Rural Report Final

8/4/2019 Rural Report Final

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RURAL CONSUMER BEHAVIOR

The ultimate objective of all production is consumption for the satisfaction of

varied needs of man. A free market economy provides freedom to the consumers to

buy and consume goods of their choice. Buying preferences of the consumers send

signals to the producers to produce various commodities in required quantities.

Producers, therefore, produces only those commodities which are desired by the

consumers. Consumer behavior is related to likes and dislikes and expectations of

the consumers. Consumer behavior has changed in recent years owing to enhanced

awareness, information technology and more importantly governmental

intervention through legislations. Thus, the manufacturers are more cautious in

dealing with consumers of their respective products.

The understanding of consumers has to invariably come from the consumer. The

information relating to consumer behavior has to be necessarily based on an

enquiry into their purchase process. The purchase act by a consumer is governed

by various factors such as economic, social and psychological.

Consumer behavior refers to the acts of individuals directly involved in obtaining

and using goods and services and includes the decision process that provide a

purchase. Consumer Behavior is not only the study of ³what people consume butalso µwhere¶, µhow often¶ and µunder what conditions¶ the product is

consumed.´

The rural consumers in India account for about 73 percent of the total consumers.

In recent years, the lifestyle of a large number of rural consumers in India has

changed dramatically and the process of change is on. The buying behavior of the

rural consumers is influenced by several factors such as socio-economic

conditions, cultural environment, literacy level, occupation, geographical location,

efforts on the part of sellers, exposure to media etc. The consumer movement in

India till now has been confined to the middle class citizens in urban areas. It has

yet to spread among the masses in rural areas.



UNDERSTANDING RURAL CONSUMER ± NEED OF THE HOUR

If there is any one part of consumer India that epitomizes the line µevery truism

about India can be contradicted by another truism¶, it is the rural consumer India.

Often marketers do not invest a great deal of effort in understanding ruralconsumers and hence fail to develop suitable marketing strategies. Most of the time

efforts are in the form of blinkered µinside out¶ approaches. At worst, it comes in

the form of tinkering to strip features and creating µno frills¶ models of a feature

rich expensive product without a concern for what the rural consumers would

consider to be frills and essentials. At best, it has been seen in the form of letting

R&D loose in their spare time to invent things that the poor can use ± based on the

stereotypical image of the poor as illiterate, uninformed and primitive. The result

has been specially created new products which are low priced but are light years behind in sophistication. In either case they usually fail to connect with the market.

Thus unless marketers are able to understand rural consumers it is almost

impossible to develop effective marketing strategies to cater to this huge untapped

market.

Types of Rural Consumers

The Affluent/ very rich: Households owning personal car/ jeep and other products.

The Well off : Households owning any/ all of these ± air conditioners, motor cycle,

scooter, washing machine, refrigerator, colour television with other durables but

not car or jeep.

The Climbers: Households owning any/ all of these ± VCR or VCP, mixer

grinder, sewing machine, audio equipment (two in ones etc.), black and white

television, geyser with other durable products but not those mentioned in the first

two categories.

The Aspirants: Households owning any/ all of these ± electric fan, electric iron,

bicycle with other durables but not the ones mentioned in the first three categories

The Destitute: Households other than those classified under Categories one to four

above (owning any/all/none of these ± wristwatches, mono cassette recorder,

pressure cooker and transistor/radio).



SIMPLE MODEL OF RURAL CONSUMER BEHAVIOR

Need recognition

It is the difference between the desired state and the actual state. A rural consumer

first recognizes his needs and accordingly thinks of purchasing the product. This isthe first step in the simple decision making model. For instance a farmer in a rural

area wants to purchase a colour television

Pre purchase search

After the need has been identified, the next step is to do a pre purchase search. Pre

purchase search is of two types namely internal search using one¶s memory and

external search which involves getting more information from friends or relatives

(word of mouth). Marketer dominated sources, comparison shopping, public mallsetc. A successful information search leaves a buyer with possible alternatives, the

evoked set. Here the farmer may go to a nearby city and visit a showroom that has

multiple products.

Evaluation of alternatives

This third step is to basically pick the best alternative from the available. In this

step the buyer needs to establish criteria for evaluation. He makes a decision about

what features he wants or does not want in the product. Accordingly ranks aregiven to the alternatives. The farmer may look for products of Videocon, Onida,

and LG that are available with the dealers and finally select one of them. If he is

not satisfied with the choice made the buyer can return to the search phase.

Also marketers try to influence the buyer by µframing¶ alternatives.

Purchase decision

This is action that results in the purchase of the product from among available

alternatives. The customer may plan to purchase a specific product that suits hisneeds and is within his budget, etc. This includes product, package, store, method

of purchase among other things. For example the farmer may plan to go for LG¶s

Sampoorna Colour Television as it has a vernacular on screen display, better sound

and superior picture quality. Besides it is priced at only Rs 8,500.



Purchase

This involves the actual purchase of the product. However it may differ from the

decision due to time lapse between the purchase decision and the actual purchase

or may also depend upon the availability of the product.Post purchase behavior

This is the final step in the simple model of consumer behavior. The buyer¶s

relationship with the seller does not come to an end with the purchase especially in

the case of consumer durables. This is not an important factor for FMCG. The

farmer may see whether LG has a service centre nearby in case the product needs

servicing.

It is found that the main elements studied for analyzing rural consumer decisionmaking process are media exposure, purchase aspects, behavior of the consumer

towards price, quality relations, credit and influence of the retailer.

RURAL CONSUMER BUYING BEHAVIOR

Rural buyer behavior refers to the buying behavior of final consumers ±

individuals and households who buy goods and services for personal consumption.

All these final consumers make up the consumer market.

The rural consumer is likely to exhibit different purchase behavior as compared to

his urban counterpart. This is basically due to the unique characteristics of rural

markets. The composition of Indian rural market is probably the much more

complex than the whole market in Europe in terms of cultural, linguistic and other

diversities.

The social and religious customs, climatic considerations, dual ownership due to

prevalence of joint family system, mould the buying habits of rural consumers. TheChairman of Hindustan Unilever Ltd also corroborates µour survey shows that rural

consumers tend to be more subject to local religious, cultural and social pressures

and there are regional variations in tastes and habits´.



Thus it is important to study the thought process of the rural consumer purchase

decision so that marketers can successfully reach this huge untapped segment.

Factors influencing buying behavior

To understand rural buying behavior a marketer must first understand

a) The factors that influence the buying behavior and,

b) The variations in that behavior

These help to generate information upon which a marketer can create bases for segment the rural market taking the following factors into consideration:

Environment of the consumer ± The surroundings within which consumer

lives has a very strong influence on the buying behavior. A villager¶s needs

are different from those of his urban cousin. The environment has a critical

influence in shaping the needs of the rural consumer. Products made to

urban specifications may be impractical in rural settings.

An excellent example would be of electrical and electronic goods. Virtually all

radios, cassette players and television sets are made to urban supply specifications.

In many villages, especially in power strapped villages, voltages fluctuate wildly

making electrical goods susceptible to frequent breakdowns. In fact villagers don¶t

mind paying more for these goods if they can sustain the frequent power cuts. Also

water supply affects demand for durables in many villages.

Geographic variations in market behavior ± The geographic location in

which the consumer is located also speaks about the thought process of the

consumer.

Rural markets are not homogeneous. Variations in economic development and

degree of acceptance of innovation are evident in such markets. Geographic

variation to urban centres and variations in development have resulted in

tremendous heterogeneity even within a state for example western and eastern UP

where there are major differences. For instance in western UP bullock carts are



smaller vehicles with one buffalo while in eastern UP bullocks carts are larger

pulled by two buffaloes. Also locals speak Hindustani in western UP while they

speak Bhojpuri in eastern UP.

For instance villages in south accept technology quicker than in other parts of India. Thus HMT sells more winding watches in the north while they sell more

quartz watches down south.

These have implications to product design and marketing strategies.

Influence of occupation and consumption patterns ± The perception that

the rural consumer is either a farmer or an agricultural labourer restricts

marketing effectiveness. In fact there are other groups of consumers with

different needs and behavior having significant purchase volumes.

The Indian Readership Survey of 1998 has chosen the occupation of chief wage

earner as a basis to define the rural consumer. It tells us that the occupation profiles

of owners of consumer durables of three popular consumer durables indicate that

non agricultural occupation group is one that constitutes the high consumption

segment.

Here the non agricultural occupation group includes shopkeepers, traders or those

in employment service like government administration jobs, banks, teachers and

other professionals.

Television owners in the service clan constitute 43 percent which means one in two

persons own a television set. In the case of other non agricultural group, the

shopkeepers and traders, one in three persons owns a television.



Influence of consumer behavior and its implications

Place of purchase ± Not all the rural consumers buy from the same location.

Also the same consumer buys from different location depending upon the

product and need. A study on haats showed that about 58% of villagers

visiting these haats preferred them over village shops due to better quality,

prices and variety.

Companies need to assess the influence on consumers of both village shops and

haats.

Rural consumer do not depend on the haats and village shops alone as some

purchases are made from the urban areas also. For example, there are few product

categories in which the rural distribution is still low and therefore consumer buys

from towns. It was observed that for certain categories of products of FMCG, the

rural consumers made as high as 50% of their purchases from urban markets.

In case where rural dealer penetration is low, the purchase from urban centres is

high. For example, shaving creams have low dealer penetration and hence 37% of purchases are made from urban area while there is a high dealer penetration for tea

and hence 60% purchases are from rural markets and 25% from urban centres.



% of products bought from the nearby town rather than within the village itself

Creative use of product ± Marketers will find it useful to keep an eye on

the different ways in which the rural consumers can use the given product.

This is because product use can differ and not be envisaged by the marketer.

Even for the experienced marketers there could be surprises. Market

development is achieved by being alert to the new and creative uses of

products.

Godrej hair dye being used to colour the horns of oxen,washing machine being

used for churning lassi. The study of product end provides indicators on the need

for education and also new product ideas.

STIMULI

Stimuli are inputs to any of the senses. Stimuli (i.e sensory inputs) include

products, packages, brand names, commercials etc. Marketing stimuli include anenormous number of variables that affect consume perceptions such as the nature

of the products, their physical and commercial attributes (including the positioning

of the print ad or the timimg of a commercial and editorial environment)

According to the Howard and Sheth model of buying behavior, the most significant

stimuli affecting buyer behavior are the information cues about the characteristics

of the product. The cue may be significative if it comes from the product itself

when the consumer is involved in a shopping activity.

SOCIAL CLASS

Social class is the classification involving stratifying people into groups with

various amounts of power, prestige and privilege. We cannot associate social class

with income because someone in a traditionally low status job like plumber may



today earn as much as an individual in a more prestigious job like a school teacher.

In certain other cultures the stratification is more clear- cut.

Although the caste system in India is no longer as powerful as it was a few years

ago, it still has a tremendous influence on rural societyCULTURE

Cultural factors exert the broadest and deepest influence on consumer behavior.

The marketer needs to understand the role played by the buyer¶s culture. Culture is

the most basic element that shapes a person¶s wants and behavior. In India, there

are so many different cultures which only go to make the marketer¶s job even

tougher. Some of the few cultural factors that influence the buyer¶s behavior are as

below:

Product: colour, size, shape, design

For example, the Tata Sumo which was launched in rural India in white colour was

not accepted. But however, when the same sumo was re ± launched as spacio in a

different name and in a bright yellow colour, with a larger seating capacity and

ability to transport goods, the acceptance was higher.

Another good example would be Philips Audio systems. Urban India looks at

technology with the viewpoint µthe smaller the better¶. However in rural India theviewpoint is totally opposite. This is the reason for the large acceptance of big

audio systems in rural India. Thus Philips makes audio systems that get easily

accepted by the sheer size.

Social practices

There are so many different cultures in India and each culture exhibits different

social practices. For example, there are common bath areas in a few villages. The

villagers used to buy one lifebuoy cake and cut it into smaller bars. This helpedlifebuoy to introduce smaller 75 gm bars which could be used individually.

Decision making by male head

The male in Indian culture has always been given the designation of the key

decision maker. For instance, the Mukhiya¶s opinion who is the head of the village



is usually shared with the rest of the village. Even in a house the male is the final

decision maker. It is the men who do the purchasing women are not allowed to step

out of the house.

In rural areas this trend is very prominent while in urban households the wife isthe key decision maker. The trend is also changing in rural households due to more

media exposure.

Changes in savings and investment patterns

The savings and investment patterns of the rural rich is shifting from gold, land to

tractors, VCR¶s, LCR¶s etc.

Thus cultural factors have a strong influence on the rural consumer behavior.

Times are changing and increased reach of information through media andinfluence of the urban areas is surely reducing the influence of traditions. But until

that happens, marketers need to

Develop products that suit the cultural practices of the rural consumer.

Identify a suitable target audience and design media and message that reflect

the social behavior.

Design the distribution to reach the places or outlets from where the

consumer has been traditionally making his purchase.

PERCEPTION

Perception can be defined as ³the process of selecting, organizing and interpreting

or attaching meaning to events happening in the environment.´ It is an integral part

of consumer behavior, whereby an individual selects data or information from his

environment, organizes it and then draws conclusions or meaning from it.

The marketer who seeks to modify the behavior of the rural consumer needs toinfluence the consumer¶s perception and attitude. It is here that the marketer has to

carefully design the products and developing message for the rural markets. The

decision variables of product and message are critical to marketing effectiveness in

rural markets as the colour, shape and actions that hold meaning for rural

consumers are different from those of urban consumers.



The factors that affect perception are exposure and interpretation.

Exposure involves the extent to which we encounter a stimulus. In rural areas

where marketers fall short of exposing the products, alternative uses for the same

product crop up.Interpretation involves making sense of the stimulus. Perception is a different

process and different people may interpret an event differently. Consumer¶s

perception of the product and promotion contribute to creating the position for the

product. The interpretations of the rural consumer are different from those of urban

consumers. Colours are interpreted differently, so are sizes and shapes. The lower

literacy levels in the rural markets increase the importance of perpetual influences.

In interior markets, brand identification is through visual patterns ± a red soap cake

identifies Lifebuoy soap.

The strong influence of perceptions on rural consumers provides a good reason for

the marketer to develop separate marketing strategies for the rural market.

ATTITUDE

Attitudes are generally the inner expressions or feelings that reflect whether a

person is favourably or unfavourably predisposed towards the subject. Consumer

attitudes are a composite of a consumer¶s beliefs, feelings and behavioral

intentions towards some object.

The beliefs that a consumer may hold towards a product may be positive (that

sturdy and tough fans last long) or negative (that sleek and designer fans perish

fast). It could also be neutral. For example fans should be preferably black or

white. Also beliefs need not be accurate e.g chemicals like fluoride in toothpaste

corrode teeth.

The feelings that consumer¶s have for some brands or objects are sometimes based

on beliefs. For example in a village in Rajasthan the village elders bannedtelevision sets as they felt everyone was getting addicted and were neglecting their

farming duties.



The behavioral intentions of rural consumers are typical of their overt habits. A

typical rural Indian applies toothpowder on his index finger and rubs it on his teeth.

This is because toothpowder is more in line with mouth washing habits. So when

an urban consumer uses toothpaste his rural counterpart uses neem sticks, charcoal

products etc.

Changing attitudes of rural consumers

Changing the attitudes of rural consumers is very difficult particularly if they feel

marketers have a vested interest in either increasing sales or making them switch to

other brands. But there are a few ways in which changes can be brought about

Attitude to quality and price

Conventional wisdom on rural marketing believes that villagers craves, but can¶tafford the products the products his city cousin consumes. As a result companies

usually try to reduce the prices of their products either by creating smaller pack

sizes or by compromising on quality. This works sometimes and with some

products only.

Small size packs get acceptance in markets that can only pay a smaller price

because of the nature of income receipts. A land less labourer may get a small sum

of money every day, so he buys his provisions daily and does not have a big sum to

spend. He will therefore buy something that has a small unit price.

The rural consumer is a very careful buyer. He is very conscious for getting value

for money and does not like to pay extra for the frills he cannot use. However it is

not true that only cheap brands sell in the market. An example to support this

would be that of the Usha Company. Usha found that the sales of its economy

brands was falling in rural areas in contrast to its premier µCentury¶ brand even

though it was priced 20 percent higher.



TYPES OF RURAL CONSUMER BUYING BEHAVIOR

Types of consumer buying behavior are determined by:

y Level of Involvement in purchase decision. Importance and intensity of

interest in a product in a particular situation.

y Buyer¶s level of involvement determines why he/she is motivated to seek

information about a certain products and brands but virtually ignores others.

High involvement purchases--Honda Motorbike, high priced goods, products

visible to others, and the higher the risk the higher the involvement.

Types of risk:

y Personal risk

y Social risk

y Economic risk



The four type of consumer buying behavior are:

y Routine Response/Programmed Behavior--buying low involvement

frequently purchased low cost items; need very little search and decision

effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc.

y Limited Decision Making--buying product occasionally. When you need to

obtain information about unfamiliar brand in a familiar product category,

perhaps. It requires a moderate amount of time for information gathering.

Examples include Clothes--know product class but not the brand.

y Extensive Decision Making/Complex high involvement - unfamiliar,

expensive and/or infrequently bought products. High degree of

economic/performance/psychological risk.

Examples include cars, homes, computers, education. Spend a lot of time seeking

information and deciding.

Information from the companies MM; friends and relatives, store personnel etc. Go

through all six stages of the buying process.

y Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same buying behavior.Product can shift from one category to the next.

For example

Going out for dinner for one person may be extensive decision making (for

someone that does not go out often at all), but limited decision making for

someone else. The reason for the dinner, whether it is an anniversary celebration,

or a meal with a couple of friends will also determine the extent of the decision

making.



Some facts with respect to rural customer and its behviour:

P urchase location preference in rural areas:

y 46% from the nearest retail shop

y 39% from the nearest city

y 15% others

P ayment habits of rural consumers:

y 27.5% Cash

y 24% Credit

y 48.5% Mixed

Brand loyalty status in rural areas:

y 38.5% Always purchase same brand

y 23% usually purchase same brand

y 29.5% sometimes purchase same brand

y 9% never purchase same brand

SOME FINDINGS ABOUT RURAL CONSUMER BEHAVIOR

A majority of rural consumers draw information from friends and

neighbours.

More rural consumers gather information from retailers, compared to those

in urban areas.

About 70% of the rural consumers are advised by the retailer to buy a

specific brand.

Friends and relatives are the most reliable sources of information, compared

to other sources in both rural and urban areas, and retailers play a pivotal

role in rural markets, particularly for convenience products.

Very few consumers feel that advertisements through mass media have

made any impact



In a little more than 50% of the cases, family members would select the

brand in both rural and urban areas.

Higher income consumers in rural areas are fairly conscious of brand use

and social prestige. About 70% of the rural consumers use the same brand that is used by

neighbours and friends. Among these, a majority are from the lower income

group.

Price is relatively important in case of durable products and less important in

case of non durables for both rural and urban consumers.

Consumers in both rural and urban areas generally perceive a product to be

of inferior quality when it is priced low and vice versa.

Higher income consumers are less- price sensitive and fairly brand loyal for

all the products.

A majority of the consumers buy the convenience products from the same

shop, indicating high shop loyalty; rural higher income consumers buy from

outside the village.

Rural consumers buy durables mostly during the post harvest season, outside

the village (nearly towns).

Changes in consumer behavior in rural markets

The Indian rural market is expected to grow more than tenfold to become a

USD$100 billion opportunity for retail spending in the next 15 years, The Nielsen

Company has found. Details of the findings were unveiled today at Nielsen¶s

flagship Consumer 360 conference in New Delhi, India. The study showed that inmore than half the largest FMCG categories, rural India is now contributing more

to their growth than urban. One of the key drivers of this trend appears to be the

unprecedented growth of smaller packaging options in rural India.



³While the ability of lower priced packs to improve accessibility is known, their

pace and presence has been unrelenting´. In addition, premium skin care brands

typically associated with urban areas are growing nearly twice as fast in rural.

The rural market is currently worth approximately USD$9 billion in consumer spending in the FMCG space annually. The study findings show that food

categories are currently driving the bulk of the additional USD$91 billion into the

marketplace by 2025.

One of the most telling points is ³the unprecedented pull of consumer demand

fueled by an overdrive of awareness and acceptability. This will allow, and propel

manufacturers to swing into full gear,´ said Prasun Basu, Executive Director and

Vice President, The Nielsen Company. It was also found a surprising set of

priorities. In rural areas, education of children ranked second after having a goodcrop.

On the consumption front, a third of rural consumers are eating biscuits for

breakfast and one in six rural buyers of hair dye now uses colors other than black

to indulge in the trend of externalized beauty that is picking up fast in rural areas.

These emerging cues that seem to be on the fringes of the larger market, or

µEmerFringe¶ trends are the signs of a future that has arrived. The rural consumer

is no longer merely experimenting with urban products because of a phase of prosperity ± rather, she is reveling in it and indulging unabashedly, providing

gratification to her senses and her self-esteem.

Increased literacy and greater awareness in rural markets create new demands and

discriminating buyers. This is observed more in the younger generation. In villages

today, this segment of buyers consumes a large variety of products, both durable

and non-durable. There is a visible increase in the consumption and use of a variety

of products. The younger generation appears to seek variety and is more

discriminating. The young adult in a village likes to sport a fashionable watch andthe preferred brand of toilet soap for the youth is not necessarily Lifebuoy, the

brand preferred by the elders.



The studies also revealed that:

y Rural purchasing power has grown faster than urban in the last six quarters.

y Faster growth in rural is not limited to penetration; today the rural

consumer¶s frequency of consumption is growing faster as well,demonstrating their entrenchment in these categories.

y Instant noodle sales are growing nearly twice as fast in rural India compared

to urban in both penetration and frequency.

y Seemingly µurbane¶ brands in categories like deodorant and fabric softener

are growing much faster in rural India than urban

Rural Report Final

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