Rural Consumer Behaviour1

For ManagementParadise.com By ex-TYBMS students.
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
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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 2030%. 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 non-durable 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 Volume Dealers (Lacs) 148 K.L 1099 K.L 1 1 Pun/Har, Assam Del, Assam, Bihar, M.P. Bihar, W.B., Guj, M.P., Maha Assam, Karnataka Major States
BRANDS
No. of 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
1837
11
1276
2190 T
20
W.B., Bihar, M.P.
1009
28
Assam, Bihar, Maha
34 7
9893 K.L 733 K.L
14 4
Raj, U.P. Pun / Har U.P., Bihar, Guj, M.P.
200
Assam
26
755
U.P., Guj, M.P.
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 hire-purchased 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.

Rural Consumer Behaviour1

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For ManagementParadise.com By ex-TYBMS students.

For ManagementParadise.com By ex-TYBMS students.

For ManagementParadise.com By ex-TYBMS students.

For ManagementParadise.com By ex-TYBMS students.

For ManagementParadise.com By ex-TYBMS students.

No. of look alike Brands

W.B., Bihar, M.P.

Assam, Bihar, Maha

9893 K.L 733 K.L

Raj, U.P. Pun / Har U.P., Bihar, Guj, M.P.

U.P., Guj, M.P.

For ManagementParadise.com By ex-TYBMS students.

For ManagementParadise.com By ex-TYBMS students.

For ManagementParadise.com By ex-TYBMS students.

For ManagementParadise.com By ex-TYBMS students.

Benefits Product features Packaging

Availability Retail Shops Haats

For ManagementParadise.com By ex-TYBMS students.

For ManagementParadise.com By ex-TYBMS students.

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