RURAL MARKETING Before getting into issues like whether the Indian rural market stands and the

opportunities for corporates to explore it or not ... let's look at the definition of rural India According to the census of India, villages with clear surveyed boundaries not having a municipality, corporation or board, with density of population not more than 400sq.km and at least 75 per cent of the male working population engaged in agriculture and allied activities would qualify as rural. So, from the above stated conditions, there are 638,000 villages in the country. Of these, only 0.5 cent has a population above 10,000 and 2 per cent have population between 5,000 and 10,000.. Now for some facts and figures The Indian rural market today accounts for only about Rs 8 billion (53 per cent - FMCG sector, 59 per cent durables sale, 100 per cent agricultural products) So clearly there seems to be a long way ahead.

Prospects for companies planning to enter rural market or what is the potential of rural market Seventy percent of India's population, or approximately 700 million people, live in rural areas. 75 percent of the population is agrarian. With such a large number of potential consumers, it is clear why multinational corporations would like to successfully penetrate the rural Indian market.

Large, Diverse and Scattered Market: Rural market in India is large,

and scattered into a number of regions. There may be less number of shops available to market products. Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied with agriculture prosperity. In the event of a crop failure, the income of the rural masses is directly affected. Standard of Living and rising disposable income of the rural customers: It is known that majority of the rural population lives below poverty line and has low literacy rate, low per capital income, societal backwardness, low savings, etc. But the new tax structure, good monsoon, government regulation on pricing has created disposable incomes. Today the rural customer spends money to get value and is aware of the happening around him. Changing Outlook: Villagesvhave a traditional outlook. Change is a continuous process but most rural people accept change gradually. Rising literacy levels: It is documented that approximately 45% of rural Indians are literate. Hence awareness has increases and the farmers are well-informed about the world around them. They are also educating themselves on the new technology around them and aspiring for a better lifestyle. Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses, communication system, and financial facilities,transportation facility are inadequate in rural areas. Hence

physical distribution is a challenge to marketers who have found innovative ways to market their products. 1 2 3 4 5 6 7 8 Large population Rising prosperity Growth in consumption Life cycle changes Life cycle advantages Market growth rate higher than urban Rural marketing is not expensive Remoteness is no longer a problem 1. 2. Growth in consumption: Life style changes:

3.

Market growth rates higher: Growth rates of the FMCG market and the durable market are higher in rural areas for many products. The rural market share will be more than 50% for the products like toilet soaps, body talcum powder, cooking medium (oil), cooking medium (vanaspati), tea, cigarettes and hair oil.

4. Rural marketing is not expensive: Conventional wisdom dictates that

since rural consumers are dispersed, reaching them is costly. However, new research indicates that the selling in Rural India is not expensive.This includes the expenses of advertising in vernacular newspapers, television spots, in-cinema advertising, radio, van operations and merchandising and point of purchase promotion. Campaign like this, which can reach millions, costs twice as much in urban area.

5. Remoteness is no longer a problem: Remoteness in a problem but not

insurmountable. The rural distribution is not much developed for the reasons, Lack of proper infrastructure such as all-weather roads, electrification and sanitation, and Lack of marketers imagination and initiative. Marketers have so far, failed in analyzing the rural side and exploiting rural Indias traditional selling system- Haats & Melas.Their near obsession with just duplicating the urban-type network and that too with very limited success, has kept them blind to the potential of these two outlets.

Consumption pattern of rural india

The total number of rural households is expected to rise from 135 million in 2001-02 to 153 million in 2009-10. Thus, this is likely to result in rural India becoming the largest potential market in the world

An increase in the education level and media exposure has led to significant changes in the consumption pattern of rural India. the share of milk and milk products, egg, fish, meat, fruits and nuts has increased by about one percentage point each, vegetables by 2.5 percentage points while that of beverages, refreshments and processed food has increased by two percentage points since 1972-73 whereas it has decreased for cereals. In rural India, expenditure on cereals forms 18 per cent of the total consumption expenditure at present compared with 40 per cent in 1972-73, according to the report. According to the National Council of Applied Economic Research (NCAER), an independent, non-profit research institution, rural households form 71.7% of the total households in the country. Spending in this segment is growing rapidly and consumption patterns are closing in on those of urban India. "No consumer goods company today can afford to forget that the rural market is a very big part of the Indian consumer market. You can't build a presence for a brand in India unless you have a strategy for reaching the villages." however, the penetration is still low .the low penetration rates can be attributed to three major factors: low income levels, inadequate infrastructure facilities and different lifestyles. But income levels are going up, infrastructure is improving and lifestyles are changing. Almost a third of the rural population now uses shampoo compared with 13% in 2000, Indians have a very low disposable income. Most rural homes have minimal storage space and no refrigeration. Very few people own or have access to cars. As a result, rural Indian purchasing habits tend to be of an "earn today, spend today" mentality. Rather than buying in bulk, which would mean paying more for a large quantity upfront, rural Indians tend to buy what they need for short segments of time. These factors result in consumers buying products locally, as well as on a daily basis. In addition to the fact that income levels are low, rural incomes also vary greatly depending on the monsoons. When a monsoon hits, this devastates the livelihood of most rural consumers because they are dependent on agricultural work for income. Corporations are also directly affected because this makes it difficult to predict demand. Before a company considers entering the rural market, understanding the types of products and packages that rural Indians typically use is crucial. For example, urban Indian consumers would typically use toothpaste for brushing their teeth, while most rural Indians prefer using tooth powder . As a company seeking to enter India's market with an oral care product, this would be an important fact to know and consider during both the product and

package development stages. Similarly, Hindustan Unilever Ltd. (HUL), the Indian subsidiary of Dutch-based Unilever, discovered that rural Indians tend to use the same soap for washing everything from hair to their bodies to clothing (if they use any soap at all). Because HUL manufactures products including various soaps and detergents, HUL product and packaging development processes have taken this rural habit into account by designing all-in-one soaps. By taking into account the low disposable incomes and the unique product and package needs of this market, consumer products that are designed and packaged for this market have great potential. Any company starting to venture in rural Indian market must have to look into these aspects and after that, schedule their next steps, because one-step wrong from their side can ruin their whole brand image in other parts of the country also. marketing to rural customers often involves building categories by persuading them to try and adopt products they may not have used before. "A company like Colgate has to build toothpaste as a category, which means convincing people to change to toothpaste instead of using neem twigs to clean their teeth, which was the traditional practice," he says. "This is difficult to do and requires patience and investment by companies. It's not like getting someone to switch brands." Companies that have figured this out are doing better in the villages than in the cities. Soft drinks giant Coca-Cola is growing at 37% in rural markets, compared with 24% in urban areas. According to Hansa Research, a market research firm that has published a Guide to Indian Markets 2006, the penetration of consumer durables has risen sharply in India's in recent years. In color TVs, sales are up 20%; in motorcycles, 77%. In absolute numbers, however, the penetration is still low. Coke, for instance, reaches barely 25% of the rural market. This means the upside potential is huge for companies that develop effective rural marketing strategies. rural India already accounts for the lion's share. According to MART, a New Delhi-based research organization that offers rural solutions to the corporate world, rural India buys 46% of all soft drinks sold, 49% of motorcycles and 59% of cigarettes. This trend is not limited just to utilitarian products: 11% of rural women use lipstick. Challenges for entering Indian Rural Markets There are several challenges that make it difficult to progress in the rural market. Marketers encounter a number of problems like :-

1. Standard of living: The number of people below the poverty line is more
in rural markets. Thus the market is also underdeveloped and marketing strategies have to be different from those used in urban marketing. 2. Low literacy levels: The low literacy levels in rural areas leads to a problem of communication. Print media has less utility compared to the other media of communication.

3.

Low per capita income: Agriculture is the main source of income and hence spending capacity depends upon the agriculture produce. Demand may not be stable or regular. 4. Transportation and warehousing: Transportation is one of the biggest challenges in rural markets. As far as road transportation is concerned, about 50% of Indian villages are connected by roads. However, the rest of the rural markets do not even have a proper road linkage which makes physical distribution a tough task. Many villages are located in hilly terrains that make it difficult to connect them through roads. Most marketers use tractors or bullock carts in rural areas to distribute their products. Warehousing is another major problem in rural areas, as there is hardly any organized agency to look after the storage issue. The services rendered by central warehousing corporation and state warehousing corporations are limited only to urban and suburban areas. 5. Ineffective distribution channels: The distribution chain is not very well organized and requires a large number of intermediaries, which in turn increases the cost and creates administrative problems. Due to lack of proper infrastructure, manufacturers are reluctant to open outlets in these areas. They are mainly dependent on dealers, who are not easily available for rural areas. This is a challenge to the marketers. 6. Many languages and diversity in culture: Factors like cultural congruence, different behaviour and language of the respective areas make it difficult to handle the customers. Traits among the sales force are required to match the various requirements of these specific areas. 7. Lack of communication system: Quick communication is the need of the hour for smooth conduct of business, but it continues to be a far cry in rural areas due to lack of communication facilities like telegraph and telecommunication systems etc. The literacy rate in the rural areas is rather low and consumers behaviour in these areas is traditional, which may be a problem for effective communication. 8. Spurious brands: Cost is an important factor that determines purchasing decision in rural areas. A lot of spurious brands or look-alikes are available, providing a low cost option to the rural customer. Many a time the rural customer may not be aware of the difference due to illiteracy. 9. Seasonal demand: Demand may be seasonal due to dependency on agricultural income. Harvest season might see an increase in disposable income and hence more purchasing power. 10. Dispersed markets: Rural population is highly dispersed and requires a lot of marketing efforts in terms of distribution and communication. Factors that will decide the success of rural marketing initiative 1. Research: A research should be conducted before launching the business. The research may be Primary or Secondary one. If it is primary then it sounds good, as there will be more clarity about the Business and Opportunities. This is about studying the market before entering.

2.Segmentation:The most important factor is the segmentation , as the rural market consists of different groups and socio economic class. They have different lifestyles, Cultures, Economy, and Demography backgrounds. So the company should think of this and make the segmentation in a perfect manner. Depending upon the product and business the company should keep some parameters to make the segmentation. The parameters should be selected in such a way that it effects the demand of the product. 3. Lifestyle Analysis: The people will be from different cultures and demographic background. So they will be having different lifestyles and needs. Depending upon their way of thinking and Lifestyle the company need to understand to think of their product. The lifestyle of the consumer makes an impact on the demand of the product . So by this analysis the company can draw their strategies to market the product. 4. Profile Study: The company should develop a profile for the rural consumers. The profile helps the company while designing the marketing mix . The profile should be in a proper manner which impacts the designing and marketing of the product. For developing such profiles local organizations/players can help out. 5. Defining Needs: The main theme of the company should look for the needs of the consumer. As from the above factors the marketer can be able to identify the needs which are suitable to their lifestyles. After that they should define the exact need of the customer. In general terms they should define the needs so as to work out on the target market. 6. Target Market: After so many steps of work flow process the company can easily identify that their product is going to match or not that is The way of matching in their marketing Mix / Business Strategy with the rural market. So by doing all this the company can target a market from the segmented market . So by selecting a segment they can target the group with their strategies and Marketing Mix. 7. Marketing Mix: As we know that marketing mix of the company is the main component to reach the customers. As there is a heterogeneous lifestyles and Geographically diverted market so the company should design or modify the mix depending upon the customer needs. There should be a proper work out of 4A's of Marketing Mix. From the above steps company can easily identify and can design their marketing mix to reach the market. So by doing this the company can attain the success. 8. Implementation: Most of the companies feel that implementation is the major problem in rural market , due the factors influences the market. So for implementation the channel players are important. They reach the last mile of rural market. So for the Implementation there should be a full focus from the organization point of view. The planning and working should be in parallel, by which the implementation cannot be a failure

. 9. Control: Last but not least, the important factor to think for the model. As there is a huge competition in the market, it will grow in a speedy manner. So there will be a lot of things that companies should always get to update . The R&D should be strong for those areas. There should be a systematic process for the up to date communications, so that they cannot miss the feedback from the customers and work on those things. The timing for the analysis and action is very important here. The regional and local players can easily move in the market and modify their strategies, so that is why companies need to be with their channel partners to work their strategies . if they can implement it and control the things then the company can reach the customers easily and can attain the success rate. So, from the above steps if the company does a work out on each step and implements perfectly then they can mark their success in the rural market. Some successful examples of rural marketing

Hindustan Unilever Limited (HUL) to tap the rural market conceived of Project Shakti. This project was started in 2001 with the aim of increasing the companys rural distribution reach as well as providing rural women with incomegenerating opportunities. This is a case where the social goals are helping achieve business goals. The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying the uncovered village. The representative of the company meets the panchayat and the village head and identify the woman who they believe will be suitable as a SA. After training she is asked to put up Rs 20,000 as investment which is used to buy products for selling. The products are then sold door-to-door or through petty shops at home. On an average a Shakti Amma makes a 10% margin on the products she sells. An initiative which helps support Project Shakti is the Shakti Vani programme. Under this programme, trained communicators visit schools and village congregations to drive messages on sanitation, good hygiene practices and women empowerment. This serves as a rural communication vehicle and helps the SA in their sales. The main advantage of the Shakti programme for HUL is having more feet on the ground. Shakti Ammas are able to reach far flung areas, which were economically unviable for the company to tap on its own, besides being a brand ambassador for the company. Moreover, the company has ready consumers in the SAs who become users of the products besides selling them. Although the company has been successful in the initiative and has been scaling up, it faces problems from time to time for which it comes up with innovative solutions. For example, a problem faced by HUL was that the SAs were more

inclined to stay at home and sell rather than going from door to door since there is a stigma attached to direct selling. Moreover, men were not liable to go to a womans house and buy products. The company countered this problem by hosting Shakti Days. Here an artificial market place was created with music and promotion and the ladies were able to sell their products in a few hours without encountering any stigma or bias. This model has been the growth driver for HUL and presently about half of HULs FMCG sales come from rural markets. The Shakti network at the end of 2008 was 45,000 Ammas covering 100,000+ villages across 15 states reaching 3 m homes. The long term aim of the company is to have 100,000 Ammas covering 500,000 villages and reaching 600 m people. We feel that with this initiative, HUL has been successful in maintaining its distribution reach advantage over its competitors. This programme will help provide HUL with a growing customer base which will benefit the company for years to come 2. ITC is setting up e-Choupals which offers the farmers all the information, products and services they need to enhance farm productivity, improve farmgate price realization and cut transaction costs. Farmers can access latest local and global information on weather, scientific farming practices as well as market prices at the village itself through this web portal - all in Hindi. It also facilitates supply of high quality farm inputs as well as purchase of commodities at their doorstep.

Unsuccessful rural marketing examples Kellogg's' is an excellent example of a company that has struggled in the Indian market. Kellogg's entered the Indian market in the mid-1990's. They intended to find a new market, which would consist of over a million people, many of whom did not eat cereal. What Kellogg's discovered was that they were introducing a completely new product category. This meant they would have to invest large sums of money to create new eating habits in consumers. The most common Indian breakfast consists of biscuits and tea. While Kellogg's was busy creating new eating habits, local competitors were able to snatch away portions of India's already small cereal market by introducing local cereal flavors at lower prices. The unimpressive sales that followed in their first three years resulted in Kellogg's needing to completely realign their marketing to meet local needs as well as introduce a line of inexpensive breakfast biscuits. Disappointments like this have caused companies who seek to enter the rural Indian market to reevaluate their entire approach.

Conclusion
Indian rural marketing has always been complex to forecast and consist of special uniqueness. However many companies were successful in entering the rural markets. They proved that with proper understanding of the market and innovative marketing ideas, it is possible to bag the rural markets. It is very difficult for the companies to overlook the opportunities they could from rural markets. As two-thirds of the Indian population live in rural areas, the market is vast than expected. For the companies to be successful in rural markets, they have to overcome certain challenges such as pricing and distribution. However, the success of the product in the rural market is as predictable as rain. But by overcoming the challenges and looking into the opportunities which rural markets offers to the marketers it is said that the future is very promising for those who understand the dynamics of rural markets and exploit them to their best advantage. examples of two companies who were successful in rural areas with their innovative marketing strategies. They found the way-out for the challenges to become successful. They believed that it is patience which is important to gain loyal customers than entering the rural with aggressive marketing. By introducing the products in to rural markets, companies are not changing customers' tastes and preferences but their habits which is most challenging and in which case if the customer is dissatisfied, it will become more difficult to regain the trust or may be never possible.