Rural India: Challenges and Opportunities

Marketing today has completely transformed the nature and dynamics of business. One
today needs to be adaptive to survive. Marketing of products has taken precedence over
the process of production itself. This can be attributed to the fact that the new-age
consumer equipped with the potent tool of information seeks more knowledge about the
product, its features and its uses. Customer today indeed is the "King". He can make or
break the company. And when this information is presented in a creative and effective
manner, it creates an everlasting impression on the consumer's mind and may even alter
his perception of what he needs.

Marketers are forever seeking fresh challenges and scouting for more and more clientele
to be drawn into their sphere of influence. The urban consumer has always been
pampered with the most dazzling array of goods and services from every industry. But
the urban market is fast shrinking due to saturation caused by the competition, and the
growth rate over the past few years has consistently shown a declining trend. In the hunt
for fresh pastures, the vast and hitherto vastly unexplored terrains of rural India
consistently beckon the moolah-seeking marketer.

Why Rural India?

There are various reasons why every industry is taking a very serious look at rural
markets: -

• About 285 million live in urban India whereas 742 million reside in rural areas,
constituting 72% of India's population resides in its 6, 00,000 villages.
• The number of middle income and high income households in rural India is
expected to grow from 80 million to 111 million by 2007 while urban India is
expected to grow from 46 million to 59 million. Infact according to a recent
survey, there are morecrorepatis in rural Punjab than in a few big urban cities.
• Size of rural market is estimated to be 42 million households and rural market has
been growing at five times the pace of the urban market.
• More rural development initiatives by the government.
• Increasing agricultural productivity leading to growth of rural disposable income.
• Lowering of difference between taste of urban and rural customers.
 • Good Monsoons in the last couple of years.
• Growing rural infrastructure - thanks to Government initiatives.
• Setting up of channels like e-choupals by companies like ITC.

• Many companies like Colgate-Palmolive, HLL, Godrej, etc., have already made
forays into rural households but still capturing the markets is a distant dream.
Most marketers still lack in-depth knowledge to analyze the complex rural
market.
• In the Indian context, rural marketing is a complex subject. For a business
organization, rural marketing is beset with a number of problems. The prices of
rural marketing pose many problems due to the vastness of the country and a high
potentiality for providing an effective marketing system.

The traditional marketing activities of promotion, distribution, sales and servicing,

undertaken so far in the urban and semi-urban contexts, are to be extended to cover a
much wider area in a rural environment by introducing appropriate innovation, selection
and adoption.

There are about 5,76,000 villages in India, 79 percent of them with a population of less
then 1,000 each. The major hurdles in tapping the rural markets can be summarized as: -

1. High distribution costs

2. High initial market development expenditure
3. Inability of the small retailer to carry stock without adequate credit facility
4. Generating effective demand for manufactured foods
5. Wholesale and dealer network problems
6. Mass communication and promotion problems
7. Banking and credit problems
8. Management and sales managing problems
9. Market research problems
10. Inadequate infrastructure facilities (lack of physical distribution, roads
warehouses and media availability)
11. Highly dispersed and thinly populated markets
12. Low per capita and poor standards of living, social, economic and cultural
backwardness of the rural masses
 13. Low level of exposure to different product categories and product brands
14. Cultural gap between urban-based marketers and rural consumers

The development of the rural market will involve additional cost both in terms of
promotion and distribution. In rural marketing, often it is not promotion of a brand that is
crucial, but creating an awareness concerning a particular product field, for instance,
fertilizers and pesticides.

Urban and semi-urban based salesmen are not able to tap the full potential in the villages.
Here, it may be suggested that the marketers may select and employ the educated
unemployed from villages

Methods Followed Traditionally

Traditional methods of rural marketing make an interesting study and they ought to be
analyzed carefully to draw relevant conclusions. Conventionally, marketers have used the
following tools to make rural inroads: -

• Use of few select rural distributors and retailers to stock their goods but no direct
interaction with prospective consumer.
• Use of print media or radio but no alternate form of advertising for promoting
their brands.
• More focus on price of product but less attention devoted to quality or durability.
• Same product features for urban and rural setting with no customization for rural
areas despite differences in the market environment.
• Low frequency of marketing campaigns.
• Little uses of village congregations like haats and melas to sell the products.
• More focus on men as decision makers and buyers.
Strategies for Rural Marketing

The past practices of treating rural markets as appendages of the urban market is not
correct, since rural markets have their own independent existence, and if cultivated well
could turn into a generator of profit for the marketers. But the rural markets can be
exploited by realizing them, rather than treating them as convenient extensions of the
urban market.

he focus should be on infecting marketing culture into the villages. The educated
unemployed youth in the villages could be trained to carry out this mission.

1. Decentralizing rural markets by detaching them from the urban bases. A give-and-
take two-way approach should replace the present one-way exploitation.
2. The salesman in rural markets should be selected from the educated unemployed
villagers, trained well and appointed as salesmen. The town-to-villages shuttling
salesmen are to be replaced by stationary salesman in villages.
3. Companies should also adequately concentrate on educating the villagers to save
them from spurious goods and services.
4. Rural markets are laggards in picking up new products. This will help the
companies to phase their marketing efforts. This will also help to sell inventories
of products out dated in urban markets.
Future Outlook

Considering the magnitude of the task at hand with the companies, it makes sense for
non-competitive companies like HLL and LG to make a joint effort to penetrate the
market. They can use each other's distribution channels to leverage their brands. Also
considering the poor awareness levels of the people, competitors like HLL and P&G
should join hands to avoid the product proliferation, which results in confusing the
consumer. Rural consumers have a very high level of ethos so all the care should be taken
not to hurt them in any form of advertising. Moreover, every effort should be made by the
companies to promote the "my brand" feel in the minds of consumers. This can be
achieved by connecting the local industries of that place and, if possible, use it in
packaging or graphics of the product.

So the need of the hour is the integration of all the above stated approaches and
constantly reinventing the products and bringing new innovations. Companies will need
to think beyond the short-term gains and resort to experimentation so as to develop a
dedicated model for these areas.

In recent years, rural markets have acquired significance in countries

like China and India, as the overall growth of the economy has resulted into substantial
increase in the purchasing power of the rural communities. On account of the green
revolution in India, 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 taken shape. Sometimes, rural marketing is confused with agricultural
marketing – the later 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. Also,
when we consider the scenario of India and China, there is a picture that comes out,huge
market for the developed products as well as the labor support. This has led to the change
in the mindset of the marketers to move to these parts of the world.
Also rural market is getting an importance because of the saturation of the urban market.
As due to the competition in the urban market, the market is more or so saturated as most
of the capacity of the
categories to an unexplored market i.e. the rural market. This has also led to the CSR
activities being done by the corporate to help the poor people attain some wealth to spend
on their product purchasers have been targeted by the marketers.So the marketers are
looking for extending their product categories. Here we can think of HLL (now, HUL)
initiatives in the rural India. One of such project is the Project Shakti, which is not only
helping their company attain some revenue but also helping the poor women of the
village to attain some money which is surely going to increase their purchasing power.
Also this will increase their brand loyalty as well as recognition in that area. Similarly we
can think of the ITC E-Chaupal, which is helping the poor farmers get all the information
about the weather as well as the market price of the food grains they are producing.In
other view these activities are also helping the companies increase their brand value. So
as it is given above the significance of the rural market has increased due to the saturation
of the urban market as well as in such conditions the company which will lead the way
will be benefited as shown by the success of HUL and ITC initiatives.

Strategies

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. This, along with several other related issues, have been
subject matter of intense discussions and debate in countries like India and China and
focus of even international symposia organized in these countries[2].

Rural markets and rural marketing involve a number of strategies, which include:

 Client and location specific promotion

 Joint or cooperative promotion..
 Bundling of inputs
 Management of demand
 Developmental marketing
 Unique selling proposition (USP)
  Extension services
 Business ethics
 Partnership for sustainability

Client and Location specific promotion involves a strategy designed to be suitable to

the location and the client.

Joint or co-operative promotion strategy involves participation between the marketing

agencies and the client.

'Bundling of inputs' denote a marketing strategy, in which several related items are sold
to the target client, including arrangements of credit, after-sale service, and so on.

Management of demand involve continuous market research of buyer’s needs and

problems at various levels so that continuous improvements and innovations can be
undertaken for a sustainable market performance.

Developmental marketing refer to taking up marketing programmes keeping the

development objective in mind and using various managerial and other inputs of
marketing to achieve these objectives.

Media, both traditional as well as the modern media, is used as a marketing strategy.

Unique Selling Propositions (USP) involve presenting a theme with the product to
attract the client to buy that particular product. For examples, some of famous Indian
Farm equipment manufactures have coined catchy themes, which they display along with
the products, to attract the target client, that is the farmers. English version of some of
such themes would read like:

 The heartbeats of rural India

 With new technique for a life time of company
 For the sake of progress and prosperity

Extension Services denote, in short, a system of attending to the missing links and
providing the required know-how.

Ethics in Business. form, as usual, an important plank for rural markets and rural
marketing.

Partnership for sustainability involve laying and building a foundation for continuous
and long lasting relationship.
'''Building sustainable market linkages for rural products: Industry’s role, scope,
opportunities and challenges'''
Introduction:

Rural products of India are unique, innovative and have good utility and values. Large
number of these rural products (like handicraft items, food products, embroidery, clothes
& other products) sustains a significant segment of the population in the rural areas.
Several attributes of rural products can be identified, for which, it has a demand in the
market. Out of the lots, ‘ethnic origin’ and ‘indigenous design & appearance’ are two
traits of rural products, attracting a premium in the market. But, contrary to this, the non-
uniformity of rural products (from one another) and lack of its quality control measures
has been creating a negative demand. Besides, the small sized and dispersed production
units of these rural products hinder realization of the economies of scale in marketing and
result in high transaction costs per unit of output. Niche-based products have no local
market. Products in local use are also not marketed horizontally; they often first travel
down to market through a long chain of intermediaries and then up to more difficult
locations in the rural areas. In the process, the people in rural areas suffer from both low
prices as producers and high prices as consumers. In this conflict, rural products loss its
equilibrium and the supply side becomes exponentially high. Because of this hazard, rural
entrepreneurs face acute economic loss and rural markets become stagnant. Therefore,
there is an emergent need for Building sustainable market linkages for rural products, so
that, it can be connected to larger markets and farmers can get a sustainable livelihood.

Market linkages for rural products:

There are, broadly speaking, three ways in which they can be connected to the markets.
They can do it on their own — through cooperatives. Or, the state can do it for them —
through its procurement engines. Stages one and two, in a manner of speaking. Today,
developmental thinking on market linkages has reached stage three — linkages through
companies or industries. Rural markets are regarded as organizations for marketing of
non-farm products in a traditional setting. Developing rural markets is one of the major
concerns of government and Non-governmental organization in India. This subject has
attracted large number of research studies over past. Among which noted contributions
are made by Rajagopal, PhD, FRSA; faculty members of Institute of Rural Management
Anand, IIMA and others.

Across India, previous attempts to create such linkages have floundered. Take Assam and
other eastern states itself. Around the Eighties, the state government here decided that
cooperatives were a great way to consolidate its political base. Loans went to the
undeserving. Debts were written off. The institutions slowly got corrupted. As for the
linkages provided by the state, these offer uncertain sustainability. Given this context,
one can conclude that profit-oriented industry linkages are a more sustainable, more
scalable alternative. In this scenario, companies can use the social infrastructure (the self
help group et al.) as an alternative procurement and distribution chain and vise versa.
Industry’s role in building market linkages:
To make an effective market linkage, industries have to play as an engine of market,
which can generate a brand image of the rural products. This initiative of industries will
also strengthen the backward and forward linkages of the rural market, besides,
accelerating the innovations of the rural products. Definitely, this strategy will also give a
remarkable dividend to the industries & profit making companies. In micro level, it is
observed that to create a sustainable market linkage for rural products, industries can
develop an ecosystem of Self Help Groups (SHGs) by involving the local communities
through village level empowerment. It is nothing less than the next phase in the
democratization of commerce. Under this paradigm, industries can create a network with
viable marketing channels covering all the linkages from villages to the global level. This
architecture provides the right value of procurement through the village procurement
centres and rural entrepreneurs can sell their products faster with better price realization.
This model is also capable of generating a consumer business and an output business in a
win-win scenario, where rural producers can get a wide marketing horizon and the
industries shall get a new, lower cost ‘salesforce’. Another role of industries in building
market linkages for agro-based rural products can be the ‘dynamic contract farming’. If a
conventional industry can kick off a contract farming business, and export niche
horticulture crops like cucumbers, the small and marginal farmers who could grow these
small cucumbers would make Rs 30,000 in profits in a year. KRBL, one of India’s largest
basmati exporters, has contract farming agreements with 24,000 farmers; Global Green
buys from about 12,000 farmers. Moreover, in the current era of information technology,
industry and private companies can also creatively use ICT for building sustainable
marketing linkages. This approach creatively leverages information technology (IT) to set
up a meta-market in favour of small and poor producers/rural entrepreneurs, who would
otherwise continue to operate and transact in 'unevolved' markets where the rent-seeking
vested interests exploit their disadvantaged position. ITC e Choupal is the best example
in this context. Through creative use of Information Technology, ITC eChoupal has been
creating sustainable stakeholder value by reorganizing the agri-commodity supply chains
simultaneously improving the competitiveness of small farmer agriculture and enhancing
rural prosperity. eChoupal also sidesteps the value-sapping problems caused by
fragmentation, dispersion, heterogeneity and weak infrastructure. ITC takes on the role of
a Network Orchestrator in this meta-market by stitching together an end-to-end solution.
It eliminated the traditional 'mandi' system which involved lot of middlemen as a result of
which farmers failed to get the right value for their produce. The solution simultaneously
addresses the viability concerns of the participating companies by virtually aggregating
the demand from thousands of small farmers, and the value-for-money concerns of the
farmers by creating competition among the companies in each leg of the value chain.
Scope & opportunities:
The basic scope of this novel initiative will be the mutual benefits of the rural
entrepreneurs and industries. The entrepreneurs – primary beneficiaries, SHGs – bridge
with the community, participating companies/industries and rural consumers have
befitted through a robust commercial relationship. These models of marketing linkages
demonstrate a large corporation which can play a major role in reorganizing markets and
increasing the efficiency of a rural product generation system. While doing so it will
benefit farmers and rural communities as well as shareholders. Moreover, the key role of
information technology—provided and maintained by the industry/company for building
linkages, and used by local farmers—brings about transparency, increased access to
information, and rural transformation. Besides, this strategy of market linkage, addresses
the challenges faced by rural entrepreneurs due to institution voids, numerous
intermediaries and infrastructure bottlenecks. Moreover, the prime scope of this model is
the creation of opportunities for the rural entrepreneurs for product differentiation and
innovation by offering them choices. Because of this sustainable market linkages, rural
producers can participate in the benefits of globalization and will also develop their
capacity to maintain global quality standard. Nonetheless, it creates new stakeholders for
the industry sector. And subsequently, they become part of the firms’ core businesses.
The involvement of the private /industry sector at the rural product and market
development can also provide opportunities for the development of new services and
values to the customers, which will find application in the developed markets. It will be
worth mentioning that building a sustainable market linkage through industry’s
intervention will also empower the rural mass (producers, farmers & entrepreneurs) to
cope with socio-economic problems in the rural society and will ensure economic self –
reliance.
Challenges:
There are significant challenges to the entire process the most important being the
capacity building of the rural entrepreneurs. For decades, the entrepreneurs associated
with very conventional/traditional knowledge of business, humiliation with government,
so they are likely to look at these initiatives with skepticism. Only consistent performance
can convince the skeptics. Therefore, the industries must play a catalytic role to cope with
this challenge and should also train the entrepreneurs to develop their managerial and IT
skills. On the other hand, the products of the existing and popular brand also stand as
threat to the rural products. These global giants (brand) may try to suppress the rural
products in the markets with its communication hype. Therefore, developing alternative
and additional market linkages for these products is an absolute necessity. Moreover, the
low volumes of rural products, high operating costs, high attrition, and absence of local
know how and relationships may also create problem in the process. Henceforth, it is
essential to make a way out to cope with these odds.

Conclusion:
These issues gain added complexity under globalization, where markets are characterized
by extreme competition and volatility. While rural products has been perceived
traditionally as catering to the local market, or at best, to a wider national market through
limited formal channels, the reality of globalization since the 1990s introduced a new
dimension to the market for such products. The issue of rural product generation through
industrialization, therefore, needs to be viewed from a new angle and on far more
scientific lines. The core of a scientific approach is to understand the market
opportunities for rural products along with the country's development priorities and to
chalk out a strategy where rural industries have an important role to play. While rural
products are forced to increasingly become part of global supply chains, these products
need to adapt themselves, not only according to the changing tastes of the national
market, but also according to changes in tastes in the international market. Therefore, a
process is essential to explore the market linkages and capacity building for SHGs
through a bottom up approach and continuous dialogue with stakeholders of rural
enterprise. This process should ensure the participation of rural people as consumers and
producers in the globalization mechanism, with better livelihoods and global access to
markets. The real challenge of building a sustainable market linkage starts here.
Present position

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, as also in several other countries, like China[3], is still in evolving
shape, and the sector poses a variety of challenges, including understanding the dynamics
of the rural markets and strategies to supply and satisfy the rural consumers.

SARAS

The promotion of Swarozgaris under the banner of SARAS was one of the major steps
taken by the Ministry of Rural Development during the year 1999-2000 for the
improvement of rural business. The main aim of the Ministry of Rural Development in
subscribing most of the rural products under the banner of SARAS was that, it wanted to
give the rural products a globally recognized brand name which would be an added value
to the trading of these products. This task taken up by the Ministry of Rural Development
has opened up a galore of opportunities for the rural artisans or entrepreneurs or officials
who are deeply involved in the program of Swarnjayanti Gram Swarozgar Yojana
(SGSY). The business people got a vast exposure in the international market with the
help of this program.
This can be claimed to be one of the beneficiary activities performed by the Rural
Ministry for the welfare of the state's economy especially the rural sector. SARAS was
recognized to be an umbrella brand under which a variety of products were marketed not
only in the domestic market but in the international markets as well. SARAS has been a
regular annual event every since 1999 when it hit the market at one go with its innovative
approach to the consumers. The SARAS exhibition is also a portrayal of the skills of
people residing in different corners of the rural sector. The products are directly displayed
in the exhibitions executed by SARAS for rural products, and the visitors enjoy the
privilege to make their choices directly from the exhibition. The products are highly
adored by every section of society and people from all across the country participate in
the SARAS exhibition. The sales graph of the rural products are growing higher and
higher and every year there is a phenomenal rise in the selling of products. Some
participants even order these products in a bulk apart from buying single pieces. The
products range includes handicrafts, textiles, artwork, furniture, draperies, household
artifacts, items of daily use, and many more.
The exhibition of rural products under the banner of SARAS has also been a participant
in the India International Trade Fair (IITF). Such enhancements in the program have
fueled the confidence and enthusiasm within the craftsmen and they are giving their best
of production every year for it. SARAS has not only recognized the in-built skills of the
artisans that were subdued but also provided them with a plethora of opportunities to
make the best use of it. The goods manufactured by these rural poor are made popular to
adorn the domestic markets and has also paved its way through the urban, metropolitan,
and global markets.
SARAS exhibitions have also won the confidence of the stakeholders in the development
of rural products or craftsmen. Apart from opening up of new roads for these hidden
talents, SARAS has been also playing a key role in connecting these talents with various
markets. SARAS 2003 will be strictly focusing on improving the skills of the artisans and
increasing the richness of products by developing more awareness programs among the
rural poor.

ORMAS (Orissa Rural Development and Marketing Society)

ORMAS (Orissa Rural Development and Marketing Society) is a self-governing apex

body, which is run by the Panchayati Raj Department under the Government of Orissa.
The main aim of ORMAS is to facilitate a better livelihood to the rural poor of Orissa by
implementing advanced technologies.

The main objective with which the state government has set up the Orissa Rural
Development and Marketing Society under the supervision of Panchayati Raj
Department, are-

 To incorporate better technology

• To provide new marketing strategies for better networking

• To undertake development measures to sharpen the skills of the rural producers to
generate better products

This is one of the major steps taken by the state government for the amelioration of the
rural business in Orissa. This also ensures a sustainable living for the rural section of
society who are involved in the manufacturing of rural products that are sold in the
markets across the country and also in the international market.
The chief activities of the industrial sectors of ORMAS include Handloom, Handicraft
and other Utility items. Apart from these three items, Orissa Rural Development and
Marketing Society is also involved in manufacturing minor forest and agri-based
products which possess a great foundation of raw materials and skills. The activities
carried out by ORMAS (Orissa Rural Development and Marketing Society) involve
producing siali and sal leaf plate and cups, hill broom, Rock Bee honey processing, dal
processing, kewda leaf products, and many more. ORMAS also does a countrywide
networking for marketing purposes for products such as Tamarind, Amla, Harida,
Kalmegh and few other MFPs and medicinal plants. In the recent period, ORMAS
promoted few more agricultural rural products for a better trading such as Onion,
Turmeric and Ginger.

ORMAS also facilitates proper input connections for the promotion of these rural
products. ORMAS works at macro-level that ensures smooth implementation of the
programs involved in the welfare activities. The other activities of the ORMAS include
helping in the formation and promotion of Self Help Groups, to facilitate the banking
operations of the SHGs, and to offer marketing linkages with lucrative prices to the
producers. The ORMAS also facilitates capacity building of the self-help groups by
offering them basic orientation and training to develop their skill further. Moreover
linkages are created by the ORMAS for meeting the infrastructure requirements of these
groups and to provide them the appropriate technology required for further development.
The ORMAS (Orissa Rural Development and Marketing Society) have taken up product
promotion programs as well in order to supply more standardized products.