Rural Quotes

The future lies with those companies who see the poor as their customers.
CK Prahalad to Indian CEO's, Jan 2000.

To get rich, sell to the poor.

Pradeep Kashyap.

Lecture Plan
Course Plan Nature of Assignments Rural Marketing Issues, Opportunities & Challenges

RURAL MARKETING
Course Plan

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

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 5 concept

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

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

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 rural marketing organisations
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Issues, Opportunities & Challenges

RURAL MARKETING

Rural Market Has Arrived

742 million people Rural consumption is bigger than urban
FMCG's Durables 53% 59% Rs Rs Rs Rs
Source: NCAER

Estimated annual size of the rural market

FMCG Durables Agri-inputs (incl. tractors) 2 / 4 wheelers 65,000 Crore 5,000 Crore 45,000 Crore 8,000 Crore

Total

Rs 1,23,000 Crore

Source: Francis Kanoi Latest McKinsey Report estimates that by 2020, Rural Consumer Market 10 Will be worth Rs. 250,000 crores

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 lakh PCOs 90% of villages covered. By end 2007, there are likely to be 11.05 crore rural phone subscribers For every Re.1/- per quintal increase in the Procurement Price for grains, Rs. 170 crores added to rural economy
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Rural Market Has Arrived

55.6 million Kisan Credit Cards issued (against 60 million credit-plus-debit cards in urban) resulting in 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: 6.6 million HHs in rural and and 6.7 million in urban Over 50% of HLLs Rs. 11700 crore sales turnover is from rural markets

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RURAL TARGET MARKETS - CLASSIFICATION

0.8 26.8

Very Rich
1.6

41.3
63.3

Consuming Class Climbers

54.7

25.0

14.7

Aspirants Destitutes

20.9 2001 - 02

12.2 2006-7
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Rural Income Dispersal Projection

Consumer Class
Very Rich Consuming Class Climbers Aspirants Destitutes Total

All figures in %

Annual Income
Above Rs 215,000 Rs 45,001215,000 Rs 22,001- 45,000 Rs 16,001 - 22,000 Rs 16,000 & Below

1995-96
0.3 13.5 31.6 31.2 23.4 100.0

2006-07
0.9 25.0 49.0 14.0 11.1 100.0

> Projections Based on 7.2% GDP Growth Consuming class households in rural nearly equal to urban. Rural Purchasing Power higher due to lower expenses on food, shelter, education & health
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Source : NCAER Indian Market Demographics Repor

Issues In Rural
Distribution Understanding the rural consumer Communication Poor infrastructure

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Distribution of Villages
Population
Less than 200 200-500 501-1000

No of villages
92,541 127,054 144,817

% of total villages
15.6 21.4 24.4

Hardly any shops in these 2.2 lac villages

1001-2000
2001-5000 5001-10000 Total no of villages

129,662
80,313 18,758 593,154*

21.9
13.5 3.2 100.0
17% of villages account for 50% of rural population & 60% rural wealth
Source: Census 2001
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*Inhabited villages, total number of villages is 638, 691

Distribution of Towns in India

Town Class
Class I Class II Class III Class IV

Population
1 lac and above 50,000-99,999 20,000- 49,999 10,000- 19,999

No of towns
423* 498 1386 1560

% of total towns
8.2 9.6 26.9 30.2

Class V
Class VI Total no of towns

5,000- 9,999
less than 5000

1057
237 5161

20.5
4.6 100.0

90 % of durables purchased by rural people are from these 1900 towns

*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354

Source: Census 2001

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Rural Consumer Insights

Rural India buys
Products more often (mostly weekly). Buys small packs, low unit price more important than economy. Distribution and pricing are the mantras to success in rural India.
Even expensive brands like Close up, Marie biscuits, Clinic shampoo are doing well because of deep distribution.
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Rural Consumer Insights

In rural India, brands rarely fight with each other, they just have to be present at the right place. Many brands are building strong rural base without much advertising support.
Chik shampoo, second largest shampoo brand. Ghadi detergent, second largest brand.

Fewer brand choices in rural : number of FMCG brands in rural are half that of urban. Buy value for money, not cheap products
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MYTH 1: Rural Market Is a Homogeneous Mass

REALITY Heterogeneous population
Big Landlords

Traders,Small Farmers

Marginal Farmers Laborers, Artisans

16 languages, 800+ dialects State wise variations in rural demographics

Literacy (Kerala 90%, Bihar 44%) Population below poverty line (Orissa 48%, Punjab 6%)
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 Urban Rural Urban 27.4 million 29.5 million Rs 9,481 Rs 19,407

Per Capita Annual Income (not Purchasing Power)

Total

Rs 12,128

Source: NCAER

Rural incomes CAGR now estimated @ 15% vs 10% in urban

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MYTH 3: Individuals Decide About Purchases REALITY

Decision making process is collective Purchase process- influencer, decider, buyer, one who pays can all be different. So marketers must address brand message at several levels Rural youth brings brand knowledge to HH
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Infrastructure Improving Rapidly

In 50 years only 40% villages connected by road, in next 10 years another 30%. More than 90 % villages electrified, though only 44% rural homes have electric connections. Rural telephone density has gone up by 300% in the last 10 years, every 1000+ pop is connected by STD.
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Media Reach Improving Rapidly

70% of R1,R2, R3 can be reached 70 through mass media.
53 41 26

21 14

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 families declined 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
CTV Refrigerator Mobile Phones

Urban
30.4 33.5 40.0

Rural
4.8 3.5 12.0

Total
12.1 12.0 18.0

FMCGs
Shampoo Toothpaste

Urban
66.3 82.2

Rural
35.2 44.9

Total
44.2 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 of the population consumes over 75% of FMCG 28 volumes

Challenges in the Future

Reaching the product to remote rural locations and entering more rural homes (penetration)
Increasing rural incomes (market growth)

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Challenges in the Future

Making effective use of the large available infrastructure
Post offices Haats (periodic markets) Melas (exhibitions) Mandis (agri markets) Public distribution shops Bank branches 1,38,000 42,000 25,000 7,000 3,80,000 32,000
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Challenges in the Future

Using IT to transform markets
ITCs e-choupal and other IT initiatives (EID Parry, Amul dairy information system kiosk) STD revolution/ mobile connectivity

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Challenges in the Future

Proliferation of large format rural retail stores
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 rural to urban geographies Rural psychography living in an Urban demography Strong purchasing power because despite lower incomes, low wasteful expenditures Become carriers and promoters of brands into rural geographies on their annual trip back home
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