FAVOURABLE GOVERNMENT POLICIES

Investment

in agriculture and rural development through five year plans research and extension

Green revolution Agriculture education, White

revolution: Milk production increased from 47 mio tonnes(1950) to 150 mio tonnes (2009). Still only 20% of the milk is processed

 VISION

(2020) BY Dr Abdul Kalam Focus on PURA i.e. providing urban facilities in rural areas- education, health care, sanitation, roads, communication, employment opportunities- for development of rural sector.

 Adi

Godrej, Chairman of Godrej has observed The rural consumer is discerning and rural market is vibrant. At the current rate of growth, it will soon outstrip the urban market. The rural market is no more sleeping- but we are.

Govt measures for rural development Total sanitation campaign in operation in 590 districts in the country Kuti Jyoti programme to provide single point light connection to rural households Mid day meal scheme: 14 crore children covered under the programme National health mission to prove health care facilities to remotest househols

 At

present only 300 out of 604 districts have medical colleges. To overcome acute shortage of doctors in rural areas, the Government has plans to start a unique three-and-a-half-year bachelor course in medicine for students from villages. Doctors have to work only in rural areas

 National

Rural Employment Guarantee scheme started in 2007-2008. Provided employment for 100 days a year for 3.5 crore households in rural areas. Pradhanmantri Gram Sadak Yojana to provide road connectivity to villages above 2000 population National Food Security Mission to increase production of wheat, rice and pulses

 HDFC

& SKS Micro Finance : Housing

loan Project to provide loans for improvement of dwellings primarily to low income women clients in Andhra Pradesh. The loans will be in the range of Rs 50,000-1.5 lakhs for a tenure of 3-5 years.

 Transition

in Rural Society Due to increase in literacy level, income, reach of mass media, more employment opportunities , rural people are leaving caste based occupations, traditional belief, traditional life, joint family life and servant master relationship and moving to towns for a better living.

 Rural

people want to replicate the life style of urban people. Agricultural development contributes towards self sufficiency in food production as well export of agricultural commodities to earn foreign exchange. There is mobility of labour from agriculture to industrial sector. This has lead to shortage of labour in villages particularly during peak agricultural season

About 70 crore population continue to live in villages and industries cannot absorb such a huge population. Therefore development of agriculture industries, handicrafts, institutional credit, minimum wages, infrastructure, social security etc have to be taken up for over all development of rural sector.

 PRIVATE

INITIATIVES

Agricultural

input companies Consumer goods companies Software for land records, community certificate, commodity prices e-choupal

 MEDIA

EXPLOSION

Expansion of regional TV, e-seva( AP), Bhoomi project (Karnataka), Project I shakti (HUL)

ASPIRATIONS

OF RURAL PEOPLE AND ATTRACTION OF HIGH STANDARD OF LIVING:

Rural youth forms a distinct segment of the population. They are modern, knowledgeable and receptive to changes than their elders. They value material comforts like TV, two wheelers, ready made garments, cosmetics etc

GROWTH IN INCOME: Modern farming methods Cultivation of cash crops Poultry, dairy, small scale industries Movement of people to cities and remittance of money from NRIs etc Cotton and Village Industries Hotels, Transport, Insurance, Banking, BPO, Education Centres, Traders Government Welfare Schemes Service Class working in nearby towns

 NEED

FOR EXPLORING THE GROWING RURAL MARKETS Severe competition in urban markets To treat agriculture as a business Creates employment opportunities Example: Fisheries, Insurance, BPO operations, development of industries Rural tourism: Example: Rural areas of Rajasthan, Plantations in South and East, Wine tourism in Maharashtra

 Over

70% of the population lives in rural areas Increase in disposable income Less foreign competition Brand loyalty, Product life cycle advantage ( Washing powder growth 6% in urban and 20% in rural)

 HOW

TO IDENTIFY POTENTIAL Main occupation is Agriculture for about 70% of rural population. Potential of the rural market depends on Irrigation facilities Types of crops/varieties grown Size of the farm Cultivation practices Use of agri inputs and agri machinery

 URBAN

ORIENTATION denotes the degree to

which a rural consumer would like to replicate the life style of urban consumer. Examples: Villages close to towns and centres , villages connected by public transport facilities.
FEEDER

MARKETS/MANDIS

Rural consumers by durables from class 2 towns (50,000 to one lakh population) and class 3 towns(20,000 to 50,000): There are 500 class 2 towns and 1500 class 3 towns

THOMSON RURAL MARKET INDEX

HTA has identified the relative potential of 355 districts in our country based on 26 parameters Population, number of villages, literacy, no of cultivators/agricultural labourers/non cultivators, cropped area, irrigated area, area under food crops/non foods crops, average size of the farm, fertiliser consumption, no of tractors, electrification, no of rural branches of banks, deposits, advances,

THOMSON RURAL MARKET INDEX Classification of Potential Markets

Class of markets No of districts

A
B

22
39

17.80
20.50

C
D E
total

54
86 154
355

20.40
23.00 18.30
100

 RURAL CONSUMERS The landlords Affluent farmers Small farmers ( 1-2 ha of land) Marginal farmers( upto 1 ha of land) Tenant farmers Agricultural labourers Traders( Agri produce/merchants) Petty traders/artisans Service class Unemployed /underemployed people

QUALITIES OF OPINION LEADERS Credibility Positive and Negative information Information and advice Category specific Examples: Rural educated youth, village president, teachers, painters, mistry etc

 Rural

market is growing since 1980s Bigger than urban market for FMCG and Durables with 53% and 59% respectively of the total market Market size: 1,23,000 crores consisting of about 70,000 crores for FMCG/durables, 45,000 crores for agriinputs and 8000 for 2/4 wheelers.

 LIC

sold 55% of the policies in rural India About 30% of the mobile users in rural areas 41 million kisan credit cards issued exceeds 22 millions credit/debit cards issued in urban India

 The

number of middle and higher income group ( Rs 70,000 plus income) in rural (21.7 million) and urban (24.2 million) are nearly the same. Many companies are active in rural market: Example: HUL 50%, Colgate 40%, Hero Honda 40%, LG 40%, Cavin care 40%, Godrej 30%, Cadbury 30%, Bharti Airtel/Vodafone(30%) ( 2008)

 Products

that are well established in Rural market:

Bicycles, motor-cycles, agri inputs, tractors, radio, coffee, tea, tobacco, bathing and washing soap and textiles.

Products
Ready

that have entered the markets in recent years:

made garments, baby care products, packaged food stuffs, consumer durables, cosmetics and toiletries, mobile phones, computers

 Rural

consumption is more compared to urban market: Bicycles, mechanical watches, tailoring machines. Products where rural consumption growth rate is higher than urban markets: Packed tea, bathing and washing cake

PRODUCT Bicycles Radio Mechanical watch Washing cake Black and white TV Colour TV Washing machine Refrigerator Nail polish Toothpaste Shampoo Face cream Tooth powder

RURAL 78% 79 76 68 63 29 15 24 23 39 25 28 79

URBAN 22% 21 24 32 37 71 85 76 77 61 75 72 21

 HIERARCHY OF NEEDS Category A( Immediate use

to the family): Bicycles, wrist watches, radio, electric fans B(Breaks the monotony of house work and source of entertainment): Sewing machines, stereo set, B & W TV C (Supplement income, entertainment and comfortable house hold working) : Colour TV, Moped, Motor cycles, Refrigerators

Category

Catergory

 SOCIAL

CLASS The rural society consists of a hierarchy of classes or grades of people. Social class is determined by a combination of factors such as education, occupation, income, wealth etc The type of durable owned by a household gives an indication of the grades of people

Category

Products
Jeep/Car
Motor cycles, AC,Colour TV. Refrigerator Moped,B&W TV, Audio, Grinder Bicycle, fans, iron
Watches, radio

1995-96

20062007

The affluent
The well-off The climbers The aspirants The destitute

1.6%
2.7 8.3 26 61.4

5.6%
5.8 22.4 44.6 21.6

 Physical

distribution

Transportation, warehousing, communication

Channel

management

Multi-tier system: Example Depot/C&F agent>distributor in major town, Stockist at taluk level, wholesaler in agricultural centres/block level and retailers in villages

Channel management Limited availability of retailers Poor viability of dealers Fewer brands Inadequate banking and credit facilities

Rural retailer

South
West East North

Average daily turnover (2000 & below population) Rs 562.00

Rs 404.00 Rs 371.00 Rs284.00

AVERAGE NUMBER OF BRANDS PER DEALER

Products Toothpaste Tooth brush Biscuits Hair oils

Rural 3 3 3 3

Urban 7 6 9 7

 SALES

FORCE MANAGEMENT

Fluency in local languages Knowledge of product, market and competition Basic knowledge of agriculture Knowledge of cultural factors: Preference for experience, look for value for money, dont make impulse purchases, prefers sturdy products, greeting elders with folded hands etc

SALES FORCE MANAGEMENT Knowledge of different type of customers Selling skills Capacity to work extended hours Ability to put up with inadequate boarding and lodging Trust and understanding while dealing with customers

RURAL PROMOTION UNDERDEVELOPED MARKETS AND CONSUMERS Low income Seasonal income Low literacy Traditional belief/ occupation/ life

 PRODUCT

Examples:

Small Unit pack, Sturdy products, No frills product etc PRICING Examples: Post harvest schemes, Extension of credit to channel members

BRAND PROMOTION THROUGH RURAL YOUTH RURAL COMMUNICATION

Examples:

Farm to farm visit, Group meeting of rural consumers, AVP vans

OPINION LEADERS DISTRIBUTION

Availability

of products with village retailers for FMCG goods