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GLAMOUR IS HERE
Companies go for rural but few MBAs fit for job: Pradeep Kashyap, MART CEO
What is your take about the current scenario of Rural Marketing in India? How should corporate and young MBAs contribute to it?
Rural now accounts for over of the countrys market for FMCGs, durables, services and agri-inputs. It is therefore not only the largest segment but also growing at a higher rate than the urban market. But there is not enough understanding of rural consumer behaviour, environment and needs. There are also huge gaps in availability and authenticity of data on rural markets. Corporate need to focus their efforts on developing rural markets and setting up robust distribution and promotion systems to cater to the growing demand. Students need to look at rural markets as a challenging and exciting opportunity for applying their minds and knowledge to innovating solutions for rural consumers. Rural is where the action is, where new knowledge and innovations are getting created, so students should not look at rural as an unglamorous market.
50 per cent
There are various career opportunities in rural marketing today. Most of the companies are looking at the rural opportunity seriously and there are not many young MBAs who have knowledge of rural markets. In fact, in placement interviews companies are giving preference to students who had rural marketing as an elective course. FMCG sector offers the best career opportunity in rural markets, but manufacturers in consumer durables are also looking at tapping the growing rural demand. It is, however, the services sector that will open the largest opportunity to young MBAs in the coming years. Private education, vocational skills, private healthcare, telecom and life insurance are emerging sectors in rural markets and are expected to grow at very high rates in the coming years.
Rural is
WHERE ACTION IS ITS MOST HAPPENING PLACE FOR WE, THE MARKETER
OOH
Mumbai, 17 July: Out of Home has undertaken the rural OOH (out of home) campaign for the worlds third largest cola brand, Royal Crown Cola (RC Cola). The brand which has been introduced in India is trying to position itself as refreshment with distinctive flavours. A research suggests that there is an untapped potential in the rural areas that will fuel quick growth in the coming years. The per capita soft drinks consumption in rural areas is only 2.8 litres, compared with 7.4 litres nationally. However, RC Cola has renewed its focus on the rural market in India and believes that there is huge opportunity with vast growth potential in these markets. RC Cola is targeting small towns such as Churu, Bharatpur and Sikar. The campaign is designed so as to create distinction between RC Cola and other league players in the market, Mr Khattar added.
The concluding session at Delhi leg of Pitch CMO Summit 2011 on Friday, brought many fresh consumer insight from rural India, as Nirmallya Roychowdhury, Head - Brand & Marketing, Hariyali Kissan Bazaar, spoke on various challenges that a marketer faces while retailing to rural consumers. He began by drawing parallels between the consumer behaviour in rural and urban. Rural consumers are not very different from the urban. They have the same level of aspiration as their urban consumers have. They want the same comfort, they want the similar experience, and they have the same levels of expectations. The only difference is that rural consumers are highly value-conscious. They count every rupee they spend, he said. We tap the rising aspirations of these price sensitive consumers by offering them variety and convenience, he said, adding that the rural retails stores have an edge as consumers get a chance to touch and feel the product which otherwise is not permissible in other kirana stores.
An Overview
The Indian rural market with its vast size and demand base offers great opportunities to marketers. Twothirds 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 around 450 districts, and approximately 630000 villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc
"The next wave of growth in subscriptions will come from semi-urban and rural areas. Today, the penetration of mobile phones in urban areas is already 100 per cent while in rural areas it is only 23 per cent," it said.
Go Rural
Hamara Bajaj Jan 2011 MUMBAI: Bajaj Auto is going at full throttle to challenge market leader Hero in rural and semi-urban markets that account for more than half of two-wheelers sold in the country.
The countrys second largest two-wheeler maker has appointed 135 dealers in small towns and mini metros, where it had only 25 dealers, and will offer special finance scheme for rural customers even if they have no bank account. We are reinventing our marketing and distribution strategy to keep up our growth momentum, said Bajaj Auto motorcycle business president S Sridhar. The key lies in addressing a bigger market, he added.
Experts feel that the rural initiative will make an immediate impact on the companys business. Bajaj Auto will be able to improve its market share to more than 30% with the rural push, said Fortune Financials analyst Mahantesh Sabarad. But the rising input cost will put pressure on margins, he added.
Go rural
While there is a general tendency to equate rural India to Below Poverty line market, here are some of the consumption numbers that will blow your mind
46% of the soft drinks sales happen in the rural areas. Rural India accounts for 49% of motorcycle sales. Rural India accounts for 59% of Cigarettes sales. 53% of FMCG sales happen at Rural India.
Talcum powder is used by more than 25% of rural India.
Go rural
Close to 10% of Maruti Suzukis sales come from the rural market. Hero , on its part, had 50% of its sales coming from rural market in FY09. Rural India has a large consuming class with 41% of Indias middle-class and 58% of the total disposable income accounting for consumption. By 2010 rural India will consume 60% of the goods produced in the country. In 20 years, rural Indian Market will be larger than the total consumer markets in countries such as South Korea or Canada today, & almost 4 times the size of todays urban Indian market. Can you dare to ignore this market?
Opportunity
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. The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban.
Availability
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. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the farflung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. 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 Kerala. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices
3.
4. 5.
6 7 8
Stree Shakti
Started by Hindustan Lever to market their product in rural India Empowerment of women in rural India Reaching to Rural India Giving them quality products One of the best blend of marketing with social responsibility
Definition
Rural marketing is the process of developing , pricing ,promoting, distributing, rural specific goods and services leading to exchange between urban and rural markets which satisfies consumer demands and also achieves organizational objectives
Urban Rural
Rural
Urban
Rural
Rural
Limitations
NSSO ( Census)
Population density < 400 / Sq Km 75 percent of the male working population is engaged in agriculture No Municipal corporation / board
Planning Commission
Contd
LG Electronics NABARD All places other than the 7 metros All locations with a population upto 10, 000 considered rural Commercial establishments located in areas servicing less than 1000 population Only clarifies what are the cities Village & town characteristics not defined Population characteristics unknown
Sahara
Source: The Rural Marketing Book- Text & Practice, Kashyap. P and Raut. S ( 2007)
Rural markets
From Wikipedia, Rural Markets are defined as those segments of overall market of any economy, which are distinct from the other types of markets like stock market, commodity markets or Labor economics. Rural Markets constitute an important segment of overall economy, for example, in the USA, out of about 3000 counties, around 2000 counties are rural, that is, non-urbanized, with population of 55 million. Typically, a rural market will represent a community in a rural area with a population of 2500 to 30000.
Defintion
Rural market As per census Any habitation with a population density of less than 400 people per square km where at least 75 % male are working in agriculture and there is no municipality or board as rural habitat. As per this definition more than 80 crores people out of 120 crores populations falls in rural category
rural products in rural and urban areas Agricultural inputs in rural areas Agricultural marketing Farming methods were primitive and mechanization was low Markets unorganized
Contd
2 Phase Two ( 1960s to 1990s)
Green
Revolution Companies like Mahindra and Mahindra, Sri Ram Fertilizers and IFFCO emerge Rural products were also marketed through agencies like KVIC
Demand
for consumables and durables rise Companies find growth in urban markets stagnating or falling
Agricultural marketing
Agri input
Seeds Fertilizers Farm equipment Farm services Water Power Climate control Consultations Pesticides Land Agri output Food Processed and semi processed food items Fruits / vegetables Live stock ,chickens and eggs
Agricultural marketing
Major inputs and outputs are still controlled by government and government sponsored agencies Due to high level of illiteracy and socio economic backwardness of majority of farmers, this market is extremely volatile. Major problems exploitation by middlemen, dependence of irregular monsoon coupled with traditions, extreme poverty, changes in regulations due to WTO reforms. Land is critical resource. This is highly fragmented for large scale farming on economic scale. Most land depends on rain. Seasonality , perish ability , low level of infrastructure , ware housing and food processing has resulted into chaotic conditions. Manufacturing cycle is more or less fixed due to nature and cannot be varied in short or medium run. Due to contract farming, organic farming , there is bright scope for agri marketing in new era.
Agriculture marketing
Agricultural marketing covers the services involved in moving an agricultural product from the farm to the consumer. Numerous interconnected activities are involved in doing this, such as planning production, growing and harvesting, grading, packing, transport, storage, agro- and food processing, distribution, and sale. Such activities cannot take place without the exchange of information and are often heavily dependent on the availability of suitable finance.
Marketable Surpluses
The concept of marketable surpluses is very important for the development of markets. Marketable surplus is different in different commodities. Marketable surplus is a surplus which is available for sale after meeting i) family needs ii) seed requirement iii) kind wages iv) gifts to relatives and friends etc. In the case of food grains surpluses are generally low. They vary from zero (with small and marginal farmers) to 70-80 percent with large farmers and in surplus areas. In general marketable surpluses in food grains are in the range of 45 to 50%. In cash crops and in those commodities which are raw materials of industry, surpluses are 80-100 %. In fruits and vegetables, which are grown on commercial scale, surpluses are above 90%. Thus, for the commodities which have large surpluses markets have to be well-organized and efficient ones.
Agriculture marketing
Agricultural marketing involves in its simplest form the buying and selling of agricultural produce. This definition of agricultural marketing may be accepted in olden days, when the village economy was more or less self-sufficient, when the marketing of agricultural produce presented no difficulty, as the farmer sold his produce directly to the consumer on a cash or barter basis. But, in modem times, marketing of agricultural produce is different from that of olden days. In modem marketing, agricultural produce has to undergo a series of transfers or exchanges from one hand to another before it finally reaches the consumer. The National Commission on Agriculture, defined agricultural marketing as a process which starts with a decision to produce a saleable farm commodity and it involves all aspects of market structure of system, both functional and institutional, based on technical and economic considerations and includes pre and postharvest operations, assembling, grading, storage, transportation and distribution. The Indian council of Agricultural Research defined involvement of three important functions, namely (a) assembling (concentration) (b) preparation for consumption (processing) and (c) distribution.
Rural marketing is the According to extended process of developing , definition pricing ,promoting, Agricultural marketing distributing, rural can be defined as specific goods and comprising of all services leading to activities involved in exchange between supply of farm inputs urban and rural to the farmers and markets which satisfies movement of consumer demands agricultural products and also achieves from the farms to the organizational consumers objectives Hence supply to farm input is common between rural and agri marketing in broad sense
Urban
Rural
Urban
Rural
Rural
Rural consumer
1) 2) 3) 4) Low literacy level ( 45 % rural 52 % urban) Low income level Location pattern Scattered Reference group : Health workers, Doctors, panchayat members , traders, Cine and TV personalities 5) Occupation: Mainly farming, Government schemes, services 6) Media habits : Local celebrations and traditional festivals, TV/Cinema, Now mobile phones 7) Other variables: Culture , language, traditions, caste , religion, social customs, social inhibitions and rigid behavior, social class
SIGNIFICANCE
Corporate Sector
With 12.2% of the worlds population, rural India represents the single largest potential market. It accounts for 53% of FMCGs and 59% of durables sale in India. The rural market has therefore become vital for the growth of most companies.
Significance
In recent years, rural markets have acquired significance in countries like China and India, as the overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities. On account of the green revolution in India, the rural areas are consuming a large quantity of industrial and urban manufactured products. In this context, a special marketing strategy, namely, rural marketing has taken shape. Sometimes, rural marketing is confused with agricultural marketing the later denotes marketing of produce of the rural areas to the urban consumers or industrial consumers, whereas rural marketing involves delivering manufactured or processed inputs or services to rural producers or consumers. The scenario of India and China, there is a picture that comes out a huge market for the developed products as well as the labor support. This has led to the change in the mindset of the marketers to move to these parts of the world.
Significance
Also rural market is getting an importance because of the saturation of the urban market. As due to the competition in the urban market, the market is more or so saturated as most of the capacity of the purchasers have been targeted by the marketers. So the marketers are looking for extending their product categories to an unexplored market i.e. the rural market. This has also led to the CSR activities being done by the corporate to help the poor people attain some wealth to spend on their product categories. Here we can think of HLL (now, HUL) initiatives in the rural India. One of such project is the Project Shakti, which is not only helping their company attain some revenue but also helping the poor women of the village to attain some money which is surely going to increase their purchasing power. Also this will increase their brand loyalty as well as recognition in that area. Similarly we can think of the ITC E-Chaupal, which is helping the poor farmers get all the information about the weather as well as the market price of the food grains they are producing. In other view these activities are also helping the companies increase their brand value. So as it is given above the significance of the rural market has increased due to the saturation of the urban market as well as in such conditions the company which will lead the way will be benefited as shown by the success of HUL and ITC initiatives.
GDP at PPP
GDP
$4.046 trillion (2010 est.) country comparison to the world: 5 $3.736 trillion (2009 est.) $3.478 trillion (2008 est.) note: data are in 2010 US dollars GDP (official exchange rate): $1.43 trillion (2009 est.) GDP - real growth rate: 8.3% (2010 est.) country comparison to the world: 7 7.4% (2009 est.) 7.4% (2008 est.)
GDP - per capita (PPP): $3,400 (2010 est.) country comparison to the world: 164 $3,200 (2009 est.) $3,000 (2008 est.) note: data are in 2010 US dollars
GDP - composition by sector: agriculture: 16.1% industry: 28.6% services: 55.3% (2009)
Urban population
Number of villages S.No State / UT Number of villages 1 India* 638,596 593,731 44,865 Number of inhabited villages Number of un-inhabited villages
Table 1.2: Rural and Urban Population : State-wise- 1991 & 2001
S.No. State/UT (Number in Millions) 1991 2001 Decennial Growth Rate of Population (per cent) 1991-2001 Total Rural Urba n
Rural
Urban
Total
% of Rural to Total
Rural
Urban
Total
% of Rural to Total
All-India
628.70
217.60
846.30
74.33
742
285
1027
72.25
21.54
17.90
31.20
Source: G O I, Census of India 2001, Provisional Population Totals, Paper-1 of 2001, Registrar General, India.
Table 1.8 (a) : Distribution of Rural Population by Size of Village in India : 1961 to 2001 (%) Source: CSO, Selected Socio-Economic Statistics India, 2006.
S.No. 1. 2. 3. 4. 5. 6. 7. 8. Size of Village in terms of Population Less than 200 200 499 500 999 1000 1999 2000 4999 5000 9999 10000 & Above Rural population as percentage of total population 1961 3.83 12.55 18.33 19.80 17.22 5.05 2.80 82.03 1971 2.68 9.91 16.45 19.90 18.68 5.94 4.07 80.09 1981 1.78 7.49 14.21 19.25 20.09 6.90 4.56 76.66 1991 1.69 7.78 16.76 25.74 29.80 11.21 7.03 74.27 2001 1.24 5.92 14.18 24.69 32.22 13.22 8.54 72.18
LIMITATIONS
Availability
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. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the farflung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. 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 Kerala. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices
Constraints
High distribution cost High initial market development expenditure Low inventory holding capacity of village traders Infrastructure bottlenecks
Opportunity
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. The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban.
Rural marketing strategy Rural marketing strategy Designing STP and 4 Ps for rural marketing Hero Honda Axe Mobile Mobile service Luxury cars TV serials and reality show Colgate Pepsi Mineral water Jeans for women
4 P AND 4 A
4 P and 4 A
Introduction For transforming a marketing strategy into a marketing programs, the marketer needs to decide on the marketing mix that is required to pursue the marketing objectives in the rural market. The Marketing mix is a crucial element of any marketing plan as it offers marketers a mix of products, services and prices, utilizes a promotion mix of advertising, sales promotion, direct marketing and personal selling to reach the target customers through distribution channels. The 4 Ps (product, price, place and promotion) of the marketing mix remain the same, both in urban and rural markets. However, marketers need to meet the challenges of availability, affordability, acceptability and awareness (the so-called 4 As) of products and services that are peculiar to rural markets.
4 Ps (Tools)
4 As (Challenges)
Product
Price Place Promotion
Acceptability
Affordability Availability Awareness
Availability
The first challenge is to ensure the availability of the product or the service. India's 638,000 villages are spread over 3.3 million sq. km.; 742 million Indians may live in rural areas but finding them is not easy. However, given the poor state of roads, it is an even greater challenge to send products to far-flung villages on a regular basis. Any serious FMCG marketer must strive to reach at least 20,000 villages with a population of more than 5,000 in the first stage and try to enhance coverage to another 87,000 villages in the 2,000-5,000 population. Marketers must trade off the distribution cost with incremental market penetration. Over the years, India's largest FMCG company, Hindustan Lever Limited (HLL), a subsidiary of Unilever, has built a strong distribution system that helps its brands reach the interiors of the rural market. To service remote villages, stockiest use auto-rickshaws, bullock carts and even boats in the backwaters of Kerala.
Availability
Thanda matlab - Coca cola Coca-Cola, which considers rural India as a future growth driver, has evolved a hub-and-spoke distribution model to reach villages. To ensure full loads, the company depot supplies, twice a week, large distributors who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than the seven metro cities as rural and semi-urban markets. To tap these unexplored country markets LG has set up 45 area offices and 59 rural/remote area offices.
Affordability
The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to rural consumers, most of whom are daily wage earners. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50gm. packs, priced at Rs. 4-5, meant specifically for Madhya Pradesh, Bihar and Uttar Pradeshthe so-called BIMARU states. Hindustan Lever, among the first MNCs to realize 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 market. 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 a multi-serve sachet of 200 gm. priced at Rs. 15.
Videocon's 'washer', a washing machine without a dryer launched specifically for the rural market, has become a phenomenal success, priced at Rs. 3,000, it has registered 100 per cent growth in the last three years. The success of this model points to the willingness of villagers to upgrade to branded, over locally made products, provided the price is affordable.
Acceptability
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 that has reaped rich dividends by doing so is LG Electronics. In 1998, it developed a customized television for the rural market and christened it Sampoorna. It was a runway hit, selling 100,000 sets in the very first year. Because of the lack of electricity and the absence of refrigerators in rural areas, Coca-Cola provides low-cost ice boxes, that is a tin box for new outlets and a thermocole box for seasonal outlets. Insurance companies that have tailor-made products for the rural market have performed well. HDFC Standard Life topped private insurers by selling rural policies worth Rs. 3.5 crore in terms of total premium collection in 2003. The company tied up with non-governmental organizations and offered reasonably priced policies in the nature of group insurance covers.
Awareness
With large parts of rural India inaccessible to conventional advertising mediaonly 41 per cent of rural households have access to televisionbuilding awareness is another challenge. Fortunately, the rural consumer has the same likes as the urban consumermovies and music and for both the urban and the rural consumer, the family is the key unit of identity. However, the rural consumer's preferences and activities differ from those of his urban counterpart. Outings for the former are confined to visiting local fairs and festivals and television viewing is confined to the state-owned channel Doordarshan. The consumption of branded products is treated as a special treat or indulgence. Hindustan Lever relies heavily on its own company-organized media. These are promotional events organized by stockiest. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their own language.
Awareness
Coca-Cola uses a combination of television, cinema and radio to reach 53.6 per cent of rural households. It doubled its spend on advertising on Doordarshan, which alone reaches 41 per cent of rural households. It has also used banners and posters and has tapped all the local forms of entertainment. Since price is a key issue in rural areas, Coca-Cola advertising stresses its 'magical' price point of Rs. 5 per bottle in all media. LG Electronics uses vans and road shows tc reach rural customers. The company uses local-language advertising. Philips India uses wall writing and radio advertising to drive its growth in rural areas.
Awareness
Thus, it requires a well-crafted plan to meet these challenges in rural markets. Leveraging opportunities and overcoming impediments is going to require a well-outlined strategy that can ride alongside the incremental improvements that are bound to take shape, as the rural imperative reaches critical mass. Companies like Hindustan Lever, Marico, ColgatePalmolive, etc. that have been able \ address these challenges successfully, are reaping benefits in rural markets. The table shows the companies in different product categories that are addressing rural challenges of the 4 As, through marketing strategies built around the 4 Ps.
MYTHS VS REALITY
Rural myths
Rapid urbanization Urban population is increasing just by .75 % in 2010 compare 2.2 % in 1980 Over a period the trend is likely to reverse.
Rural myth
Rural India is agrarian economy 2010 farm sector 40 % non farm sector 60 % 2020 farm sector 30 % non farm sector 70 %
Quotable quotes
The future lies with those companies who see the poor as their customers. C K Prahalad To get rich, sell to the poor. Pradeep Kashyap
The reality Heterogeneous population 16 languages State wise variations in rural demographics Literacy (Kerala 90%, Bihar 44%) Population below poverty line (Orissa 48%, Punjab 6%) Big Land Lords Traders & Small Farmers Marginal Farmers Labourers & Artisans
2010
80 million
2020
90 million
150 million
500 million
250 million
SUMMARY
Constraints
High distribution cost High initial market development expenditure Low inventory holding capacity of village traders Infrastructure bottlenecks