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Rural Marketing

IPER - Bhopal

4th Feb 2012


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Welcome to your module on: Rural Marketing

Instructor: Prashant Gupta Working with ITC Ltd as Branch Manager

B.Com (Hons),University of Delhi;

MBA (ISB - Hyderabad)

Work Experience:

I worked across multiple consumer goods categories and professionalservices sector.

My experience spans functional areas of Sales, Trade Marketing,

Business Development and Supply Chain Management.

I have been a key member in projects and organizational initiatives likeITC e-choupal the innovative rural retail program, and ITC Infotech

the consulting division of ITC.


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Coordinates

Mobile :9893598101

Email: [email protected]
mailto:[email protected]:[email protected]


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Today

Intro and Admin details

Course Overview

Teaching Style

Grading details


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A nation currently in a period of economic

growth and transformation.

Worlds largest democracy.

A Trillion $ economythe 4th largest in the

world.

Amongst a handful of nations to have its Flagstationed on the Moon.

Aspiring to be a Permanent UNSC member

Background Emerging India


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Socio-economic divide between the growingurban middle class and the large population of

rural India.Descriptorsus of them

Rapidly expanding population. Rising Food Prices

Weak Infrastructure

Depleting Environmental ResourcesIn search of The New India which converges the

expectation of all stakeholders.

Background Emerging India


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Enter Rural Marketing

What is Rural ?????

Is there a definition for Rural??


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Urban As per GOI

The definition of urban area adopted is as follows:

(a) All statutory places with a municipality, corporation,cantonment board or notified town area committee, etc.

(b) A place satisfying the following three criteriasimultaneously:

i) a minimum population of 5,000;ii) at least 75 per cent of male working populationengaged in non-agricultural pursuits; and

iii) a density of population of at least 400 per sq. km.(1,000 per sq. mile).


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Is Rural India = BOP?

Ownership of Life Insurance 18.6% - Rural

38.1% - Urban

Average Household Income

INR 51,922 - Rural INR 95,827 - Urban

In Rural India 64.3% dont own a Ceiling Fan

72.5% dont have a toilet or bathing facility at home

40.2% still dont have electricity 39% dont even own a Wall Clock

Looks like the answer is Yes

Source: Max-NCAER Indian Financial Protection Survey & IRS 2007 R2, Hansa Research


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Indian Agriculture has Excellent Resources

Plenty of arable land

Rich & Diverse Agro-climatic Zones

Strong Agricultural Research

Large & growing markets

Indian Farmers Resourcefulness is also Legendary

Works very hard (whole family is on the farm) Takes risk (on weather, yield, price)

Is innovative (technology adoption, risk mgmt)

Rural India


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Because of Fragmentation, Dispersion, Heterogeneity

Most of them are small (1.5 ha average holding) They do not have bargaining power

All of them live in hinterlands (600,000 villages)

They do not have access to real time information The circumstance of each one is very different (agro-ecological

conditions, resources) They cannot get customized knowledge advice

Further compounded by weak infrastructure

Physical, Social, Institutional To access markets, these farmers have to take the help of

middlemen

Yet majority of Indias Farmers are Poor


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VILLAGE

TOWN

Farmer

Mandi

Price Discovery

@ Sell TransactionVideo

PRODUCT&

SERVICE

PROVIDERS

Money

Lender

Financing

Market

Transaction

Extension

CenterKnowledge

(Use)

Traditional Transactions

Sell:

Buy:

Middleman

sunk costs, inconvenience,

other losses

high prices, spurious goods, information not timely

Information

(Aggr)
http://farmer%20problem.wmv/http://farmer%20problem.wmv/


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The Problem Faced by FarmerThe 2 DsDEEP SEAInstitutional support

- Information on farming best practices/ weather

-Quality and information on Inputs

DEVIL

Middle Men

- Price Discovery

-Quality and weighment-Handling Loss

-Time


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An Entrenched Cycle of Abject Poverty

Land and labor available to the poorare of minimal economic value

Market

Failures

Usurious

Lending

Practices

Failed Govt

Policies & Corrupt

Officials

Unbreakable debt

cycles cause by

interest rates >120%

Bonded

labor

Those with capital and power have little incentive to invest

in the productive assets that would break the cycle


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Indias Labor Force

Primary

(Agriculture, net of

Mining)

Secondary

(Industry/Manufac

turing, etc.)

Tertiary (Services)

Agriculture

48.1%

Farmers account for almost HALF of

the Indian workforce


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Indias GDP Composition

Primary

(Agriculture, net ofMining)

Secondary

(Industry/Manufac

turing, etc.)

Tertiary (Services)

but farming contributes LESS THAN 20%

of the gross value of the Indian economy.

Agriculture

18%


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An farmer is significantly less productive (in terms of

relative GDP contribution) than the average Indian

worker

0.00

0.50

1.00

1.50

2.00

2.50

Relative Productivity Ratio (Agricuture % of

GDP/Agriculture % of Workforce)

Relative Productivity Ratio (Industry % of

GDP/Industry % of Workforce)

Relative Productivity Ratio (Services % of

GDP/Services % of Workforce)

This line (1.00)

represents the

productivity of the

AVERAGE worker in

India

a trend which has only gotten worse over the past 20 years


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Indian service industry workers are significantly

more productive than Indian farmers

as such, an IT worker would expect to earn 20+ rupees for every 1

rupee a farmer earned. Stated another way, on average, a farmer

earns 4.9 paise for every rupee earned by an IT worker.

The average Services worker contributes

4.57 times as much to the Indian economy

as the average Farmer.

The average IT Services workercontributes

20.5 times as much to the Indian economy

as the average Farmer.


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A Vignette: Paharias in the Rajmahal

Hills

Dharmi Paharini is four feet three inches tall and weighs less than the

40kg of firewood on her head. She had to walk 31 km to cut and fetch

the wood and bring it to market. She will get 8 or 9 rupees for it.

Some strains of beans cultivated here fetch high prices in Bombay. Not

for the Paharias, though. I have to sell my crop to the mahajan who

gave me a loan. A study estimates that 46% of a Paharias earnings go

directly to the mahajan to repay debt, with an additional 39% going to

the lender indirectly.

No water supply systems exist here. Years of neglect have ensured

that. So the Paharias suffer from a range of water-borne diseases.

Adapted from The Hills of Hardship, p. 169- 174


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THERE EXISTS AMARKET AT THE

BOTTOM OF THE

PYRAMID

But still C. K. Prahalad may suggest

AND A FEW MYTHS

ABOUT IT TOO


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New Horizons New Hopes

Agri prices have more than doubled in the last 5 years

Agriculture production has started to improve .

Good Monsoons over the last few years.

Increased Govt spending in Rural area ex. NEREGA etc


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GrowingRural Wealth

2.1 3.6 5.28.13.1 4.1 5.0

6.58.610.1

13.7

22.329.0

39.5

43.1

42.5

57.2

42.7

32.5

20.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995-96 2001-02 2005-06 2009-10

Rural:Percent of each Income Group

Upper (> Rs,1,40, 000) Upper Middle (Rs.1,05,000-1,40,000)

Middle (Rs.70,000-1,05,000) Lower Middle (rs.35,000-70,000)

Lower (Rs.


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Rural Economy

1. Increase in Urban Household consumption of Rs 100 leads to an

increase of Rs 39 in the rural household income.

2. During the last decade, the rural economy is estimated to have grown

by 7.3% as compared to 5.4% of urban economy.

3. The rural economy is nearly as big as the urban. In 2000, the rural

economy accounted for 49% of the Indias GDP.

4. Share of agriculture in Rural economy has dropped from 72% in 1970s

to 64% in 1980s to 51% in 2000

5. The rural-urban migration has fallen from 6.5% in 1981 to 2.8% in 2001.

Source: Merinews.com


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The consumption of FMCG products increasing.

Govt. focusing more rural credit more than doubled in 3 years.

Allocated US$67 billion for 2009-10

Corporate farming and food processing are focus areas for corporate.

Education, Health and Conveyance are major spending items in rural

India

Child Centricity is high in villages

Trends in Rural India

Source:
http://images.google.co.in/imgres?imgurl=http://www.murugappa.com/news_events/media_kit/images/logos/Murugappa%20Group%20-%20New.jpg&imgrefurl=http://www.murugappa.com/news_events/media_kit/index.htm&usg=__10Ffxdlglt3f-Eh_TCf78LTyq4E=&h=764&w=777&sz=76&hl=en&start=2&tbnid=d-TwV9UUiovZLM:&tbnh=140&tbnw=142&prev=/images?q=Murugappa+group+logo&gbv=2&hl=en


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Availability Of Finance

Availability of microfinance

SKS

National Bank for Rural and Urban development

Basix

National Mission for Sustainable Agriculture

Public Private Partnerships for rural infrastructure

Women Self-Help Groups


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Segmentation Of Rural Market

Population Population Size as indicator of market consumption.

Geography/ Location

Proximity to Urban Centre

Industrial Complex.

Tourist Location

Sea/ Highway

Socio Economic Factors

Size of Land Holding

Literacy Levels

Position of Women in Society


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Consumption Behavior -Rural Market

Need Based

Lifestyle & Product Usage Limited by infrastructural constarints

Brand Conscousness

SBI

Ghadi

Parle

GoldFlake

Aspirational


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Rural Vs Urban

Market- A change in Mindset


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Myth I Lack of Spending Power

They spend, but in smaller quantities

Pay premiums to get smaller quantities

Sachets made 67% of the tonnage for Shampoos


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Myth II Impossible to reach

They are accessible

Media dark is a thing of the past

Project Shakti an alternate distribution system


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Myth III Will buy what is cheap

But are very Brand Conscious

Aspiration to be like the rest

Value seeking as well


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Connected through various media

Wireless Technologies (Cell Phone and DTH)

Cadburys Worm controversy

Myth IV They are disconnected


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Grasp advanced technologies

Nothing to unlearn, hence easy to learn

ITCs E-Choupal & Kerelas Fisherwoman

Myth V Technology is not for them


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Theres lots more to the Rural Economy then just poverty, the need is to

pick the opportunity and cater to it well


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Theres lots more to the Rural Economythen just poverty, the need is to pick theopportunity and cater to it well

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