Introduction

The world of today is changing fast. India is no exception. Especially after the opening up of the
economy, the pace of change that India and its people are experiencing in their socio-cultural
milieu is mind boggling. India, with its wide diversity, offers a fascinating scope to study the host
of changes which developmental activities have brought about in its social & economical
framework. While it is possible to get some estimates of the macro changes taking place in India,
it is impossible to get any accurate measures of the subjective experiences that proceed,
accompany or follow such changes. However, the fact remains that the profile of the Indian
market is vastly different from what it was earlier. Although these changes are difficult to
measure at the micro level, nevertheless, they have been of great significance to marketers. Any
marketer is keen in closely monitoring the changes in terms of numbers and specially keeping
regular track of the changing pattern of consumers aspirations and competitive actions. In our
country 70% of the total population lives in villages. Revolution and economic reforms in India
have brought out several changes in the whole market environment, especially in rural market.
It is widely acclaimed that India is one of the largest consumer market in the world. Estimation
signs that the Indian consumer market is likely to grow four times by 2025. (McKinsey Report 'The Rise of Indian Consumer Market'). India's overall retail sector is expected to rise to US$
833 billion by 2013 and to US$ 1.3 trillion by 2018, at a Compound Annual Growth Rate
(CAGR) of 10 percent.
Real India lives in villages. About 75 percent of Indian population lives in rural area. In the
country we have 6.45 lacs villages out of which only 13 percent villages have population above
2000. More than 50 percent of the sales of FMCG and Durable companies come from the rural
areas. The McKinsey Report on the Rise on Consumer Market in India predicts that in twenty
years the rural Indian market will be larger than the total consumer markets in countries such as
South Korea or Canada today, and almost four times the size of todays urban Indian market and
estimated the size of the rural market at $577 Billion.

Indian Consumer Survey Report 2013

Consumer optimism still falling. The decline in Indian consumer optimism observed in 2011
intensified on the back of continued adverse macro conditions. Compared to 2011, more people
expect lower salary increases and expect personal finances to worsen, making it a bad time for
large-ticket purchases. Only 5% of consumers we surveyed expect inflation to fall. Confidence in
the government is also waning.
Signs of down-trading in discretionary items. Not surprisingly there was a temporary
reversal in 2012 of the up-trading trend observed in 2011. The preference for purchasing
unbranded products again rose. Fewer people bought smartphones and more now want to buy an
entry-level car. This trend is reflected in the commentary of many companies who operate in
discretionary consumption categories and are indicating a growth slowdown.
Rural doing better than urban. Spending patterns show a significant divergence across rural
and urban India. While the mean household income of urban India declined 3%, it increased 6%
in rural India. Car penetration has stagnated in urban India, but doubled in the past two years in
rural. Monthly ARPU in urban India fell ~15%, but showed a small increase in rural.
Low penetration bodes well for long-term growth. Another silver lining for the long-term
growth potential of India is low penetration across categories. Of the eight countries surveyed,
ownership of cars, smartphones and electronic items is the lowest in India. They are among the
lowest consumers of items, such as beer, spirits, meat and cigarettes. While spending on
education has come off this year, at ~10% of household income it is still pretty high compared to
other countries. This, combined with the greater participation of rural India and lower income
categories, bodes well for Indias consumption story.
SEVERAL MYTH ABOUT THE RURAL SECTOR
The belief that rural people do not buy brands.
The belief that rural customer buy cheap products. In reality they seek value for money.
The belief that the rural market is homogenous mass. In fact it is fascinatingly heterogeneous.
The census of India defines rural as any habitation with a population density of less than 400 per
square kilometers where at least 75% of male working population is engaged in agriculture &
where there exists no municipality or board leaning aside Hindustan Uniliver Limited & ITC,

most companies in the FMCG sector would define rural as any place with the population up to
20,000. Rural consumers are fundamentally different from their urban counterparts & different
rural geographies display considerable heterogeneity calling for rural specific & region specific
strategies e.g. a farmer in rural Punjab is much more progressive than his counterpart in Bihar. A
farmer in Karnataka is far more educated than one in Rajasthan & so on.
An urban individual is free to take independent purchase decision. In a village, because of strong
social structure, including caste consideration and low literacy level, community decision
making is quite common. Companies face many challenges in tackling the rural markets.
Marketing is all about Getting to know your customer. But having largely ignored this cardinal
principle, most corporate in rural markets find that success has eluded them.
The rural market account for market worth of 27$ billion. About 285 millions live in urban India
whereas 792 million resides in rural areas. 72% of Indias population resides in its 600000
villages. Many companies like Colgate-Palmolive, HCL & Godrej etc. have already furrows into
rural households but still capturing the market is a different dream. For quite sometime now, the
life of the rural India has been the subject of animated discussions in the corporate suites, with
the urban markets getting saturated for several categories of consumer goods and with rising
rural income. For example, Tata chemicals ran a chain called Tata Kisan Kendra which offered
services ranging from agriculture input to financing to advisory services. Hindustan Levers is
offering deals to farmers to cover operation from the pre harvest to post harvest stage. Mahindra
& Mahindra limited, Indias largest farm equipment company & its subsidiary Mahindra
Shubhlabh services has operated in eleven states with 7 lacs strong Mahindra tractor customer
base& 400+ dealers provide a complete range of products and services to improve farm
productivity and establish market linkages to the commodity market chain.
BUYING BEHAVIOR:
Once the marketer has insured both economic and physical access to its product it needs to
evaluate the buying behavior of consumers in rural areas.
To understand the buying behavior of rural consumers, we must go to the factors that influence
their buying behavior. The factors include:
1. Socio-economic environment of the consumer
2. Cultural environment
3. Geographic location
4. Education/literacy level
5. Occupation
6. Exposure to urban lifestyles
7. Exposure to media and enlarged media reach.
8. The points of purchase of products.
9. The way the consumer uses the products
10. Involvement of others in the purchase.
11. Marketers effort to reach out the rural markets
Some of these points are discussed in some detail below:
INFLUENCE OF CULTURE:
Culture and tradition influence perception and buying behavior. For example, the preference in
respect of color, size and shape is often the result of cultural factors. Rural consumers perception
of products is strongly influenced by cultural factors.

GEOGRAPHIC LOCATIONS:
Rural consumer behavior is also influenced by the geographic location of the consumers. For
example, nearness to feeder towns and industrial projects influence the buying behavior of
consumers in the respective clusters of villages. We are discussing this aspect in detail in the
section on market segmentation in rural markets. To cite one more example of how geographic
location affects buying behavior, we can point out the fact that the lack of electricity in many
rural households acts as a barrier to the purchase of certain consumer durables.
EXPOSURE TO URBAN LIFESTYLES:
Extent of exposure of rural consumers to urban lifestyles also influences their buying behavior.
An increased exposure and interaction with urban communities has been the trend in recent
years.
THE WAY THE CONSUMER USES THE PRODUCTS:
The situation in which the consumers utilize the product also influences their buying. The
example of lack of electricity affecting buying behavior illustrates this point as well. Lack of
electricity automatically increases the purchase of batteries by rural consumers. Similarly, since
rural consumers cannot use washing powders/detergent powders that much, as they wash their
clothes in streams or ponds, they go in more for washing bars and detergent cakes.
PLACES OF PURCHASE:
Buying behavior of rural consumer also varies depending on the place of purchase. Different
segments of rural buyers buy their requirements from different places/outlets. Some buy from the
village shopkeepers; some from village markets/fairs; others buy from the town that serves as the
feeder to the rural area. It is also seen that the same buyer buys different requirements from
different places. For understanding the buying behavior of the rural consumer correctly, the
marketer must ask the question: Where from do they buy the products and why?
INVOLVEMENT OF OTHERS IN THE PURCHASE:
Involvement of others in the purchase in the purchase decision is yet another relevant factor in
this regard. There has been a change here in recent years. In the past, the head of the family used
to make the purchase decision all by himself. In contrast, the involvement of the other members
of the family in the purchase decision has been growing in recent years. An increase in literacy
coupled with greater access to information has resulted in this development. The marketer has to
reckon the role of the influencers while sizing up the buying behavior of rural consumers.
MARKETERS EFFORTS TO REACH OUT THE RURAL MARKET:
In recent years, many corporate companies have been trying hard to develop a market for their
products in the rural areas, investing substantially in these areas. This has brought about some
change in the way buyers purchase different products. Developmental marketing has created
discriminating buyers and hitherto unknown demand in the rural market.
All the above factors influence the buying behavior of rural consumer and hence their responses
to the marketing mix variables, and the reference points they use for purchase decisions.
BRAND EQUITY:
Brand equity is another aspect of perception. Some of the brands like Colgate, Marlboro are
popular brands in rural areas. It might therefore be advantageous to retain these brand names and
packaging in rural areas, although companies might want to use the local language on the
package itself.
PRICE-QUALITY RELATIONSHIP:
The next aspect of perception is price quality relationship. Mostly rural area consumers rely on
word of mouth communication more than price as a means to judge quality.

COMPARATIVE STUDY OF RURAL AND URBAN CONSUMERS

Location:. Urban consumers prefer location as the major factor for choosing the particular store
as compared to rural consumers because it reduces the commuting distance, so he/she chooses
retail store in his/her nearby locality.
Reference: References from family & friends plays major role in choosing a particular store for
rural consumers than for urban consumers, because of their economic conditions, they dont go
in search of the information related to the retail store so they go by word of mouth.
Brand name: Brand name is widely considered by urban consumer but its not of much
importance to a rural consumer as urban customer is more brand conscious, he goes in search of
a particular brand in choosing a retail store and brand is considered as status symbol amongst
urban consumer.
Discounts: Discounts on commodities attract rural consumers more wherein the urban consumer
is not distracted by the discounts because of their income factor. The per capita income of rural
customer is low compared to urban customers.

Service: Having Services like Free home delivery, pay by card, retailers loyalty card is of prime
importance for Urban consumer where as rural consumer doesnt give much importance to the
factor because he just goes & gets the products due to ignorance/literacy.
Comfortness: Ease of shopping like getting all the products or different brands at one place is the
factor which attracts urban customer rather than rural customer
Product variety: A variety amongst products is paid attention equally by both rural & urban
customers.
Parking Facility: Urban customers perceive a retail store with parking facility as the bonus for
their tension free shopping than their rural counterparts because in a city like Bangalore parking
is the biggest challenge for the customers and the urban customer doesnt want to go in search of
parking place which is very time consuming.
Others opinion: Previous buying experiences of their fellow rural consumers are of prime
importance for rural consumers.
Product Availability: Product Availability plays important role for Urban Customers than the
rural customers. The urban customer makes sure about the availability of product before
travelling to the retail store, so that his efforts doesnt go in vain in reaching the retail store.
Entertainment: Though Entertainment plays vital role between both the consumers, urban
consumer gives more importance as he/she feels it as part of relaxation. Urban customer thinks
entertainment is of prime importance while shopping at a retail store as he wants to relax amidst
his busy schedule whereas rural customer rarely pays any attention to entertainment factor as his
focus is just for shopping.
FAMILY SIZE Rural consumer behavior is also influenced by family size and structure. As the
family size increases so does the consumption of products. In such a case, the demand for family
pack or the economy refill pack increases. Likewise large families have more bread earners
which mean higher family income and thus more consumption of products. This often leads to
multi brand consumption of a product category among different family members.
PRICE It is the amount of money a consumer must pay to obtain the right to use a product
(Hawkins, Best and Coney 2001).The right price influences the quantities of various products or
services that the rural consumers will buy. Marketers often erroneously perceive price as their
only bludgeon when targeting rural consumers. In reality rural consumers are driven by value for
money and not price alone. High priced products with difficult to handle features is generally not
liked by rural consumers. Gillette Guard was launched to provide high quality shave at an
affordable price for men in the rural areas. Rural consumers generally compare a products price
to a reference price considered reasonable for a certain type of product. The reference price is
based on either the memory of past prices or on the price of other products on the same shelf or
the same product line. Based on the reference price the consumer judges whether prices are too
high, too low or on target. Rural consumers are deeply involved in the purchase of agricultural
products and wedding items. Here price plays an important role, but not at the cost of quality.
AGE The purchase of products and their forms are influenced by age. Like urban areas this is
highly visible in case of rural areas. For instance in the age group of twenty to forty the
consumption of motorcycle, mobile, readymade clothes is more as compared to a person above
sixty. For example, in rural area, young adults exhibit a marked preference for mobile handsets
with the latest features and technology whereas elders are content with second hand mobiles with
simple and basic features.
ADVERTISING Low literacy level, poor media reach and exposure and the huge and diverse
rural audience characterized by variations in language, culture and lifestyle poses multiple

challenges for communicating with the rural audience. For rural consumers the message has to
be simple and logical. The use of education with entertainment and slice of life appeals gets more
acceptances. The FM radio station has truly matured radio as a medium of rural communication.
Television is the fastest growing and most popular mass medium in rural areas. Conventional
outdoor media includes wall paintings which is a widespread form of advertising in rural Bihar.
Wall paintings are important as they remind rural people constantly of the brand name and logos,
in addition to highlighting the key brand promise.
Rural Market Opportunities
The Indian growth story is now spreading itself to Indias hinterland, not just witnessing an
increase in its income but also in consumption and production. The economy is vibrant, income
is rising, and the habits, tastes, preferences, and attitudes are changing rapidly. Nowhere these
changes are evident in the rural areas. The rural market has grip of strong countrys shops, which
affect the sale of various products and services in the rural market. The companies are trying to
trigger growth in rural areas. The low rate finance availability has also increased the affordability
of purchasing the costly products by the rural people. Although with the substantial upgradation
in purchasing power, increased brand consciousness pattern and rapid spread of communication
network , rural India offers a plethora of opportunities, all waiting to be harnessed, the marketers
lack of in-depth knowledge of the villages psyche, strong distribution channels and awareness
that are indeed the fundamentals for making a dent into the rural markets. Indias rural market
offers a huge potential for the marketers and seems to be the replacement of urban market. The
rural market is extremely attractive with its vast demand base and offers the following
opportunities The rural market is now acknowledge viable market that has captured the attention
of marketers, it already accounts for 56% of Indias total income, 64% of expenditure and 33%
of savings. Infrastructure is also developing fast, leading to the better connectivity by road (67%
villages are connected by all-weather roads), by phone (30% tele-density in rural areas), and
access to mass media through television. Increased electrification of households (60%) has
opened up the rural market for durables. All these factors have increased the purchasing power
and the demand base for and access to new goods and brands, as seen over the past decade.
The future of the rural India looks brighter. Future predictions of income are very positive,
suggesting that the present income will change as the proportion of the poor earning less than
USD 1 per day drastically shrinks over the next decade to almost half. The majority of the rural
population will be earning between USD1to 5 per day, and the proportion with the incomes of
over USD 5 per day will increase three-fold. Rural India is fastly moving from poverty to
prosperity. The rural population earning more than USD 5 per day per capita income holds great
promise for the marketers. Rural income constitutes around 56%shares of the total income in
India.
The per capita in rural India has increased from INR 4860 in 1994-95 to INR 15,173 in 2010.
The middle class grew six fold in this decade and expected to grow from 32 million in 2005 to
208 million in 2025. Income growth per households is expected to accelerate from the current
2.8 percent to 3.6 percent by 2025. Good monsoons and two-fold increase in the support price of
food grains in the last decade have contributed to improving agriculture prosperity as well as to a
INR 720 billion loan waiver, which benefitted 40 to 45 millions farmers. A major shift to cash
crops will increase the income from agriculture. The continuing increase in prosperity leads to
increase in the demand of consumer and non-consumer goods in rural areas. An increasing

labour force participation in non-farming activities has led to more income earning opportunities,
and this trend is likely to grow in future, which further promote the marketers to enter into the
rural market.
An increasing number of people have given up farming (declined from 63% to 50% during 20002010) on account of land fragmentation, declining profitability, and increasing nuclearization of
families. India is no longer an agrarian economy. There is an increasing incidence of
supplementary occupation-an occupation pursued either in addition of primary occupation, or on
seasonal basis to augment income. Thirty percent of rural households have a supplementary
occupation. Out of these, 56% have been stated as self-employment in agriculture as their
supplementary occupation.
Over the next decade, it is expected that the rural infrastructure will improve drastically, with
approximately 100% road connectivity, electrified villages, literacy, television households, 80%
pucca households and 50% mobile penetration. The government has spent INR 480 billion in the
year 2010-2011 Bharat Nirman Programmes, leading to rapid infrastructure development, and 53
percent increase from 2009-2010. The government has the target to create 10 million hectares of
additional potential, to provide allweather connectivity to all habitants with over a 1,000
population , to provide electricity to 1,25,000 villages and to construct six million houses in rural
areas, and to connect telephonically all habitants. The infrastructure development attracts the
marketers in rural areas. The rural enterprises, especially non-farming has doubled 25 million
between 1990-2025, absorbing an 20 million workforce largely in services like trading and
transportation, and social services, which have emerged as rapidly grow in sectors in rural areas.
Out of the total of 41.8 million enterprises in the country, 25.5 million (61%) are located in the
rural areas. These are the driving force of demand base for the rural people.
Rural markets are also very viable targets for marketers as a young population; rising income and
low penetration of many consumer durables imply that they are a strong source of demand.
Moreover, the consumption pattern in rural areas is witnessing a shift from necessities to
discretionary products. The survey has revealed that about one in every two rural households
now has a mobile phone and around 42 per cent of rural households owned a television in 200910, up from 26 per cent in 2004-05. Internet and mobile revolution has given rural India a
complete makeover. Rural areas offer a great potential for growth in internet usage with the
number of claimed internet users in these spaces to be reached at 45 million by December 2012,
according to the recent IMRB survey, conducted jointly with the Internet and Mobile Association
of India (IMAI)... Economy models and lower prices of mobile phones have facilitated the
penetration of mobile devices in rural India. The penetration of the computer literates among the
rural population is 8.4 per cent while the penetration of claimed internet users has grown from
2.68 per cent in 2010 to 4.6 per cent in 2012. The penetration of active internet users has
enhanced from 2.13 per cent in 2010 to 3.7 per cent in 2012.
Rural market offers significant growth potential. Growing adaptability to innovative products is
increasing in the minds of rural customers. The following points important to notice in this
respect:
The major Indian consumer base present in rural areas, the FMCG sales have grown at 6-7
percent over the last couple of years, and rural markets contribute about 40-50 percent of
revenue, which is very impressive. The demand for the personal care products grew faster in
rural areas than urban areas. Most of the FMCG corporations have increased their hiring in rural
India in order to establish a rural contact and increase visibility. The rural market will be a key

growth driver for FMCG majors planning to expand their domestic business. It is estimated that
more than two-thirds of the next generation youth will come from rural India.
The rural retail market is currently estimated at US $ 112 billion, or around 40% of the US$
280 billion Indian retail market. There has been a greater shift from purchasing nearby towns
towards purchasing locally. This phenomenon has important implications for the rural marketers.
The marketers can reach the rural customers by effectively utilizing the rural retail system.
The rural market volume is an indication of the market attractiveness and this is influenced by
the market size and also the market profile. The large base of population and increasing income
make the rural market an attractive proposition for marketers. The market volume is captured by
the consumption expenditure.
Challenges of Rural Market in India
The rural market offers a vast untapped potential, it should be recognised that it is not easy to
operate in the market, because of several attendant challenges. Rural market remains untapped
because of mainly three challenges:-distance, diversity, and dispersion. As much as Rural India
presents a great opportunity, there are still many challenges that have to be overcome. Dispersed
population and trade, large number of intermediaries in the value chains leading to the higher
costs, scarce bank and credit facilities for rural customers and retailers, highly credit driven
market and low investment capacity of retailers are the other roadblocks. Thus, there are several
roadblocks that make it difficult to progress in the rural market. Marketers encounter a number of
problems like dealing with physical distribution, logistics, proper and effective deployment of
sales force and effective marketing communication when they enter into the rural segments.
1) The large population base and number of households indicates a widely spread out market and
it is a challenge for the marketer to service this dispersed market. The number of the villages is
more than five lakhs and is not uniform in size. Nearly half of the population lives in middle
sized villages which have a population ranging from 1000 to 5000 persons. These types of
distribution of population warrants appropriate distribution and promotion strategies to decide
the extent of coverage of rural market.
2) The rural per capita income is low as compared to urban area. Low per capita income leads to
low purchasing power. This apart, the distribution of income is highly skewed, since the
landholding pattern, which is basic asset, is itself skewed. Thus, rural market presents a highly
heterogeneous scene. Therefore few challenges arise in this respect, like; off-taking of any
product by rural consumer, maintaining of inventory levels, distribution system options, and
frequency of distribution. This aspect should be carefully considered by the marketers.
3) There are lacks of proper physical communication facilities in rural areas. Nearly half of the
villages in the country do not have all-weather roads. Therefore reaching these villages is very
physically taxing. Hence, distribution efforts put up by the marketers prove to be expensive and
ineffective.
4) The rural market, by and large, are characterized by underdeveloped people and consequently
underdeveloped market. A vast majority of rural people is not financially stable and is traditionbound, fatalistic, mired in age-old customs, traditions, habits, taboos, and practices.
Unfortunately, the impact of agricultural technology has not been felt uniformly throughout the
country. The large segments of rural population have remained untouched by technological
breakthroughs.
5) There are vast variations in the levels of literacy amongst rural people. Around two-fifth of the
rural population is illiterate and only one-fifth holds a matriculate or higher degree. Also, literacy

levels vary hugely among different states. These variations pose a challenge to easy and clear
comprehension of the message by all sets of rural audience. The limited reach of mass media in
rural areas and its regional and state variations pose limitations on a universal approach to
communication for rural consumers. Also different perceptions, traditions, and values across
states and in some case within a state; are other obstacles in communication development.
6) The distribution of products continues to pose an immense challenge to marketers because
reaching of 7.8 million retail outlets spread across 6,40,000 villages and feeding a retail network
of villages shops is a distribution nightmare. The challenges for the suppliers is the small size of
each villages with low throughout per outlet, coupled with the high cost of distribution since
these villages are some distance away from distributors. These factors make high quality
distribution unviable. The distribution of any product in the rural areas; agricultural inputs,
consumables or durables, should necessarily follow a seasonable pattern. The demand pattern in
the rural areas is seasonable. The distributions in the rural areas are frequent and not uniform
throughout the year. The rural market in India is undergoing a massive change. These changes
have resulted in shifting the marketable battlefields from urban to rural. Most of the companies
treat rural market as a dumping ground for the lower end products designed for urban audience.
But, this scenario is slowly changing and importance is given to the need of the rural customer.
Considering the emerging issues and challenges, government support is necessary for the
development of marketing. The government may adjust suitable budget allocations to rural
infrastructure plans, and proper supervision for effective plan implementations. Marketers should
understand these challenges and then making strategies in the light of these challenges to face
them and to tap the rural Indian market and importance is given to the need of the rural customer.
Considering the emerging issues and challenges, government support is necessary for the
development of marketing. The government may adjust suitable budget allocations to rural
infrastructure plans, and proper supervision for effective plan implementations. Marketers should
understand these challenges and then making strategies in the light of these challenges to face
them and to tap the rural Indian market.
Analysis of Rural marketing Scenario

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