Amity Business School

Amity Business School

MBA, Semester III
Overview of Rural Marketing
Dr.Garima Malik

1
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Why Companies Go Rural

• Urban Markets are getting Saturated.

• A Huge Untapped Market.
• Rising Disposal Income
• Remittances from Aboard
• Impact of Media.
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Some Impressive Facts About the Rural Marketing

• There are 42,000 rural supermarkets (haats) in

India that exceed the total number of retail chain
stores in the United States.
• In 2001-02 the Life Insurance Corporation (LIC)
sold 55 percent are in small towns and villages.
• Of the 20 lakh BSNL mobile phones connections,
50 percent are in small towns and villages.
• The billing per cell phone in small towns in Andhra
Pradesh is higher than the billing in the capital
Hyderabad city.
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Rural Market Has Finally Arrived

• 50% of BSNL mobile connections in small towns/villages.
• 482 crorepatis in rural Haryana, only 137 in Bangalore,
similar number in Kolkata or Hyderabad.
• 55.6 million Kisan Credit Cards (KCC) issued (against 60
million credit-plus-debit cards in urban) resulting in
tremendous liquidity.
• As per National Council of Applied Economic Research
(NCAER), rural market accounts for 55% of LIC policies,
70% of toilet soap consumption, and 50% of TV, fans,
bicycles, tea and wrist watch consumption. So as a
target market, it is attractive not only because of the size,
but also because of impressive growth potential.
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• BEIJING: LENOVO, CHINA'S LARGEST PERSONAL

COMPUTER MAKER, AIMS TO SELL FIVE MILLION
COMPUTERS IN RURAL AREAS WITHIN THREE YEARS, CHINA
DAILY REPORTED FRIDAY. BEIJING: LENOVO, CHINA'S
LARGEST PERSONAL COMPUTER MAKER, AIMS TO SELL
FIVE MILLION COMPUTERS IN RURAL AREAS WITHIN THREE
YEARS, CHINA DAILY REPORTED FRIDAY. (March 6th 2009)
(THE COMPANY PLANS TO ESTABLISH 700 SALES AND SERVICE OUTLETS IN
TOWNS, AND TO COVER 320,000 VILLAGES ACROSS THE COUNTRY
THROUGH 7,800 SALES NETWORKS IN THE NEXT THREE YEARS).
• Nokia eyes 3G, rural market with new phone
models news, Nokia has tied up with SKS
Microfinance, which has 653 branches across 15
states. Apart from this, Nokia tries to reach into
rural areas with 'showrooms on wheels' and
'rural care on the go'- marketing and servicing
vehicles, respectively.
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• Of the 2 crore who have signed up for rediffmail , 60 percent are from small
towns, of the one lakh who have transacted on the rediff online shopping
site 50, percent are from the small towns.

• Internet access in semi-urban and rural areas has increased through the ‘
sanchar Dhabas’ of BSNL operating in 3,617 out of 6,332 blocks in the
country.

• Electricity consumption by the agricultural sector has shown a sharp

increase from 17.6 percent of total consumption in 1980-81 to 29.2 percent
in 1999-2000. During the same period the industry share has dropped from
58.4 percent to 38.8 percent

• Electricity consumption

Sector 1980 2000

Agriculture 17.6% 29.2%
Industry 58.0% 34.8%
 Rural Marketing Amity Business School

(Overview)

There is no single definitions

of the term ‘rural’ that suits all the stakeholders
operating in the rural market.

Rural areas constitute a distinct market; they are not

just a poor extension of the urban areas.
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Rural
(Census of India (2001) defines rural is)

• “ ‘Rural’ as any habitation with a population density of less

than four hundred per sq. km. Where at least seventy fiver
percent of male working population is engaged in
agriculture and where there is no municipality board.”
Or
( According to IRDA and NCAER)
• ‘Rural’ as ‘villages with a population of less than 5,000, with
75 percent of the male population engaged in agriculture
etc.
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Rural Marketing

• Rural Marketing has been defined as the process of developing,

pricing, promoting, distribution rural specific goods and services
leading to exchange between urban and rural markets which satisfies
consumer demand and also achieves organizational objectives.

As per the National Commission on Agriculture,” Rural marketing is a

process which starts with a decision to produce a saleable farm
commodity and involves all aspects of market structure or system,
functional and institutional based on technical and economic
considerations and includes pre and post harvest operations,
assembling, grading, storage, transportation and distribution.
(Rural marketing in simple words, is planning and
implementations of marketing functions for the
rural areas).
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Rural Marketing Vs Urban Marketing

Factors Differentiating Rural Marketing from Urban

Marketing
• Infrastructure Availability: Electricity supply, availability of
finance facility, education level, roads connectivity. In
these infrastructural aspects, the rural market varies
widely from the urban market.

• Income Streams: The patterns of income generation

areas based on agricultural is seasonal and highly
unreliable unlike the fixed monthly income in the urban
areas. This creates a consumption pattern that is quite
different from the urban one.
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3.Lifestyle: The lifestyle and daily routine of consumers in

two markets is markedly different. This cerates
significantly different profiles of urban and rural
consumers for the same product.

4. Social – Cultural Background: Value system and thus

perception towards goods/ services and consumption in
general is quite different in the two markets.

5.Accessibilty: The cost and logistics of accessing

consumers in a highly widespread and heterogeneous
rural market are very different from those involved in
reaching urban consumers concentrated in good number
in a single location. It demands two distinct marketing
approaches.
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• Media reach and habits: The reach of media

vehicle and media habits, varying widely in rural
an urban markets, requires different types of
promotional strategy in these two markets.

• Nature of Competition : The nature and intensity

of competition amongst the brands is very
different in the two markets.

• Consumer Behavior: The consumer’s response

to marketing stimuli differs widely in two markets.
The rural consumer's behavior is quite different
from that of the urban buyer’s behavior.
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Case Study
Akashganga
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This case study is about a product and service named

Akashganga sold by a small, entrepreneurial business
named Shree Kamadhenu Electronics Private Ltd.
(SKEPL).

Akashganga is for diary farmers and it is intended to enable

to them to increase their efficiency and productivity.
The Indian diary industry is plagued by several
problems, the major ones being low productivity of Indian
cows, the delays in processing milk, low quality caused
by manual handling, corruption and mismanagement,
and, of course, endemic dilution of milk with water.
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Akashganga attempts to alleviate some of these issues. Akashganga is

a computerized system. When a farmer gets milk into the collection
point, it's weighed and the amount of fat measured and immediately
an entry is made on the farmer's swipe card.

The money can be collected immediately. This is marked contrast to

the previous system where the financial calculation was done later to
avoid holding up the queue of farmers ready for milking; the
calculation
was done by hand and was somewhat complicated.
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With the new system, calculation is done Automatically which makes it

possible to pay the farmer on the spot rather than having him wait for a
couple of days. Also the potential for cheating is reduced. An entry is made
electronically on the farmer's swipe card.

When SKEPL wanted to market this service, it ran up against

the skepticism of the Indian rural people against unproven
technology. This is the classic catch-22 situation as the farmer
does not trust the tool till he tries it, and is reluctant to try it till
he trusts it.
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SKEPL got around this problem by offering free trials and

delayed payment schemes stretching up to several months.
The company also provided responsive and efficient after-
sales service. It established a service network covering the
rural areas, and typically would attend to a compliant within a
few hours of receiving it.

It's important to note that the company's local presence

whether for marketing, sales or service helped tremendously,
since the villagers would not be disposed to make a journey to
a town or city to learn about their products.

The company also used a name Akashganga that Indian

villagers can relate to. This helped earn the trust of the
villagers.
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Also, Shree Kamadhenu Electronics used local people for

marketing, sales, service, etc. This was a very important
factor that helped the farmers relate to and trust the
company.

Of course, the company had a solution that was superior in

terms of time, transparency, fairness, etc, and that played a
big role in their success.

As a result of these factors, SKEPL gained a threshold in

this large market and earned respect among farmers.
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Successful stories in Indian Rural Market

• ITC’s eChoupal
• HLL’s Project Shakti
• Colgate’s Project Jargruti
• Escort’s Rajdoot Motocycle
• LG & Goodrej
• Cipla & Ranbaxy
• Philips & Asian Paints
• Marico …..Many More
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Evolution of Rural Marketing

• Phase I (Before the 1960s).

• Phase II( 1960s-1990s).

• Phase III( 1990s to Present)

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Phase I (Before the 1960s)

• Rural marketing referred to marketing of rural

products in rural and urban areas and
agricultural inputs in rural markets.
• Agricultural produces like food grains and
industrial inputs like cotton , sugarcane etc.
• The scope of farm mechanization equipment
(tractors, pumps sets) and agricultural inputs like
fertilizers seeds and pesticides was very limited.
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Phase II (1960s-1990s)
• The green Revolution changes the face of rural India,
ushering in scientific farming practices with the advent of
agricultural inputs and implements.
• During this phase , apart from conventional ‘agricultural
marketing’, a new area’ marketing of agricultural inputs’
emerged . This period saw the emergence of companies
such as Mahindra & Mahindra , Escorts, Sriram
Fertilizers and IFFCO.
• During this period the marketing of rural products
received considerable attention through agencies like
KVIC( Khadi and Village Industries Commissions) and
handicrafts emporiums.
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Phase III (1990s to the Present

• The objective of rural marketing in the

current phase is the improvement of the
quality of life .
• This approach has been demonstrated
successfully by HLL’s Project Shakti, ITC
e-choupal, AMARON Batteries.