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RURAL MARKETING
Jayesh Aagja
Assistant Professor
Institute Of Management
Nirma University
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RURAL MARKETING
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The future lies with thosecompanies who see the poor astheir customers
~C.K.Prahalad
The Potential of the UnreachedThe Potential of the Unreached
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What makes Rural markets attractiveWhat makes Rural markets attractive
Substantial increase in purchasing power of rural
communities.
Due to the effect of Green revolution, rural areasare consuming a large quantity of industrial and
urban manufactured products.
Rural marketing initiatives are driving
manufactured or processed inputs or services torural producers or consumers.
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What makes Rural markets attractiveWhat makes Rural markets attractive
Rural
Markets
FMCGRs 65000 crs
Durables
Rs 5000 crs
Agri-inputs
Rs 45000 crs
2/4 wheelersRs 8000 crs
Estimated annual size of the rural market
742 million
people
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What makes Rural markets attractiveWhat makes Rural markets attractive
RuralMarkets
6.6 million
households haveformal savings
investments
2005-06 LICsold 55% policies
in rural India
41 millionKisan Credit Cards
issued
42 million households
use banking service6 lac villageswith Public Tel.
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What makes Rural marketsWhat makes Rural markets
attractiveattractive Of20 million Rediffmailsignups, 60 % are
from smalltowns. Similarlythe 1,00,000
whohavetransactedon Rediffonlineshoppingsite, 50 percentarefrom small
towns
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Rural marketing
Rural market accounts for 56 % of the total
FMCG demand, the tobacco major is
moving fast to add 31,000 villages to its
market and all by leveraging its web of
6,000 e- choupals
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CHARACTERISTICS OF RURAL
CONSUMER GROUP
Many rural Indiaswithin rural Indias
CTV ownership,top 1/3rd , 12% own; 2/3rd just 3%
SCATTERED MARKETRural marketisascattered market. Rural populationisscatteredacross 5,70,000villagesPopoulationsizeclass.doc
Unlike urbandemand,whichishighlyconcentrated, ruraldemandisscatteredoveralarger
areaA heterogeneouslot
Demographics,socio-cultural
Mixed pictureinincomeandsocio-eco positionMorethan 50% lowdisposableincome;insignihaslargeincome
Morethan 50% ofvery rich + well-offarein rural India; 41% ofmiddleclassin rural
Age: 25% 5-14; morethan 48% lessthan 20 years; 25% 20-35
Statetostatevariation; BIMARU states;villagesinindiaavg 33 develop index points; Kerala
88 points; Bihar 22; Maha, Haryana Karna 40 to 50
60% ofruralincomecomesfrom agriculture; Green,white & Blue revolution; BharatNirman
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CHARACTERISTICSCONTD.
CULTURALLY A DIVERSE AND HETEROGENOUS MARKETRural marketsarediverseintermsofreligious,social,culturalandlinguisticfactors.
Heterogeneityistheno.1 hallmarkofthe rural market-
5,70,000 villages,
halfdozen religions,
33 languages,1,650 dialectsanddiversesub-culturescharacterizethe market.
LIFESTYLEConservativeandtradition boundlifestyle.
Lifestyle undergoes majorchangewhich may becontributedtoseveralfactors:
1. Growthinincomeandchangeinincomedistribution.2. Growthineducation
3. Enhanced media reach.
4. Growinginteractionwith urbancommunities.
5. Marketerseffortsto reachoutthe rural market.
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Situation in which consumption
occursAvailability of electricity
Place of purchase: towns/haats/melas/RO
Influence by youngsters/bahus (ORG-M)Influence of community
Development marketing - discriminating
buyers
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RURAL DEMAND STEADY GROWTHPopoulationsizeclass.doc
Welcomechangeinthecompositionofruraldemand.
Many new products have entered the consumption basket of the ruralconsumer and relative shares of different categories of products haverecorded welcome change.
Several products already well established in rural market.
Textiles, bath soaps, medicines and hygiene products, fans , TVs, packagedtea etc.
In many products rural consumption account for larger share than urban.
washing soaps & batteries, rural share is over 60%,
bath soaps, packaged tea & hair oils more than 50%;
among durables like sewing m/c, wristwatches, table fans & pressurecookers ; colour tv more than 65%;
Telecom turnover will be 40% 2025
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Inseveral products rural markethasovertakenthe urbaningrowth rate
A survey by NationalCouncilofApplied
Economic Research (NCAER) showsthatrural marketisgrowingfasterthan urbanmarketinseveral products.
Theseinclude packagedtea,analgesics,
detergent powder,washingsoap anddetergentcake.
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Tapping The Rural Markets
Unique strategy in every function of
marketing
Segmentation
Channel
Product
Sales Force
Physical Distribution
Marketing communication
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Tapping The Rural Markets
Segmentation Geographic
Climate/irrigation level
Nearness to town
Demographic Population concentration
40% lives in 7% of villages
Age 16-30 years : 25 crores; greater literacy & exposure
SEC Classification
Income
Micromapping will reveal underserved pockets
Data Sources Census/ NCAER/NSSO/CSO
Thompson rural market index
MICA Rural market ratings on districts
Ruralscan, quarterly newsletter
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Marketing mix for rural markets Product strategy- Induce rural customers to buy and try the new
product trial by low unit packs , Sachets(HLL),Cavin Care -Chik, P&G-Vicks Vaporub, Godrej
with 6ml sachet , HUl 75gm lifebuoy & 100gm Wheel Detergent
Social & Cultural variations ITC sells its Gold Flake Cigarette pack in yellow cover
in South India : Purity & same brand in Golden color in North India .
Visual Patten on Packing : Red soap signifies Lifebuoy soap
Combi- Packs Colgate offers toothbrush with small toothpaste
Family Packs-Britannia , Priyagold
Product that are fairing well are Parle G , Lifebuoy ,Lux ,Nirma ,and Ghari ,Amul ,
Coca Cola ,Colgate , Eveready batteries , LG Electronics ,Philips , BSNL , Life
Insurance Corporation , Cavin care , Britannia , Hero Honda
Sunfeast and Ashirwad which today contribute to 60% of ITCs FMCGs business find aplace in all its rural shop shelves
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Marketing mix for rural markets Specifically Designed Product Rajdoot , Eveready brass torch- Jeevan
sathi , BATA introduced PVC shoes
Sturdy Product- HLL Lesancy (big soap)
Brand Names- Pilli tikki for washing soaps , Brand names Britannia s Glucose biscuits as Tiger with red background
symbolizing energy
Logos inserted so that consumers recall the product, Britannia launched economy Glucose biscuits Tiger
Utility oriented products- Philips introduced Bahadur in rural area a 2band transistor which covered entertainment channels as well; handwound radio; smokeless chulhas
Samsungs CTVs for rural markets in the 14 and 20 categories l LG Electronics launched Sampoorana , Indias first TV with Devnagri
script on screen display, equally accepted in urban LGs Golden eye andOnidas KY Thunder
Sell value brands, not cheap brands Ruf & TufAravind; Lifebuoy HUL; Tiger Biscuits - Britannia
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Marketing mix for rural markets Pricing Strategy-Low cost products i.e Clinic-plus in
50 paisa, one rupee , two rupee pack, Colgate at Rs. 50 /-
HLL derives 50% of its revenue from rural areas,
sells Lux shampoo in a four militer sachet priced at 50
Paisa and six-milliliter sachet priced at one rupee , Quality products Marico - Indian Edible Oil Company
Substitute costly parts with cheaper parts and materials (Milk proteins with Soya protein) Britannia-Probisk
Seconds sale Akai in India- sales increase
Special occasion pricing: festivals
Payment terms coinciding with harvest cycle Rich in rural buy by cash down payment
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Physical Distribution
Problems in transportation & warehousingParts of rural India outside rail network
50% of villages not connected by proper roads
Kachcha roads, inadequate warehouses; cold storageCost service dilemmaGuaranteed service in delivery increases the cost by
50% compared to urban area
Delivery VanCos/c&f agents/Stockists/distributors operates these
vans
HLL, ITC & Eveready
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Marketing mix for rural markets Place or Distribution-
Co-operative societies Utilization of petrol pumps
Feeder markets / Mandi towns
Delivery vans- HLL( Operation Harvest ) fleet of vans regularly visitingremote village and ITC
Project Shakti is HLLs rural initiative which is an attempt to use self help
groups as an alternate distribution channelSamsung- Van displays all the products , the company has tied up with
local distributors to showcase the Samsung range in local melas andfairs
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Place: Channel Management
Problems: Multiple tiers
Non-availability of outlets
Inadequate banking & credit facilities
The village shop is the key
Satellite distribution 2,300 towns with a population of > 20,000
Each stockists will service 100 outlets in 100 villages; can reach onelakh of six lakhs villages
Chain stores in rural DCM kisan hariyali kisan bazar 54 rural supermarket
ITC choupal sagar rural hypermarket chain across 15 states Aadhaar chain Godrej Agrovet; floor space of 1,000 sq.ft
Non-conventional delivery mechanisms ICICI Pru e-mitra; network of computer kiosks in Raj/ Aponline-AP
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Marketing communications
Constraints:Literacy rate is low
Linguistic diversity
Tradition bound nature, cultural barriers & taboosLocal idiom
Expensive, as elaborate and step by step; break existing deep-rooted
behaviour patterns
Audience is fragmented, location-wise & in media habits Job: Find a media mix that will deliver the message in a cost-
effective manner to a pre-dominantlty illiterate targetaudience
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Marketing communications
Selecting the Media Mix TV
Radio
Cinema 33% of cinema earnings from rural
Print (opinion leaders)
Outdoors Hoardings, wall paintings, illumination & other such display (Haats, mandis & mela)
POPs bright colours
Audio-visual vans Philips, Colgate-Palmolive, Godrej
Syndicated AV vans
Puppet Shows, folk theatre, Harikatha Music cassettes/cds
Demos
Word of mouth
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Marketing mix for rural markets
Promotion Television
Cinema- 36% of the population view cinema
radio
Print Media 9% read newspaper , 5%publications reach rural area
Hoardings , Posters , Banners- in Melas and puppet
shows e.g. HLL,ITC,Godrej,Nirma ,P&G are majorFMCG players who book their stalls
Gift Schemes etc,
Unilever Video Vans
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Sales Force Management
Rural Marketing Calls forSome Special Traits on thePart ofSalesmen.
Willingness to be located in rural areas.
Cultural congruence.
Attitude factors.
Knowledge of local language.
Ability to handle several product lines
Creativity
ICICI Pru hired 250 retired jawans of Air Force for sellinginsurance
HLL has largest rural salesforceAP Rural academy
700 youth have graduated; retail majors like Future Group; FoodWorld; Reliance Retail; Spencers Mc Donalds
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Arvind Mills
When Arvind Mills discovered even the cheapest brandcould not make dent in the rural markets .
It introduced ready-to-stitch Ruf&Tuf Jeans with price aslow as 195 a Piece .
The Jeans were distributed using local retail outlets invillages with population up to 5,000 .
Tailors were trained and given Machine accessoriesneeded to stitch heavy denim
In about year and a half Arvind sold 50 Lakh Rug & Tufkits because it had beaten the lowest-priced organizedsector jeans around Rs. 300 at that time
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Coca Cola
When Coca Cola re-entered the Indian Marketin the mid-1990s , it took the high road tomarketing and got nowhere.
More recently it re-invented itself and its TVcommercial showed Bollywood star Amir Khanfirst as a Punjabi Farmer and also in other rusticroles in different parts of India .
Coca Cola available at Rs. 5 a bottle
Result was within months Coke was able toreach out to rural audiences in large numbers allover India .
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Cavin Care
Cavin Care ( Chik shampoo fame ) found thatmany rural consumers are using bathing soap
for washing hair since it was practice followed
for years
The rural consumer was aware that shampoo
cleaned hair better , but at Rs. 2 a sachet it was
still beyond reach .
Cavin Care therefore launched Chik in sachetprices very cheap .
Today it is a huge success in rural markets .
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RURAL MARKETING IS
DEVELOPMENTAL MARKETING
FACINATING AND CHALLENGING
Challenges
Lack of understanding of rural customers
and data
Poor infrastructure
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India- Rural Market Opportunities
Opportunities The rural market in India constitutes 740+
million people, and is by far the largest potentialmarket in the world
Rural annual household income averagesRs.56,630 with high savings rates
Changing rural aspirations in consumptionpatterns and lifestyle unfolds opportunities forrural marketing
Literacy levels are rising steadily