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Rural Marketing
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Rural Marketing
Session 16
1
Learning Objectives
1. Define rural India and rural markets and review the
evolution of rural marketing.
2. Understand the concept of Middle India.
3. Review the changes in demographics and socio-
cultural in rural India.
4. Basics of MR and STP in rural India.
5. Introduction to 4 As of rural marketing.
2
Definition of Rural
Organization Definition of Rural Limitation
Census
o Several hamlets demarcated by physical boundaries
o Towns are urban areas that satisfy: o Minimum population 5,000 o Population density > 400 per sq. Km. o 75% of the male population engaged in non-
agricultural activities
The term “rural” is not defined, nor is the upper limit of population for villages
IRDA o Similar to Census except that the percentage for
male population in towns is 25% and not 75%
Widening of definition allows a larger market to be considered as rural
RBI Rural: All locations with a population of up to 10,000 Semi-urban: All locations with a population between 10,000 and 100,000
Distinction defined only by population
3
The Evolution of Rural Marketing
• Marketing of rural products in rural and urban markets and agricultural inputs to rural markets.
• A totally unorganised market
Phase I
(Prior to the 60s)
• Green revolution ushered in scientific farming practices resulting in exponential growth in agricultural production
• White revolution gave a fillip to cooperative movement
• Establishment of distribution networks by FMCG companies
Phase II
(60s to 80s)
• Increased rural thrust and strengthening of local governance resulted in socio-economic progress.
• Growth in consumables and durables
Phase III
(90s)
• Going rural becomes the mantra even for high value products and services
• Government initiatives of rural loan waiver, employment and rural infrastructure development provide further acceleration
Phase IV
(2000 to present)
4
Small and Middle Level Towns
Town Nos. Pop. in mns % Share of total
disposable income %
5 million plus 8 85.19 22.6
One million plus 38 64.69 17.2
One million plus 46 149.88 39.8 53%
5 lakhs to 1 million 45 36.04 9.6
2 lakhs to 5 lakhs 139 49.77 13.2
1 lakh to 2 lakhs 267 40.96 10.9
Middle level towns 451 136.77 33.7 26%
Less than 1 Lakh 7438 100.46 26.6 21%
TOTAL - URBAN 7935 377.11 100.0
TOTAL - RURAL 640,870 833.46 100.0
5
Source : Census 2011
aaa
Small and Middle Level Towns
FMCG Value Sales 2002 2010 Multiple Increase
Metro and Mini Metro 110 412 3.8
Middle India 83 287 3.5
Rest of Urban 98 245 2.5
Rural 151 480 3.2
TOTAL 442 1425 3.2
Unit: Rs, billion
6
Source : Nielsen Rmiddle India eport
Why does Middle India Matter?
They contribute 20% of All India FMCG sales and 30%
of urban sales of FMCG products.
They are home to nearly 1 million outlets.
Annual per capita consumption of FMCG products is
INR 2800. This level was reached by metros in 2009.
The Top 10 FMCG players added 42% to their
turnover between 2010 and 2011
7
Rural Population by Village Size
Population Number of Villages Population
Thousands % Millions %
10,000 plus 5.00 0.78% 72.31 8.68%
5,000 to 9,999 20.00 3.12% 123.80 14.85%
2,000 to 4,999 103.37 16.13% 288.50 34.61%
1,000 to 1,999 149.26 23.29% 197.44 23.69%
500-999 152.08 23.73% 103.22 12.38%
Less than 500 211.17 32.95% 48.19 5.78%
TOTAL 640.87 100.00% 833.09 100.00%
8
o 20% of the villages contribute to over 58% of population and nearly 70% of rural expenditure
Source : Census 2011
Household Distribution - India
9
Number per HH
Urban Rural Total
Millions % Millions % Millions %
1 2.85 3.6 6.19 3.7 9.04 3.7
2 7.53 9.5 16.45 9.8 23.98 9.7
3 12.55 15.9 21.11 12.6 33.66 13.6
4 20.80 26.4 35.18 21.0 55.98 22.7
5 14.59 18.5 31.68 18.9 46.26 18.8
6-8 16.25 20.6 45.15 26.9 61.40 24.9
9+ 4.30 5.4 12.06 7.2 16.36 6.6
TOTAL 78.87 100.0 167.83 100.0 246.69 100.0
Source : Census 2011
o Average per household 5 in rural against 4.7 in urban o Number of joint families around 18% all India o Joint family structure in rural giving way to individualised joint families with
separate kitchens in same house.
Literacy
TOTAL Rural Urban
Millions % Millions % Millions %
Literates – Male 511.58 82.14% 335.99 78.57% 175.30 89.67%
Literates – Female 384.54 65.46% 238.43 58.75% 145.15 79.92%
Literates - Total 896.31 74.04% 574.34 68.91% 320.47 84.98%
M:F Difference 16.68% 19.82% 9.75%
M:F Ratio 933 946 900
TOTAL 1210.57 833.46 68.8% 377.11 31.2%
10
o Literacy in rural up from 54% in 2001 o Female Male Difference in literacy much higher in rural
Source : Census 2011
The Evolving Rural Consumer
11
Changing cultural and social norms
High use of self-help groups (SHGs),especially for women
Marketers need to focus on creating awareness and
excitement amongst women and youth
Value-driven and looks for products that add to earning
capabilities or to status
Increasing literacy and exposure to mass media,
increasing aspiration levels
Better road infrastructure leading to increased mobility
Highest change amongst children and youth, increasing
their role as influencers
Rural India: The Exploding Middle Class
67% road connectivity, 41% tele-density, 67%
electrification
349.2 million mobile users contributing 39% of total.
17 million DTH subscribers
87 million Kisan Credit Cards
12
The Transition of the Rural Economy
Transition has occurred at three
levels: o Food grain crops
o On-land activities
o Farm activities
Transition linked to high
opportunity for value addition
resulting in high rural incomes.
Farm sector now contributes only
40% of the rural income with non-
farm activity contributing to 60%.
13
Food grain crops On land activities Farm activities
Non food grain crops Cash crops Off-land allied activities (Livestock, fisheries etc.) Non-farm activities (Services, manufacturing, etc.)
Cultural Factors
14
Culture o Decreasing insularity and increased literacy in rural.
o Breakdown of the joint family
o Social customs and traditions strong in rural India and have
to be respected by marketers.
Sub-culture o Caste an important factor in rural India
o Clear demarcation for dwelling and natural resources.
Special Tools used in Rural Marketing Research
15
Participatory Rural Appraisal
• Market Access or Mobility Map
• Daily Activity Clock
• Chapati Diagram
• Process Map
• Wealth Map
Scaling tools for Quantitative Research
• Satisfaction Scale
• Agreement Scale
• Ranking Ladder
Differences Between PRA and FGD
PRA FGD
Large and heterogeneous in nature, ensuring participation from all walks of life
Typically small and homogenous groups
As expression is both verbal and non-verbal, even the less assertive people can express their views
A verbal channel – outspoken individuals often dominate the discussion
Moderator’s role is limited, hence the flow of information flow is natural
Moderator’s intervention can be high in evolving a response from all sectors
Attitude and behaviour change oriented Action oriented
On-the spot analysis by participants Analysis done by moderators
Cross-checking and validation of data can be done on site by involving the members of the group
Findings need to be validated with more FGD till a consensus is reached
16
Heterogeneity in Rural Markets
Socio-cultural differences
Population size and density
Level of infrastructure development
Media exposure levels
Variations in literacy levels
Differences in income levels and income flow
Family structure
17
Monthly Consumption Expenditure
Year
1993-94 2004-05 2009-10 2011-12
MPCE Rural (Rs.) Current prices. 281.40 558.78 927.70 1278.94
Price deflator for rural sector 176 319 494 580
MPCE Rural (Rs.) at 1987-88 prices 159.89 175.17 187.79 220.51
MPCE Urban (Rs.) Current prices 458.04 1052.36 1785.81 2399.24
Price deflator for urban sector 173 338 503 599
MPCE Urban (Rs.) at 1987-88 prices 264.76 311.35 355.03 400.54
18
Source : NSSO
o The gap between rural and urban is constant over the last two decades. o The growth in the last two years has been much higher than the previous years.
Rural Marketing Mix
The 4 Ps of marketing – price, product, place and
promotion – replaced by 4 As in rural markets
Affordability Availability
Awareness Acceptability
19
Rural Marketing Mix
•Rural consumers are driven by value proposition and not by cost Affordability
•Single largest challenge for marketers in rural markets
•Paucity of data for villages and small towns is a hindrance Availability
•Media reach is increasing
•Need for specific messages aimed at the rural psyche
•Use of alternative rural means of communication Awareness
•Rural consumers look for productive assets
•Specific needs should be looked into while designing products for rural consumers
Acceptability
20
The Product Concept
21
The first and central decision in the marketing mix Confirms acceptability Points for taking products to rural markets:
o Appropriate for the rural environment o Simple to operate o Visually identifiable o Affordable
Products include physical goods, services, places, ideas, persons, organizations, etc.
TATA Ace, LG Sampoorna, Washing Machine, Philips “Free Wave Radio”.
Fast Moving Consumer Goods
YEAR URBAN RURBAN RURAL TOTAL
2010 550 300 550 1400
2011 650 350 700 1700
2012 720 420 860 2000
2013 750 470 930 2150
Source: Nielsen Unit : Rs. Billion Urban: 2 lakhs plus towns
Major players in rural are HUL, Dabur, Marico, Colgate
Palmolive, Nirma, CavinKare and Godrej.
22
Fast Moving Consumer Goods
Category Penetration (%)
Edible oil 96
Washing powder/liquid 90
Tea 89
Washing cakes/bars 85
Biscuits 76
Hair oil 70
Toothbrushes 56
Toothpaste 51
Vanaspati 42
Toothpowder 29
Ghee/Desi ghee 18
Utensil cleaner 18
Toilet cleaner 8
Coffee 8
Data on basis of IRS Q1-
2010.
What are the learnings for
rural marketing strategy?
23
Consumer Durables Penetration
24
64.7 70.2 63.1 60.5 33.1 44.2
27.8 36.3 20 14.7 7.7
91.2 80.6
63.8 56
77.5 31.9
24.1 13.4 29.1
8.6 3.8
0
20
40
60
80
100
120
140
160
180
Urban Rural
Nu
mb
er o
f h
ou
seh
old
s
Brand Loyalty versus Stickiness
25
Rural consumers are more “brand sticky” rather than
brand loyal due to lower literacy and awareness.
Brand stickiness since rural consumers still
discovering core benefits.
“Brand stickiness” higher amongst older people.
Brand dominance also because “word of mouth” is
strong
Entry of new brands is therefore difficult in rural.
Brands will also have to customise for local tastes.
Pricing in Rural India
26
Affordability a major issue in rural
Growing purchasing power raising aspiration levels
Premium brands making inroads into rural markets.
How do companies price? o Rural consumers look at value for money
Consumer psychology and pricing o Good quality at cheap price
o Fancy features not appreciated
o Compare prices to a reference price.
Technology and Pricing
27
Godrej Chotukool o Top opening six litre capacity weighing 7.8 Kgs. o Uses chip and fans instead of compressor. o Priced at Rs. 3,250
Dish TV o Low cost set top boxes o Cheaper subscription rates
Nokia 1100 o Incorporating radio, alarm and flashlight and priced less
than Rs. 1000
Tata Swach
Rural Specific Pricing Strategies
28
Low price points through smaller pack sizes. o Encourages trial
o Maintain freshness
o Variety options
Examples o Chik shampoo
o 5 Kg cylinders by BPCL
o Nestle, HUL, Dabur, Britannia
Availability: The Challenges and the Dilemma
29
Reaching 4.5 million retail outlets across 640,000
villages.
80% of the villages have a population of less than
2,000 population.
Poor road connectivity
Multiple tiers of distribution leading to higher costs.
Low density of shops per village and high variation in
their concentration.
Poor availability of suitable dealers.
Availability: The Challenges and the Dilemma
30
Inadequate bank and credit facilities to rural retail
outlets.
Poor storage systems leading to inadequate stocking.
Highly credit driven market.
Poor visibility of products on rural shelves.
Poor communication of offers and schemes due to
poor reach of media.
Inadequate power supply leading to spoilage of
goods which need refrigeration.
The Evolution of Rural Distribution Channels
31
LEVEL Channel Partners Market Place
1 Company Depots/CFAs, Super stockists National/State
2 CFAs/Redistribution stockists Retailers/Modern/Traditional
Cluster of districts District Headquarters
3 Redistribution stockists
Semi-wholesalers/Retailers Sub-district (Tehsil/Block)
Feeder town
4 Semi-wholesalers/Retailers
Mobile traders in haats/vans Feeder town
Periodic market
5 Retailers/Vans/Barefoot agents (Shakti
dealers)/Cooperative societies/ Government agencies (Fair price shops)
Large and small villages
The Rural Retail Environment
Population Number of Villages Population Retail Outlets
Thousands % Millions % Thousands Number per
village
10,000 plus 5.00 0.78% 72.31 8.68% 250 50
5,000 to 9,999 20.00 3.12% 123.80 14.86% 640 32
2,000 to 4,999 103.37 16.13% 288.50 34.63% 1,650 16
1,000 to 1,999 149.26 23.29% 197.44 23.70% 1200 8
500-999 152.08 23.73% 103.22 12.39% 500 3
Less than 500 211.17 32.95% 47.82 5.74% 210 1
TOTAL 640.87 833.09 4,450
32
o 20% of the villages contribute to over 57% of the population and 66% of rural expenditure
o There are hardly any shops in smallest villages (33% of total).
Source : Census 2011, RMAI
Rural Centric Distribution Models
33
Haats/Shandies
Modern Distribution Models
Vans
The Public Distribution System
Cooperative Societies
Petrol Pumps and Extension Counters
Non-government Organisations
Rural Mobile Traders
The Communication Problem
34
Scheduled Languages
17
Languages with widespread use
47 in primary education 98 in print media
71 in radio; 13 in films
Local Vernaculars 114 recognised varieties
National Languages
English and Hindi
Creating Advertisements for Rural Audiences
35
Main objective for rural advertising is creating
awareness.
Factors to be kept in mind: o Understand mind set through research
o Pick up “gems” in terms of idioms and expressions.
o Gimmicky ads do not work in rural.
o Edutainment is a good path.
o Short ads do not work in rural.
o Bring in aspirational element
Rural Media
36
Conventional Media
• Mass Media
• Outdoor Media
• Personalised Media
Rural Centric
• Video Van/Rath
• Haats
• Melas
• Mandis
• Folk Media
The Way Forward
37
• Sensitized to rural conditions and rural markets Dedicated rural teams
• Create manufacturing jobs locally Forward innovation
• Enhance rural incomes while marketing to them Inclusive marketing
• Use social infrastructure and SHGs Innovative rural
distribution
• Deliver on the basics with not many frills A new price
performance paradigm
Rural marketing is marketing to a rural mindset ; not a rural market
Successful Mantra for Entering Rural Markets
Think like a businessman with
feelings of a social worker
