Rural Consumer Behaviour

Consumer Buyer Behaviour refers to the buying behaviour of final consumers - individuals and households who buy goods and services for personal consumption. All of these final consumers combined make up the consumer market. The consumer market in this case is Rural India. About 70% of India's population lives in rural areas. There are more than 600,000 villages in the country as against about 300 cities and 4600 towns. Consumers in this huge segment have displayed vast differences in their purchase decisions and the product use. Villagers react differently to different products, colours, sizes, etc. in different parts of India. Thus utmost care in terms of understanding consumer psyche needs to be taken while marketing products to rural India. Thus, it is important to study the thought process that goes into making a purchase decision, so that marketers can reach this huge untapped segment.

Factors influencing buying behaviour

The various factors that effect buying behaviour of in rural India are: 1. Environmental of the consumer - The environment or the surroundings, within which the consumer lives, has a very strong influence on the buyer behaviour, egs. Electrification, water supply affects demand for durables. 2. Geographic influences - The geographic location in which the rural consumer is located also speaks about the thought process of the consumer. For instance, villages in South India accept technology quicker than in other parts of India. Thus, HMT sells more winding watches in the north while they sell more quartz watches down south. 3. Influence of occupation The land owners and service clan buy more of Category II and Category III durables than agricultural laborers/farmers. 4. Place of purchase (60% prefer HAATS due to better quality, variety & price) Companies need to assess the influence of retailers on both consumers at village shops and at haats. 5. Creative use of product ex Godrej hair dye being used as a paint to colour horns of oxen, Washing machine being used for churning lassi. The study of product end provides indicators to the company on the need for education and also for new product ideas.

6. Brand preference and loyalty (80% of sale is branded items in 16 product categories)

Cultural factors influencing consumer behaviour

Cultural factors exert the broadest and deepest influence on consumer behaviour. The marketer needs to understand the role played by the buyer's culture. Culture is the most basic element that shapes a persons wants and behaviour. In India, there are so many different cultures, which only goes on to make the marketer's job tougher. Some of the few cultural factors that influence buyer behaviour are: 1. Product (colour, size, design, shape): There are many examples that support this point. For example, the Tata Sumo, which was launched in rural India in a white colour, was not well accepted. But however, when the same Sumo was re-launched as Spacio (a different name) and in a bright yellow colour, with a larger seating capacity and ability to transport good, the acceptance was higher. Another good example would be Philips audio systems. Urban India looks at technology with the viewpoint of the smaller the better. However, in rural India, the viewpoint is totally opposite. That is the main reason for the large acceptance of big audio systems. Thus Philips makes audio systems, which are big in size and get accepted in rural India by their sheer size. 2. Social practices: There are so many different cultures, and each culture exhibits different social practices. For example, in a few villages they have common bath areas. Villagers used to buy one Lifebuoy cake and cut it into smaller bars. This helped lifebuoy to introduce smaller 75-gram soap bars, which could be used individually. 3. Decision-making by male head: The male in Indian culture has always been given the designation of key decision maker. For example, the Mukhiyas opinion (Head of the village), in most cases, is shared with the rest of the village. Even in a house the male head is the final decision maker. In rural areas, this trend is very prominent. 4. Changes in saving and investment patterns From gold, land, to tractors, VCRs, LCVs

The Differences in Buyer behaviour

Rural Conservative Values, aspirations, needs traditional and based on culture, social customs, beliefs Eldest Male Member KDM Collective Sanction Urban Innovative Follow trends (including International) Varies Unheard of

Brand Protection in India

This is the latest initiative by the consumer goods industry in India in association with Federation of Indian Chambers of Commerce and Industry to fight a long standing menace - that of counterfeits and pass-off products. Be it Soap, shampoo, toothpaste or hair oil, biscuit, soft-drink or confectionery, batteries or balm - go to any market in India and you will find a plethora of products that are available in look alike packages under slightly twisted names Fair & Lovely could be Pure & Lovely or a Parachute could be Parashudh. The packaging, color and design of the pass-off product is so similar to the original, that it is impossible to distinguish between the two if you are not the sort who reads product names before picking them up. Leave alone the vast uneducated masses that live in this country, hardly any of the educated informed consumer would also be in a habit of verifying the accuracy of the product name or manufacturer before buying goods at the local kirana shop. A recent study conducted by AC Neilson reveals that 80% of consumers realize they have brought a counterfeit or fake product only after they have consumed it. And there may be a large number of those who never realize the same even after consumption! While the problem of fakes is witnessed all across the country, it is more severe in the North. Counterfeiting is rampant in the states of Delhi, Punjab, Haryana and UP. Procter & Gamble, which has embarked on a major drive against counterfeits of its popular Vicks Action 500 brand, found through a study that 54 strips in every 100 strips of Action 500 being sold in the market were counterfeits. The companys sales growth in this sector has been stated to have been affected by 10% due to this menace of counterfeits. Counterfeits and pass-off products are reportedly affecting sales of several brands to the extent of 20-30%. It is estimated that the counterfeit products contribute to about Rs17bn worth of sales of the Rs60bn FMCG market. Government would be losing almost Rs6bn in revenues that would have been generated on excise, octroi, sales and income taxes that would have been paid on these sales. For companies, besides loss of revenues, an even greater loss would be through damage to brand reputation or loss of customer loyalty caused by the poor quality of these look alike

brands. And the customer unwittingly is using products that may sometimes cause bodily harm or even danger to life. The problem of counterfeits is not confined to India alone. It is estimated that counterfeits account for Rs200bn i.e. about 5-7% of total world trade. The consumer goods industry in India has therefore come together to launch on offensive against these unscrupulous players. A Brand Protection Committee has been formed under the aegis of the Federation of Indian Chambers of Commerce and Industry (FICCI). The Mission of the Committee is to stem the sale of counterfeits and fakes in India. Directors of leading consumer nondurable companies such as P&G, HLL, Marico, Smithkline Consumer, Britannia, Indian Shaving and research agencies such as A C Neilson and CERC are members of the Brand Protection Committee. The committee aims to work in close conjunction with industry, consumer associations, trade associations and regulatory authorities to eliminate counterfeit and pass-off sales in the country. The Committee proposes to focus on enforcement of applicable laws, measure and publicize negative economic impact of counterfeits and create consumer awareness, and take action against errant manufacturers, wholesalers, distributors and retailers with the help of regulatory authorities. This is a concerted effort on part of the FMCG industry to stem the loss that accrues to the companies, the Government and the consumers. The problem of fakes is more rampant in rural areas due to low literacy levels and consumers reliance on product identification through pneumonics. Companies are trying to educate customers to look for certain packaging identification marks before purchase.

A brief summary of a study conducted by ORG-MARG is given below. Aug 2000 Jul 2001 No. of BRANDS look alike Brands Dabur Vatika Clinic All Clear Surf Nw Exl Act Oxg Horlicks Colgate Dental Cream Colgate Tooth Powder Dabur Amla Panteen Pro-V New Ariel Power Compact Iodex 2 38 5 2 9 6 34 7 4 26 148 K.L 1099 K.L 1837 1276 2190 T 1009 9893 K.L 733 K.L 200 755 Volume No. of Dealers (Lacs) 1 1 11 20 28 14 4 9 9 Pun/Har, Assam Del, Assam, Bihar, M.P. Bihar, W.B., Guj, M.P., Maha Assam, Karnataka W.B., Bihar, M.P. Assam, Bihar, Maha Raj, U.P. Pun / Har U.P., Bihar, Guj, M.P. Assam U.P., Guj, M.P. Major States

Product Strategy: This is a strategy which companies apply to

their product according to the market needs and the target group. It is a strategy which best suits the company and also targets the consumer of that particular region. Some product strategies are such that they encapsulate the whole of rural India. e.g.: Coca-Cola targeted the whole Indian rural market with the positioning of Thanda Matlab Coca-Cola advertisements because most of the villagers say when wanting a drink refer to it as Thanda so Coca-cola used that word.

Product Market Selection: While launching product variants for

different markets, a company has to consider two things:- Reach: the company must ensure that the rural area they are targeting should be easily reachable by road and should also be well connected with a major town nearby. This is important because regular supplies have to be transported to the village from the major town. - Cost-effectiveness: in order to supply to the village area, a company must assess their costs and other charges so as to maximize returns. Only if cost-effective, must the market be selected and product variants (if any) be launched.

Product Features: this is the most important factor in reinforcing

positioning because rural folk will purchase products only if they have functional benefits and features that appeal. - The consumer should experience the product benefits. They should be able to use, touch and feel the product, and benefit from the it, only then will they buy it again. - Demonstration: an example of this would be Colgate showing video films wrestler with a weak tooth; highlighting the importance of oral hygiene; and other examples would include free shampoo washes, etc. and companies can get very innovative with their demonstrations. - Product Education: companies need to educate the rural consumers about their products and their advantages. E.g. Colgate Palmolive shows video films on oral hygiene to the rural masses. Most of the companies build their strategy linking consumer perceptions and their product features. - Size: sizes are altered or increased in accordance with the consumer perceptions which can be found out by surveys and by in depth interviews with the rural consumer. E.g. torches and audio systems, Tata Spacio was a bigger rural version of the Tata Sumo. - Shape: companies have changed product features like wide bodied cookers with handles on both the sides for chulha cooking. - Colour: an example would be that mostly all hair oils are green in colour. Tata launched the Spacio in a bright yellow colour. - Consistency: Cadbury came out with harder chocolates so as to delay the melting process. - Taste: the villagers tastes and preferences should be incorporated in food items. - Technology: companies came out with better technology to enable their products to perform better under the tough rural circumstances. E.g. Philips eye-fi (to improve satellite reception), LML scooters with stronger suspension, electronic instruments to

withstand voltage fluctuations and Philips also came out with power free radios.

Packaging: (Sachets, bubble packs) Packaging of the product

largely depends on these factors: - Affordability: companies should consider the fact that rural consumers largely depend on daily wage. A product should be packaged by keeping this in mind. E.g. Videocon came out with a washer priced at Rs. 3000. - Perceptions: social and cultural perceptions should be taken care of while packaging the product. Eg. Tata Spacio came out in a bright yellow colour and not in the traditional white colour because the rural people in some parts of India perceive white as a symbol of death. - Ability to read: the product should be packaged so that the rural consumer should identify it. since literacy levels are low symbols, logos and visuals are important associating it with a symbol. E.g. lightning picture of Rin. Pricing: pricing should be kept in accordance with the financial strength of the villagers or the people one aims to target. One should remember that a major part of the rural consumer base earn a daily wage, so their savings are minimal. A company should not emphasize on price but on value. It should provide value to the rural consumer for the least possible price. The Consumption Basket of the villagers is allocated among different needs among the villagers and they prioritize and spend their meager earnings. Examples of good pricing strategies are Philips 14 TV for Rs. 8000 which provides good value for the price and Videocon washer for Rs. 3000.

THE MARKETING PROCESS

The markets for different products vary largely in size in rural areas. The sizes of the markets for the different sectors in rural markets are shown below: FMCG Rs. 50,000 Crore. Durables Rs. 5,000 Crore. Agricultural Inputs Rs. 45,000 Crore. Automobiles Rs. 8,000 Crore. The automobile sector is growing at a rate of 25 30 %. The following table shows the extent of rural sales by select companies. HLL COLGATE GODREJ MARICO CADBURY GSK HEINZ CIPLA HERO HONDA KINETIC 50 50 30 25 25 25 20 18 40 30 % % % % % % % % % %

THE SEGMENTATION PROCESS - This process includes: - Identification of the segmentation variable, - Segmentation of the market, and, - Development of the profile. The different variables are: 1. GEOGRAPHIC: Segmentation on the basis of geography is done depending on various factors such as Region: North, South, East and West. Village Size: < 500 people 501 2000 people

2001 5000 people > 5000 people Proximity to the feeder town Density: The no. Of people per sq. km Climate: Moderate, rain fed or dry with scanty rainfall. Level of Irrigation: Whether good, moderate, scanty or none at all. 2. DEMOGRAPHIC: Segmentation based of demographics takes into consideration factors such as Age, Income, Occupation, Literacy (Level of Education) and Caste. 3. PSYCHOGRAPHICS/BEHAVIOURAL: Such segmentation is done using variables such as Lifestyle of the people, (whether rigid, traditional, changing or imitating urban), Occasion, (whether on a regular day or a special occasion), Benefits sought from the product (such as Quality, Price and Service), and Loyalty to brands, (whether Low, Medium or High.) Rural Consumers majorly look into the value that the product offers. They associate value with the Benefits that the product offers, its Availability, and its Cost. When talking of Benefits, they look at the features of the product as well as the Packaging and attractiveness, Availability, whether or not the products are available at Retail Shops and Haats, Cost, whether or not the product is reasonably priced. Rural Consumer Occupation, income, Culture, Perception, Attitude

Benefits Product features Packaging

Availability Retail Shops Haats

Cost Price

Value

Rural Branding
It is the process of creating and disseminating the brand name so that it is instantly understood by the customer. It is different from branding in rural areas as there people dont understand English names of brands. They rather associate the product with the picture on the package. E.g. Laal sabun or red soap for lifebuoy. Creating an Identity under this process an identity is created in the minds of the customer. E.g. TATA Namak Desh Ka Namak here what TATA has done is they have given the salt a national image. They have associated it with the country and as a result rural consumers tend to connect with it and trust it more & they also remember it well. Enhance Recognition The brand should be recognizable to the consumer and create top of the mind (TOM) consumer recall. E.g. Fevicol majboot jod. Building a brand Image The brand should have a personality of its own. E.g. Mahindra & Mahindra has built its brand image in the tractor sector. Bhumiputra series of tractors, Sarpanch series have done very well in the rural areas. Brand name has connected well with villagers.

Marketing Tips
Target consumers on unmet needs vis--vis price, products, and features. Develop the market through a unique positioning. Product and packaging should be creatively used for delivering VALUE and influencing perception. Product features can be communicated effectively to create a favorable attitude. Distinct colours, designs, symbols help illiterate consumers to identify the brand. Leverage strengths e.g. distribution (e.g. Wheel) or costs (Nirma) to deliver the value offering. For high-priced durables, the market can be enlarged through hirepurchased schemes.

Researching the Rural Markets

- Marketer has limited understanding of the rural consumer. E.g. The consumer research people in the rural areas of the south find researching very difficult as the people do not answer in Hindi. As a result the marketer should make note of such points in order to market his product well. Consumer responses to variables in urban markets may need to be unlearned. The rural consumer must be handled differently due to the vast psychographic difference.

Essentials (points to remember)

Sceptism of villagers the villagers do not trust a person from a big company. Some people do not even answer an official well. Thus when marketing, promoting or advertising a product, one should take care that it is done in the regional language. This makes the customer willing to listen or see. Informal (Dress, Greeting) Dressing at the first meet should be very informal in order for them to receive u well. Informal greeting helps generally researchers to get information out of rural consumers. Be a good listener and always explain the objective of the research at the outset. Dont write down too much as it again creates doubts in the minds of the consumer. Never refuse their hospitality. It feels like an insult to them when someone does so.

Locations for Conducting Research Retail shops, STD booths o Women one can have a direct one to one conversation with women at retail shops as they are generally there for shopping. o One stop shop generally such stores provide almost all requirements of a villager. o Retailer is usually well informed about the village Tea stall o Middle age people generally sit around such places and chat o At such places there are many conversations and one can indulge into one or create one. Play ground o Youth (morning/evening) one finds young people playing at the ground or exercising. o Watchers Chaupals o Evenings: middle aged and old people meet together at a certain spot in the village and discuss things about the village. This is a rather informal meeting of the villagers.

o One can easily find influencers and opinion leaders from amongst people who are talking.

STUDY OF RURAL CONSUMER BEHAVIOR TOWARDS RURAL RETAIL STORES

Posted by Skyline Business School / July 14, 2010 / in Dissertation

Tags: Disseration reprt marketing

Name: Krishan Kumar (2008 -2010) Title: STUDY OF RURAL CONSUMER BEHAVIOR TOWARDS RURAL RETAIL STORES

Executive Summary India, like Britain, is also a nation of shopkeepers. With over 12 mn retail outlets, India has one of the highest densities of retail outlets in the world with one retail outlet for 90 persons. Retailers inspired by the Wal-Mart story of growth in small town America are tempted to focus on smaller towns and villages in India. However, a careful analysis of the town strata-wise population, population growth, migration trends and consumer spend analysis reveals a very different picture for India. After a long spell of shortages, which shackled consumer buying for decades, retail is becoming India's new mantra. The Sanskrit word "mantra" is not just "hymn" or "slogan"; it embraces aspiration and encompasses new India's way of life. While the retailing industry itself has been present through history in our country, it is only the recent past that has witnessed so much dynamism. We have entered the 21st century at a time when the demography of our population is changing significantly to drive organized retail growth. India now has a large young working population with a median age of 24. The number of nuclear families in urban areas is growing fast. Then there is the increase in working women population. Add to

these the emerging opportunities in the service sector. Lifestyle habits are shifting from austerity to complete self-indulgence and Indians are now unapologetic about spending lavishly on non-essential goods such as luxury watches, cars, and hi-tech products. India can be said to have entered the second phase of retail growth when there is high-speed growth. There are retail chains like Tata's Westside, Pantaloon's Big Bazaar and Rahejas' Shoppers' Stop, to name a few, along with global players such as McDonald's and Benetton, trying to tap country's vast potential. Bringing all these under one roof are mega malls such as Lifestyle, Fun Republic and Big Bazaar. Now, top names in international malls such as Marks and Spencer and Mango are also eying the Indian market. It is only later that the retailing scene will move to the other phases when the fruits of rapid growth will result in economies of scale and greater efficiency leading finally to consolidation through mergers and acquisitions. Thus, retailing in India has a very long haul ahead. Quantum jump in rural retail outlets In India for a long time a large chunk of retail outlets were grocery shop. This pattern had been changing in recent years, in urban and rural markets. Of late, India's largely rural population has also caught the eye of retailers looking for new areas of growth. A slew of supermarket chains, including those of the Tata and ITC, are set to storm the rural areas of the country as corporate realize the huge potential of the untapped market ITC launched the country's first rural mall 'Chaupal Sagar', offering a diverse product range from FMCG to electronic appliances to automobiles, attempting to provide farmers a one-stop destination for all of their needs. Companies such as Godrej and DCM Shriram Consolidated are launching `one-stop shops' for farmers and their communities. Godrej Agrovet, for instance, is planning to set up 1,000 Aadhar stores across rural India by 2010. DCM Shriram plans to set up 35 rural/semi-urban utility marts over 2006-07. Positioned as a one-stop shop, the Hariyali Kisaan Bazaar Chain will cater to a variety of farmers' needs by providing access to retail banking, LPG outlets and even a motorcycle showroom. As clear from the story on Reliance Fresh and Metro, organized retail sector can bring a revolutionary change in rural India unless it goes for quick short-term gains. With Wal-Mart famous for its 'Always Low Prices' coming in India with Bharati as equal partner, Indian farmers and rural craftsmen can hope for a better direct deal. Retailing does not benefit just the consumer. It can give huge benefits to other industries, to government, and to the entire economy. The Indian retail scenario is poised for a quantum leap. Not only are newer names set to dot the retail landscape but also new and emerging retail formats will drive the diversity of the fast-changing retail backdrop. Organized Retail means 'Big Stores' a common myth

nothing can be further then the truth. In its very essence, organized retailing is about "aggregating value" and what shape, size and configuration your customer facing entity takes is largely a function of your offer and proposition. A growing population, a young workforce and zooming consumer confidence will fuel the expansion of the retail sector. As organized retail in rural India awaits the arrival of Reliance Retail, current majors like ITC, Godrej and DSCL are expanding their retail operations by setting up more stores, entering new states and offering newer product categories. A shift from selling agri-inputs will help these stores target the non-farming segments. It is a little known fact that, while 25% of the rural population is not engaged in agriculture, it earns 50% of the rural income. The retail market is the next growth frontier for corporate India. It offers an opportunity for a large player to build a Rs. 40,000 Cr retail business spanning multiple categories by 2015 (at current prices). However, to capitalize on the opportunity, a player needs to be aggressive in its outlook and build scale quickly. India's rural retail market is expected to grow by 29 percent to 1.8 trillion rupees by 2012 helped by rising incomes and changing consumption patterns, is found in a survey conducted by industry. But poor infrastructure, supply chain inefficiency, and product pricing must be addressed if its full potential is to be realized, the report released by the Confederation of Indian Industry and Yes Bank on Thursday said. Rural retail includes fast moving consumer goods, durables, agricultural inputs and autos like tractors. In India rural per capita income would double to 14,000 rupees by 2012 as more families switch to commercial from subsistence farming, a big enough jump to spur demand for a wider range of products. Village households are expected to rise to 153 million in 2009-10 from 135 million in 2001-02, probably making rural India the largest potential market in the world. However, there is no organized marketing and distribution in 87 percent of India's villages, home to 50 percent of the rural population. Corporate are increasingly eyeing rural areas as drivers of future growth.

Objectives: 1. 2. 3. 4. 1. 2. 3. 4. To determine the importance of Indian rural market To know the features of rural retail stores To analyze the perception of the rural people in the context of retail stores To know about different between the rural and urban retailing To determine the importance of Indian rural market To know the features of rural retail stores To analyze the perception of the rural people in the context of retail stores To know about different between the rural and urban retailing

Recommendations & Suggestions:

The retailer approach should be more professional like in urban The retailers should try for up selling and cross selling rather to focus on the bulk selling The promotion strategy should be local and easy to grab able for the target audience The quarries and questions should be addressed by retailer The awareness about product quality should be spread between customer so they can shift to these stores rather to traditional stores Stores should enhance their portfolio so that more and more customers can find their needs.

Limitations:

Researcher has observed that data was not sufficient and not up to the mark as per the expectations. Due to the diversity of the locations and lack of awareness researcher was not able to collect qualitative data. The stores were not helpful to the researcher. Customer data base are not provided by the retail stores because it is confidential for the stores and the companies. Stores have provided recorded data on the sales figures The bias opinions of customers and employees

Conclusion: In India for a long time a large chunk of retail outlets were grocery shop. This pattern had been changing in recent years, in urban and rural markets. Of late, India's largely rural population has also caught the eye of retailers looking for new areas of growth. A slew of supermarket chains, including those of the Tata and ITC, are set to storm the rural areas of the country as corporate realize the huge potential of the untapped market ITC launched the country's first rural mall 'Chaupal Sagar', offering a diverse product range from FMCG to electronic appliances to automobiles, attempting to provide farmers a one-stop destination for all of their needs. Companies such as Godrej and DCM Shriram Consolidated are launching `one-stop shops' for farmers and their communities. Godrej Agrovet, for instance, is planning to set up 1,000 Aadhar stores across rural India by 2010. DCM Shriram plans to set up 35 rural/semi-urban utility marts over 2006-07. Positioned as a one-stop shop, the Hariyali Kisaan Bazaar Chain will cater to a variety of farmers' needs by providing access to retail banking, LPG outlets and even a motorcycle showroom.

Marketers are trying to grab this untapped market but still the reach of those players is mere they should more focused and rural oriented. There are some points which they should undertaken

The retailer approach should be more professional like in urban The retailers should try for up selling and cross selling rather to focus on the bulk selling The promotion strategy should be local and easy to grab able for the target audience The quarries and questions should be addressed by retailer The awareness about product quality should be spread between customer so they can shift to these stores rather to traditional stores Stores should enhance their portfolio so that more and more customers can find their needs.