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Rural Marketing
IPER - Bhopal
4th Feb 2012
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Welcome to your module on: Rural Marketing
Instructor: Prashant Gupta Working with ITC Ltd as Branch Manager
B.Com (Hons),University of Delhi;
MBA (ISB - Hyderabad)
Work Experience:
I worked across multiple consumer goods categories and professionalservices sector.
My experience spans functional areas of Sales, Trade Marketing,
Business Development and Supply Chain Management.
I have been a key member in projects and organizational initiatives likeITC e-choupal the innovative rural retail program, and ITC Infotech
the consulting division of ITC.
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Coordinates
Mobile :9893598101
Email: [email protected]
mailto:[email protected]:[email protected]8/2/2019 Slide Deck 1
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Today
Intro and Admin details
Course Overview
Teaching Style
Grading details
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A nation currently in a period of economic
growth and transformation.
Worlds largest democracy.
A Trillion $ economythe 4th largest in the
world.
Amongst a handful of nations to have its Flagstationed on the Moon.
Aspiring to be a Permanent UNSC member
Background Emerging India
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Socio-economic divide between the growingurban middle class and the large population of
rural India.Descriptorsus of them
Rapidly expanding population. Rising Food Prices
Weak Infrastructure
Depleting Environmental ResourcesIn search of The New India which converges the
expectation of all stakeholders.
Background Emerging India
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Enter Rural Marketing
What is Rural ?????
Is there a definition for Rural??
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Urban As per GOI
The definition of urban area adopted is as follows:
(a) All statutory places with a municipality, corporation,cantonment board or notified town area committee, etc.
(b) A place satisfying the following three criteriasimultaneously:
i) a minimum population of 5,000;ii) at least 75 per cent of male working populationengaged in non-agricultural pursuits; and
iii) a density of population of at least 400 per sq. km.(1,000 per sq. mile).
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Is Rural India = BOP?
Ownership of Life Insurance 18.6% - Rural
38.1% - Urban
Average Household Income
INR 51,922 - Rural INR 95,827 - Urban
In Rural India 64.3% dont own a Ceiling Fan
72.5% dont have a toilet or bathing facility at home
40.2% still dont have electricity 39% dont even own a Wall Clock
Looks like the answer is Yes
Source: Max-NCAER Indian Financial Protection Survey & IRS 2007 R2, Hansa Research
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Indian Agriculture has Excellent Resources
Plenty of arable land
Rich & Diverse Agro-climatic Zones
Strong Agricultural Research
Large & growing markets
Indian Farmers Resourcefulness is also Legendary
Works very hard (whole family is on the farm) Takes risk (on weather, yield, price)
Is innovative (technology adoption, risk mgmt)
Rural India
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Because of Fragmentation, Dispersion, Heterogeneity
Most of them are small (1.5 ha average holding) They do not have bargaining power
All of them live in hinterlands (600,000 villages)
They do not have access to real time information The circumstance of each one is very different (agro-ecological
conditions, resources) They cannot get customized knowledge advice
Further compounded by weak infrastructure
Physical, Social, Institutional To access markets, these farmers have to take the help of
middlemen
Yet majority of Indias Farmers are Poor
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VILLAGE
TOWN
Farmer
Mandi
Price Discovery
@ Sell TransactionVideo
PRODUCT&
SERVICE
PROVIDERS
Money
Lender
Financing
Market
Transaction
Extension
CenterKnowledge
(Use)
Traditional Transactions
Sell:
Buy:
Middleman
sunk costs, inconvenience,
other losses
high prices, spurious goods, information not timely
Information
(Aggr)
http://farmer%20problem.wmv/http://farmer%20problem.wmv/8/2/2019 Slide Deck 1
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The Problem Faced by FarmerThe 2 DsDEEP SEAInstitutional support
- Information on farming best practices/ weather
-Quality and information on Inputs
DEVIL
Middle Men
- Price Discovery
-Quality and weighment-Handling Loss
-Time
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An Entrenched Cycle of Abject Poverty
Land and labor available to the poorare of minimal economic value
Market
Failures
Usurious
Lending
Practices
Failed Govt
Policies & Corrupt
Officials
Unbreakable debt
cycles cause by
interest rates >120%
Bonded
labor
Those with capital and power have little incentive to invest
in the productive assets that would break the cycle
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Indias Labor Force
Primary
(Agriculture, net of
Mining)
Secondary
(Industry/Manufac
turing, etc.)
Tertiary (Services)
Agriculture
48.1%
Farmers account for almost HALF of
the Indian workforce
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Indias GDP Composition
Primary
(Agriculture, net ofMining)
Secondary
(Industry/Manufac
turing, etc.)
Tertiary (Services)
but farming contributes LESS THAN 20%
of the gross value of the Indian economy.
Agriculture
18%
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An farmer is significantly less productive (in terms of
relative GDP contribution) than the average Indian
worker
0.00
0.50
1.00
1.50
2.00
2.50
Relative Productivity Ratio (Agricuture % of
GDP/Agriculture % of Workforce)
Relative Productivity Ratio (Industry % of
GDP/Industry % of Workforce)
Relative Productivity Ratio (Services % of
GDP/Services % of Workforce)
This line (1.00)
represents the
productivity of the
AVERAGE worker in
India
a trend which has only gotten worse over the past 20 years
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Indian service industry workers are significantly
more productive than Indian farmers
as such, an IT worker would expect to earn 20+ rupees for every 1
rupee a farmer earned. Stated another way, on average, a farmer
earns 4.9 paise for every rupee earned by an IT worker.
The average Services worker contributes
4.57 times as much to the Indian economy
as the average Farmer.
The average IT Services workercontributes
20.5 times as much to the Indian economy
as the average Farmer.
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A Vignette: Paharias in the Rajmahal
Hills
Dharmi Paharini is four feet three inches tall and weighs less than the
40kg of firewood on her head. She had to walk 31 km to cut and fetch
the wood and bring it to market. She will get 8 or 9 rupees for it.
Some strains of beans cultivated here fetch high prices in Bombay. Not
for the Paharias, though. I have to sell my crop to the mahajan who
gave me a loan. A study estimates that 46% of a Paharias earnings go
directly to the mahajan to repay debt, with an additional 39% going to
the lender indirectly.
No water supply systems exist here. Years of neglect have ensured
that. So the Paharias suffer from a range of water-borne diseases.
Adapted from The Hills of Hardship, p. 169- 174
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THERE EXISTS AMARKET AT THE
BOTTOM OF THE
PYRAMID
But still C. K. Prahalad may suggest
AND A FEW MYTHS
ABOUT IT TOO
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New Horizons New Hopes
Agri prices have more than doubled in the last 5 years
Agriculture production has started to improve .
Good Monsoons over the last few years.
Increased Govt spending in Rural area ex. NEREGA etc
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GrowingRural Wealth
2.1 3.6 5.28.13.1 4.1 5.0
6.58.610.1
13.7
22.329.0
39.5
43.1
42.5
57.2
42.7
32.5
20.6
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1995-96 2001-02 2005-06 2009-10
Rural:Percent of each Income Group
Upper (> Rs,1,40, 000) Upper Middle (Rs.1,05,000-1,40,000)
Middle (Rs.70,000-1,05,000) Lower Middle (rs.35,000-70,000)
Lower (Rs.
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Rural Economy
1. Increase in Urban Household consumption of Rs 100 leads to an
increase of Rs 39 in the rural household income.
2. During the last decade, the rural economy is estimated to have grown
by 7.3% as compared to 5.4% of urban economy.
3. The rural economy is nearly as big as the urban. In 2000, the rural
economy accounted for 49% of the Indias GDP.
4. Share of agriculture in Rural economy has dropped from 72% in 1970s
to 64% in 1980s to 51% in 2000
5. The rural-urban migration has fallen from 6.5% in 1981 to 2.8% in 2001.
Source: Merinews.com
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The consumption of FMCG products increasing.
Govt. focusing more rural credit more than doubled in 3 years.
Allocated US$67 billion for 2009-10
Corporate farming and food processing are focus areas for corporate.
Education, Health and Conveyance are major spending items in rural
India
Child Centricity is high in villages
Trends in Rural India
Source:
http://images.google.co.in/imgres?imgurl=http://www.murugappa.com/news_events/media_kit/images/logos/Murugappa%20Group%20-%20New.jpg&imgrefurl=http://www.murugappa.com/news_events/media_kit/index.htm&usg=__10Ffxdlglt3f-Eh_TCf78LTyq4E=&h=764&w=777&sz=76&hl=en&start=2&tbnid=d-TwV9UUiovZLM:&tbnh=140&tbnw=142&prev=/images?q=Murugappa+group+logo&gbv=2&hl=en8/2/2019 Slide Deck 1
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Availability Of Finance
Availability of microfinance
SKS
National Bank for Rural and Urban development
Basix
National Mission for Sustainable Agriculture
Public Private Partnerships for rural infrastructure
Women Self-Help Groups
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Segmentation Of Rural Market
Population Population Size as indicator of market consumption.
Geography/ Location
Proximity to Urban Centre
Industrial Complex.
Tourist Location
Sea/ Highway
Socio Economic Factors
Size of Land Holding
Literacy Levels
Position of Women in Society
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Consumption Behavior -Rural Market
Need Based
Lifestyle & Product Usage Limited by infrastructural constarints
Brand Conscousness
SBI
Ghadi
Parle
GoldFlake
Aspirational
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Rural Vs Urban
Market- A change in Mindset
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Myth I Lack of Spending Power
They spend, but in smaller quantities
Pay premiums to get smaller quantities
Sachets made 67% of the tonnage for Shampoos
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Myth II Impossible to reach
They are accessible
Media dark is a thing of the past
Project Shakti an alternate distribution system
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Myth III Will buy what is cheap
But are very Brand Conscious
Aspiration to be like the rest
Value seeking as well
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Connected through various media
Wireless Technologies (Cell Phone and DTH)
Cadburys Worm controversy
Myth IV They are disconnected
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Grasp advanced technologies
Nothing to unlearn, hence easy to learn
ITCs E-Choupal & Kerelas Fisherwoman
Myth V Technology is not for them
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Theres lots more to the Rural Economy then just poverty, the need is to
pick the opportunity and cater to it well
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Theres lots more to the Rural Economythen just poverty, the need is to pick theopportunity and cater to it well