MODULE 6 RURAL MARKETING

38.1 RURAL DEMAND

Welcome changes in the composition of Rural Demand
The composition of rural demand has been changing significantly & in a
welcome manner in recent years. Many new products have entered the
consumption basket of the rural consumer; and the relative shares of
the different categories of products in the consumption basket have also
recorded a welcome change. The upper segments, in particular, have
started buying & using a variety of modern consumer products, which
were till recently unknown in the rural market.

Products that are already well established in the Rural Market

Textiles of different kinds
Bath soaps, washing soaps, washing powder, detergent powder/cakes
Medicines & hygiene products
Toothpowder/Toothpaste
Razor blades
Packaged tea
Other beverages including alcoholic beverages
Tobacco & tobacco products
Agricultural inputs like fertilizers, pesticides
Cooking utensils
Pressure cooker
Ornaments & jewellery
Agricultural capital goods like tractors, pump sets
Bicycles, scooters & motorcycles
Wristwatches
Radio/Transistor/Tape Recorder
Fans/ TV (B&W)
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38.2 RURAL DEMAND (CONTD-1)

In many products, rural consumption accounts for a

larger share than urban: In washing soaps (cakes/bars), the rural
share is >60%. In popular bath soaps, it is >50% & in batteries, it is
>56%. Similar is the case with packaged tea & hair oils.

In many products, the rural market has overtaken the

urban growth rate: A survey by NCAER shows that the rural
market is growing faster than the urban market in several products.
These include packaged tea, analgesics, and detergent powder, washing
soap & detergent cakes. Growth in motorcycles too has been more in the
rural market than the urban market.

Position of Durables:

According to NCAER, against 7 consumer

durables owned by urban HHs on an average, rural HHs 3. Rural
Indias market for consumer durables is estimated @ Rs 45 billion, with
an average annual growth rate of 8%.

It is now known that every other rural HH has a bicycle, every 3rd HH
has a fan, every 6th HH has a B&W TV and every 7th a pressure cooker.
Also, nearly 80% of rural HHs own a mechanical wristwatch & 42% a
radio/transistor. Rural India now purchases a 3rd of the CTV, a 4th of
the mixer/grinders and a 5th of the refrigerator sold in the country.
Who buys the hi-priced durables in the rural areas? With reference to
the rural market, NCAER has classified durables into 3 categories. The
1st consists of relatively lo-priced durables like watches, radios, irons,
fans etc., The 2nd consists of relatively hi-priced durables like B&W
TVs, sewing machines mixers & 2-in-1s. The 3rd consists of hi-aspiration
& hi-priced durables like CTVs, refrigerators & motorized 2-wheelers.
The 1st is well penetrated & accounts for the lions share of rural durables demand
& is growing slow. The 2nd is modestly penetrated & accounts for 1/5th of the total
value of rural durables demand & is growing at a healthy rate, while the 3 rd is
nascent & is growing at a hi-pace.
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38.3 RURAL DEMAND (CONTD-2)

Factors behind the growth & diversification in Rural Demand :
While a variety of factors have brought about the big growth &
welcome change in the rural demand, a few of them such as growth in
income, changes in income distribution, changes in lifestyle & the
expectation revolution among the rural folks deserve special mention.
New income due to agricultural/rural development: The
technological breakthrough, popularly known as the green revolution,
which took place in Indian agriculture from the mid-70s onwards, has
added to the prosperity of rural India considerably. Because of offering
high support prices for farm products, there is more money in the rural
areas. The rural population can no longer be labeled as a povertystricken lot.
The Expectation Revolution: The rising expectations of the rural
people have greatly influenced the rural market environment. It has
enlarged the desire as well as awareness of the rural people; it has
strengthened their motivation to work, earn & consume. The rise in
income provides substance to the aspirations.
Rural demand is more seasonal: The predominance of agriculture in
the income pattern is one main reason for this. The relatively greater
influence of marriages & festivals on the purchase pattern is another.
Interestingly, marriages & festivals often coincide with the harvest.
Besides being seasonal, rural demand is somewhat irregular as well. The
predominance of agriculture in the income pattern is again the main
reason for this. After all, agriculture in many parts of India still
depends on the vagaries of the monsoons.

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38.4 RURAL MARKETS ATTRACT CORPORATES

Growing opportunity Main Driver: The growing opportunity

in the rural market is no doubt the prime factor. The increased
income/purchasing power of the rural consumer & the improve income
distribution have enhanced rural demand for several products. Better
access to many modern products/brands has added to this growth.

Heat of competition in the urban market a strong driver:

The opportunity in the rural market becomes all the more rosier when
the corporate see it in combination with the growing competition in the
urban markets. The heat of competition in the urban market actually
serves as the stronger driver behind the growing interest of corporate in
the rural market. The fact that the rural market is still largely an
untapped & virgin market & the fact that the early entrants can tap it
without having to face intense competition as in the case of the urban
market, makes the rural market all the more attractive to them.

EXTENT OF RURAL SALES BY SELECT COMPANIES

COMPANY
HLL
GODREJ
MARICO
SKB
GLAXO
RANBAXY
TOYOTA

RURAL SALES (%)

50
30
25
25
25
17
50

COMPANY
COLGATE
CAVINCARE
CADBURYS
HEINZ
CIPLA
NICHOLAS
HERO HONDA

RURAL SALES (%)

50
33
25
20
18
19
40

EXTENT OF RURAL SALES BY SELECT INDUSTRIES

INDUSTRY
AUDIO
CTVs
CEMENT

RURAL SALES (%)

INDUSTRY
40
REFRIGERATORS
22
PHARMA
10 - 20
PAINTS

RURAL SALES (%)

24
20
10 - 12

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38.5 RURAL MARKETS ATTRACT CORPORATES
Many companies have already taken to the rural market in a big way
It can be seen from the earlier graph that in the FMCG category, of
the revenue of HLL & Colgate comes from the rural market. In the case
of many other companies too, the countryside accounts for a substantial
part (25-30%) of the total sales.
It can also be seen that about 1/5th of pharma sales occur in the rural
India. For Glaxo, the proportion is slightly higher at about 25%. In
respect of hi-priced durables, about 1/4th of the TV sales happen in rural
India; Kinetic sells about 30% of its scooters, Toyota nearly half of its
vehicles & Hero Honda 40% of its bikes.

Tapping the Rural Markets

While rural India does not constitute an attractive & sizeable market,
firms have to strive hard for securing a share of it. For, the market
bristles with a variety of problems. The firm has to grapple with them &
find innovative solutions. Particularly in every task of marketing, rural
marketing poses some unique problems.
The major tasks that need unique handling in rural marketing are:

Segmentation & Targeting

Product Management
Physical Distribution
Channel Management
Sales Force Management AND
Marketing Communication

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38.6 SEGMENTATION & TARGETING
Geographic Segmentation
In the first place, the rural market can be segmented geographically,
using different geographic bases.

Climate & Level of Irrigation

Regions endowed with favorable climate are usually more prosperous
compared with climatically handicapped regions. Level of irrigation can
be another base; irrigated areas & dry land areas pose different
economic & marketing environments.

Nearness to a feeder town/Industrial project

Studies have revealed that consumers located close to a feeder town visit
it at least once a month to sell their product &/or buy their
requirements, & in buying habits, they differ from those living in the
interior areas. It will thus be meaningful to segment the rural market
into consumers located closer to a feeder town & consumers located
away from them.

Demographic Segmentation
The rural markets can be segmented demographically too. In fact, there
are many possibilities of segmenting the rural market demographically:
Population Concentration: About 40% of the rural population lives in 7% of
the villages in the country & remaining 60% in the other 93% of the villages.
Thus, the market can be segmented on the basis of different size classes with
regard to population.

Age: The youth in the rural areas can be picked up as a separate market. There
is a population of > 200 m in the age group of 16-30 years in the rural market.
Surveys have revealed that the younger generation dominates purchases in the
rural market. This is due partly to their greater literacy & exposure, & partly to
their changing values & lifestyles.

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38.7 SEGMENTATION & TARGETING
Literacy Level
Though rural India, in general, is characterized by low literacy, there
are wide variations in the matter of, literacy. For ex, while the rural
literacy rate in Kerala is 80% that in Bihar is only 15%.

Income
The rural consumers can be segmented into different income classes.
They can also be segmented into regular & seasonal nature of rural
income & demand. There is a sizeable salaried class in the rural India.
There is also a sizeable self-employed group, consisting of shopkeepers
& service providers.

Buying Behavior Segmentation

Rural consumers differ in their buying behavior from their urban
counterparts as well as among themselves. Firms should, generate
relevant data on the rural consumers & their buying behavior,
perceptions & attitudes & then segment them using their buying
behavior as the base.

Thomson Rural Index

Hindustan Thomson associates have developed the Thomson Rural
Market Index based on 26 variables, including area of the concerned
district, demographic pattern, occupation pattern, agriculture-related
data, rural electrification data & commercial bank data. This index can
be of use ion segmentation.
The firms will have to abandon SEC in respect of HHs, while
segmenting the rural market. For ex, income in rural HHs is not very
well defined & urban classifications of occupations may not be relevant
to the rural area.
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