rural marketing lecture

8/8/2019 Rural Marketing Lecture

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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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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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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

rural marketing lecture

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