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RURAL MARKETING DEFINITION Market: Market means not a particular market place in which things are bought and sold but the whole of any region in which buyers and sellers are in such a free intercourse with one another that the prices of the same goods tend to equality, easily and quickly.-Cournot Marketing: Marketing as a process by which goods and services are exchanged and their value is determined in terms of money prices. H. E. Mitchell Agricultural Marketing: According to National Commission on Agriculture XII Report Agricultural marketing is the process which starts with a decision to produce a suitable farm commodity or product & it involves all aspects of market structure or systems, both functional and institutional, based on technical and economic considerations and include pre and post harvest operations like assembling, grading, storage, transportation, and distribution. Historical Perspective Of Agricultural Marketing: Historical perspective of agricultural marketing is mainly divided in to four periods they are as fallows: 1. Ancient period 2. Medieval period 3. Colonial period 4. Post independence/ modern period Ancient period: During the ancient period barter system was present where people used to exchange their goods or commodities in terms of another commodity. Kautilya in Arthashastra has mentioned that trade, commerce and finance formed the basis of the state. Medieval period: During the medieval period the main four kingdoms were: a. Delhi Sultans Dynasty. b. Mughal Dynasty.
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Peshwas Regime: External trade: China, Afghanistan and Persia. Internal trade: Was carried out through water and land Main commodities: sugar, spices, dry fruits, and food grains. Trade centers: Poona, Satara, Kolhpur, Nasik, Solapur, Kalyan and Miraj. Colonial period: The Colonial Administration converted the traditional payment to the State, in the form of a proportion of actual produce in kind, into a fixed payment of land revenue in the form of cash. The land revenue was calculated to be 5% of gross produce per acre in Central Provinces, 7% in Berar, 7% to 13% in Delhi & Bombay and 20% Gujrat. Zamindari system was introduced during this period. This all led to debt traps to the poor farmers. Brokers and dalals came in to existence between the farmer and the consumer. Post independence/ modern period: Five-year plan was introduced: First five year plan: Regulated markets were established in Bombay, Madras, Punjab, Hyderabad, Mysore and Madhya Pradesh where the management of these markets was vested in the committees in which growers (farmers) were also represented. In this plan the main thrust was laid on cooperative marketing and its aim was to have minimum 425 regulated markets in India. Second five year plan: To recognize the existing system so as to secure for farmer his due share of price paid by customer and sub serve the needs of planned development. Total agriculture produce markets were 2500 out of which 725 were regulated markets. Third five year plan: Bring remaining markets to regulation, and Expand grading program for the commodities. Aim to improve agriculture market system and
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Majority of the population of India still exist in the Rural Area itself. States like Uttar Pradesh, Madhya Pradesh, Rajasthan and Kerala have > 80% of the population in the Rural areas only. While, States like Bihar and Orissa still have > 90% in the Rural area. b. Consumer Characteristics: Low purchasing power
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c. Location Pattern Urban: Population concentrated in 3200 cities & towns Rural: Population scattered over 576000 villages. 6300 villages have population more than 5000 persons More than 55% villages have population of 500 or less people More than 1.5 lakh or nearly 25% of the villages have population of 200 or less. Inference: Rural demand is scattered over a large area. d. Literacy level: Rural India 23% literacy as compared with 36% of whole country In absolute numbers 11.5 crore of literate people are in Rural India Every year 60 lakh is getting added to the literate population of rural India.
compared with 12 crore in urban India. e. Rural income: Evidently, rural prosperity and the discretionary income with the rural consumer are directly tied with agricultural prosperity because, nearly, 60% of rural income is from Agriculture. Inference: Rural Demand is Seasonal and Festival linked. f. Rural savings: The commercial and co-operative banks have been marketing the saving habit in the rural areas for quite some years. 70% of rural households are saving and majority of them belong to salary earners and self-employees non -farmers. 2. SIZE AND COMPOSITION OF RURAL DEMAND: Size of Rural market in non-food consumption items has been increasing from Rs. 5000 crores in 1969-70 to Rs. 22000 crores in 1993-94. (Size of market at current prices)
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2. Heterogeneous Market:
The relative status of the rural areas of different states differs. Parameters on which they differ are Health and education facilities, nature of facilities, availability of public transport, electricity, TV transmission, banks, post offices, water supply etc.
IMRB study reveals that an average village in India has 33 development index points, Keralas average Is 88; Bihars average is just 22; while MP, Rajasthan and UP are close to Bihar; and states like Maharashtra, Haryana, Karnataka range between 40 and so. 3. Demand, Seasonal and Agriculture dependent:
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2. Green Revolution:
A technological break through since 1965 in Indian agriculture. Today, rural India generates 185 million tonnes of food grains per year and expected to reach 210 million tonnes by 2010. It produces 15 million eggs, 90 million broilers, 50 million tonnes of milk per annum (White revolution, Blue Revolution). Operation flood.
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10. Media:
Role of newspapers, radio, T.V., etc. has given rise to new demand for goods and services.
The Problem Areas in Rural Marketing: 1. Physical Distribution 2. Channel Management 3. Sales force Management 4. Promotion and Marketing Communication
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Transportation problem:
Railway: Though India has the fourth largest railway system in the world; many parts of the rural India remain outside the rail network. Road: Nearly 50% of the 576000 villages in the country are not connected by roads at all. The government had planned to connect at least the bigger villages, i.e. villages with a population of 1500 or above, with all weather roads by 1990 but this is not accomplished yet. Many parts of rural India have only kuchha roads and many parts of the rural interiors are totally unconnected by roads with any mandi level town. ii. Warehousing problem: Business firms find it quite difficult to get suitable godowns in many parts of rural India, and there are no public warehousing agencies in the interiors of rural India. Three tier warehouse structure: Top tier -At nodal points/ major market centre Second / Middle tier -At Mandi level Third / Bottom tier - At villages CWC/SWC do not extend their network of warehouses in rural parts. Warehouses owned by cooperatives provide warehousing service only to their members. A business firm has to manage with the CWC/SWC n/w, which stops with the nodal points, or it has to establish its own depots or stock points run by its stockists / distributors. iii. Communication Problems: owned by cooperatives owned by cooperatives CWC and SWC
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Advantages Bullock carts are cheaper, they are available in plenty and are ideal for rural roads. 3. Company Delivery Vans:
Companies like HLL, Tomco, Brooke Bond-Lipton and ITC use delivery vans. These vans takes the products to the retail shops in every nook and corner of
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Rural Consumer
ii. Scope For Manufacturers Own Outlets Limited, Greater Dependence on Dealers Inescapable Dependence of the firm on intermediaries is very much enhanced. Control is mostly indirect.
iii. Non Availability Of Dealers: Even if the firm is willing to start from scratch and try out rank newcomers, the choice of candidates is really limited.
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vi. Inadequate Credit Facilities From Banks: The rural outlets are unable to carry adequate stocks due to lack of credit facilities. They are unable to extend credit to their customers. And the vicious circle of lack of credit facilities leading to inadequate stocking or loss of business finally resulting in poor viability of outlets get perpetuated. Solutions: The Existing Market Structure: Indian rural market is composed of 22,000 primary rural markets and 20 lakh retail sales outlets of which nearly one lakh are FPS (Fair Price Shops) of the public Distribution System (PDS). One retail shop serves on an average 60-70 families in the rural areas. The structure involves stock points in feeder Towns to service. These retail outlets at the village level. The stock points belong to either the manufacturer or the marketer / distributor for the area. The Available Channel Choices: Private shops- FPS Co-operative Societies Village Shandy/ Weekly markets.
The co-operative societies are mainly concerned with distribution of agricultural inputs are the FPS with distribution of essential commodities. The village shandy is widely used in rural marketing, but its role is limited in marketing branded products.
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They are the main channel in the rural market for a large variety of consumer products; they are also the cheapest and the most convenient channel to align with. According to the Operations Research Group (ORG) there are 2.02 sales outlet in rural India. It is quite natural that firms seeking an effective presence in rural marketing, willingly embrace the private village shops. It has to select its outlets from out of existing shopkeepers or select a few freshers & appoint them as the outlets. The choices are usually confined to the following categories : Existing traditional private shops. Moneylenders willing to branch off to trade. Land owners willing to branch off to trade. Educated unemployed persons. Satellite Distribution:
The firm appoints stockists in feeder tours. They take care of financing of goods, warehousing of goods and sub-distribution of goods in the area covered by the feeder town. The firm also appoints a no.of retailers in and around the feeder towns and attaches them to the stockists. The firm supplies the goods to the stockists either on cash or credit or on consignment basis. The stockists take care of the sub-distribution job or the terms or conditions determined by the firm. Over a period of time, some retailers grow in terms of business turnover. If such retail points also happen to be transportation centers within the feeder town area, the firm elevates them as stockists. The area of operation of the original stockists shrinks in this process, but care is taken to see that his volume of business does not shrink. This is achieved, in practice, on account of the growth in demand & deeper market penetration. The process continues as long as the market keeps expanding. Advantages: It helps & facilitates market penetration in the interiors of rural market.
III.
Unique Traits required on the part of rural salesman. 1. Willingness to get located in Rural Areas.
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TYBMS V Sem Rural Marketing 3. Attitude factors: The rural salesman must have great deal of patience as
their customer is a Traditional & cautious person. Perseverance is another essential traits
6. Greater creativity: Rural salesman should introduce new products in the rural areas through creative selling, using the consumption pioneers and opinion leaders. Rural marketing also presupposes the delivery of new standard of living to the rural masses. It is essentially developmental marketing.
Managing Rural Sales Force Selecting the salesman Giving them orientation more on the job training, coaching in selected village markets. Educate rural marketing environment. IV. Problems: Low literacy rate: printed word has limited use. Tradition bound Cultural barriers Overall economic backwardness Linguistic diversity Motivating them. Developing them Marketing Communication in Rural Markets
It has been estimated that all organized media put together can reach 30% of the rural population in India.
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Solutions
1.
non-formal media.
Selecting
the
media
mix:
Evidently, in the rural context the firm has to choose a combination of formal and Formal / Organised : TV, Cinema, Press, Other print media, direct mail, radio, point of purchase (POPs), outdoors, etc. Non-formal / rural Specific Media : A V vans / Publicity vans, Dance-dramas, Puppet Shows, rural specific art forms like Harikatha and Villupatu performed at village melas and temple festivals, demonstrations, study classes, mike announcements, processions, caparisoned elephants, decorated bullocks carts carrying ad panels, music records, house to house campaigns by special promotion squads, information centers on companies products. TV : 77 % of villages in India now receive TV transmission and 27 % of all rural people actual watch TV. Radio ; is a well established medium in rural areas while radio as a medium cannot match TV in potentiality or effectiveness, radio does have a major role in rural communication. Cinema : 29 % of all rural people do see cinema as a matter of regular lifestyle or habit. Short feature films with disguised advertisement. Messages, direct advertisement, films or documentaries, that combine knowledge or advertisement can be employed for rural communication. Out doors :Hoardings, wall paintings, illuminations and other displays in rural areas. Pops :More than written words, symbols, pictures and colours must be used. A V vans :Films can exhibit its films or other A-V presentations such as slide shows, sound or sight presentations, puppet shows, etc. The van is a comprehensive mobile
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Classification of Markets
1. Location:
Village Markets Located in small villages, major transaction takes place among buyers and sellers of a village. Primary Wholesale Market Located in big towns, near center of production of agricultural commodities, a major part of produce is brought for sale by the producer-farmer themselves. Transaction is between farmers and traders. Owned by market committees, local bodies / private individuals
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Secondary Wholesale Markets Located in district head quarters / important trade centers / near railway junctions, major transaction takes place between village traders and wholesalers. The bulk arrival in these markets is from other markets. The produce in these markets is handled in large quantities. There are specialized marketing agencies performing different functions such as; commission agents, brokers, weighmen.
Terminal Markets where the produce is finally disposed off directly to the consumer / processor / assembled for export and possesses sufficient warehousing and storage facilities covering a wide area extending over a state or two.
Sea board Markets Located near sea shore, meant for import / export of goods.
2. Area / Coverage:
Regional Markets buyers and sellers for commodities are drawn from a
larger area. Ex: foograins
National Market - buyers and sellers are at national level. Ex: dural
commodities like jute, tea
World Market - buyers and sellers are drawn from whole world. Ex:
coffee, gold, silver, cotton 3. Time Span:
Short period Market few hours, products of highly perishable nature. Ex: fish, milk Long Period Markets larger period, less perishable. Ex: foodgrains, oilseeds Secular Markets permanent nature. Ex: manufacture goods, timber
4. Volume of Transaction: Wholesale Markets Commodities are bought and sold in large quantities / bulk. Transaction is between traders.
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5. Nature of Transaction:
a. b. t+1. Spot or Cash Market: A market in which goods are exchanged for money Forward Market: Purchase and sale of commodities takes place at time t immediately after the sale. but the exchange of commodity takes place on some specific date in future i.e.
6. No of Commodities:
a. General Market: All types of commodities such as food grains, oilseed, fibre crops etc. are bought and sold. b. Specialised Market: Transactions take place only in one or two commodities e.g. food grains market, cotton markets, mango markets.
7. Degree of competition:
a. Perfect Market: Large number of buyers and sellers.
8. Nature of Commodities:
a. Commodity Market: deals in goods and raw materials such as wheat, barley, cotton etc. b. Capital Market: deals with bonds, shares and securities. c. Service Market: deals in providing service e.g. consultancy
9. Stage of marketing:
a. Producing market: Those markets, which mainly assemble the commodities for future distribution to other markets. Located in producing areas. b. Consuming Markets: Which collect the produce for final disposal to the consuming population located in areas where production is inadequate or in thickly populated urban centers.
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2. Private Negotiations:
Unregulated markets. The individual buyers come to the shops of commission agent at a time convenient to the latter and offer price for the produce which, they think are appropriate after the inspection of the sample. If the price is accepted the commission agent conveys the decision to the seller and the produce is given after it has been weighed, to the buyer. In village, private negotiations take place directly between the buyer and seller. Disadvantage: Time consuming, slow, not suitable when either large quantities have to be sold or a large number of buyers exist in the market. Advantage: Seller gets good price, for buyers are not aware of the price offered by other buyers.
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TYBMS V Sem Rural Marketing 2) Marketed Surplus: - is that quantity of produce, which the producer-farmer
actually sells in the market, irrespective of his requirements for family consumption, farm needs and other payments. Bansil writes that there is only one item- marketable surplus, which may be defined subjectively and objectively. Subjectively, the term refers to theoretical surplus available for sale with the producer-farmer after he has met his own genuine consumption requirements and the requirements of his family, the payment of wages in kind, his feed and need requirements; and his social and religious payments. Objectively, the marketed surplus is the total quantity of arrivals in the market out of the new crop. Limitations: a) Limited geographic coverage b) Small and marginal farmers c) Inconvenience in borrowing Relationship between marketed and marketable surplus: Marketed surplus can be <, >, or = Marketable surplus
1) Marketed Surplus > Marketable surplus: - When the farmers retain a smaller
quantity of the crop than his actual requirements for family and farm needs. This is true especially of small and marginal farmers, where need for cash is immediate. This situation of selling more than the marketable surplus is termed as distress or forced sale.
2) Marketed Surplus < Marketable Surplus: - When the farmer retains some of
the surplus produce. This situation holds true under the following conditions: a) Large farmers generally sell less than the marketable surplus, because of their better retention capacity. They retain extra produce in the hope that they would get a higher price in the later period.
b) Farmers may distribute the crop for another crop, either for family
consumption purpose or for feeding their livestock, because of the variation in the prices. With the fall in price of the related to a competing crop, the farmers may consume more of the 1st crop and less of the 2nd crop.
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1) Size of holding There is positive relationship between the size of holding and
the marketable surplus, according to a study by Dr. Dharm Narayan.
2) Level of Production Positive relationship. 3) Price of the communication has both positive and negative relationship,
depending upon whether one considers short and long run, or the micro and macro levels.
4) Size of the family Larger the number of members in a family, the smaller the
surplus in the farm.
6) Consumption habits e.g. South India- A.P., Karnataka are predominantly riceconsuming states, and hence wheat enters the market.
7) Cash requirements If fixed: Marketable surplus will vary inversely with price
changes. If variable: Marketable surplus will increase in response to increase in price.
8) Nature of crops Farmers produce two types of crops: food crops and cash
crops. Food crops are retained, while cash crops enter the market.
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2. Middlemen: i) Merchant Middlemen- Wholesalers, Retailers, Beoparies. ii) Agent Middlemen- Commission Agents, Arahatias, Brokers. iii) Speculative Middlemen- Those middlemen who take title to the product with a
view to making a profit on it. They specialise in risk-taking.
iv) Facilitative Middlemen- some middlemen do not buy and sell directly but
assist in the marketing process. E.g. Hamals/Labourers, Weighmen/Tolas, Grades, Transport Agency, Communication Agencies, Advertising Agencies, etc. 1) Beoparis: Village Beoparis have their small establishments in villages. They purchase the produce of those who have either taken finance from them or those who are not able to go to the market. Village beoparis also supply essential consumption goods to the farmers. They act as financiers of poor farmers. They often visit nearby markets or keep in touch with the prevailing prices. They either sell the collected produce in the nearby market or retain it for sale at a later date in the village itself. Itinerant Beopari are petty merchants who move from village to village, and directly purchase the produce from the cultivaters. They transport it to the nearby primary or secondary market and it there. (ii) Arahatias/Commision AgentsKaccha Arahatias primarily act for the sellers, including farmers. They sometimes provide advance money to farmers or itinevant beoparies/traders on condition that the produce will be disposed of through them. They charge arahatias/commission in addition to the normal rate of interest on the money they pay in advance. Pacca Arahatias- act on behalf of the traders in the consuming market. The processors (vice millers, oil millers or cotton/jute dealers) and big wholesalers in the
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MARKETING FINANCE
Agricultural credit is of two types: 1.Production credit 2.Consumption credit 1.Production credit: (i) Short term: 15 to 18 months Loans to meet daily working capital requirements of farmers purchase of Inputs, payment of wages, hike charges of machinery or tools, electricity charges etc. (a) Cash component (b) Kind component: Co-operative marketing societies. (ii) Medium term: - Survey committee 15 months to 5 years. NABARD 18 months to7 years. Creating capital assets. Purchase of livestock, agricultural machinery, equipment etc. Only a part of medium term loan is expected to be ventured in current production. The remaining is carried forward over the period of 7 years. (iii)Long term: 5/7 years to 20/25 years. Land fencing, mechanization, construction of farm houses, storage facilities etc. 2. Consumption credit: It is basically for survival of farm families. Sources of agricultural credit: a) Co-operative credit: i) Primary cooperative credit: Short term ii) C-operative Land Development Bank: Medium term Limitations: i) Limited geographic coverage ii) Small and marginal farmers
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TYBMS V Sem Rural Marketing Authorised capital structure: Authorised Capital- Rs. 1 Crore, Paid-up capitalRs 25 Lakhs, Share Capital Ratio 50:15:35 i.e. Govt: Own Deposits: Sponsoring Commercial Bank. Problems: Problems in organization (Multi-agency control) Increasing Losses. Recovery Problems. Problems in Management. g) NABARD: Apex Body, which looks after the financial needs of agricultural and rural development. h) Government Finance: Takkavi loans to release distress caused by the draughts, floods and the other natural calamities. TO assist the farmers to overcome emergencies. Land Improvement loans Act 1883 Long-term loans. Agriculturists Loans Act 1884 Short-term loans.
Nature and Volume of Business: Financial requirements for trading in high value
crops like cumin, chillies, Cotton and oilseeds are higher than for trading in food grains . Whole sale business requires more than retail business.
Necessity of carrying large stocks: This is in case of seasonal produce. Continuity of business during various seasons: Financial requirements are higher for
continuing business than the seasonal businesses.
Time required between production and sale: Financial requirements are higher for
durable goods than the perishable ones.
Terms of payment for purchase and sale: Whether payment will be in cash or credit
or by instalments affect financial requirements of manufacturing middlemen.
Fluctuations in the price: If the prices increase, the financial requirements increase. Risk Taking capacity: A middleman with low risk taking capacity often resorts to
hedging and needs less finance than the middleman who takes risk.
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TYBMS V Sem Rural Marketing General conditions in the economy: During the period of price falls/recession, the
financial requirements increase, since the marketing agency has to hold stock for a longer period in anticipation of a price rise. DEFECTS IN RURAL MARKETING:Efficient Marketing is a prerequisite in the development process of any economy. The basic objectives of an efficient marketing are to ensure remunerative prices to the producers and a reduction in the marketing costs and margins, to provide commodities to the consumers at reasonable prices, and promote the movement of surpluses for economic development. There are many imperfections in the marketing system for agricultural commodities. They are: 1) Heavy village scales of agricultural commodities:A majority of the farmers in India sell a large part of their produce in the villages , which result in low returns for their produce .The village sale is 20% to 60% in the food grains, 35% to 80% in cash crops and 80% to 90% in perishable commodities .The factors responsible for village sale :a) Farmers are indebted to village moneylenders ,traders or landlords. They are often forced either to enter into advance sale contract or sell the produce to them at low prices . b) Transport Bottlenecks: Difficult to carry the produce in bullock carts to the markets which is often situated at long distances. c) There is small quantity of marketable surplus with a majority of the farmers since of the small size holdings . d) Perishability of the produce or lack of storage facilities. e) Farmers dislike city markets mainly since of their lack of knowledge about prevailing market practices , the possibility of theft or robbery in transit. 2) Post harvest immediate sales by farmers / distress sales:A majority of the cultivators tend to sell their produce immediately after the harvest at the low prices prevailing at that time . About 60% to 80% of the food grains are still marketed in the first quarter of the harvest season. The reasons for existence of "Distress Sales ":a) Poor Retention power of the farmers arising out of their pressing need
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b. Complete Shops:
The purchase and sale of commodities is undertaken entirely by the government or its agencies. Private traders are not allowed to enter the market for purchase or sale. In India, complete wholesale trade in wheat was taken over by the government in 1973; but it had to be given very soon. State Trading was initially taken up by the food department in the state and central government. In Jan 1965, the FCI was set up to undertake the purchase, storage movement, transport, distribution and sale of foodgrains.
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