1. rural market - an introduction
TRANSCRIPT
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Rural Quotes
The future lies with those companies who see thepoor as their customers.
CK Prahalad to Indian CEO's, Jan 2000.
To get rich, sell to the poor.Pradeep Kashyap.
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Lecture Plan
Course Plan
Nature of Assignments
Rural Marketing Issues, Opportunities& Challenges
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RURAL MARKETING
Course Plan
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Rural Marketing Course Plan Details
Issues, Opportunities & Challenges Rural Marketing Environment
Defining Rural India
Evolution of Rural Marketing Rural Market Structure
Size of Rural market
The Rural Economic Scenario
Rural Economic Structure Incomes & Consumption
Physical Infrastructure
Marketing Infrastructure
Commercial Infrastructure and Govt. policies
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Rural Marketing Course Plan Details
Consumer Behaviour Cultural Factors
Technological Factors
Economic Factors
Characteristics of the Rural Consumer
Buying Behaviour Patterns Customer Relationship Management and the Trade role
Rural Market Research Planning Rural Research
Field Procedures & Rural realities
Understanding the Rural Market Research Industry
Segmenting, Targeting & Positioning Demographic/Psychographic & Behavioural Segmentation
Targeted/Differentiated Marketing
Identifying/Selecting/Developing & Communicating the positioning
concept
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Rural Marketing Course Plan Details
Product Strategy Product Concepts & Classification
Rural Product Categories
New Product Development
Consumer adoption process
The Role of Fakes
Pricing Strategy Pricing Influences
Pricing Strategies
Role of Retailer & Schemes/Margins
Distribution Strategy Coverage challenges & dilemma
Channels of Distribution
Existing Distribution Models
Emerging Distribution Models
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Rural Marketing Course Plan Details
Communication Strategy Challenges in Rural Communication
The Communication Process
Developing Effective Communication
Rural Media
Role of Innovative Media
Innovation in Rural Markets Role of Innovation in Rural India
IT Interventions
Emergence of Organised Retailing
Financial Services in Rural India Need for Credit Sources of Credit
Other Financial Products
Future of Rural Marketing
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Rural Marketing Nature of Assignments
Case Studies from Indian experiences
Visits to different rural markets, haats &
melas Interviewing Rural Practitioners
Conducting Rural Market Research
Attachments with strong ruralmarketing organisations
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RURAL MARKETINGIssues, Opportunities & Challenges
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Rural Market Has Arrived
742 million people
Rural consumption is bigger than urban FMCG's 53%
Durables 59%Source: NCAER
Estimated annual size of the rural market FMCG Rs 65,000 Crore
Durables Rs 5,000 Crore
Agri-inputs (incl. tractors) Rs 45,000 Crore 2 / 4 wheelers Rs 8,000 Crore
Total Rs 1,23,000 CroreSource: Francis Kanoi
Latest McKinsey Report estimates that by 2020, Rural Consumer Market
Will be worth Rs. 250,000 crores
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Rural Market Has Arrived
Some impressive facts about the rural sector. In the first 6 months of 2005-06, rural India bought
30 lakh Life Insurance policies
Of two million BSNL mobile connections, 50% in
small towns/villages. Of the six lakh villages, 5.40 lakh have a Village
Public Telephone (VPT). Additionally there are 2 lakhPCOs 90% of villages covered.
By end 2007, there are likely to be 11.05 crore ruralphone subscribers
For every Re.1/- per quintal increase in theProcurement Price for grains, Rs. 170 crores added torural economy
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Rural Market Has Arrived
55.6 million Kisan Credit Cards issued (against 60million credit-plus-debit cards in urban) resultingin tremendous liquidity.
Of HHs earning Rs. 20 lakh + per year, 34% in
rural India. Also 15% of Indias crorepatis 42 million rural HHs availing banking services in
comparison to 27 million urban HHs.
Investment in formal savings instruments: 6.6million HHs in rural and and 6.7 million in urban
Over 50% of HLLs Rs. 11700 crore sales turnoveris from rural markets
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0.81.6
26.8
54.7
25.0
20.9
2001 - 02
41.3
63.3
14.7
12.2
2006-7
Very RichConsumingClass
Climbers
Aspirants
Destitutes
RURAL TARGET MARKETS - CLASSIFICATION
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Rural Income DispersalProjection
ConsumerClass
Annual
Income1995-96 2006-07
Very Rich Above Rs 215,000 0.3 0.9
Consuming
Class
Rs 45,001-
215,000
13.5 25.0
Climbers Rs 22,001- 45,000 31.6 49.0
Aspirants Rs 16,001 - 22,000 31.2 14.0
Destitutes Rs 16,000 & Below 23.4 11.1
Total 100.0 100.0
> Projections Based on 7.2% GDP GrowthConsuming class households in rural nearly equal to urban. Rural Purchasing Power higher due to lower expenses on food, shelter, education & health
All figures in %
Source : NCAER Indian Market Demo ra hics Re o
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Issues In Rural
Distribution
Understanding the rural consumer
Communication
Poor infrastructure
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Distribution of Villages
Source: Census 2001
Population No of villages % of totalvillages
Less than 200 92,541 15.6
200-500 127,054 21.4
501-1000 144,817 24.4
1001-2000 129,662 21.9
2001-5000 80,313 13.5
5001-10000 18,758 3.2
Total no of villages 593,154* 100.0
17% of villagesaccount for 50%
of ruralpopulation &60% rural
wealth
Hardly any shopsin these 2.2 lac
villages
*Inhabited villages, total number of villages is 638, 691
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Distribution of Towns in India
Town Class Population No of towns % of total
towns
Class I 1 lac and above 423* 8.2
Class II 50,000-99,999 498 9.6
Class III 20,000- 49,999 1386 26.9
Class IV 10,000- 19,999 1560 30.2
Class V 5,000- 9,999 1057 20.5
Class VI less than 5000 237 4.6
Total no of
towns
5161 100.0
Source: Census 2001
90 % of
durablespurchased byrural people
are fromthese 1900
towns
*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354
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Rural Consumer Insights
In rural India, brands rarely fight with eachother, they just have to be present at the rightplace.
Many brands are building strong rural basewithout much advertising support. Chik shampoo, second largest shampoo brand.
Ghadi detergent, second largest brand.
Fewer brand choices in rural : number of FMCGbrands in rural are half that of urban.
Buy value for money, not cheap products
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MYTH 1: Rural Market Is aHomogeneous Mass
REALITY
Heterogeneous population
16 languages, 800+ dialects
State wise variations in rural demographics Literacy (Kerala 90%, Bihar 44%)
Population below poverty line (Orissa 48%, Punjab6%)
BigLandlords
Traders,Small Farmers
Marginal Farmers
Laborers, Artisans
Source: Planning Commission, GoI
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MYTH 2: Disposable Income Is Low
REALITY Number of middle class HHs (annual income Rs
45,000- 2,15,000)
Rural 27.4 million
Urban 29.5 million
Per Capita Annual Income (not Purchasing Power)
Rural Rs 9,481
Urban Rs 19,407Total Rs 12,128 Source: NCAER
Rural incomes CAGRnow estimated @ 15% vs10% in urban
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MYTH 3: Individuals Decide AboutPurchases
REALITY
Decision making process is collective
Purchase process- influencer, decider, buyer, onewho pays can all be different. So marketers mustaddress brand message at several levels
Rural youth brings brand knowledge to HH
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Infrastructure ImprovingRapidly
In 50 years only 40% villages connected by road,in next 10 years another 30%.
More than 90 % villages electrified, though only44% rural homes have electric connections.
Rural telephone density has gone up by 300% inthe last 10 years, every 1000+ pop is connectedby STD.
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Media Reach Improving Rapidly
70% of R1,R2, R3 can be reachedthrough mass media.
14
21
41
26
53
70
Satellite
TV
Radio Press Cinema TV All Media
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Climbing Social Indicators
Between 1981 to 2001
Number of pucca houses doubled from 22% to 41%and kuccha houses halved (41% to 23%)
Percentage of Below the Poverty Line familiesdeclined from 46% to 27%
Rural Literacy level improved from 36%to 59%
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Opportunity & Challenges
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Marketing Opportunities
Low penetration rates in rural
% of rural HH
Durables Urban Rural Total
CTV 30.4 4.8 12.1
Refrigerator 33.5 3.5 12.0
Mobile Phones 40.0 12.0 18.0
FMCGs Urban Rural Total Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6
Source: NCAER
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Marketing Opportunities
R1 - 4% R2 - 11%
R3 - 37%
R4 - 48%
Low rural consumption in FMCGs (rich HHs)urban rural
Annual consumption Rs 13,000 Rs 9,400
Rural consumption volumes (R1+R2+R3) Toothpaste 88%
Toothpowder 79%
Shampoo 88%
So this half ofthe populationconsumes over75% of FMCG
volumes
Key Features of the Rural Market
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Key Features of the Rural MarketAggregate Rural Consumption
0
5000
10000
15000
20000
25000
30000
3.9%
5.1%
1985 1995 2005 2015 2025
(Source : MGI India Consumer Demand Model)
Rural Consumption will accelerate
By 2025, rural consumption would
have tripled
Rural market will be worth Rs.
28,85,000 crores
Larger than todays consumer
markets in Canada & South Korea
4 times the size of the Indian
urban market
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Key Features of the Rural Market
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0%
10%20%
30%
40%
50%
60%
70%
80%
90%
100%
Key Features of the Rural MarketShare of Rural Population by Income Class
Household Income Brackets
(Indian Rupees Thousands)
Global (>1000) + Strivers (500 -1000)
Seekers (200 500)
Aspirers (90 200)
Deprived (< 90)
1985 1995 2005 2015 2025
(Source : MGI India Consumer Demand Model)
R l C Cl ifi ti
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Rural Consumer Classification
Classification Description
The Globals Households owning personal car/jeep with other
products
The Strivers HHs owning any/all of these : A/C, scooter/motorcycle,
washing machine, fridge, colour TV etc. but no car/jeep
The Seekers HHs owning any of these: moped/VCR/ mixer grinder,sewing machine, audio equipment, B/W TV, geyser etc
but not those in 2 cats. above
The Aspirers HHs owning any of these : bicycle, electric fan, electric
iron etc but not those mentioned in 3 cats. above
The Deprived HHs other than those classified in Cats 1-4 above, but
own any of : wrist watch, pressure cooker, transistor
radio etc.
Key Features of the Rural Market
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2005: Ram Khilawan is a weaver, born in the foothills of theHimalayas. He lives with his wife, 5 children and a sick mother.They live in a mud house on 4 acres land which they own. Butthe plot has no irrigation so there is low yield. He is well skilledin weaving, but has to rely on commission agents andmiddlemen to market his weaves. He is often in debt.
2015 : Ram Khilawan is still a weaver, but life has changed forthe better. The village was connected to the National Highwaywith an all-weather road some years ago. So, traders come tohis village and buy from the small market he has created withhis fellow weavers. A subsidized irrigation scheme has meant
better yield for his produce and his sons have convinced him torotate with herbs which he directly sells on contract with apharmaceutical company. With electricity available, he has alsobought some electrical & electronic items.
Key Features of the Rural MarketA Tale of Two Times
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Changing Attitudes of the Rural Consumer
From Pre-Liberization To Post Liberization
Willing to Settle for less Willing to Stretch for More
Reluctance, Avoidance Seeking Experiences
Not for us attitude Affordable Indulgence
Destiny driven & resigned to
fate
Struggling & Aspiring for a
better life
Simple Needs State Need of the Hour
Source : Rama Bijapurkar : We are like that only
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Changing Attitudes of the Rural Consumer
Assumptions Reality
Why pay for access totechnology etc ?
Value all kinds of productivity devicesMore Public Transport means more 2wheelers
N Logue Kiosks
E Choupal
Simple Financial Thinking Complicated Value processing
Cable/DTH vs going out
Not Innovative Making their own Value-Right Innovations
Missed Call
Community Lighting
Smaller Glasses at weddings
Source : Rama Bijapurkar : We are like that only
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Challenges in the Future
Making effective use of the largeavailable infrastructure
Post offices 1,38,000 Haats (periodic markets) 42,000
Melas (exhibitions) 25,000
Mandis (agri markets) 7,000
Public distribution shops 3,80,000
Bank branches 32,000
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Challenges in the Future
Using Technology to transform markets ITCs e-choupal
N Logue communications - IIT Madras
EID Parry Inagriline in Tamil for farm inputs, Gyandoot by M.P. Govt.
Amul dairy information system kiosk
Rural Telemedicine Project I-Shakti
Telecom
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Challenges in the Future
Proliferation of large format rural retailstores
DSCL Haryali stores M & M Shubh Labh stores
TATA/Rallis Kisan Kendras
Escorts rural stores Warnabazaar, Maharashtra (annual sale Rs
120 crore)
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An interesting Option - RURBAN
Describes the clusters of migrants from ruralto urban geographies
Rural psychography living in an Urbandemography
Strong purchasing power because despitelower incomes, low wasteful expenditures
Become carriers and promoters of brands intorural geographies on their annual trip backhome