rural+market+ +an+introduction

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RURAL MARKETINGIssues, Opportunities & Challenges


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Defining Rural IndiaOrganisation Definition Limitations

NSSO(Census)Defn ofurban-

Municipal corporation / boardOr

Min. Population of 5000

Population density > 400 / SqKm 75 percent of the male

working population is engagedin non-agriculture

rural notdefined

PlanningCommission

Towns upto 15,000 populationare considered rural

Towncharacteristicsnot defined


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Contd

LG Electronics All places other

than the 7 metros

Only clarifies what

are the cities

NABARD All locations with apopulation upto

10, 000 considered rural

Village & towncharacteristics not

defined

Sahara Commercialestablishments

located in areasservicing less than1000 population

Populationcharacteristics

unknown

Source: The Rural Marketing Book- Text & Practice, Kashyap. P and Raut. S ( 2007)


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Rural Market Has Arrived742 million peopleRural consumption is bigger than urban

FMCGs 53%Durables 59% Source: NCAER

Estimated annual size of the rural marketFMCG Rs 65,000 CroreDurables Rs 5,000 Crore

Agri-inputs (incl. tractors) Rs 45,000 Crore

2 / 4 wheelers Rs 8,000 CroreTotal Rs 1,23,000 CroreSource: Francis Kanoi

Latest McKinsey Report estimates that by 2020, RuralConsumer Market will be worth Rs. 250,000 crores


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Rural Market Has ArrivedSome impressive data to give you an idea about the rural sector.

In the first 6 months of 2005-06, rural India bought 30 lakh Life

Insurance policies

Of two million BSNL mobile connections, 50% in small

towns/villages.

Of the six lakh villages, 5.40 lakh have a Village Public Telephone

(VPT). Additionally there are 2 lakh PCOs 90% of villages

covered.

By end 2007, there are likely to be 11.05 crore rural phone

subscribers

For every Re.1/- per quintal increase in the Procurement Price for

grains, nearly Rs. 200 crores added to rural economy


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Rural Market Has Arrived55.6 million Kisan Credit Cards issued (against 60 million credit-

plus-debit cards in urban) resulting in tremendous liquidity.

Of HHs earning Rs. 20 lakh + per year, 34% in rural India. Also

15% of Indias crorepatis

42 million rural HHs availing banking services in comparison to 27

million urban HHs.

Investment in formal savings instruments: 6.6 million HHs in rural

and and 6.7 million in urban

Over 50% of HLLs Rs. 11700 crore sales turnover is from rural

markets


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Positive features of Rural markets1. Large population :- According to 2011 census, rural population is 72% of

total population and it is scattered over a wide range of geographic area inmore than 6.38 Lakh villages

2. Rising rural prosperity :-Average income level has unproved-modernfarming practices, contract farming, industrialisation, migration to cities

3. Growth in consumption :- There is a growth in purchasing power of rural

consumers. The average per capita house hold expenditure is Rs. 3824. Change in life style :- Life style of rural consumer has changed5. Market growth rate higher than urba n:- The growth rate of fast moving

consumer goods [FMCG] market and durable market is high in rural areas.The rural market share is more than 50% for products like cooking oil, hair

oil etc.6. Life cycle advantage :- The products which have attain the maturity stage

in urban market is still in growth stage in rural market.7. Rural marketing is not expensive

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Challenges of Rural Marketing1. Excessive dependence on agriculture :- Direct as well as indirect, High

Risk- Low return, Monsoon dependence, Seasonality, Poor awarenessof modern inputs, Inadequate and inappropriate financing, opaque andvolatile markets, outdated processes on supply and demand side

2. Highly scattered market:- Costs of distribution is high

3. Marketers have poor understanding4. Obtaining market/consumer knowledge is difficult5. Conventional consumer research methods are inadequate6. Poor physical infrastructure

7. Inadequate financial inclusion8. Low level of literacy9. Immense diversity of culture, language, contexts, geographies10. Traditional way of thinking and behaving

11. Suspicion of outsiders/city slickers 16


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0.8 1.6

26.8

54.7

25.0

20.9

2001 - 02

41.3

63.3

14.7

12.2

2006-7

Very RichConsumingClass

Climbers

AspirantsDestitutes

RURAL TARGET MARKETS - CLASSIFICATION


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Rural Income DispersalProjection

ConsumerClass

AnnualIncome

1995-96 2006-07

Very Rich Above Rs 215,000 0.3 0.9

Consuming

Class

Rs 45,001-

215,00013.5 25.0

Climbers Rs 22,001- 45,000 31.6 49.0

Aspirants Rs 16,001 - 22,000 31.2 14.0

Destitutes Rs 16,000 & Below 23.4 11.1

Total 100.0 100.0

> Project ions Based on 7 .2% GDP GrowthConsu ming c lass hous eholds in rura l near ly equal to urban. Rural Purchas ing Power h igh er due to lower expenses on food, shel ter, educ at ion & health

All figures in %

Source : NCAER Indian Market Demo ra hics Re o


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Distribution of Villages

Source: Census 2001

Population No of villages % of totalvillages

Less than 200 92,541 15.6

200-500 127,054 21.4

501-1000 144,817 24.4

1001-2000 129,662 21.9

2001-5000 80,313 13.5

5001-10000 18,758 3.2

Total no of villages 593,154* 100.0

17% of villagesaccount for 50%of rural

population &60% rural

wealth

Hardly any shopsin these 2.2 lac

villages

*Inhabited villages, total number of villages is 638, 691


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Distribution of Towns in India

Town Class Population No of towns % of totaltowns

Class I 1 lac and above 423* 8.2

Class II 50,000-99,999 498 9.6

Class III 20,000- 49,999 1386 26.9

Class IV 10,000- 19,999 1560 30.2

Class V 5,000- 9,999 1057 20.5

Class VI less than 5000 237 4.6

Total no oftowns

5161 100.0

Source: Census 2001

90 % of

durablespurchased byrural people

are fromthese 1900

towns

*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354


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Factors influencing Rural Consumer Behaviour1. Environment of the consumer :- Electrification, refrigeration, storage

space, piped water supply affects demand for durables.

2. Geographic influence

3. Influence of occupation

4. Place of purchase:- City shop, company showroom, Melas and Haats,

Village shop, Video Vans, Footpath, Traditional Markets, Malls

5. Creative use of product:- Godrej hair dye, Washing Machine, Asian Paints,

Coca Cola large bottle, Sim Cards, Mobile handsets

6. Brand preference and loyalty:- Brand sticky rather than brand loyal

7. Decision making style & decision makers

8. Opinion Leaders

9. DIY culture21


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Issues In Rural

1. Distribution2. Understanding the rural consumer3. Communication4. Poor infrastructure


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Rural Consumer Insights

Rural India buys Products more often (mostly weekly).Buys small packs, low unit price moreimportant than economy.Distribution and pricing are the mantras to

success in rural India.

Even expensive brands like C lose up , Marie biscuits, Clinic shampooare doing well because of deep distribution.


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Rural Consumer InsightsIn rural India, brands rarely fight with each other, they just have

to be present at the right place.

Many brands are building strong rural base without much

advertising support.

Chik shampoo, second largest shampoo brand.

Ghadi detergent, second largest brand.

Fewer brand choices in rural : number of FMCG brands in rural

are half that of urban.

Buy value for money, not cheap products


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MYTH 1: Rural Market Is aHomogeneous Mass

REALITYHeterogeneous population

16 languages, 800+ dialects

State wise variations in rural demographicsLiteracy (Kerala 90%, Bihar 44%)Population below poverty line (Orissa 48%, Punjab6%)

BigLandlords

Traders,Small Farmers

Marginal Farmers

Laborers, Artisans

Source: P lanning Com miss ion , GoI


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MYTH 2: Disposable Income Is Low

REALITYNumber of middle class HHs (annual income Rs45,000- 2,15,000)Rural 27.4 millionUrban 29.5 millionPer Capita Annual Income (not Purchasing Power)Rural Rs 9,481

Urban Rs 19,407Total Rs 12,128 Source: NCAER Rural incomes CAGR now estimated @ 15% vs10% in urban


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MYTH 3: Individuals Decide AboutPurchases

REALITY

Decision making process is collective

Purchase process- influencer, decider, buyer, onewho pays can all be different. So marketers mustaddress brand message at several levels

Rural youth brings brand knowledge to HH


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Media Reach Improving Rapidly

70% of R1,R2, R3 can be reachedthrough mass media.

14

21

41

26

53

70

SatelliteTV

Radio Press Cinema TV All Media


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Climbing Social Indicators

Between 1981 to 2001 Number of pucca houses doubled from 22% to 41%and kuccha houses halved (41% to 23%)

Percentage of Below the Poverty Line familiesdeclined from 46% to 27%

Rural Literacy level improved from 36% to 59%


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Opportunity & Challenges


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Marketing Opportunities

Low penetration rates in rural% of rural HH

Durables Urban Rural Total

CTV 30.4 4.8 12.1Refrigerator 33.5 3.5 12.0Mobile Phones 40.0 12.0 18.0

FMCGs Urban Rural TotalShampoo 66.3 35.2 44.2Toothpaste 82.2 44.9 55.6

Source: NCAER


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Marketing Opportunities

R1 - 4%R2 - 11%R3 - 37%R4 - 48%Low rural consumption in FMCGs (rich HHs)

urban rural Annual consumption Rs 13,000 Rs 9,400

Rural consumption volumes (R1+R2+R3)Toothpaste 88%Toothpowder 79%Shampoo 88%

So this half ofthe populationconsumes over75% of FMCG

volumes


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Challenges in the Future

Reaching the product to remote rurallocations and entering more rural homes

(penetration)

Increasing rural incomes (market growth)


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Making effective use of the largeavailable infrastructure

Post offices 1,38,000Haats (periodic markets) 42,000Melas (exhibitions) 25,000Mandis (agri markets) 7,000Public distribution shops 3,80,000Bank branches 32,000


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Using IT to transform markets ITCs e-choupal and other IT initiatives

(EID Parry, Amul dairy information systemkiosk)

STD revolution/ mobile connectivity


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Proliferation of large format rural retailstores

DSCL Haryali storesM & M Shubh Labh storesTATA/Rallis Kisan Kendras

Escorts rural storesWarnabazaar, Maharashtra (annual sale Rs120 crore)


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An interesting Option - RURBAN

Describes the clusters of migrants from ruralto urban geographiesRural psychography living in an UrbandemographyStrong purchasing power because despitelower incomes, low wasteful expenditures

Become carriers and promoters of brands intorural geographies on their annual trip backhome

rural+market+ +an+introduction

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