Objectives: To give basic understanding of different concepts relating to Rural marketing

Unit I 15

Concept of Rural. Rural Marketing: Meaning, Concept, Phased Evolution, Significance Factors and
Environment. Structure and Characteristics Of The Rural Markets. Rural Vs. Urban Marketing.Rural
Marketing in India.

1. Concept of Rural Marketing:

Marketing can be defined as the process of identifying, anticipating and knowing customer needs,
and organizing all the resources of the company to satisfy them.

• Satisfying the customer’s need is primary condition of marketing and essential for existence
of any organization. In order to achieve marketing goals, knowledge of consumer behaviour
is must.
• The consumer’s behaviour comprises the acts, processes and social relationships exhibited
by individuals, groups and organizations in searching, obtainment, use of, and consequent
experience with products and services.
• An understanding and knowledge of the motives underlying consumer behaviour helps a
firm in seeking better and more effective ways to satisfy its customers. It helps to select
appropriate sales and advertising strategies, and to plan marketing program in a more
efficient manner.

The rural market of India started showing its potential from the 1960s and the 70s and 80s showed
its steady development. During 90’s, there was a steady growth of purchasing power of rural India,
and there are clear indications that the 21st century is going to see its full blossoming.

In our country, where research on consumer behaviour has been limited to names only, not much
synchronized information is available about the rural consumers. Only a few big companies known
for their marketing orientation, for example Hindustan Lever, Philips India, Asian Paints, Larsen and
Toubro, TATA group have made concrete efforts in this direction.

There are many aspects that affect rural marketing, for instance, the rural buyers are not very
discriminating. Once they are persuaded to buy a particular product, they develop a strong felling for
it, and become brand loyals. As a result, Indian manufacturers generally prefer selling fewer items at
higher prices than selling more items at lower prices.

Another thing is that the rural buyers are not particularly keen about quality and packaging because
of which consumer research is not accurate for entering the rural market.

In recent years, the rural sector gives a unique opportunity to expand their market since the urban
segment is showing clear signs of saturation. The nature and characteristics of rural market is quite
different than the urban market. Therefore, it is necessary to understand the rural area
characteristics and environment and take action accordingly.
1.1 Meaning
‘Rural marketing’ is similar to simply ‘marketing.’ Rural marketing differs only in terms of buyers.
Here, target market consists of customers living in rural areas. Thus, rural marketing is an application
of marketing fundamentals (concepts, principles, processes, theories, etc.) to rural markets.

Rural marketing is a process of developing, pricing, promoting, and distributing rural specific goods
and services leading to desired exchange with rural customers to satisfy their needs and wants, and
also to achieve organizational objectives.

1.2 Concept
The concept of Rural Marketing in India Economy has always played an influential role in the lives of
people. In India, leaving out a few metropolitan cities, all the districts and industrial townships are
connected with rural markets. The rural market in India generates bigger revenues in the country as
the rural regions comprise of the maximum consumers in this country. The rural market in Indian
economy generates almost more than half of the country’s income. Rural marketing in Indian
economy can be classified under two broad categories.

These are:

i. The market for consumer goods that comprise of both durable and non-durable goods

ii. The market for agricultural inputs that include fertilizers, pesticides, seeds, and so on

The concept of rural marketing in India is often been found to forms ambiguity in the mind of people
who think rural marketing is all about agricultural marketing. However, rural marketing determines
the carrying out of business activities bringing in the flow of goods from urban sectors to the rural
regions of the country as well as the marketing of various products manufactured by the non-
agricultural workers from rural to urban areas.

To be precise, rural marketing in India Economy covers two broad sections, namely:

i. Selling of agricultural products in the urban areas

ii. Selling of manufactured products in the rural regions

The rural market in India is not a separate entity in itself and it is highly influenced by the
sociological and behavioural factors operating in the country. The rural population in India accounts
for around 627 million, which is exactly 74.3 percent of the total population.

Conceptually, rural marketing is not significantly different to urban marketing. Marketing manager
has to perform the same tasks, but differently in rural marketing. It can be said that marketing is not
different, but markets (buyers and users).

In rural marketing, a firm has to undergo marketing efforts to satisfy rural segments, which notably
differ from urban segments in some aspects. At the same time, we must note that increasing literacy
rate, improved sources of income, awareness due to improved and increased means of
communication and transportation, high rate of mobility within and between countries due to
liberalization and globalization, and many other such reasons, some customers are likely to be
identical.

Even, a few rural customers seem cosmopolitan! So, one can find customers of different behaviour
patterns within a village or a town. In the same way, most of products are commonly used in both
urban and rural areas. In some aspects, both rural and urban customers behave in homogeneous
pattern. Some Indian customers have become global and cosmopolitan!

1.3 Phased Evolution

EVOLUTION OF RURAL MARKETING IN INDIA

A) Phase 1 (A decade Post-Independence)(Before 1960)

Characteristics-

• Rural economy in a primeval stage

• Limited scope for agricultural marketing
• Just ‘no scope’ for marketing of non-agricultural produces from cottage industries like
earthen vessels, metallic utensils, ropes and wooden products etc.
• Overall a complete ‘Unorganized Market’

B) Phase 2 (The Revolution Era) (1960 – 1990)

Characteristics-

• The green revolution brought scientific farming techniques with improved irrigation facilities
and agricultural tools along with use of fertilizers, pesticides and high yield seeds.
• The white revolution initiated formation of milk producer’s co-operations which played an
important role in concentrating milk production and processing.
• Promotion of cottage industries encouraged formation of agencies like Khadi and Village
Industries Commission which exhibited and sold the rural produces through handicrafts and
handlooms expos in urban market. This era saw few risk taking Indian FMCG industries enter
the rural segment market and establish their network. Apart from this there was a financial
support with unorganized banking sector spreading its claws over large rural India.

The above two phases were unable to tap the benefits of rural market because the urban economy
boost kept them focused there and the latent of rural markets was neither visible nor sizeable
predominantly because rural markets were mostly unapproachable.

C) Phase 3 (A decade of Liberalization) (1990 - 2000)

Characteristics-
 • Central and State Government efforts for rural development by strengthening the local
governance highly boosted the socio-economic progress.
• Economic reforms converted markets into competitive ones.
• Indian industrial sector gained maturity and strength and a new ‘Service Sector’ emerged.
• This phase made the Indian and the new multi-national entrants realize the importance of
rural marketing that had been neglected for a long.

D) Phase 4 (The Millennium Era) (2000 – 2010)

Characteristics-

• Rural marketing took a centre stage and became a priority sector for Indian as well as
foreign corporations.
• Various durable and non-durable FMCG companies employed rural folks on various positions
in order to smartly create a bond and network with the ghettoes.
• Companies acted smartly and introduced consumables at affordable price range in order to
attract the rural people towards their products which were manufactured using low-cost
technologies
• Government also gave a thrust to the rural development by developing necessary
infrastructure in rural areas building the bridge between the urban and rural markets.

E) Phase 5 (The E-era) (After 2010)

Characteristics-

• Post 2010, the Internet and Smart-phones have taken a toll over the market. The
telecommunication growth dominated the market with overloading of information.
Moreover, with smartphones becoming cheaper and technology getting affordable, even in
rural areas such mobiles gained huge popularity. Not only that, Dish-Cable connections
became popular in the rural areas on account of affordable hassle-free connection. As a
result of all these, the rural consumer got exposed to the marketing and ad-world.
Moreover, the companies got a way more acceptance amongst the rural consumers. The
social media marketing emerged as a new genre which also initiated the rural consumption.
The e-commerce and e-retailing online companies like Flipkart, Amazon, Snapdeal, Myntra,
OLX etc. gained huge popularity in the rural areas.
• Number of good monsoons lead to growth in the financial status and purchasing power of
the rural consumers along with positive and philanthropist attitude of government in the
form of waiver of farmer loans raised the standard of living in several Indian villages. There
was a huge transformation in the lifestyle of rural people.
• Many FMCG products have achieved maturity in the rural markets on account of their high
penetration levels.
• The market is dominated by youth. According to Mindshare insights the research division of
a media buying agency, 65% or over 700 million Indians are younger than 35 years. They are
open to risk and are enthusiastic to try anything that is trend setting, an aspect that has
been emphasized by their growing purchasing power. As a result, marketers are forced to try
new inventive strategies.
1.4 Significance and Important Factors
If you meet a sales executive today and ask which market he would prefer to serve, the immediate
answer would be, “Rural Markets” as they are still unexploited. A number of factors have been
recognized as responsible for the rural market boom. Some of them are:

1. Increase in population:

Rise in population is directly related to increase in demand. The rural population in 1971 was 43.80
crores, which increased to 50.20 crores in 1981, 60.21 crores in 1991 and 66.0 crores in 2001.

2. Rising Disposable Income:

Good monsoons, green revolution and Administered Pricing Mechanism (PAM), and MGNREGA have
led to rising disposable income in rural areas. According to Advanced Estimates of National Income
released by the Central Statistical Office (CSO) “The per capita income at current prices during 2011-
12 is estimated to be Rs 60,972 compared to Rs 53,331 during 2010-11, showing a rise of 14.3 per
cent,” Roughly 50 to 60% of people are employed in other businesses.

Many of the second generation are getting white collar jobs in near by towns. They earn urban
salaries but continue to live in self-owned homes in the villages, they have high purchasing power.
Thus, with a growing middle class with a monthly income there is a drastic change free from
monsoon or cropping pattern.

3. Favourable Government Policies:

Tax exemption in backward areas, subsidy, concession, incentives and heavy investment in rural
development programmes have brought rapid growth of rural markets and capital investment plans
of Consumer Goods Companies.

4. Employment Opportunities:

The income from new employment schemes and rural development efforts of the government and
the corporate sector efforts has increased the purchasing power of rural people.

5. Agricultural Revolution:

Due to green and white revolution, technological breakthrough in the form of green and white
revolutions have taken place in rural India, which results into substantial wealth generation in these
areas.

6. Increased contact of rural people with their urban counterparts due to development of transport
and a wide communication network.

The growth of satellite TV channels has made a major impact on villages. This has led to a change in
lifestyle and consumption pattern.
7. Literacy Growth:

Literacy rate is increasing in rural areas. According to Census 2011 it stood at 68.9% (2001 census
58.7%). There are now more graduates in rural than in urban India. This brings social and cultural
changes in buying behaviour of the rural customers.

8. New growth avenues for the corporate:

It appears that the corporate will have to look at rural customers for increasing demand for their
products, after all urban demand has its own limitations. Now manufacturers go in for forward
innovation approach instead of ‘globalisation’. It calls for developing products for rural consumers.
Eg. Ghari detergents.

Inflow of foreign remittances and foreign made goods in rural areas.

9. Attraction of Higher Standard of Living:

Education, constant touch with urban areas, and fashion trends have motivated rural people to
change their lifestyles and have higher standard of living.

10. Changes in the land tenure system causing a structural change in the ownership pattern and
consequent changes in the buying behaviour. The general rise in the level of prosperity appears to
have resulted in two dominant shifts in the rural consuming system. One is conspicuous
consumption of consumer durables by almost all segments of rural consumers, and the obvious
preference for branded goods as compared to non-branded goods of rural.

1.6 Rural Marketing Environment

• Large and Scattered market
• Low standard of living
• Traditional Outlook
• Diverse socio-economic backwardness
• Infrastructure Facilities

Large and Scattered market:

• The rural market of India is large and scattered in the sense that it consists of
about 70 % of the country’s population as its consumers.
• Major income from agriculture: Nearly 60 % of the rural income is from agriculture. Hence
rural prosperity is tied with agricultural prosperity.

Low standard of living:

• The consumer in the village area do have a low standard of living because of low
literacy, low per capita income, social backwardness, low savings, etc.
Traditional Outlook:

• The rural consumer values old customs and tradition. They do not prefer changes.

Diverse socio-economic backwardness:

• Rural consumers have diverse socioeconomic backwardness. This is different

in different parts of the country.

Infrastructure Facilities:

The Infrastructure Facilities like roads, warehouses, communication system, and financial facilities
are not equally developed and still inadequate in larger part of rural areas. Hence physical
distribution becomes costly due to inadequate Infrastructure facilities.
2. Structure and Characteristics Of The Rural Markets.

2.1 Structure of Rural Markets

The structure of the rural market can be defined by interlinking the Product and Consumer flow
processes as mentioned in the illustration below. We have taken the buyer and seller to define
different systems in rural markets.

Quadrant I − It explains a situation in which both the buyer and seller are from rural area. This is a
constant economy system in which all rural produce is consumed within the system.

Quadrant II − It explains that the majority of people concentrate on Quadrant II situation, which
unsustainably is tried by marketers to sell urban products in rural markets.

Quadrant III − It is necessary to develop an urban-rural marketing linkage, so that both urban and
rural products can freely move across both the markets. Marketing should work as a process of
motivation to deliver and improve standards of living of rural people and consumption rural
products by urban people.

Quadrant IV − It explains a situation in which both the buyer and seller are from urban area. This is a
constant economy system in which all urban produce is consumed within the system.
2.2 Characteristics of Rural Markets in India
India still lives in villages. Around 68. 84% of Indian population lives in 6, 40,867 villages (2001 – 6,
38,588 villages – 72.2% population). In 1901, the rural population in India comprised 89.2%, but in
2011 it has gone down to 68.8%. Growth in Rural Population in India is steadily declining since 1991.

According to Census 2011, of the Indian Population (121 crore), rural population comprised 83.3
crore (2001 – 74.3 crore). For the first time since independence, the absolute increase (as well as in
terms of percentage Urban areas 9.1% and for rural areas 9%) in population is greater in urban areas
than rural areas. In terms of household rural household comprise 166 million (urban – 71 million).
Traditional households in rural areas were joint families. But due to rise in population, pressure on
land, increasing literacy, and separate sources of income, migration, etc. have given birth to more
and more nuclear families.

1. Large and scattered market:

According to 2011 census rural population is 68.4% (2001 – 72%) of total population and it is
scattered over a wide range of geographical area. With regard to size, still more than 2/3 of the
population lives in rural India and the 170 million household consumers. The sheer size is equal to
US, UK, Germany, France, Japan and Italy together. To reach 6.00.000+ villages is really a challenge.
A few new rural distribution and procurement models have been innovated by ITC e-chaupal and
HUL Project Shakti.

2. Diverse socio-economic background:

This is different in different parts of the country and brings diversity in rural markets.

3. Changing demand pattern:

Demand pattern of rural customer is fast changing due to increase in income and credit facilities
offered by the banks like ‘kisan credit card’. In terms of India’s GDP, 54%, equal to that of
Switzerland, is contributed by rural India. In India’s monthly expenditure, about 55% comes from
rural India.

Non-food spending is equal to that of urban India. Consumerism is certainly on a rise and the
spending on lifestyle products is emerging. Consumer durables market is growing at 10% per annum
in urban areas, but the growth rate in rural India is 25%. Of the 40% of the sale in auto industry
comes from rural India.

4. Major income comes from agriculture:

About 60% of the rural income is from agriculture and hence the demand for consumer goods is high
during harvesting season.

5. Saving habits:

Rural consumer is now having saving habits due to the efforts of cooperative and commercial banks.
Presently more than 33% of India’s savings comes from rural India.
6. Traditional outlook:

Rural customer values old customs and traditions and are interested in deriving core benefit from
the product. They believe in price-performance paradigm. It is because of this reason that ‘Ghari’
detergent has replaced ‘Wheel’ as the no. 1 laundry brand.

7. Low standard of living:

Rural consumer have low standard of living because of low literacy, low per capita income and social
backwardness. However, roughly 34% of FMCG manufacturers’ total sales comes from rural areas.

8. Infrastructure facilities:

Facilities like roads, warehouses, communication system, etc. are inadequate in rural areas. Hence,
physical distribution becomes costly affair. Electrification is yet not complete in all the villages. The
Literacy rate in rural areas has gone up from 58.7% in 2001 to 68.9% in 2011. During this period the
improvement in literacy rate in rural area is twice that of urban areas (rural: 10.2% and urban: 5.1%).
Improvement in female literacy is more than males in both rural and urban areas.

The telephone service is not available in all the villages, especially where there is no post office.
Radio network has increased considerably. From 6 radio stations at the time of independence, All
India Radio covers 98.8% population spread over 90% of the country. Infrastructure or lack of it has
not deterred the telecom companies to reach rural areas through their wireless telephony.

The cell phone users’ number is more than 200 million. The number is more than the subscribers in
Brazil, Indonesia and Russia. The number of account holders in banks in rural areas is greater than
urban India. In case of LIC half the policies are from the rural area.

3. Rural Vs Urban Marketing.

No. Aspects Urban Rural
1 Philosophy Marketing and social Development and
concept relationship marketing
2 Market demand High Low
3 Competition Organised sector Unorganised sector
4 Literacy High Low
5 Income High Low
6 Needs High level Low level
7 Adoption Faster Slow
8 Product awareness High Low
9 Product quality Good Moderate
10 Price sensitive Yes Very much
11 Transportation Good Average
12 Advertising TVs, magazines, online, TVs, radio, posters, etc
advertisement board,
shops, etc
13 Personal selling Door to door, Occasionally
frequently
Urban marketing Rural marketing

Crate relationship by offering integrated Crate relationship by inclusive growth of product

innovation in product or service. or service.

Buyer looks for style, quality &novelty. Buyer looks for quality products that offer value
for money.

Internet, TV channels, mobile, are used for Interactive approaches, observation, rating scale
research. are used for research.

Psycho graphic, usage based segmentation is Demographic & geographic segmentation can be
the main base of divide the market. the base of divide the market.

Marketing goal is capture market share, image, Create a brand name then capture the market
and profitability. with enough profitability.

Sophisticated technology can be used to create Primarily appropriate technologies can be used
product. for rural innovation.

Consumers take purchasing decision Consumers are too much emotional to take
emotionally &rationally purchasing decision.

A marketer has to devise a separate methodology for connecting with rural customers &redesign
combinations of the components of the marketing mix relevant to rural areas .In growth stage profit
may be come, but the marketer may not be too aggressive on profit &choose those strategies which
create long-term loyal relationship with rural consumers.

4. Rural Marketing in India. (write in brief)

Refer to

• Concept of marketing
• Characteristics of rural marketing in India
• Rural marketing environment
• Evolution of rural marketing in India