demographics show that most of the

people still depend on agriculture, which generate seasonal

demand of various products. Census shows that most of

the rural people are cultivators or wage earners. Also the

distribution of income among the rural population is

diverse and the bottom of the pyramid is a very low

earner.

Thus with the low disposable incomes and seasonality of

purchasing power, products need to be affordable to the

rural consumer. Thus in case of the FMCG companies,

introduction of sachet packets makes it easy to enter rural

market.

HUL launched a variant of its largest selling soap

„Lifebuoy‟ at Rs.2 for 50gms. Coca Cola introduced the

returnable200ml glass bottle priced at Rs.5. keeping in

mind the rural wallet the telecom giant Bharti Airtel

introduced Rs.10 recharge coupon valid for 10 days.

Philips launched a low-cost smokeless „Chandu‟ stove.

Thus it is very important to keep the cost of the product as

limited as possible. When we talk about value- conscious,

it is to be noted that rural consumer do not like to pay for

fancy features. They look for the basic functionality of the

product. For e.g. Bharat Petroleum introduced a 5Kg mini

cylinder priced at Rs.100 to penetrate the rural kitchens.

Videocon came out with a washing machine without a

drier for Rs.2500. Nokia 1100 was priced at less than

Rs.1000, with all the basic features. Thus customising the

rural product that suits the rural needs and also fill in their

pockets is a strategy.

C) PLACE – AVAILABILITY –

CONVINIENCE:

As mentioned earlier, rural market is vast and scattered.

42% of total villages of India have a population below 500

people. It is not an easy task to reach rural consumer. And

to prepare an efficient distribution and logistics system

would require a huge investment that will eventually raise

the price of the product.

Thus the need is to employ some non-conventional

methods that effectively reach the far-flung villages. So to

service a remote village, stockists use auto-rickshaws,

bullock-carts and even boats in the backwards of Kerala.

The rural retailers influence the buying decisions of the

consumers more often. Thus mere availability of the

product can affect the decision of the market share. Many

companies have taken some really creative steps to tackle

this problem. BPCL designed a rural marketing vehicle

that moved from villages to villages to fill out the

cylinders. HUL‟s project Shakti is a classic example. This

project is a win-win for both the company and the

villagers. By getting in collaboration with the rural

women, that they distribute HUL‟s products from home to

home and also earn a livelihood. Thus apart from

providing them with income-generating opportunities the

company has amplified its rural distribution network.

Thus marketers should carefully examine the market

potential of different villages and target the villages that

can be served in a financially viable manner through an

organised distribution effort.

D) PROMOTION – AWARENESS –

COMMUNICATION:

Merely providing a good product, at a reasonable price to

a convenient place, will not serve the purpose, unless the

consumers are aware and convinced to buy the product.

Methods used in the urban areas for promotion of the

product are not helpful for the rural man. Majority of them

do not have access to televisions and internet even today.

Out of 13 million, only 1.8 million users live in the

villages. The need of the hour is to realise, that even

building a super market on a large scale will still fail to

reach the corners of the country. So how to reach these

potential customers? Where the advertisement should be

placed so that it has a mass reach?

In a country like India, where 70% of the population

resides in rural India, 25000 melas are conducted every

year. The top hundred melas attract a huge population,

mostly rural from throughout the country. Marketers can

target these melas and haats. Advertising in local language

is also very important as it gives a personal touch.

Reference groups also have an influence on the rural

man‟s decision, so the retailers and the small vendors also

play an important role in promotion of the product.

Packaging of the product is not very important for these

people as they are looking for the value of the product and

not fancy looks. But spurious products may eat the brand

market by offering same packaging and similar names. For

e.g. brands like Jifebuoy, bonds talcum, funny and lovely

are doing the rounds of the rural markets.



56

CONCLUSION:

Hence to conclude, we understand that, rural market

undoubtedly holds a very crucial position in the success of

any brand. With the urban market reaching its saturation

point, rural market is definitely next step in the ladder.

Where rural market offers tremendous opportunities, it

poses some serious challenges as well. These challenges

need to be tackled carefully; else even a huge investment

made on rural market can go waste in slumps. To

successfully cater to the needs of the rural consumer, one

needs to understand the mindset of a rural man. They are

very different from there urban counterpart. Their tastes,

preferences, occupation, beliefs, family structure vary

hugely. The demand of the situation is to deliver value to

your rural consumer with honesty and not just consider

them as a bin to throw your urban leftovers. To take

lessons from your rural masters is the key. They have

created a mutually beneficial relationship by merging their

objectives with the rural needs.

Thus before entering the rural market, the marketers must

do their homework thoroughly. The 4P‟s of the marketing

mix namely, price, place, product and promotion need to

be customised according to the rural market. For this it is

very important for the marketers to understand and

overcome the challenges that come along with each „P‟ of

the marketing mix. These are the 4A‟s namely

affordability, availability, acceptability and awareness

respectively. And to overcome these challenges one needs

to understand the rural consumer. This takes us to another

set of the rural marketing mix, which are the 4C‟s namely,

cost, convenience, consumer needs and wants and

communication. These 4C‟s will give a marketer an in-

depth view in to the consumer‟s mind, which eventually

helps them to be more prepared. Hence, we create a rural

marketing mix, also known as the „PAC Model‟.

REFERENCES:

[1] Dr. Ahmed Ashfaq, “Rural Marketing Strategies for

selling Product and Services: Issues and

Challenges”, Journal of Business Management and

Social Sciences Research, Volume 2, No. 1,

January 2013.

[2] Bhushan Ratna, “Rural India can now go the

distance”, The Economic Times, 7th

July 2009.

[3] Chaturvedi Pallavi Rao, “From Urban India to

Rural India”, http://extension.umd.edu/agmarketing

/marketing-101/marketing-mix-4ps-and4cs, January

30, 2014.

[4] Prof. Dikkatwar Ramakrishna, “Exploring

opportunities and meeting Challenges in Rural

Markets through collaboration and use of

technology”,

[5] Kotler Philip, Marketing Management 1992, 8th

edition.

[6] Shah Chintan, Desai Reney, “The 4A‟s of

Rural Marketing Mix”, International Journal of

Rural Management and Social Sciences Research,

Volume 2, No. 1, January 2013.

[7] Census: 2001.

[8] Xavier Institute of Management, Bhubaneswar,

Session III, Rural Marketing.

[9] http://www.thehindustanbusinessline.com/features/

weekend-life/stay/married-to-the-cause/article

5268911.ece.

[10] www.mbaskool.com/businessarticles/marketing/23

29-indian-rural-market-the-next-big-thing.html.

http://extension.umd.edu/agmarketing/marketing-101/marketing-mix-4ps-and4cs

http://extension.umd.edu/agmarketing/marketing-101/marketing-mix-4ps-and4cs

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Rural Markets: Untapped Treasure