Cooperatives and Rural Markets

SYBMS SEM IV

Historical Background of Cooperation in India

Uplift the weaker sections of the society. Industrial Revolution in England affected the village cottage industries in India. Dependencies on agriculture sector increased. Increase indebtness of rural people. Agricultural India = Moneylenders = Poverty

Historical Background of Cooperation in India

To reduce the importance of moneylenders GOI passed the following act, 1. Deccan Agricultural Relief Act,1879 2. Land Improvement Act, 1883 3. Agriculturist Loan Act, 1884 Demand for starting Credit societies for giving loans to agriculturist were increased. As per recommendations given by Sir Frederick Nicolson and Justice Ranade, 1899, 200 cooperative societies were established in UP and Madras.

Historical Background of Cooperation in India

In 1903, the membership of these societies went up to 36000 GOI formed a committee for studying the possibilities of Co-operative Credit in India. 1904 , GOI passed Cooperative Act.

Development of Indian Cooperative Movement

THE FIRST STAGE 1904 - 1911

 Co-operative Credit Society Act was introduced on 25th March 1904 Started to provide credit for agri- sectors. Not successful in solving the problems of non agriculture. Played a major role as starting point of the cooperative movement in India .

 Important clauses of Law: 1. atleast 10 people living in the same village/town 2.Control of Registrar 3. Free Audit of Accounts by the Registrar 4. Classification of rural and urban societies 5. Limits on the distribution of dividend.

Development of Indian Cooperative Movement

THE SECOND STAGE 1912- 1918

 Cooperative act 1904 was not sufficient to cope up with the needs of societies. Necessary to provide financial assistance to other fields Thus, GOI passed another act in 1912.

 Important clauses of Law: 1. permission to start non-credit supplying societies 2.utilisation of profit 3. special rights to societies 4. restrictions in using co-operative in name 5. concession to cooperative societies

Development of Indian Cooperative Movement

THE THIRD STAGE 1919-1929

 Number of committees were formed to regulate the cooperatives The Royal Commission was appointed to study the Indian Agriculture Because the Act passed in 1919, number of cooperative societies providing credit increased. During this stage, only QUANTITATIVE development of societies would be seen, NO ATTENTION was given to QUALITATIVE GROWTH. Defined as UNPLANNED DEVELOPMENT.

Development of Indian Cooperative Movement

THE FORTH STAGE 1929-1939

 1930 = GREATE DEPRESSION PHASE Indian economy received a setback Prices of agricultural product fell -> failure in repayment of credit -> growth of cooperatives hampered. Number of newly formed credit societies declined but other types of cooperatives flourished.

 Cooperative societies had invested in agricultural activities Prices of agricultural product went down -> arrears increased -> dangerous for cooperatives The percentage of arrears went up to 93% About 50% cooperatives went into liquidation. Royal committee pointed out failure was due to lack of education of members and lack of proper guidance

 During this period only, The Land Mortgage Bank was established. Objective was to provide agricultural loans on long term basis Central Banking Enquiry Committee (1931), stressed on the strengthening of cooperative movement to serve agricultural needs of the country 1934, Reserve Bank of India was created and 1935 ,Rural Credit Department was created in the Bank -> gave a new life to the cooperative movement in India.

Development of Indian Cooperative Movement

THE FIFTH STAGE 1939-1947

 During second world war -> prices of agricultural produce started increasing -> increase income of agriculturist ->repayment capacity increased. Increase in the deposits and funds of cooperative societies . During 1939-1945 there was an increase in the deposits from 25 crores to 54 crores with Primary Credit Cooperative Societies.

 The Consumer Cooperative stores proposed due to the restriction imposed during war time Industrial cooperative societies came into existence for the purpose of providing war materials. A committee headed by Dr. Dhananjayrao Gadgil was appointed in 1944 to review the position of cooperative societies. Committee suggested > govt. should give financial aids .

Development of Indian Cooperative Movement

THE SIXTH STAGE 1947-1970

 During second world war -> prices of agricultural produce started increasing -> increase income of agriculturist ->repayment capacity increased. Increase in the deposits and funds of cooperative societies . During 1939-1945 there was an increase in the deposits from 25 crores to 54 crores with Primary Credit Cooperative Societies.

Development of Indian Cooperative Movement

THE SEVENTH STAGE 1970-2000

 More importance on the development of Rural Banking sector Cooperatives were asked to develop rural banks Formation of NABARD as an apex bank for monitoring cooperative banks

Development of Indian Cooperative Movement

THE EIGHT STAGE 2000-ONWARDS

 Cooperatives have to face direct competition from multinationals. Govt. is providing adequate support and help to the cooperatives by building brands, distribution network and also in exporting their products to global market.

Organizational Structure of Cooperatives in India

 Co-operatives as a formal organisation came into existence after passing of the cooperative Credit Society Act of 1904 The co-operative Movement was activated after independence. The policies regarding National Development including Co-operation are planned and managed at the national level.

Co-operative at National Level

1955 Central Govt. set up a small Cooperation Division in the Ministry of Food and agricultural Dept. In 1958 separate dept. was started In August 1976, a separate ministry was again formed as the dept. of Civil Supplies and cooperation

Functions :
1) Decide policies of urban supply 2) Decide policies regarding education and training in cooperation and make necessary arrangements 3) To look after the problems of all consumer Cooperatives 4) To coordinate all the activities in all the sectors 5) To arrange Workshops, National Conferences, Seminars etc.

Structure of State Level Co-operatives

Registrar of Co-op. Soc. Maharashtra -> Addl. Registrars -> Dy. Registrars-> Asst. Registrars -> District Co-op. Officers -> Asst. Co-op. Officers Cane Co-op. -> Cane Commissioner -> Dy. Cane Commissioner -> District Cane Commissioner -> Dist. Cane Officers -> Cane Development Inspectors -> Cane Supervisors

 Every state has passed separate acts pertaining to the co-operative segment. In most of the states Departments of Cooperation has been created. State Minister of that Co-operation is the chief of that dept. Registrar of societies is the HOD of cooperation For assisting the registrar appointment of other inspectors, auditors are made

 For sugar factories and production of sugar cane a post for Commissioner is created at state level. Cane Co-op. -> Cane Commissioner -> Dy. Cane Commissioner -> District Cane Commissioner -> Dist. Cane Officers -> Cane Development Inspectors -> Cane Supervisors

 For dairy development there is a Director.

Dairy Co-op. -> Director dairy development (Addl. Registrar)->Dairy Development Officer -> Dy. Dairy Development Officer-> Dairy Manager -> Asst. Technical Officers -> Milk supervisors

 Registrar is very important in co-operative movement. He is known as Friend, Philosopher and Guide for the Cooperative movement.

 Functions of the Registrar :1) As Administrator : - Planning organization - Motivation - Coordination - Control

 Functions of the Registrar :2) Executive :- executing the policies - providing Counseling - Removal of Members officials - Arranging Meetings, seminars, Workshops

 Functions of the Registrar :3)Judicial :- as a judge decides disputes arisen among societies 4) Other Duties :- Enforcement of Act and duties - Cancellation of societies - Audit Enquiry - Recovery of Dues

Distinguish between Co-operatives and other Forms of Organization

Co-operative Management Owner Registration is optional At least 11 members Enjoy exemption from income tax Society can be dissolved only by orders of court Profits of the business are not divided
Joint Stock Company Management Shareholders are the owners Registration is compulsory The minimum number in public company is two. No limit for maximum no. Never exempted from income tax Liquidated by the legal process only After provisions and reserves aside remaining profit is distributed as dividend.

Sources of Principles
1) ROCHDALE PRINCIPLES: Robert Owen formed Rochdale Equitable Pioneers Society in 1844. He made this principle with help of 28 weavers. (industry Oriented) - Main Principles: 1) Open and voluntary membership 2) Limited interest on capital 3) Democratic management 4) Cooperative education 5) Distribution of surplus 6) Cooperation among cooperators

1) 2) 3) 4) 5)

- Secondary Principles :Equal rights to all Cash transaction Neutrality in political and religious matters Service motive human service Limited responsibility

2) REIFFEISEN PRINCIPLES: Late 19th century there was a serious problem of agricultural indebtedness in Germany To provide relief to agricultural workers , started Agricultural Societies in 1862 (Agricultural Oriented) He proposed the following principles: 1) All should be accepted as member 2) Liability should be limited 3) Board members should be on voluntary services 4) Surpluses should be used for services 5) Assistance should be given to members

3) SCHULTIZ PRINCIPLES : Reiffeisen had started the concept of b banks with the objects of meeting the needs of middle and lower middle class people. Schultiz ran these banks on cooperative basis. He proposed following principles:1) Organization should be managed on the basis of Self Help 2) Maximum interest should be paid on shares 3) Surplus should be distributed on the basis of cooperation 4) 10% of the surplus should be kept as reserve 5) Each bank should have some specialisation

 Following Cooperative Principles were universally accepted in International Conference held at Vienna in 1966 :1) Open and voluntary membership 2) Limited interest on capital 3) Democratic management 4) Cooperative education 5) Minimum Profit 6) Equitable distribution of profit 7) Cooperation among cooperators.

Management of Co-operative Societies

Definition of Co-operative Society

is a union of persons, established according to the principles of equality, where the membership is unlimited , the purpose is to improve the financial positions of its members by joint performance of their economic acts, by means of either self-help or with Govt. Support, provided that all profits made by the joint action shall be distributed in the proportion to which each member has taken part in the business and not in proportion to the capital invested.

Features of Co-operative Society

Union of Persons Membership Equality Common Interest Spirit of Service Part of co-operative movement Body Corporate Declare Dividend

Benefits of Co-operative
Easy formation Democratic management Limited Liability Open membership Stability Low cost of operation Self financing and charity Low prices Cash trading Tax concession

Types of Co-operative

Types of Co-operative Societies

1) Agricultural Marketing Society : Sec.2(1) of Maharashtra Co-op. Soc. Act, 1960 defines , a) the object of which is the Marketing of agriculture produce and the supply of implements and other requisites for agricultural production b) not less than 3/4th of the member of which are agriculturist or societies formed by agriculturists.

Types of Co-operative Societies

2) Consumer Co-operative Society : Sec.2(9) of Maharashtra Co-op. Soc. Act, 1960 defines , a) the procurement , production or processing and distribution of goods to or, the performance of other services for its members and also other customers b) distribution among its members and customers

Types of Co-operative Societies

3) Co-operative Bank : Sec.2(10) of Maharashtra Co-op. Soc. Act, 1960 defines , a society which is doing a business of banking and includes any society which is functioning or is to function as an Agricultural and Rural Development Bank a) Central Banks: District Central Banks, NABARD b) other banks : Janakalyan Sahakari Bank Ltd., The Saraswat Cooperative Bank

Types of Co-operative Societies

4) A Federal Society : Sec. 2(14) of the Act, defines a Federal Society as a Society, a) Not less than five members of which are themselves societies b) Voting rights are regulated that the members which societies have not less than four-fifths of the total number of votes in the general meeting.

Types of Co-operative Societies

5) A Farming Society : Section 2(12), of the Act defines, a society in which, with the object of increasing agricultural production, employment and income and the better utilization of resources, lands are brought together and jointly cultivated by all the members.

Types of Co-operative Societies

6) A Crop Protection Society : Section 2(10), of the Act defines, a society in which, with the object of protection of the crops, structures, machinery, agricultural implements .

Types of Co-operative Societies

7) A Processing Society : Section 2(22), of the Act defines, a society in which, with the object of processing of goods.

8) Lift Irrigation Societies : Sec. 2(16-4) of the act defines, a society the object of which is to provide water supply by motive power or otherwise to its member for irrigation and otherwise.

Lift irrigation

Types of Co-operative Societies

9)Housing Society : Section 2(22), of the Act defines, a society in which, with the object of which is to provide its members with open plots for housing or flats are already acquired to provide its members common amenities and services . 10) A General Societies : Sec. 2(15) of the act defines, a society not falling in any of the classes of societies defined by the other clauses of this section.

Membership of Co-operatives Societies

Definition of a Member: Sec. 2(19) defines a member as, A person who joins in an application for the registration of a cooperative society after the society is registered. Before registration of the society such a person is called a Promoter or Founder Member of the society. After registration of the society a person who is duly admitted to the membership of a society becomes a member of that society.

Types of Membership
Original Member : a person who is admitted to the membership of the society is the original member of the society. Joint / Associate Member: a member who holds jointly a share in the society with others, but whose name is not first on the share certificate. Nominal Member : a person may be admitted after the registration of the society as a nominal member on payment of small admission fee. Sympathizer Members: a person who sympathizes with the aim and objects of the society.

Rights and Duties of Members:

To hold share Transfer his share Right to get an entry in the register of members Right to nominate Right to vote Right to receive copies of documents Right to inspect Right to Contest Election Right to know affairs Right to refer the dispute Right to resign Right to receive dividend

Duties of Members:
Pay the dues of the society regularly To comply with the provisions of the act Not to create nuisance in the society A member should make sure that his interest shall not conflict with the objects of the society of which he is a member.

Termination of Membership
On his registration from membership being accepted On the transfer of his share or interest in the society to another member On his death On his removal

CREDIT CO-OPERATIVES

Introduction
Government took certain steps, 1) All India Rural Credit Survey Committee Report, 1954 2) Co-operative Planning Committee Report, 1946 More stress was laid on the publication of All India Rural Credit Survey Committee Report, 1954( Gorwala Report)

All India Rural Credit Survey Committee Report, 1954

The RBI appointed a Committee in 1951 under the chairmanship of A.D. Gorwala to assess the source of rural finance and suggest some crucial measures to reorganize rural credit. Committee surveyed 600 villages in 75 districts and published its report in 1954. Committee found that rural areas were under the complete control of money lenders and only 3.5% needs were fulfilled by the Govt. Committee also pointed out the ineffectiveness of cooperative Institutions to supply adequate credit to the farmers.

Recommendation of the Committee

State Partnership Loans against crops Long term operation fund Linking of credit with marketing Large sized societies Training facilities Effective Supervision and Audit Inspection Additional Special Funds ( National Agricultural Credit Fund- State Level, National Stabilization Fund Central level) Co-operative Credit Structure

Co-operative Credit Structure

Agricultural Credit Soc

Non Agricultural Credit Soc

Short Term (12 to 15 months)

Long Term (Exceeding 5 years)

1. State Co-operative Bank 2. Central Co-operative Bank 3. Primary Non Agricultural Co-op. Bank

PACS (Primary Agricultural Credit Society)

Primary Agricultural Credit Society (PACS)

PACS may be started with 10 or more persons, normally belonging to a village The value of each share is generally nominal The liability of each member is unlimited Short term loans are provided normally for a year Rate of interest is low Profits are not distributed as dividend to the shareholders but they are used for the welfare of the village The PACS have stepped up their advances to the weaker section particularly Small and Marginal farmers

Functions:
To distribute different agricultural inputs To provide sufficient finance to their members To supervise the use of loans To provide storing facilities to the farmers for agricultural produce To encourage their member to promote the habit of saving To collect or purchase agricultural produce from the farmer and supply the same to consumer Co-operative societies To borrow from central agencies

Central Co-operative Banks

Central Co-operatives Banks constitute one of the important agencies Operate at district level Objectives : - to provide finance for financing Co-operative Credit Society - to collect savings from members and general public - to create, develop and extend banking facilities for their members - to develop the co-operative movement in their respective districts

Apex Co-operative Banks or State Level Banks

The structure of co-operative credit institutions :
Primary Co-operative Credit Society at village Central Co-operative Credit Society at district State Co-operative Credit Society at State

Generally for each state there is one State cooperative Credit Society

 To provide leadership to Co-operative Movement in the state To link the co-op organization with general money market and commercial banks in the country To prepare and formulate forecast report for central coop bank To co-ordinate the working of different central Co-op bank To provide financial resource to Central Co-op bank To make maximum extension of credit to the rural section To play the role of media of communication between other co-operative societies and the District Central Coop Banks.

Purpose of Bank:

Objectives and Functions of Apex Cooperative Bank

To ensure overall direction and regulation of the co-op movement To supervision and guide the activities of the central co-op bank To acts as investment agency for the central co-op bank To establish and maintain control with money market To co-ordinate the co-op policies of the state To act as a banking centre clearing house and financing agencies of the co-operative institutions.

Land Development Co-operative Bank (LDCB)

The Primary Co-op Credit societies and other Co-op Institution who provided finance for agricultural development could not provide long term finance for agricultural development There was a need for long term finance With this purpose LDCB (earlier known as Land Mortgage Co-op. Bank) was established.(1929, Madras) These banks are suppose to provide credit at low rate of interest and also without delay.

Need for LDCB

To provide long term financial loans for agricultural sector Reducing impact of money lenders and unorganized sectors various committees also recommended different measures for supplying long term credit to cultivators. Because of all above reasons GOI decided to set up LDCB

Functions of LDCB:
To encourage savings and co-operation among members To supervise and inspect the working of PACS To open branches of to organize new primary land development banks To grant loans to PACS To provide valuable advice to cultivators in connection with their land

Regional Rural Banks(RRBs)

Main and important objective of RRBs is to provide credit and other facilities to small and marginal farmers, agricultural labourers, artisans, and small entrepreneurs. Initially five RRBs were set up in October 2, 1975 at Jaipur in Rajasthan, Moradabad and Gorakhpur in Uttar Pradesh, Bhiwani in Haryana and Malta In West Bengal. These banks were sponsored by the Syndicate Bank, SBI, the PNB, United Commercial Bank and United Bank of India respectively The share capital of the RRBs is subscribed by Central Govt. (50%), concerned state Govt. (15%), and the Sponsoring Commercial Bank(35%).

Objectives of RRBs
To provide credit at the rate of interest at which co-op. credit societies provide To provide credit to small and marginal farmers, agricultural labourers and rural artisans To limit the area of functioning

Urban Co-operative Banks

First Urban Co-op. Banks was set up at Kanjivaram in Madras(1904) In 1915 the Mallegan Committee emphasized on the expansion of Urban Co-op. Banks in urban areas. Main objective of Urban Co-op. Bank is to provide credit to middle class and small income group.

Objectives :
To provide credit at reasonable rate of interest to the members To promote the habit of savings among the members To provide credit on the security of valuable goods and immovable property To provide credit to small merchants, small industrialist, and craftsman To accept deposits and raise capital through share capital.

Introduction and Definition

The prime necessities of human beings One of the basic problem housing The reasons are varied like tremendous growth in population , migration from rural to urban, highly speculative trend in the cost of land, weakening of joint family system = creating a requirement of a separate house for each family unit.

Introduction and Definition

To solve housing problem of common man cooperative housing emerged. These are legally established association of persons and democratically controlled by the members These co-operatives provide for minimum required facilities like drinking water, electricity, common parking and terrace a society, the object of which is to provide its members with open plots for housing or flats, dwelling houses or if open plot, the dwelling houses or flats are already acquired to provide its members common amenities and services.

Working of different types of cooperative Housing Societies

1) Tenant Ownership Operative Housing Society:

To purchase or take on lease land for the purpose of construction of houses for members To develop the land , obtain water connection, electricity connection etc. Division of land into plots and allotment of plots to the members To formulate policy regarding construction of houses by the society of members To collect contribution for common expenditure such as bills for electricity provided in the society campus, payment to watchman, payment of non-agricultural land tax.

Working of different types of cooperative Housing Societies

2) Tenant Co-partnership Co-Operative Housing Society:

To purchase land/building duly constructed and sell the flats or shops to the members To maintain and manage the property of the society in the interests of the members or the society To provide common amenities to the members as per agreement To collect contribution from members for maintenance To arrange for social/educational/entertainment programmes for the members to develop cordial relations amongst members and management

Working of different types of cooperative Housing Societies

3)House Mortgage Co-operative Housing Society:
To sanction loans to members for the construction of houses against the property mortgage To give loans for repairs or extension of the owned house To purchase or sell property or to lease out the property To raise funds from Maharashtra Housing Finance Co-operative Society

Working of different types of cooperative Housing Societies

4) District Level Housing federation:
To help the co-operative housing societies in getting approval to the plans from town planning department and completion certificate from the municipal authorities To give legal and technical guidance To guide the members in administration and management of their societies.

Working of different types of cooperative Housing Societies

5) State level Housing Federation: To help primary housing societies in getting loans To guide the primary co-op housing societies technical, legal, management problems To advance loans to small housing complexes To help the housing societies in getting better building material at reasonable rates To help proposed co-operative housing societies in getting land.

Working of different types of cooperative Housing Societies

6) National Co-operative Housing Federation: To established financing institutions at the state level for helping the primary co-operative housing societies in getting loans at lower rate of interest. To give technical and legal guidance to member federation To undertake research and development work for reduction in the construction cost and give publicity to the results To give publicity and propaganda of co-operative housing movement To explain various financial schemes to the co-operative housing societies and their members.

LABOUR CO-OPERATIVE SOCIETIES

MEANING
Labour societies are those which work for giving employment to the group of labourers. More number of labour is required for building, constructional work, roads, factories, irrigation work, dams etc. The co-op labour society has good scope at such works. The co-op labour societies after consulting the bigger projects take the contract of providing labour and complete the work in time.

Objectives
To provide instrument to members for carrying out essential jobs. To get the work for the society and plan it in a such a way that the labour will get regular employment. Mutual understanding amongst members, self service and inculcation of saving habit among the members to be increased. To take contracts of public and private works To work for over all welfare of members. To increase the skill of members To increase the dealings power of labourers.

Problems of Labour Societies

Obstacles by govt. and semi govt officials in getting work for society Lack of continuity of work Difficulties in accepting big jobs Exploitation of societies Competition with private contractors Shortage of working capital

Remedial Measures
A) REMEDIES FOR SIZE,CONSTITUTION AND CAPABILITY: Undertake the jobs of the area where there are no labour societies or even if such societies exist, but are not capable of shouldering responsibilities The area of operation of the society should be fixed with a view to its size, nature of work and possibilities of getting the work

B) INSTRUCTION FOR RESERVATION OF WORKS : The unskilled type of works should be separated from skilled type and should be entrusted to these societies Every year works upto Rs. 50,000 for skilled and unskilled labour in govt, semi govt. and local bodies should be reserved for these societies There should be separate arbitrator for the differences and disputes arising in completion of work The machinery required for the job to be undertaken by job offering agencies or made it available on rental basis.

C) FINANCIAL INSTRUCTION : The societies which give work to labour co-op societies should pay 20% of total contract in advance On the basis of work certificate produced by the societies, SBI should give advance to district central banks Labour co-op can directly transact with primary labour co-op societies Govt. should give financial aid in order to fulfill the requirement of working capital of labour coop societies.

Part II Rural Markets

Definition of Rural
Govt. agencies define rural as villages with a population of less than 5,000 with 75% of the male population engaged in agriculture. Rural marketing means marketing activities in the rural areas where favorable infrastructure may not be available. Rural market offers a vast untapped potentials.

Profile of Rural Marketing

Large and scattered market Large no. of consumers Major income from agriculture Low standard of living Traditional outlook Diverse socio-economic background Changing demand pattern Infrastructure facilities Saving habit Media reach Communication facilities Rural electrification

Scope of Rural Marketing in India

Higher purchasing power Changing in rural markets Media exposure Decision making Growing urbanization Infrastructural facilities Rise of alert buyers Opinion leaders

Problems of Rural marketing

Under developed people and under developed market Transportation problem Many languages and dialects Communication problems Warehousing problems Market organization and staff Product positioning Hierarchy of markets Vastness and uneven spread Low per-capita income Non- availability of dealers

RURAL MARKETING ENVIRONMENT

Environment = sum total of external factors and made up of tangible and intangible factors both controllable and uncontrollable The rural market= always changing environment and complex The rural marketing environment with a view to enabling marketers to understand the rural market and therefore to plan and develop appropriate strategies

Changes in Rural Marketing Environment

In the area, Social changes Ethical changes Physical changes Economic changes Political changes Technological changes

Factors contributing to the change in Rural Demand

Organized agencies for marketing Warehousing facilities Market Information Advertising on TV network Post liberalisation of the economy Transport system Fair Price Composition of the Market

Factors contributing to the Growth of Rural Markets

New employment opportunitites Green revolution Expectation revolution among rural masses Favourable government policies Literacy growth Rising disposable income Attraction for higher std of living Marketing efforts Spread of cable television

1) Social Changes:
a) Sociological factors : consumers lifestyle is influenced by social setup b) Anthropological factors : the regional culture and subculture and living factors influence advertising c) Psychological factors : the consumer behaviour, attitude, personality, thinking style are unique.

2) Economic Force:
a) Competition : brings quality, quantity and prices. (Healthy competition) b) Consumers : knowledgeable and choosy c) Price : should be market friendly, not too high or low. Decent returns on investment

3) Ethical Force :
Business Ethical values = degeneration No standardization, exploitation, falsification are the main ethical issues

4) Political factors :
The govt. policies towards trade, commerce, internal taxation, external levies and preferential treatment have influence on marketing strategies.

5) Physical forces:
Availability of Infrastructural facilities Storage of goods Efficient and cheaper logistics helps the market in a big way.

6) Technological forces :
The fast changing science and technology gives a cutting edge to the marketing of products The change of processes reduce manufacturing , packaging and handling cost of products

Variables of the Indian rural market Environment

1) Population : for every consumer in the area, there are three of them in the rural areas. This increasing population will require a wide variety of consumable and durable goods and services 2) Occupation Pattern: agriculture is the main occupation in the rural economy

Variables of the Indian rural market Environment

3) Income generation : occupation pattern decides income generation. With major occupation being agriculture 75% of income generated in rural areas. The income from allied activities : - sale of agricultural produce - sale of animal produce - by service - interest on investment - govt. subsidies and grants - mortgage of property and gold - labour work in the construction industry and so on.

Variables of the Indian rural market Environment

4) Location of Rural Population 5) Rural expenditure pattern : - Seasonal - high expenditure from Rich Farmers and upper society in villages - other purchase 6) Literacy Level 7) Land use pattern

Variables of the Indian rural market Environment

8) Irrigation 9) Development Programmes - Intensive Agricultural District Programme - Small farmers development agency - sericulture Development - fisheries Development

Variables of the Indian rural market Environment

10) Rural Infrastructure : - Rural Electrification - Transport system - Rural Communication 11) Rural recreation - dramas and puppet show -folk dances and music - radio -religious ways - television - Cinemas

Variables of the Indian rural market Environment

12) Rural credit institution 13) Rural requirement

Profile of the Rural Consumer

Size of the rural consumer Location pattern of rural consumer Low Literacy levels Rural income Rural savings Reference groups Occupation Media habits Conscious customer Brand Loyalist High degree of involvement Interpersonal communication Consultation Significant aspect

Classification of Rural Consumer

The Affluent Group Chilly farmers of AP, Wheat farmers from Punjab The Middle Class Jute farmers of West Bengal and Sugarcane cultivators of UP The Poor Framers growing Jowar, Bajra etc from Orissa, Bihar

Composition of Rural Demand

Cooking utensils Razor blades Packaged teas Tobacco and tobacco products Ornaments and jewellery Beverages including alcohol Bathing soaps, washing soaps and detergents Entertainment goods, radios, tv etc Agricultural capital goods

Rural Marketing Mix

Introduction :
Fundamental concept in marketing Mixture of basic components (4Ps) Price, Place, Product, Promotion techniques = Marketing Mix. Product : any article which the manufacturer desires to sell in the open market Place : physical distribution is the delivery of goods at the right time and at the right place to the consumers. Promotion: advertising and publicity of the product, personal selling, display of goods for publicity and sales promotion. Price : it is the amount at which the seller is willing to sell and buyer is willing to buy.

Rural Marketing Mix Strategies : A) Product Strategy

Economic Survey has categorized the consumer goods into three categories with prices varying from Rs.100 to Rs. 20,000. Category I : immediate use to the family ( fans, cookers,watches) Category II: entertainment products + products that ease the households work (Sewing machines, grinders) Category III : means to supplement income + easy household working + source of entertainment (washing machines, fridge, VCRs)

Product Item Decisions :

A product or a service which is offered by the marketer has the ability to satisfy the needs and wants of customers. The main consideration in individual product/services offer is developing of product at three levels : 1) Core Product Development 2) Tangible Product Development 3) Augmented Product Development

1) Core Product Development

Focus on the needs of the consumer Business is to be viewed as a customer satisfying process and not as a goods producing process. For Eg. The need for brushing teeth.

2) Tangible Product Development

The product concept becomes visible and operational when the psychological needs are specified in physical terms. Every product has five characteristics : a) Quality b) Features c) Style/ design d) Packaging e) Branding

3) Augmented Product Development :

Marketers should have a vision to look at the specific needs of the consumers and their related requirements.

Other Important Strategies: I) Customer Value Strategies:

a) Mass Product Strategies : The urban consumers are brand conscious, while rural consumers are price sensitive Concerned about functional benefits of the products Several companies have launched no frills economy products to attract rural consumers.

Other Important Strategies: I) Customer Value Strategies:

b) Premium Product Strategy: In case of some products rural consumers exhibit preference similar to those of urban consumers Premium Brands are gaining wide acceptance in the rural areas.

Other Important Strategies: II)Innovation Strategies:

a) Rural Urban Common : There are many products that are common to rural and urban markets Cosmetics, washing powder, communication services

Other Important Strategies: II)Innovation Strategies:

b) Special for Rural : There are some companies who choose to develop products especially to meet rural market needs. Rural Transporters, Hero Cycles

Other Important Strategies: III) Quality Strategies:

a) Quality Improvement Strategy : Many companies utilize the quality aspect to win the customer. In the organized sector competition requires quality improvements

Other Important Strategies: III) Quality Strategies:

b) Spurious Goods Strategy: Generally marketed by the unorganized, low end entrepreneurs. They use similar pack designs and pack sizes Eg. Lifebuoy : Loveboy Tata : Teta

Rural Marketing Mix Strategies : A) Product Strategy

Marketers have realized that to enter the rural market, it is necessary to offer products at the lowest unit price. At the same time, innovative packages are necessary to add value to the premium products. Small packs, combi packs, see through packs and sachets are becoming more popular.

Price in marketing mix for rural consumers:

Customers are price sensitive Customers mainly concerned with functional benefit Marketer can employ few methods when price quality relationships are associated 1) Discriminatory Pricing 2) Perceived Pricing 3) Psychological Pricing

1) Discriminatory Pricing:
Charge different customers differently , the different discriminatory pricing are: 1) Product from Pricing: different versions of the product are priced differently 2) Location Pricing : same product is priced differently at different location 3) Time Pricing : prices varies by days or seasons.

2)Perceived Value Pricing:

Enhance customers perceived value , companies add features to their products. For each feature which enhance attractiveness, reliability, durability, convenience etc. the marketer charge extra price.

3) Psychological Pricing
In the form of reference pricing or image pricing Reference Pricing = marketers position and sell products at higher prices by endorsing the product by celebrities or placing products with classy products Image Pricing = effective in case of ego sensitive products

Pricing Methods :
1) 2) 3) 4) Skimming Pricing Penetration Pricing Value Pricing Psychological Pricing

General pricing in rural markets

Marketer has to examine different methods by which he can make the product more affordable to the rural customer Many of the consumer durables are purchased through banks and hire purchase schemes. A company has to offer smaller size units at lower price Product packaging and presentation also makes the price low to suit local purchasing power, For Eg. - Low cost/cheap products - Refills/Reusable Packaging - Application of value engineering

Communication and Promotion in Rural Market

Low literacy rate Limited reach of the organized media Expensive communication Traditional ways of consumption Poor infrastructure facilities Unique media habits Low spending capacity Lack of research data Selective attention Socio- cultural differences Joint families

Overcoming the constraints and managing the communication task

The Formal Organized Media: a) Newspapers and Magazines b) TV c) Cinema d) Radio e) POPs (Point of Purchase) f) Outdoors

Overcoming the constraints and managing the communication task

The Informal Organized Media: a) Appropriate Communication b) Tailor - made communication c) Music records / Harikatha d) Group meeting / House to house campaigns e) AV vans f) Interpersonal Media g) Puppetry h) Folk theatre i) Use of stalls, HAATS and Melas j) Wall painting k) Use of logos and symbols l) Focus on reference groups m) Use of information technology

Distribution(Place) Strategy in Rural Market

Many companies foresee the rural markets as a great opportunity for expanding their sales but they find distribution as a major obstacle. Not easy to transplant strategies which work successfully in urban markets into the rural markets. There are various problems to reach the rural consumers.

Methods of distribution :
Stockists van or company owned vehicles Hired vehicles Working by stockist independently Selling through bullock cart or camels Appointment of primary dealers

Problems of Physical Distribution :

Transportation problems Warehousing problems Communication problems Scope for manufacturers own Outlets limited, greater dependence on dealers Inadequate Bank Facilities Inadequate credit facilities from banks

Measures to solve the problems:

Use of cooperative societies Utilization of public distribution system Utilization of multipurpose distribution centers by petroleum or oil companies Distribution upto mandi towns Agricultural input dealers Combining different Modes of Transport may be Advantageous Company delivery Vans

RURAL MARKET SEGMENTATION TARGETING AND POSITIONING

MEANING OF MARKET SEGMENTATION:

Market Segmentation is the process of dividing a potential market into distinct submarkets of consumers with common needs and characteristics.

Benefits of Market Segmentation

Understanding the needs of consumers To adopt better positioning strategies Proper allocation of marketing budget Helps in preparing a better competitive strategy Provides guidelines in preparing media plan of the economy Different offerings in different segments enhance the sales Customer get more customized product Helps company to identify core markets Provides opportunities to expand market Encourage innovation

Requisites of Effective Segmentation

Measurable and Obtainable Substantial

Accessible Differentiable

The Process of Market Segmentation

Identify existing and future wants in the current market Examine the attributes that distinguish segments. Evaluate the proposed segment attractiveness on the basis of measurability, accessibility and size

Bases for Segmenting Consumer Markets

1) Geographical Segmentation 2) Demographic Segmentation a) Age and Life Cycle Stage b) Gender c) Income

Bases for Segmenting Consumer Markets

3) Psychographic Segmentation - SRI International divide entire US population into 8 groups 1) Innovators : successful, sophisticated people 2) Thinkers : mature, satisfied, comfortable people 3) Achievers : are successful career or work oriented 4) Experiencers : young, enthusiastic people

5) Believers : conservative, conventional people 6) Strivers : seek motivation, self definition people 7) Makers : practical people who have constructive skills 8) Survivors : tend to be chronically poor

Bases for Segmenting Consumer Markets

4) Behavioural Segmentation or Consumer Response Segmentation: buyers are divided into groups on the basis of their knowledge or attitude towards the use of or response to a product . a) Occasions b) benefits c) User Status ( non users, potential users, first time users, regular users) d) usage rate (light, medium and heavy product users)

Bases for Segmenting Consumer Markets

4) Behavioural Segmentation or Consumer Response Segmentation: e) Loyal Status : - Hard Core - Split Loyals - Shifting Loyals - Switchers f) Buyer Readiness Stage

TARGETING

Targeting
As a group of people or organization for which an organization designs, implements and maintains the marketing mix. Once the bases for segmentation are selected, the marketer has to identify the people or organization to whom the product is meant. Organization may not differentiate their customer or it may have different customer for different products.

Selecting Target Market Segments

1) Undifferentiated Marketing : It is a market coverage strategy in which the company treats the target market as one and does not consider that there are market segments that exhibit uncommon needs. The feature one product all segments. The Coca-cola Company sells Coke,Limca, Thums up etc. and does not distinguish the target audience.

Selecting Target Market Segments

2) Differentiated Marketing : The company goes for proper market segmentation as depicted by its analysis of the total market. The company goes for several products or several segment approach which calls for preparing different marketing mixes for each of the market segment. For Eg. Hindustan Unilever Limited sells different soaps Life Bouy, Lux , Rexona, Liril, Pears etc.)

Selecting Target Market Segments

3) Concentrated Marketing: It is a market coverage strategy in which company follows one product one segment principle The marketer gets maximum knowledge about the segments needs and therefore acquires special reputation. This strategy can help small companies to stand against a large corporation

Comparison of Market Coverage Strategies

Focus Product Segment
Undifferentiated Marketing Differentiated Marketing Concentrated Marketing

One/ Few All

Many Many Many

One/ Few One/ Few One / Few

Marketing One Mix

Market Positioning
Positioning is the act of designing the companys offering and image to occupy a distinctive place in the target markets mind Positioning involves three tasks: 1) Identifying the differences of the offer with the competitors offer 2) Selecting the differences that greater competitive advantages 3) Communicating such advantages effectively to the target audience

AGRICULTURAL MARKETING

DEFINITION
Is the process which starts with a decision to produce a suitable farm commodity or product and it involves all aspect 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.