Rural Quotes

The future lies with those companies who see the

poor as their customers.
CK Prahalad to Indian CEO's, Jan 2000.

To get rich, sell to the poor.

Pradeep Kashyap.

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

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RURAL MARKETING

Course Plan

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Rural Marketing Course Plan Details
Issues, Opportunities & Challenges
Rural Marketing Environment
Defining Rural India
Evolution of Rural Marketing
Rural Market Structure
Size of Rural market

The Rural Economic Scenario

Rural Economic Structure
Incomes & Consumption
Physical Infrastructure
Marketing Infrastructure
Commercial Infrastructure and Govt. policies
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Rural Marketing Course Plan Details
Consumer Behaviour
Cultural Factors
Technological Factors
Economic Factors
Characteristics of the Rural Consumer
Buying Behaviour Patterns
Customer Relationship Management and the Trade role
Rural Market Research
Planning Rural Research
Field Procedures & Rural realities
Understanding the Rural Market Research Industry
Segmenting, Targeting & Positioning
Demographic/Psychographic & Behavioural Segmentation
Targeted/Differentiated Marketing
Identifying/Selecting/Developing & Communicating the positioning
concept 5
Rural Marketing Course Plan Details
Product Strategy
Product Concepts & Classification
Rural Product Categories
New Product Development
Consumer adoption process
The Role of Fakes
Pricing Strategy
Pricing Influences
Pricing Strategies
Role of Retailer & Schemes/Margins
Distribution Strategy
Coverage challenges & dilemma
Channels of Distribution
Existing Distribution Models
Emerging Distribution Models
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Rural Marketing Course Plan Details
Communication Strategy
Challenges in Rural Communication
The Communication Process
Developing Effective Communication
Rural Media
Role of Innovative Media

Innovation in Rural Markets

Role of Innovation in Rural India
IT Interventions
Emergence of Organised Retailing

Financial Services in Rural India

Need for Credit
Sources of Credit
Other Financial Products

Future of Rural Marketing 7

Rural Marketing Nature of Assignments

Case Studies from Indian experiences

Visits to different rural markets, haats &
melas
Interviewing Rural Practitioners
Conducting Rural Market Research
Attachments with strong rural
marketing organisations

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 RURAL MARKETING
Issues, Opportunities & Challenges

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

Estimated annual size of the rural market

FMCG Rs 65,000 Crore
Durables Rs 5,000 Crore
Agri-inputs (incl. tractors) Rs 45,000 Crore
2 / 4 wheelers Rs 8,000 Crore
Total Rs 1,23,000 Crore
Source: Francis Kanoi
Latest McKinsey Report estimates that by 2020, Rural Consumer Market
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Will be worth Rs. 250,000 crores
 Rural Market Has Arrived
Some impressive facts about the rural sector.
In the first 6 months of 2005-06, rural India bought
30 lakh Life Insurance policies
Of two million BSNL mobile connections, 50% in
small towns/villages.
Of the six lakh villages, 5.40 lakh have a Village
Public Telephone (VPT). Additionally there are 2 lakh
PCOs 90% of villages covered.
By end 2007, there are likely to be 11.05 crore rural
phone subscribers
For every Re.1/- per quintal increase in the
Procurement Price for grains, Rs. 170 crores added to
rural economy
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 Rural Market Has Arrived
55.6 million Kisan Credit Cards issued (against 60
million credit-plus-debit cards in urban) resulting
in tremendous liquidity.
Of HHs earning Rs. 20 lakh + per year, 34% in
rural India. Also 15% of Indias crorepatis
42 million rural HHs availing banking services in
comparison to 27 million urban HHs.
Investment in formal savings instruments: 6.6
million HHs in rural and and 6.7 million in urban
Over 50% of HLLs Rs. 11700 crore sales turnover
is from rural markets

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RURAL TARGET MARKETS - CLASSIFICATION

0.8 Very Rich

1.6
Consuming
26.8 41.3 Class
54.7 Climbers
63.3

25.0
14.7 Aspirants
Destitutes
20.9 12.2

2001 - 02 2006-7 13
 Rural Income Dispersal
Projection All figures in %

Consumer Annual
1995-96 2006-07
Class Income
Very Rich Above Rs 215,000 0.3 0.9
Consuming Rs 45,001-
13.5 25.0
Class 215,000

Climbers Rs 22,001- 45,000 31.6 49.0

Aspirants Rs 16,001 - 22,000 31.2 14.0

Destitutes Rs 16,000 & Below 23.4 11.1

Total 100.0 100.0

> Projections Based on 7.2% GDP Growth

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

 Issues In Rural

Distribution
Understanding the rural consumer
Communication
Poor infrastructure

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 Distribution of Villages
Population No of villages % of total
villages Hardly any shops
Less than 200 92,541 15.6 in these 2.2 lac
villages
200-500 127,054 21.4

501-1000 144,817 24.4

1001-2000 129,662 21.9

2001-5000 80,313 13.5

17% of villages
5001-10000 18,758 3.2 account for 50%
of rural
Total no of villages 593,154* 100.0 population &
60% rural
wealth
*Inhabited villages, total number of villages is 638, 691
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Source: Census 2001
 Distribution of Towns in India
Town Class Population No of towns % of total
towns
Class I 1 lac and above 423* 8.2

Class II 50,000-99,999 498 9.6 90 % of

durables
Class III 20,000- 49,999 1386 26.9 purchased by
rural people
Class IV 10,000- 19,999 1560 30.2 are from
these 1900
Class V 5,000- 9,999 1057 20.5 towns

Class VI less than 5000 237 4.6

Total no of 5161 100.0

towns

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*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354 Source: Census 2001
 Rural Consumer Insights

Rural India buys

Products more often (mostly weekly).
Buys small packs, low unit price more
important than economy.
Distribution and pricing are the mantras to
success in rural India.

Even expensive brands like Close up, Marie biscuits, Clinic shampoo
are doing well because of deep distribution.
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 Rural Consumer Insights

In rural India, brands rarely fight with each

other, they just have to be present at the right
place.
Many brands are building strong rural base
without much advertising support.
Chik shampoo, second largest shampoo brand.
Ghadi detergent, second largest brand.
Fewer brand choices in rural : number of FMCG
brands in rural are half that of urban.
Buy value for money, not cheap products
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 MYTH 1: Rural Market Is a
Homogeneous Mass
REALITY Big

Heterogeneous population Landlords

Traders,Small Farmers

Marginal Farmers

Laborers, Artisans

16 languages, 800+ dialects

State wise variations in rural demographics
Literacy (Kerala 90%, Bihar 44%)
Population below poverty line (Orissa 48%, Punjab
6%)
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Source: Planning Commission, GoI
 MYTH 2: Disposable Income Is Low
REALITY
Number of middle class HHs (annual income Rs
45,000- 2,15,000)
Rural 27.4 million
Urban 29.5 million
Per Capita Annual Income (not Purchasing Power)
Rural Rs 9,481
Urban Rs 19,407
Total Rs 12,128 Source: NCAER
Rural incomes CAGR now estimated @ 15% vs
10% in urban
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 MYTH 3: Individuals Decide About
Purchases
REALITY

Decision making process is collective

Purchase process- influencer, decider, buyer, one

who pays can all be different. So marketers must
address brand message at several levels

Rural youth brings brand knowledge to HH

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 Infrastructure Improving
Rapidly
In 50 years only 40% villages connected by road,
in next 10 years another 30%.

More than 90 % villages electrified, though only

44% rural homes have electric connections.

Rural telephone density has gone up by 300% in

the last 10 years, every 1000+ pop is connected
by STD.
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Media Reach Improving Rapidly

70% of R1,R2, R3 can be reached

through mass media. 70

53

41

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21
14

Satellite Radio Press Cinema TV All Media

TV 24
 Climbing Social Indicators

Between 1981 to 2001

Number of pucca houses doubled from 22% to 41%
and kuccha houses halved (41% to 23%)

Percentage of Below the Poverty Line families

declined from 46% to 27%

Rural Literacy level improved from 36% to 59%

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Opportunity & Challenges

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 Marketing Opportunities
Low penetration rates in rural

% of rural HH
Durables Urban Rural Total
CTV 30.4 4.8 12.1
Refrigerator 33.5 3.5 12.0
Mobile Phones 40.0 12.0 18.0

FMCGs Urban Rural Total

Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6

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Source: NCAER
 Marketing Opportunities
R1 - 4%
R2 - 11%
R3 - 37%
R4 - 48%
Low rural consumption in FMCGs (rich HHs)
urban rural
Annual consumption Rs 13,000 Rs 9,400

Rural consumption volumes (R1+R2+R3)

Toothpaste 88% So this half of
Toothpowder 79% the population
consumes over
Shampoo 88% 75% of FMCG
volumes28
 Challenges in the Future

Reaching the product to remote rural

locations and entering more rural homes
(penetration)

Increasing rural incomes (market growth)

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 Challenges in the Future

Making effective use of the large

available infrastructure
Post offices 1,38,000
Haats (periodic markets) 42,000
Melas (exhibitions) 25,000
Mandis (agri markets) 7,000
Public distribution shops 3,80,000
Bank branches 32,000

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 Challenges in the Future

Using IT to transform markets

ITCs e-choupal and other IT initiatives
(EID Parry, Amul dairy information system
kiosk)

STD revolution/ mobile connectivity

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 Challenges in the Future

Proliferation of large format rural retail

stores
DSCL Haryali stores
M & M Shubh Labh stores
TATA/Rallis Kisan Kendras
Escorts rural stores
Warnabazaar, Maharashtra (annual sale Rs
120 crore)
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An interesting Option - RURBAN

Describes the clusters of migrants from rural

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

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