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Research Paper on Marketing Channel Strategies in Rural Market in India

By

Huyen Pham
061- PGDM Marketing 2012-2014
Under the guidance of

Prof. Neha Yadav Faculty of KJ SIMSR

K J Somaiya Institute of Management Studies & Research


23rd, July, 2013

1. The issue under study


Rural market scenario Indian Rural market is the potential emerging market. It carries traits of an emerging country such as largely rural population. Census 2011 reported 83.3 crore people are living in rural out of 121 crore people in India. There are 6,40,867 villages in Indian rural area1. The size of this population speaks of its potential. In Indian economy scenario, where urban is the main market segment and contributes 80% profits for them. However, there are lots of players; high competitive; urban markets are getting saturated. The rural economy contributes nearly half of the country GDP. They are the single largest segment contributed for portion of sales of fast moving consumer goods such as HUL, Dabur, etc, and durable companies such as Maruti and Mahindra& Mahindra. This current scenario brought the companies go to huge untapped market in rural to looking for new opportunities and avenues. While there are huge profit potential, the question remains as to how companies can successful tap into it. Indias rural population presents a huge, untapped market. On the contrary, there exist challenges for the company enters to this market. Consumer behavior in rural market is different and varies from different states. This is impacted by culture, religion, living pattern. These factors make impact to the need and demand of rural consumers. Rural marketing in India is still in a infancy stages, faces the various types of problem in respect of marketing, product designing, positioning, pricing, distribution and promotion. For those reasons, marketers require to prepare a good marketing strategy solve all problems in rural market. Rural India is divided into two category consumers: one is very rich with huge land for farming and has lots of efforts to the society, second is very poor is ranked into illiteracy group. Source for income of rural people mainly comes from agricultural surplus and rural-urban trade. Recently years, the rural India living standard has changed vastly over period of time due to urbanization, new generation of employment, NGOs projects or investment programs of Indian government or sponsors from foreign government. How did Indian rural consumers grow recently years? Let looks at the change in rural market from varies products, according to Census 20112.

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Census of India 2011, http://censusindia.gov.in/2011-provresults/paper2/data_files/india/Rural_Urban_2011.pdf The economic times, Census 2011: A marketer's road map to rural India(2012), http://economictimes.indiatimes.com/news/news-by-industry/cons-products/durables/census-2011-a-marketersroad-map-to-rural-india/articleshow/12285479.cms

2001 2011 India Urban India Urban Rural Rural 24.7 21 35.2 Two Wheelers 11.7 6.7 14.3 5.6 4.7 9.7 Four wheelers 2.5 1.3 2.3 <2 <2 53.2 64.3 Mobiles Nil 47.9 31.8 64.3 47.2 76.7 Television 18.9 33.4 (Fig.1: Census of India 2011: Category ownership All figures as % of total household) The above figures showed immense growth in rural market over the year. But the space room for companies is still big and requires lots of job to be done in affordable marketing. Understanding the potential of rural market3 as the following: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) (xvii) Large population Growth in market It penetration in rural market Impact of globalization Increasing income and purchasing power Accessibility of markets Consumer behavior changes Competition in urban market New employment opportunities Green revolution Various Government policy Better credit facilities through banks Green card/Credit card for farmers Improved exports due to export policy Remittances from Indian working aboard Political and social changes through favorable government policies Media

Product

The paper examines the marketing channel strategies in rural market. How do companies make strategies to enter into rural market? or in another way How do companies make their product affordability, awareness, accessibility, acceptance in terms of marketing channel perspective? In the book MARKETING, 6/e of (BERKOWITZ KERIN, 2000), gives the following definition for a marketing channel A Marketing Channel consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumer or individual users4.
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Anil Kalotra, Rural Marketing Potential in India An Analytical Study, International Journal of advanced research in computer science and software engineering, Jan 2013: (3-5)

The papers will start with analyzing challenges and opportunities when the company is building their marketing channel in rural market. Then I will present traditional distribution network model how it affects to rural income. An innovation model is important to deliver benefit to farmers, through E-Choupal of ITC will present the company use internet for procurement of agricultural and aqua culture products. And then the paper will conduct secondary research paper on influence of the external environment and rural retailer buyer behavior on the length of channels in rural area in India.5 After studying about challenges, opportunities, and marketing channel length in terms of rural retailer buyer behavior, the main purpose is to give a good model for rural marketing channel that assure about win-win situation for both the company and farmers. To entering rural market, company need a framework that can be used when they are in process of building their own marketing channels in rural marketing, it should be suit with Indian context. The framework is given by Benjamin Neuwirth, Kellogg School of Management, studied on marketing channel strategies in rural emerging markets. Finally, I study about two examples from companies such as HUL, Dabur. How do these companies go rural successfully?

2. The need of study


Indian rural market is caught attention by the companies nowadays as urban market is getting saturated. The companies are willing to enter this market because there are lots of opportunities for them. Besides that, Indian rural market is very touch market due to lots of challenges such as poor in infrastructure, different in consumer behaviors, distribution network logistics, affordability, lack of trustable brands, lack of education, high level of social pressure. However, rural market structure is different from that of urban market. The population is widely dispersed, transportation infrastructure is poor or non-existent, household incomes are low and sporadic, and traditional methods of creating brand trust and awareness will not work6. A good distribution will be good practices for penetrating the Indian rural market. The traditional method in distribution network in rural area is the multi-layered distribution model where goods have to hand over many distributors to reach end customers. It creates barriers between farmers and companies and against. The marketers must understand the nature of rural market to build their marketing channel. Hence, it proposed to study about marketing channel strategies in Indian rural market.

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BERKOWITZ KERIN HARTLEY RUDELIUS, Marketing 6 edition, 2000 Rajesh K. Aithal, Marketing channel length in rural India, 2011. (Aithal, 2011) 6 Benjamin Neuwirth, Marketing Channel Strategies in Rural Emerging Markets, Kellogg School of Management: 5

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Bibliography
2011, C. I. (2011). http://censusindia.gov.in/2011provresults/paper2/data_files/india/Rural_Urban_2011.pdf. Aithal, R. K. (2011). Marketing channel length in rural India. BERKOWITZ KERIN, H. R. (2000). Marketing. Kalotra, A. (2013). Rural Marketing Potential in India. International Journal of Advanced Research in Computer Science and Software Engineering. Neuwirth, B. Marketing Channel Strategies in Rural Emerging Markets. Kellogg School of Management. Times, T. E. (2012). http://economictimes.indiatimes.com/news/news-by-industry/consproducts/durables/census-2011-a-marketers-road-map-to-rural-india/articleshow/12285479.cms.