Rural Marketing

Module II & III

Why Rural Marketing
is hot?
Rural Push Policy of UPA Government
Four Consecutive years of positive growth
in rural GDP
40% hike in MSP of Crops over last two
years
Farm Loan Waiver & NREGS
Growing Industry Demand for land
(Overnight Wealth)
Big rise in remittances from Cities
Slowing urban demand forcing corporates
to rural markets
% Annual Change in
Rural GDP
Year Change
2003-04 10%
2004-05 -6.7%
2005-06 5.8%
2006-07 4%
2007-08 4.9%
2008-09
(Estimates)
2.6%
51%
Rs. 13,65,000
Crore
49%
Rs 13,17,018
Crore
Why Rural Marketing
is a New Discipline?
Rural Marketing is a new discipline because:-

India is a predominantly agrarian society.
Western Marketing has no experience to
manage it.
Urban markets are saturating in India.
There are immense opportunities at the
bottom of the pyramid.
R. M. can change rural business.
Retail boom will also expedite the growth
of rural marketing.
What is Rural?
Definitions of Rural
Census Village: Basic Unit for rural areas is the revenue village, might
comprise several hamlets demarcated by physical boundaries.

Town: Towns are actually rural areas but satisfy the following
criteria.
Minimum Population >=5,000
Population density>= 400/ sq. km.
75% of the male population engaged in non-agri activity.
RBI Locations with population up to 10,000 will be considered as rural
and 10,000 to 100,000 as semi-urban.
Nabard All locations irrespective of villages or town, up to a population of
10,000 will be considered as rural.
Planning
Commission
Towns with population up to 15,000 are considered as rural.
Sahara Locations having shops/ commercials establishments up to 10,000
are treated as rural.
LG Electronics The rural and semi urban area is defined as all other than the seven
metros.
What is Rural
Marketing?
According to the National Commission on Agriculture:
Rural Marketing is a process which starts with a decision
to produce a saleable farm commodity and it involves all
the aspects of market structure or system, both functional
and institutional, abase on technical and economic
considerations and includes pre and post harvest
operations, assembling, grading, storage, transportation
and distributions.
Rural Marketing can be defined as a function that
manages all activities involved in assessing, stimulating,
and converting the purchasing power of rural consumers
into an effective demand for specific products and
services and moving these products and services to the
people in rural areas to create satisfaction and a better
standard of living and thereby achieving organizational
goals.


Scope of
Rural Marketing
The Rural Marketing Matrix
(
M
a
r
k
e
t
)

Handicrafts, Handloom
Textiles, Leather
products (Semi-
organised)
Farm & Non-Farm
and services
(Unorganised Sector)

Rural
Brand Consumables
and durables
(Organised)

Urban
Rural Urban

(Production)

Evolution of Rural
Marketing
Phase Origin Function Major
Products
Source
Market
Destination
Market
I Since
independence
Agricultural
marketing
Agricultural
produce
Rural Urban
II Mid-Sixties Marketing
of
agricultural
inputs
Agricultural
inputs
Urban Rural
III Mid-Nineties Rural
marketing
Consumables
and durables
for
consumption
and production
Urban/ Rural Rural
IV 21
st
Century
Nature of Rural Marketing
(Transactional Vs Development Marketing)
S. No. Aspect Transactional Development
1 Concept Consumer orientation,
Marketing concept
Society orientation, societal concept
2 Role Stimulating and conversional
marketing
Catalytic and transformation agent
3 Focus Product-market fit Social change
4 Key task Product innovations and
communications
Social Innovations and communications.
5 Nature of activity Commercial Socio-cultural, economic
6 Participants Corporate enterprises, Sellers Government, voluntary agencies, corporate
enterprises, benefactors
7 Offer Products and services Development Projects/Schemes/Programmes
8 Target group Buyers Beneficiaries and buyers
9 Communication Functional Development
10 Goal Profits Customer satisfaction
Brand image
Market Development Corporate Image
11 Time-Frame Short-Medium Medium-Long
12 Motivation Profit-motive Business policy Service-motive Ideological or Public policy
Taxonomy of Rural
Markets
(Classification of Rural Markets)
Constituents Products Durables Services
Consumer
Market
Individuals and
households
Consumables: Foods
products, Toiletries,
Cosmetics, Textiles
and Garments, Foot
Wear etc.
Watches, Bicycles,
Radio, T.V.,
Kitchen
appliances,
Furniture, Sewing
machines, Two
Wheelers etc.
-------
Industrial
Market
Agricultural and
allied activities,
Poultry farming,
Fishing, Animal,
Husbandry cottage
industries, Health
Centre, School,
Cooperatives,
Panchayat office
etc.
Consumables: Seeds,
Fertilizers, Pesticides,
Animal feed, Fishnets,
Medicines,
Petrol/Diesel etc.
Tillers, Tractors,
Pump sets,
Generators,
Harvesters, Boats
etc.
-------
Services
Market
Individuals, House
holds, Officers,
and Production
firms
------- ------- Repairs,
Transport,
Banking, Credit,
Insurance
Health care,
Education,
Communication
, Power etc.
Whether Rural Markets
are Attractive?
Large population
Rising prosperity
Growth in consumption
Life-style changes
Life-cycle advantages
Market growth rates higher than Urban
Rural marketing is not expensive
Remoteness is no longer a problem.

Rural Vs Urban
Marketing
S. No. Aspect Urban Rural
1 Philosophy Marketing and societal
concepts, Green
marketing
and relationship
marketing
Marketing and societal
concepts, development
marketing, and
relationship
marketing.
2 Market
(a) Demand
(b) Competition

(c) Consumers
o Location
o Literacy
o Income
o Expenditure
o Needs
o Innovation
adoption

High
Among units in organized
sector

Concentrated
High
High
Planned, Even
High level
Faster

Low
Mostly from unorganized
units

Widely spread
Low
Low
Seasonal variations
Low level
Slow
3 Products
o Awareness
o Concepts
o Positioning
o Usage method
o Quality preference
o Features

High
Known
Easy
Easily grasped
Good
Important

Low
Less known
Difficult
Difficult to grasp
Moderate
Less Important
Contd.
Rural Vs Urban Marketing Contd.
S. No. Aspect Urban Rural
4 Price
o Sensitive
o Level desired

Yes
Medium-High

Very much
Low-Medium

5 Distribution
o Channels




o Transport facilities
o Product availability

Wholesalers, Stockists
Retailers, Supermarkets,
Specialty stores and
authorized show rooms

Good
High

Village shops
Shandies Haats and
Jatras


Average
Limited
6 Promotion
o Advertising



o Personal Selling

o Sales promotion

o Publicity

Print audio-visual media,
out doors, exhibitions etc.
Few languages

Door-to-door frequently

Contests, Gifts, Price
Discounts
Good opportunities

TV, Radio, Print Media to
some extent. More
languages

Occasionally

Gifts, Price discounts

Less
Value Added Rural
Marketing
Ensure
increase in
customer
value
Communicat
e unique
proposition
Build special
brands for
rural customers
Provide
functional
benefits
Segment
rural
customers
Study
demographic
patterns
Study
product
ownership
patterns
Identify unique
characteristics
of rural
customer
HOW TO ADD VALUE THROUGH RURAL MARKETING
Are relevant
needs being
met?
Are the
clusters
large
enough?
No Yes No No
SESSION II


Rural Marketing Environment
& Rural Economy

Structure of Rural
Markets

Demographic Environment
1971 1981 1991 2001
Total population (million) 548.2 683.3 848.3 1026.9
Rural population (million) 524.0 628.8 741.6
Rural Proportion to total population (%) 80.1 76.7 74.3 72.2
Decadal Variation - 19.8 16.7 15.2
Source: Census of India 2001
Education and the
Level of Demand
Rural Literacy 1981 1991 2001
% of literates 36 45 59
Source: Census of India 2001
Household Pattern
Family Structure
Particulars 1991 2001
Rural Urban Total Rural Urban Total
Households (Million) 112 40 152 138 54 192
Family Size (Number) 5.55 5.32 5.36 5.31
Source: Census of India 2001
Rural Housing Pattern
House Type 1981 1991 2001
Pucca (%) 22 31 41
Semi-Pucca (%) 37 36 36
Kuccha (%) 41 33 23
Total 100 100 100
Source: Census of India 2001
Occupational Pattern
Distribution of Households by Occupation of the
Head, 1999-2000
Heads Occupation Distribution of households
(%)
Urban Rural All
Housewife 0.84 1.01 0.96
Cultivator 3.45 40.86 29.99
Wage earner 20.93 35.28 31.12
Salary earner 40.72 11.28 19.84
Professional 3.59 0.73 1.56
Artisan 6.90 3.41 4.42
Petty Shopkeeper 16.05 4.97 8.19
Businessman 3.68 0.46 1.40
Other 3.85 1.98 2.52
Total 100.00 100.00 100.00
Source: NCAER 2002
Physical Environment

Rural and Urban Life:
Distinguishing Features
Population Density (Urban + Rural) (Per Sq. Km.)
1971 1981 1991 2001
Popu. Density (Total) 177 216 267 312
Rural 171 214 253
Distribution of Towns and Villages
1991 2001
No. of Towns 3,697 5,161
No. of inhabited Villages 580,779 593,154
Total no. of Villages 634,321* 638,588*
* The total number of Villages also includes non-inhabited Villages.
Source: Census of India 2001
Settlements
(Scattered and Clustered)
Town
class
Population No. of
Towns
% of total
Towns
% of
Population
Decadal
Growth
(1991-2001)
Class-I 1 Lakh and above 423 8.2 61.5 24
Class-II 50,000 99,999 498 9.6 12.3 15
Class-III 20,000 49,999 1,386 26.9 15.0 16
Class-IV 10,000 19,999 1,560 30.2 8.1 7
Class-V 05,000 09,999 1,057 20.5 2.8 8
Class-VI Less than 5,000 237 4.6 0.3 -22
Total 5,161 100.0 100.0
* 10 Lakh + : 27; 5-10 Lakh: 42; 1-5 Lakh:354
Source: Census 2001
Economic Environment

%

H
o
u
s
e
h
o
l
d
s


80 --

70 --

60 --

50 --

40 --

30--

20--

10--

0--

23.9
8.8
39.5
42.7 42.5
67.3
17.8
36.9
20.6
1989-90 2001-02 2009-10
Source: Market Information Survey of Households, NCAER

_________ Low (<Rs.45K p.a) ________ Middle (Rs.45K-90K p.a)
_________ High (>Rs.90k p.a)

Changing Rural
Consumers Expenditure
Pattern
Per capita consumption
expenditure (Rs. Per month)
Rural Urban
1983 112 166
1991 281 458
2001 486 855
Source: NSSO
Composition of rural per capita
consumption expenditure
Food Non-Food
1983 66 34
1991 63 37
2001 59 41
Source: NSSO
Technological
Environment
Size of Rural Market
Estimated Annual Size : Rural Market
FMCG Rs. 65000 Crore
Durables Rs. 5000 Crore
Agri-inputs (incl. tractors) Rs. 45000 Crore
2/4 Wheelers Rs. 8000 Crore
Total Rs. 1,23,000 Crore
Source: Francis Kanoi 2002
II-The Rural Economy:
The Economic Scenario
in Rural India
Human Development Index
(HDI)
Year Rural Urban Total
1981 0.26 0.44 0.30
1991 0.34 0.51 0.38
2001 ------ ------ 0.47
Source: Human Development
Report, 2001
The HDI is a composite of
variables capturing attainments
in three dimensions of human
development, viz., economic,
educational and health.
The Changing Face of
Rural Development
Population below the poverty line (Rural)
Period No. of Persons
(Million)
% of Persons Poverty line
(Rs.)
1983 252 46 89.5
1993-94 244 37 206
1999-2000 193 27 328
Source: Human Development Report, 2001
The Development Exercise:
The Five-Year Plans
Sectoral allocations during the five-year plans (Rs. Billion)
Head of
Development
Seventh
Plan
Eighth Plan Ninth Plan Tenth Plan
(1985-90) (1992-97) (1997-2002) (2002-07)
1. Agriculture 105 225 372 589
2. Rural Development 89 344 890 1,219
Source: Planning Commission 2002
Percentage share of the different sectors in GDP (at 1993-94 prices)
Year Primary
(Agri and Allied)
Secondary
(Manufacturing)
Tertiary
(Services)
Total
1950-51 57.2 14.8 28.0 100.0
1980-81 39.7 23.7 36.6 100.0
2001-02 23.9 26.6 49.5 100.0
Source: National Account Statistics, 1951-2001
Transition of the
Rural Economy

1. Food grain crops


2. On-land activities


3. Farm activities
1. Non-food grain crops, cash
crops

2. Off-land allied activities like
livestock and fisheries

3. Non-farm activities, including
manufacturing and services.
The Rural Economic
Structure
Farm Sector
(Agri & Allied)
Agriculture
Animal Husbandry
(Dairy, Goat, Poultry)

Horticulture
Forestry
Fishing
Rural Economy
Non-Farm Sector
(Formal & Informal Sector)
Rural Industries Rural Services
Agro Processing
(Sugarcane, Oilseed etc)
Retailing & Trading
Manufacturing
(Handloom, Handicrafts etc)
Community & Social
Service

Mining & Quarrying Transport & Storage
Construction Communication
Income Disparity
Rural-Urban Income Comparison
Sector Bottom (30%) Middle (40%) Top (30%) All Classes
Rural Urban Rural Urban Rural Urban Rural Urban
Average
Consumption
Expenditure
(Rs./Annum)
3,270 4,580 5,110 8,150 9,400 18,720 5,830 10,260
Population
(Million)
223 86 297 114 223 86 742 285
Source: NSS 55
th
Round (1999-2000), Census 2001
The Rural Infrastructure
Road Connectivity
Road Connectivity at the Village level (%)
Population
less than
1,000
Population
between
1,000 and
1,500
Population
more than
1991-92 36.52 72.32 89.82
1994-95 37.45 76.54 91.72
1996-97 49.18 74.58 78.04
Source: National Human Development Report 2001
Telephone Services
Telecom Density (Phone per 100)
2000 2005 Increase
Urban 8.2 26.2 220%
Rural 0.7 1.74 148%
All 2.9 9.08 213%
Source : Telecom Regulatory Authority
of India Report, 2005
Why Agriculture Growth
has been slow & tardy?
1. Low priority to Agriculture
2. Subsistence Orientation of Agriculture
3. Failure of Land Reforms
4. Low size of operational Landholdings
5. Inadequate Food Supplies
6. Sluggish Infrastructural Growth
7. Disconnect between Research &
Farmers
8. Insufficient Availability of Credit
9. Inadequate Inputs
10. Slowdown of Rural Industrialization
Policy Interventions
Required
1. Thrust on Land Reforms
2. Strengthening the Panchayati Raj Institutions
3. Financial Inclusion (Innovative Credit Delivery)
4. Development of Rural Infrastructure
5. Expansion of Kisan Credit Card Scheme
6. Protection of Farmers from natural calamities
7. Extensive use of ICT
8. Higher Investment in Agriculture & Rural
Development.
9. Focus on High Value Crops & Non-farm Incomes.
10. Bridging the Gap Between Agri-Research &
Farming.