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Tuesday, July 26, 2011

Abstract on Rural marketing in india

 Rural marketing in india
The purpose of this paper is to examine the impact of marketing strategies on rural India and shift of multi national corporations  concentration towards the Indian rural market. But often, rural marketing is confused with agricultural marketing  Particular emphasis is placed on the impact of the four A’s principles on the rural economy and its participants, namely farmers, landless laborers and marketing intermediaries. The marketing had a positive effect on all these participants through the creation of vast marketing opportunities. The driving force of this success was “market forces,” generating virtuous cycles in the transition marketing. At the same time, the “absence of bad marketing policy” is emphasized as a key for the success in the context of India, where excessive  intervention of private companies like H.U.L, CALVIN CARE PORTER AND GAMBLE, often resulted in success of rural marketing in India. The Indian rural market is observed as a high potential market across the world.

Indian Rural Market
An Overview
The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in approximately 630000 villages, which can be sorted in different parameters such as literacy levels, income levels, penetration, distances etc.

What makes Rural Markets Attractive?

Rural market has following arrived and the following facts substantiate this.
·        742 million people
·         Estimated annual size of the rural market
·         FMCG Rs 65,000 Crore
·         Durables Rs 5,000 Crore
·         Agri-inputs (incl. tractors) Rs 45,000 Crore
·         2 / 4 wheelers Rs 8,000 Crore
·         In 2001-02, LIC sold 55 % of its policies in rural India.
·        Of two million BSNL mobile connections, 50% in small towns/villages.
·        Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT)
·        41 million Kisan Credit Cards issued (against 22 million credit-plus-debit cards in urban) with cumulative credit of Rs 977 billion resulting in tremendous liquidity.
·        Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from these towns on Rediff online shopping site
·        Investment in formal savings instruments: 6.6 million HHs in rural and 6.7 million in urban.


·         Infrastructure is improving rapidly.
·        In 50 years only 40% villages connected by road, in next 10 years another 30%.
·         More than 90 % villages electrified, though only 44% rural homes have electric connections.
·        Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected by STD.
·        Social Indicators have improved a lot between 1981 and 2001
·        Number of “pucca” houses doubled from 22% to 41% and “kuccha” houses halved (41%to 23%)
·        Percentage of BPL families declined from 46% to 27%
·        Rural Literacy level improved from 36% to 59%
·        Low penetration rates in rural so there are many marketing opportunities.

Durables Urban Rural Total (% of rural HH)
CTV 30.4 4.8 12.1
Refrigerator 33.5 3.5 12.0

FMCGs Urban Rural Total (% of rural HH)

Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6
·        Marketers can make effective use of the large available infrastructure
·        Post offices 1,38,000
·        Proliferation of large format rural retail stores which have been successful also.
·         DSCL Haryali stores
·         M & M Shubh Labh stores
·         TATA/Rallis Kisan Kendras
·         Escorts rural stores
·         Warnabazaar, Maharashtra (annual sale Rs 40 crore)

The above figures are a clear indication that the rural markets offer the great potential to help the India Inc which has reached the plateau of their business curve in urban India to bank upon the volume-driven growth.
As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income.
The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased.
The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart.

Features of Indian Rural Markets
·         Large and Scattered market:
The rural market of India is large and scattered in the sense that it consists of over 63 crore consumers from 5,70,000 villages spread throughout the country.
·         Major income from agriculture:
Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity.
·         Traditional Outlook:
The rural consumer values old customs and tradition. They do not prefer changes.
·         Diverse socio-economic backwardness:
Rural consumers have diverse socio-economic backwardness. This is different in different parts of the country.
·         Infrastructure Facilities:
The Infrastructure Facilities like roads, warehouses, communication system, financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to inadequate Infrastructure facilities.
The rural bazaar is booming beyond everyone's expectation. An estimated induction of Rs 140 billion in the rural sector through the government's rural development schemes in the Seventh Plan and about Rs 300 billion in the Eighth Plan is also believed to have significantly contributed to the rapid growth in demand.
Problems in the Booming Rural Marketing
Although the rural market does offer a vast untapped potential, it should also be recognized that it is not that easy to operate in rural market because of several problems. Rural marketing is thus a time consuming affair and requires considerable investments in terms of evolving appropriate strategies with a view to tackle the problems.
The major problems faced are:
·        Under developed Peopleand Under developed Markets:
The number of people below poverty line has not decreased in any appreciable manner. Thus underdeveloped people and consequently underdeveloped market by and large characterize the rural markets.
·         Media for Rural Communication:
Among the mass media at some point of time in the late 50's and 60's radio was considered to be a potential medium for communication to the rural people. Another mass media is television and cinemas. Statistics indicate that the rural areas account for hardly 2000 to 3500 mobile theatres, which is far less when compared to the number of villages.
·         Many Languages and Dialects:
The number of languages and dialects vary widely from state to state, region to region and probably from district to district. The messages have to be delivered in the local languages and dialects. Even though the number of recognized languages are only 16, the dialects are estimated to be around 850.
·         Dispersed Market:
Rural areas are scattered and it is next to impossible to ensure the availability of a brand all over the country. Seven Indian states account for 76% of the country's rural retail outlets, the total number of which is placed at around 3.7 million. Advertising in such a highly heterogeneous market, which is widely spread, is very expensive.
·         Low Per Capita Income:
Even though about 33-35% of gross domestic product is generated in the rural areas it is shared by 74% of the population. Hence the per capita incomes are low compared to the urban areas.
·         Low Level sof Literacy:
The literacy rate is low in rural areas as compared to urban areas. This again leads to problem of communication for promotion purposes. Print medium becomes ineffective and to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy.

The 4A Approach
The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media.
However, the rural consumer is not unlike his urban counterpart in many ways. The more daring MNCs are meeting the consequent challenges of AVAILABILITY, AFFORDABILITY, ACCEPTABILITY, AWARENESS. (the so-called 4 A’s).

The first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system, which helps its brands reach the interiors of the rural market.  To service remote village, stockiest use auto-rickshaws, bullock-carts and even boats in the backwaters of Kerela. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market.
Study on buying behavior of rural consumer indicates that the rural retailers influences 35% of purchase occasions. Therefore sheer product availability can affect decision of brand choice, volumes and market share. Some of the FMCG giants like HLL took out project streamline to significantly enhance the control on the rural supply chain through a network of rural sub-stockiest, who are based in the villages only. Apart from this to acquire further edge in distribution HLL started Project “SHAKTHI” in partnership with Self Help groups of rural women.

The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh - the so-called `BIMARU' States.
Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and multiserve sachet of 200 gm priced at Rs 15.

The third challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market. One company, which has reaped rich dividends by doing so, is LG Electronics. In 1998, it developed a customized TV for the rural market and christened it Sampoorna. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola provides low-cost ice-boxes - a tin box for new outlets and thermocol box for seasonal outlets.
The insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard LIFE topped private insurers by selling policies worth Rs 3.5 crore in total premia. The company tied up with non-governmental organisations and offered reasonably priced policies in the nature of group insurance covers.

Mass media is able to reach only to 57% of the rural population. Creating awareness then, means utilizing targeted, unconventional media including ambient media .For generating awareness, events like fairs and festivals, Haats, etc., are used as occasions for brand communication. Cinema vans, shop-fronts, walls and wells are other media vehicles that have been utilized to increase brand and pack visibility. innovative media used by personal wash like Lux and Lifebuoy and fabric wash items like Rin and Wheel. Idea was to advertise not only at the point of purchase but also at the time of consumption.
With large parts of rural India inaccessible to conventional advertising media - only 41 per cent rural households have access to TV - building awareness is another challenge. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned channels. Consumption of branded products is treated as a special treat or indulgence.
Hindustan Lever relies heavily on its own company-organised media. These are promotional events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language.
Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising.  
The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. In case of nestle, company's product portfolio is essentially designed for urban consumers which cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive.

Some Live Examples:
·        One very fine example can be quoted of Escorts where they focused on deeper penetration. They did not rely on T.V or press advertisements rather concentrated on focused approach depending on geographical and market parameters like fares, melas etc. Looking at the ‘kuchha’ roads of village they positioned their bike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punch line ‘Jandar Sawari, Shandar Sawari’. Thus, they achieved whopping sales of 95000 vehicles annually.
·        HLL started ‘Operation Bharat’ to tap the rural markets. Under this operation it passed out low–priced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million households.
·        ITC is setting up e-Choupals which offers the farmers all the information, products and services they need to enhance farm productivity, improve farm-gate price realization and cut transaction costs. Farmers can access latest local and global information on weather, scientific farming practices as well as market prices at the village itself through this web portal - all in Hindi. It also facilitates supply of high quality farm inputs as well as purchase of commodities at their doorstep.
·        BPCL Introduced Rural Marketing Vehicle (RMV) as their strategy for rural marketing. It moves from village to village and fills cylinders on the spot for the rural customers. BPCL considered low-income of rural population and therefore introduced a smaller size cylinder to reduce both the initial deposit cost as well as the recurring refill cost.

Thus looking at the challenges and the opportunities which rural markets offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage. A radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is called for, so they can successfully impress on the 230 million rural consumers spread over  approximately six hundred thousand villages in rural India.
Abstract on Rural marketing in india Reviewed by creativeworld9 on 10:27 AM Rating: 5  Rural marketing in india Abstract:   The purpose of this paper is to examine the impact of marketing strategies on rural India and s...


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