rural marketing

RURAL MARKETING

Session 16

Learning Objectives

1. Define rural India and rural markets.

2. Review the changes in demographics and socio-

cultural in rural India.

3. Basics of MR and STP in rural India

4. Introduction to 4 As of rural marketing.

2

Rural MarketingFlow of Products/Services

3

1

3 4

2

Rural

Ru

ral

Urban

Urb

an

To

Fro

m

EXCLUDED

BARTER

AREAOF INTEREST

SIMILARTO

NORMAL

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 5,000o 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

IRDAo 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

RBIRural: All locations with a population of up to 10,000Semi-urban: All locations with a population between 10,000 and 100,000

Distinction defined only by population

3

Some basic facts

Census 2011 Rural Urban Total

Population 833.09 377.11 1210.20

% 69% 31%

Decadal Growth Rate

12.18% 31.80% 17.64%

Literacy(%) 68.91 84.98 74.04

Sex Ratio 947 926 940

5

Decadal growth rate in rural down from 17% to 12% primarily due to re-classification of a number of villages as urban unitsLiteracy has gone up from 50% in 2001 to 69% in 2011 in rural

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

6

Source : Census 2011

Towns with population of less than 2 lakh treated as peri-urban since they are

closer to the rural psyche.

Rural consumers buy 90% of the durables from towns with population of

50,000 to 2,00,00.

Small and Middle Level Towns

FMCG Sales (Rs. Billion) Multiple Increase2002 2010

Metro and Mini Metro 110 (25%) 412 (29%) 3.8

Middle India 83 (19%) 287 (20%) 3.5

Peri-Urban 98 (22%) 245 (17%) 2.5

Rural 151 (34%) 480 (34%) 3.2

TOTAL 442 1425 3.2

7

Source : Nielsen Middle India Report

Share of metros and mini-metros goes up at the expense of peri-urban

Rural Population by Village Size

PopulationNumber 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 14.86%

2,000 to 4,999 103.37 16.13% 288.50 34.63%

1,000 to 1,999 149.26 23.29% 197.44 23.70%

500-999 152.08 23.73% 103.22 12.39%

Less than 500 211.17 32.95% 47.82 5.74%

TOTAL 640.87 100.00% 833.09 100.00%

8

o 20% of the villages contribute to over 66% of rural expenditure


Top Seven States Rural Population

State Population % of total Rural:Urban

Uttar Pradesh 155.32 18.6% 77.7%

Bihar 92.34 11.1% 88.7%

West Bengal 62.18 7.5% 68.1%

Maharashtra 61.56 7.4% 54.8%

Andhra Pradesh 56.36 6.8% 66.6%

Madhya Pradesh 52.56 6.3% 72.4%

Rajasthan 51.50 6.2% 75.1%

9

o Top 7 states contribute to over 65% of rural population.o States of Himachal Pradesh has the highest rural to urban ratio at 90% followed

by Bihar, Assam, Odisha, Meghalaya, Uttar Pradesh, Arunachal Pradesh, Chhatisgarh, Jharkhand.


Household Distribution - India

10

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


o Average per household 5 in rural against 4.7 in urbano Number of joint families around 18% all Indiao Joint family structure in rural giving way to individualised joint families with

separate kitchens in same house.

Landholding Pattern in Rural India

HoldingNumber - Millions (%) Area Million hectares (%)

2000-01 2005-06 2010-11 2000-01 2005-06 2010-11

Marginal(Below 1 ha) 75 (62%) 84 (64%) 92.4 (67%) 30 (19%) 32 (20%) 35.4 (22%)

Small (1 to 2 ha) 23 (20%) 24 (18%) 24.7 (18%) 32 (20) 33 (21%) 35.1 (22%)

Small Medium (42 to 4 ha) 14 (12%) 14 (11%) 13.8 (10%) 38 (24) 38 (24%) 37.5 (24%)

Medium (4 to 10 ha) 7 (6%) 6 (5%) 5.9 (4%) 38 (24) 37 (23%) 33.7(21%)

Large (10 ha and above) 1 (1%) 1 (1%) 1 (1%) 21 (13) 19 (12%) 17.4 (11%)

TOTAL 120 129 138 159 159 159

11


o Land fragmentation increasing in rural Indiao Gross Cropped Area is around 46% with 23% forest, 23% not available for cultivation

and 8% fallow land.

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%.

12

Food grain crops On land activities Farm activities

Non food grain cropsCash crops

Off-land allied activities(Livestock, fisheries etc.)

Non-farm activities(Services, manufacturing, etc.)

Income and Expenditures

Rural 52.9% Urban 42.6%Share of Food:

Rural 8.0% Urban 6.7%Share of fuel and light

Rural 7.0% Urban 6.4%Share of clothing and footwear

Rural 6.7% Urban 5.5%Share of Medical

Rural 3.5% Urban 6.9%Share of Education

Rural 4.2% Urban 6.5%Share of Conveyance

Rural 4.5% Urban 5.3%Share of durable goods

13

SEC Classification

14

EducationType of House

Pucca Semi Pucca Kucha

Illiterate R4A R4A R4B

Below SSC R3A R3B R4A

SSC/HSC R2 R3A R3B

Some College Not Graduate R1 R2 R3B

Graduate/PG (General) R1 R2 R3A

Graduate/PG (Professional) R1 R2 R3A

Old classification up to mid-2011

New SEC Classification

15

Comparison of SEC Classifications

16

Durable Goods Ownership - % HH

RURAL URBAN

1999-00 2004-05 2009-10 2011-12 1999-00 2004-05 2009-10 2011-12

Bicycle 40.5 47.1 54.9 57.1 39.0 41.7 41.1 38.6

Radio 30.4 26.3 26.5 18.7 35.1 33.6 23.3 17.4

Sewing Machine 7.4 9.5 10.9 13.0 20.3 23.8 21.7 22.3

Motor Cycle/Scooter 4.5 7.7 13.9 18.4 18.4 26.0 33.0 37.8

Television 18.7 25.6 41.7 49.6 59.5 66.1 75.8 80.4

Electric Fan 26.3 38.4 55.2 63.5 68.5 81.8 90.6 92.7

Motor Car/jeep 0.4 0.8 1.4 2.0 2.7 4.6 6.5 8.0

Refrigerator 2.7 4.4 7.1 9.4 22.9 31.9 39.0 43.8

Air Cooler 1.7 2.9 5.0 5.9 10.9 18.2 21.4 23.5

Source: NSSO 68th Round Report

17

Rural India: The Exploding Middle Class

164 million households accounting for 56% of Indias total

income, 64% of expenditure and 33% of savings

67% road connectivity, 44% tele-density, 95% electrification

377.73 million mobile users contributing 39% of total.

17 million DTH subscribers

100 million Kisan Credit Cards

Kotak Mahindra Bank shows share of rural in retail portfolio up

from 15% in 2008 to 40% in 2013.

RBI has mandated that banks to open at least 25% of their

branches in villages with population of less than 10,000.

18

CHALLENGES IN RURAL MARKETING

Low product discrimination on quality

Low literacy levels

13 major languages and 1300 dialects

Diversity in traditions and cultures

Lack of distribution channels

Poor reach of mass media

Poor understanding of rural customers

19

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

20

SOCIOCULTURAL REGIONS

89 socio-cultural regions.

Each region has its own

identity in terms of

language, dress, culture.

This has been maintained in

rural.

Media penetration and

durables ownership may

also vary across regions.

21

Demographic Segmentation

Children, teens, young adults, elders, seniorsAge and Lifecycle

joint family, invidualized joint family, nuclear familyFamily structure

Male, femaleGender

Deprived, aspirers, seekers, strivers, globalIncome

Landless, marginal, small and largeLand ownership

Illiterates, semi-literates, literatesEducation

Pucca, semi-pucca, kucchaHouse type:

Self-employed farmers, daily wage labourers, salaried, tradersOccupation

Hindu, Muslim, Christian, SikhReligion

Upper caste, lower casteCaste22

Occasions

Family occasions

Religious occasions

Haat days

23

Positioning

24

Identifying the positioning concept

Product differentiation

Service differentiation

People differentiation

Image differentiation

Selecting the positioning concept

Attractive

Distinctive

Pre-emptive

Affordable

Communicable

Developing the concept

Concept development

Select appropriate media

Communicating the concept

How many ideas /differences to promote?

Which positioning to promote?

Special Tools used in Rural Marketing Research

25

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

Moderators role is limited, hence the flow of information flow is natural

Moderators 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

26

Some Dos and Donts in Rural Research

Wear simple clothes and greet in the local language

Be familiar with the local dialect

Explain the purpose and benefits of the research at the outset

Let the respondent lead the interview

Minimal physical contact with no contact with the opposite gender

Be ready for crowds and slowly guide respondent to secluded place

Always carry food, water and first aid kit to avoid health problems

27

LO 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)

28

Rural Marketing Mix

The 4 Ps of marketing price, product, place and

promotion replaced by 4 As in rural markets

Affordability Availability

Awareness Acceptability

29

Rural Marketing Mix

Rural consumers look for productive assets

Specific needs should be looked into while designing products for rural consumers

Acceptability

Rural consumers are driven by value proposition and not by costAffordability

Single largest challenge for marketers in rural markets

Paucity of data for villages and small towns is a hindranceAvailability

Media reach is increasing

Need for specific messages aimed at the rural psyche

Use of alternative rural means of communicationAwareness

30

Acceptability

31

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

TATA Ace, LG Sampoorna, Washing Machine, Philips

Free Wave Radio.

Fast Moving Consumer Goods

YEAR METROMiddle India

RURBAN RURAL TOTAL

2010 410 290 245 480 1425

2011 485 345 295 575 1700

2012 560 400 350 690 2000

2013 605 430 380 775 2190

Source: Nielsen Unit : Rs. Billion Urban: 2 lakhs plus towns

Major players in rural are HUL, Dabur, Marico, Colgate

Palmolive, Nirma, CavinKare and Godrej.

32

Overall growth slows down from 17.6% to 9.5% with rural growth slowing down to 12.5%

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

33Source Q 1 IRS 2010

Consumer Durables Penetration

34

82.0%89.0%

80.0%76.7%

42.0%

56.0%

35.2%

46.0%

25.4%18.6%

9.8%

54.3%48.0%

38.0%33.4%

46.2%

19.0%14.4%

8.0%

17.3%

5.1% 2.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Urban Rural

Major players in rural are Usha, Bajaj, Philips, Titan, Godrej, Videocon, LG, Samsung, Hero ,

Mahindra & Mahindra, Maruti and Tata

Brand Loyalty versus Stickiness

35

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.

36

In rural India AFFORDABILITY and

AVAILABILITY are the most important determinants of

consumption

Affordability

37

Exchange value for a product or service.

Affordability a major issue in rural.

The role of sachets and price points in rural.

Growing purchasing power raising aspiration levels

Premium brands making inroads into rural markets.

Pricing in Rural India

38

How do companies price?o Rural consumers look at value for money

o Target pricing approach

o Launch of Gillette Guard at Rs 15 for rural

Consumer psychology and pricingo Good quality at cheap price

o Fancy features not appreciated

o Compare prices to a reference price.

Rural Specific Pricing Strategies

39

Low cost packaging which is durable and aesthetic.

Refillable/reusable packs

Highlight value not price

Coinage pricing for convenience of consumers and

retailers.

Product-sharing services HPCL Rasoi Ghar

Availability: The Challenges and the Dilemma

40

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

41

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

42

LEVEL Channel Partners Market Place

1 Company Depots/CFAs, Super stockists National/State

2CFAs/Redistribution stockists Retailers/Modern/Traditional

Cluster of districtsDistrict Headquarters

3Redistribution stockists

Semi-wholesalers/RetailersSub-district (Tehsil/Block)

Feeder town

4Semi-wholesalers/Retailers

Mobile traders in haats/vansFeeder town

Periodic market

5Retailers/Vans/Barefoot agents (Shakti

dealers)/Cooperative societies/ Government agencies (Fair price shops)

Large and small villages

Rural Centric Distribution Models

43

Haats/Shandies

Melas

Modern Distribution Models

Vans

The Public Distribution System

Cooperative Societies

Petrol Pumps and Extension Counters

Non-government Organisations

Rural Mobile Traders

44

In rural India AWARENESS is the most difficult determinant of consumption

Challenges in Rural Communication

Heterogeneity and Spreado Widely dispersed villages

Low literacy and varying comprehension abilities

Different media reach and habits o Television reach in single digits in

Madhya Pradesho Radio reach in single digits in

Andhra Pradesh

45

Scheduled Languages

17

Languages with widespread use

47 in primary education98 in print media

71 in radio; 13 in films

Local Vernaculars114 recognised varieties

National Languages English and Hindi

Designing the Communication Strategy

46

Mass media primarily broadcast, print, wall paintings and point of purchase.Advertising

Coupons, contests, discounts, demonstrations and sampling

Mostly done through sampling and demonstrations at haats and retail outlets

Sales Promotion

Most popular in village is mailers and SMSDirect Marketing

Image building through activities reported in the press or broadcast mediumPublic Relations

Normally conducted by insurance companiesPersonal Selling

Rural Media

47

Conventional Media

Mass Media

Outdoor Media

Personalised Media

Rural Centric

Video Van/Rath

Haats

Melas

Mandis

Folk Media

LO 5

Folk Media

48

Folk Theatre

Folk songs

Folk dances

Magic shows

Puppet shows

Interactive games

Successful Mantra for Entering Rural Markets

Think like a businessman with feelings of a social worker

rural marketing

Documents