Indian Rural Market Issues Opportunities
Indian Rural Market Issues Opportunities
Indian Rural Market Issues Opportunities
*ASSISTANT PROFESSOR
SURYA COLLEGE OF BUSINESS MANAGEMENT,
DEPARTMENT OF BUSINESS MANAGEMENT, LUCKNOW
ABSTRACT
Mahatma Gandhi had once said: "India's way is not Europe's. India is not
Calcutta and Bombay. India lives in several hundreds of villages"
In recent years, rural markets have acquired significance, as the overall growth of the economy
has resulted into substantial increase in the purchasing power of the rural communities. On
account of green revolution, 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 emerged. But often, rural marketing is confused withagricultural marketing – the
latter 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.Rural markets, as part of any economy, have untapped
potential. There are several difficulties confronting the effort to fully explore rural markets. The
concept of rural markets in India is still in evolving shape, and the sector poses a variety of
challenges. Distribution costs and non availability of retail outlets are major problems faced by
the marketers. The success of a brand in the Indian rural market is as unpredictable as rain. Many
brands, which should have been successful, have failed miserably. This is because, most firms
try to extend marketing plans that they use in urban areas to the rural markets. The unique
consumption patterns, tastes, and needs of the ruralconsumers should be analyzed at the product
planning stage so that they match the needs of the rural people. This paper tries to explore the
issues, opportunities & challenges in rural marketing and the strategies that a marketercan
incorporate while approaching the rural consumer.
INTRODUCTION
Before gamboling into issues like where the Indian rural market stands and the opportunities for
corporate to explore there... let's look at the definition of urban and rural India. The Census
defined urban India as - "All the places that fall within the administrative limits of a municipal
corporation, municipality, cantonment board etc or have a population of at least 5,000 and
have at least 75 per cent male working population in outside the primary sector and have a
population density of at least 400 per square kilometer. Rural India, on the other hand,
comprises all places that are not urban!"
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Now for some facts and figures The Indian rural market today accounts for only about Rs 8
billion (53 per cent - FMCG sector, 59 per cent durables sale, 100 per cent agricultural products)
of the total ad pie of Rs 120 billion, thus claiming 6.6 per cent of the total share. So clearly there
seems to be a long way ahead.
Time and again marketing practitioners have waxed eloquent about the potential of the rural
market. But when one zeroes in on the companies that focus on the rural market, a mere handful
names come to mind. Hindustan Lever Limited (HLL) is top of the mind with their successful
rural marketing projects like 'Project Shakti' and 'Operation Bharat'. The lynchpin of HLL's
strategy has been to focus on penetrating the market down the line and focusing on price point.
Furthermore, activating the brand in the rural market through activities, which are in line with
the brand itself, is what sums up HLL's agenda as far as the rural market is concerned informs
MindShare Fulcrum general manager R Gowthaman. Amul is another case in point of aggressive
rural marketing. Some of the other corporates that are slowly making headway in this area are
Coca Cola India, Colgate, Eveready Batteries, LG Electronics, Philips, BSNL, Life Insurance
Corporation, Cavin Kare, Britannia and Hero Honda to name a few.
We can safely say that until some years ago, the rural market was being given a step-motherly
treatment by many companies and advertising to rural consumers was usually a hit and miss
affair. More often than not, the agenda being to take a short-cut route by pushing urban
communication to the rural market by merely transliterating the ad copy. Hence advertising that
is rooted in urban sensitivities didn't touch the hearts and minds of the rural consumer. While,
this is definitely changing, the process is slow. The greatest challenge for advertisers and
marketers continues to be in finding the right mix that will have a pan-Indian rural appeal. Coca
Cola, with their Aamir Khan ad campaign succeeded in providing just that.
Corporates are still apprehensive to "Go Rural." A few agencies that are trying to create
awareness about the rural market and its importance are Anugrah Madison, Sampark Marketing
and Advertising Solutions Pvt Ltd, MART, Rural Relations, O&M Outreach, Linterland and
RC&M, to name a few. Also, the first four agencies mentioned above have come together to
form The Rural Network. The paramount objective of the Network is to get clients who are
looking for a national strategy in rural marketing and help them in executing it across different
regions. Interestingly, the rural market is growing at a far greater speed than its urban
counterpart. "All the data provided by various agencies like NCAER, Francis Kanoi etc. shows
that rural markets are growing faster than urban markets in certain product categories at least.
The share of FMCG products in rural markets is 53 per cent, durables boasts of 59 per cent
market share. Therefore one can claim that rural markets are growing faster than urban markets,"
says Sampark Marketing and Advertising Solutions Pvt Ltd managing director R A Patankar.
Coca-Cola India tapped the rural market in a big way when it introduced bottles priced at Rs 5
and backed it with the Aamir Khan ads. The company, on its behalf, has also been investing
steadily to build their infrastructure to meet the growing needs of the rural market, which
reiterates the fact that this multinational has realized the potential of the rural market is going
strength to strength to tap the same.
Clearly the main challenge that one faces while dealing with rural marketing is the basic
understanding of the rural consumer who is very different from his urban counterpart. Also
distribution remains to be the single largest problem marketers face today when it comes to
going rural. "Reaching your product to remote locations spread over 600,000 villages and poor
infrastructure - roads, telecommunication etc and lower levels of literacy are a few hinges that
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come in the way of marketers to reach the rural market," says MART managing director Pradeep
Kashyap.
Citing other challenges in rural marketing, Patankar says, "Campaigns have to be tailor made for
each product category and each of the regions where the campaign is to be executed. Therefore a
thorough knowledge of the nuances of language, dialects and familiarity with prevailing customs
in the regions that you want to work for is essential. The other challenge is the reach and the
available means of reaching out to these markets, hence the video van is one of the very effective
means of reaching out physically to the rural consumers."
The fact of the matter remains that when compared to the Indian urban society, which is turning
into a consumerism society; the rural consumer will always remain driven by his needs first and
will therefore be cost conscious and thrifty in his spending habits. "Decision-making is still
conscious and deliberated among the rural community. But nevertheless, the future no doubt lies
in the rural markets, since the size of the rural market is growing at a good pace. There was a
time when market predictions were made on the basis of the state of the monsoon but this trend
has changed over the years; there is a large non farming sector, which generates almost 40 per
cent of the rural wealth. Hence the growth in the rural markets will be sustained to a large extent
by this class in addition to the farmer who will always be the mainstay of the rural economy,"
affirms Patankar.
"Although the melting of the urban - rural divide will take a while, this is not for want of the
availability of the means but for want of the rural consumer's mindset to change; which has its
own logic, which is driven by tradition, custom and values that are difficult to shed," he points
out.
Fulcrum's Gowthaman says, "The biggest impending factor or deterrent on rural monies going up
is that there is a general sense of trying to benchmark cost per contact (CPC). The television CPC
is going to anyways be cheaper to rural CPC and unless and until the volume - value equation
turns the other way round, you will not be able to spend disproportionate monies in the rural
market."
For HLL, a one rupee or a five rupee sachet or the KuttiHamam (the small Hamam) helps in
giving the consumers a trial opportunity. While it does help in generate volume but not in terms
of values. "Till the time that volume - value equation is managed better, the CPC is preventing
anybody to look at rural at a large scale activation programme," reiterates Gowthaman.
Ultimately, the ball lies in the court of rural marketers. It's all about how one approaches the
market, takes up the challenge of selling products and concepts through innovative media design
and more importantly interactivity.
Anugrah Madison's chairman and managing director RV Rajan sums up, "There is better scope
for language writers who understands the rural and regional pulse better. I also see great scope
for regional specialists in the areas of rural marketing - specialists like Event Managers, Wall
painters, folk artists, audio visual production houses. In fact all those peoplewho have specialized
knowledge of a region are bound to do well, thanks to the demands of the rural marketers."
So the fact remains that the rural market in India has great potential, which is just waiting to be
tapped. Progress has been made in this area by some, but there seems to be a long way for
marketers to go in order to derive and reap maximum benefits. Moreover, rural India is not so
poor as it used to be a decade or so back. Things are sure a changing!
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Size of the market
Largely untapped
Income from other than agriculture
Better exposure-media
Income flow from urban and abroad.
In 2001-02, LIC sold 55 % of its policies in rural India.
Of two million BSNL mobile connections, 50% in small towns/villages
Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT)
41 million Kisan Credit Cards issued (against 22 million credit-plus-debit cards in urban)
Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from
with cumulative credit of Rs.977 billion resulting in tremendous liquidity.
AVAILABILITY
The first challenge is to ensure availability of the product or service. India's 627,000 villages
arespread over 3.2 million sq km; 700 million Indians 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
productsto the villages. Over the years, India's largest MNC, Hindustan Lever, has built a
strongdistribution system which helps its brands reach the interiors of the rural market. To
serviceremote village, stockiest use auto rickshaws, bullock-carts and even boats in the
backwaters ofKerala. Coca-Cola, which considers rural India as a future growth driver, has
evolved a hub andspoke distribution model to reach the villages. LG Electronics defines all cities
and towns otherthan the seven metro cities as rural and semi-urban market.
AFFORDABILITY
The second challenge is to ensure affordability of the product or service. With low
disposableincomes, products need to be affordable to the rural consumer, most of whom are on
dailywages. Some companies have addressed the affordability problem by introducing small
unitpacks. Godrej recently introduced three brands of Cinthol and Fair Glow in 50-gm packs,
pricedat Rs. 4-5 meant specifically for rural markets. The success of Cavin Kare has become a
verynotable case study. It is a company that began in a small way. It started the Chic shampoo
sachetfor 50 paise when shampoo was available at Re.1, and it revolutionized the market.
Hindustan Lever, among the first MNC's to realize the potential of India's rural market,
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haslaunched a variant of its largest selling soap brand, Lifebuoy at Rs.2 for 50 gm. Coca-Cola
hasaddressed 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 for coke now come from the
ruralmarkets
ACCEPTABILITY
The third challenge is to gain acceptability for the product or service. Therefore, there is a needto
offer products that suit the rural market. One company which has reaped rich dividends bydoing
so is LG Electronics. It developed a customized TV for the rural market and was a runwayhit
selling 100,000 sets in the very first year. Because of the lack of electricity and refrigeratorsin
the rural areas, Coca-Cola provides low-cost ice boxes — a tin box for new outlets andthermocol
box for seasonal outlets. The insurance companies that have tailor-made products forthe rural
market have performed well. HDFC Standard LIFE topped private insurers.
AWARENESS
Since large parts of rural India are inaccessible to conventional advertising media,
buildingawareness is another challenge. Hindustan Lever relies heavily on its own company-
organizedmedia. Godrej Consumer Products, which is trying to push its soap brands into the
interior areas,uses Radio to reach the local people in their language. Coca-Cola uses a
combination of TV,Cinema and Radio to reach rural households. LG Electronics uses vans and
road shows to reachrural customers. Philips India uses wall writing and Radio advertising to
drive its growth in rural areas.
In rural India, brands rarely fight with each other; they just have to be present at the right
o Buys small packs, low unit price more important than economy
Many brands are building strong rural base without much advertising support
place
Fewer brand choices in rural: number of FMCG brand in rural is half that of urban
o Ghadi detergent, third largest brand
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Dynamics of rural markets differ from other market types, and similarly rural marketing
strategies are also significantly different from the marketing strategies aimed at an urban or
industrial consumer.
The real income of rural households is projected to rise from 2.8% in the past two decades to
3.6% in the next two. Higher incomes and exposure to urban lifestyles have also raised the
aspirations of the rural populace, as they strive to improve their quality of life by gaining access
to new technologies, products and services.
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Rural India consists of 638596 villages that house 742,490,639 people. This figure represents
around 70% of the total population of India and 12% of the globe‘s population. In fact, as per
Mckinsey, despite rising urbanization, 63% of India‘s population will continue to live in the rural
areas even in 2025. Further, the number of consumers earning over $5 a day is projected to
catapult from 50 million today to 150 million by 2020.
No of households (m)
Demographic classification Urban Rural Total
Rich ( income greater than Rs 1m per annum) 4.8 1.3 6.1
Well off (income greater than Rs 0.5m per annum) 29.5 27.4 56
Total 34.3 28.7 63.0
% of Total 54.4% 45.6%
Source: Ministry of Communications & Information Technology, India
Cut throat competition in urban areas has compelled many companies to look for new,
unexploited markets. Rural India has emerged as an answer, owing to lack of strong presence by
brands in most sectors as well as a high growth potential. Further, improvement in infrastructure
prompted by government initiatives seems to have lowered entry barriers for many companies.
Also, rural India is insulated against global economic downturns, which adds to its attractiveness.
LOW LITERACY
There are not enough opportunities for education in rural areas. The literacy level is as low
(36%) when compared to all- India average of 52%.
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SEASONAL DEMAND
Demand for goods in rural markets depends upon agricultural situation, as agriculture is themain
source of income. Agriculture to a large extent depends upon monsoon and, therefore,the
demand or buying capacity is not stable or regular.
TRANSPORTATION
Many rural areas are not connected by rail transport. Kacha roads become unserviceableduring
the monsoon and interior villages get isolated.
DISRTIBUTION
An effective distribution system requires village-level shopkeeper, Mandal/Taluka-
levelwholesaler or preferred dealer, distributor or stockiest at district level and company-
owneddepot or consignment distribution at state level. The presence of too many tiers in
thedistribution system increases the cost of distribution.
COMMUNICATION PROBLEM
Facilities such as telephone, fax and telegram are rather poor in rural areas.
TRADITIONAL LIFE
Life in rural areas is still governed by customs and traditions and people do not easily adaptnew
practices. For example, even rich and educated class of farmers does not wear jeans orbranded
shoes.
BUYING DECISION
Rural consumers are cautious in buying and decisions are slow and delayed. They like to givea
trial and only after being personally satisfied, do they buy the product.
CULTURAL FACTORS
Culture is a system of shared values, beliefs and perceptions that influence the behaviour
ofconsumers. There are different groups based on religion, caste, occupation, income,
age,education and politics and each group exerts influence on the behaviour of people in
villages.There is a belief among rural people that experience is more important than formal
educationand they respect salespersons who can offer practical solutions to their problems.
Therefore,it is desirable that sales persons, especially those who have been brought up in cities
aregiven a thorough training consisting of both theory and practical aspects of village life. The
training will help these sales persons to align themselves with the market realities and settledown
smoothly in their jobs. Rural market has a tremendous potential that is yet to be tapped.A small
increase in rural income, results in an exponential increase in buying power.
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o In 50 years only 40% villages connected by road, in next 10 years another 30%
o More than 90 % villages electrified, though only 44% rural homes have electric
connections
o Rural telephone density has gone up by 300% in the last 10 years; every 1000+
o Number of ―pucca‖ houses doubled from 22% to 41% and ―kuccha‖ houses
halved (41% to 23%)
o Percentage of BPL(Below Poverty Line) families declined from 46% to 27%
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Proliferation of large format rural retail stores which have been successful also.
o Bank branches 32,000
CONCLUSION
Contrary to the stereotyped image of their isolation from trade and markets, the rural poor are
already closely involved in local, national and, to some extent, global markets. Rural households
earn much of their income from non-farm activities and are active in non-farm labour markets
and food markets. This view of the small farmer as a ‗multi-sectoral firm‘90 contrasts with the
predominant image of small farmers in low-income countries. Many farming households appear
willing to accept the new opportunities of commercialization, in the hope that they will be
released from poverty, but are constrained from doing so fully. The rural poor see that
commercialization and globalization can bring increased employment opportunities and income-
generating activities. Small farmers and the rural poor often cannot take advantage of these
opportunities. The transactions costs arising from poor physical access, the asymmetric structure
of many markets, and their lack of skills, information and organization can represent substantial
barriers to accessing markets. Remoteness, scarce and poorly maintained roads, inadequate
transport and storage facilities, and difficulties in accessing reliable information on products and
prices prevent the rural poor from participating in competitive markets, often restricting them to
non-contestable markets dominated by a few, powerful purchasers. Reducing these transaction
costs is a priority for improving access to markets. The difficulties lie in selecting policies that
will have the greatest impacton reducing rural poverty while using scarceresources efficiently.
Investing large sums in road building schemes linking remote villages may beless appropriate
than alternative infrastructurepolicies aimed at maintaining roads and improvingtransport and
communications. A complementaryapproach would tackle not just the physicalaspects of market
access but the institutional transaction costs: encouraging competition byreducing information
asymmetries, and removingfarm price controls and other distortions that biasfood and staples
production.If the rural poor are to escape poverty they needaccess to competitive markets not just
for theirproduce but also for inputs, assets and technology,consumer goods, credit and labour.
Many of thetransaction costs that affect farm prices also affectavailability and distort prices of
other goods andservices. Confronting the physical and institutionaltransaction costs through
market reformand infrastructure development will raise productivityand incomes through greater
farm outputand more rural farm and non-farm employment. ‗Getting prices right‘ needs to be
tackled alongsideInfrastructuredevelopment. However, the new opportunities presented by
liberalization and globalization are accompaniedby new risks, and the poor are often ill-
equippedto take these unless they have safety-nets. This isone more reason why some degree of
food securityis a precondition for the poor‘s enthusiasm for,and safe involvement in, crop-
export-based globalization.Most smallholders with cash-crops,exports and/or supermarket links
neverthelesskeep some land in food for subsistence, diversifyinginto cash crops while
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