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.

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

RURAL MARKETING
Course Plan

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

Rural Marketing
 Consumer Behaviour
     

Course Plan Details

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 5 concept

Rural Marketing
 Product Strategy
    

Course Plan Details

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

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

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

Rural Market Has Arrived

 742 million people  Rural consumption is bigger than urban
 FMCG's  Durables    

53% 59% Rs Rs Rs Rs

Source: NCAER

 Estimated annual size of the rural market

FMCG Durables Agri-inputs (incl. tractors) 2 / 4 wheelers 65,000 Crore 5,000 Crore 45,000 Crore 8,000 Crore

 Total

Rs 1,23,000 Crore

Source: Francis Kanoi Latest McKinsey Report estimates that by 2020, Rural Consumer Market 10 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 India s 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 HLL s Rs. 11700 crore sales turnover is from rural markets

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RURAL TARGET MARKETS - CLASSIFICATION

Very Rich
1.6 26.8 41.3

0.8

Consuming Class Climbers

54.7

63.3

25.0

14.7

Aspirants Destitutes

20.9 2001 - 02

12.2 2006-7
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Rural Income Dispersal Projection

Consumer Class
Very Rich Consuming Class Climbers Aspirants Destitutes Total

All figures in %

Annual Income
Above Rs 215,000 Rs 45,001215,000 Rs 22,001- 45,000 Rs 16,001 - 22,000 Rs 16,000 & Below

1995-96
0.3 13.5 31.6 31.2 23.4 100.0

2006-07
0.9 25.0 49.0 14.0 11.1 100.0

> 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 Report

Issues In Rural
   
Distribution Understanding the rural consumer Communication Poor infrastructure

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Distribution of Villages
Population
Less than 200 200-500 501-1000 1001-2000 2001-5000 5001-10000 Total no of villages

No of villages
92,541 127,054 144,817 129,662 80,313 18,758 593,154*

% of total villages
15.6 21.4 24.4 21.9 13.5 3.2 100.0

Hardly any shops in these 2.2 lac villages

*Inhabited villages, total number of villages is 638, 691

17% of villages account for 50% of rural population & 60% rural wealth
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Source: Census 2001

Distribution of Towns in India

Town Class Class I Class II Class III Class IV Class V Class VI Total no of towns *10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354 Population 1 lac and above 50,000-99,999 20,000- 49,999 10,000- 19,999 5,000- 9,999 less than 5000 No of towns 423* 498 1386 1560 1057 237 5161 % of total towns 8.2 9.6 26.9 30.2 20.5 4.6 100.0
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90 % of durables purchased by rural people are from these 1900 towns

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  Heterogeneous population
Big 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%)
Source: Planning Commission, GoI
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MYTH 2: Disposable Income Is Low

REALITY  Number of middle class HHs (annual income Rs 45,000- 2,15,000)
Rural Urban Rural Urban Total 27.4 million 29.5 million Rs 9,481 Rs 19,407 Rs 12,128
Source: NCAER

 Per Capita Annual Income (not Purchasing Power)

 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 70 through mass media.
53 41

21 14

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Satellite TV

Radio

Press

Cinema

TV

All Media

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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
 CTV  Refrigerator  Mobile Phones

Urban
30.4 33.5 40.0

Rural
4.8 3.5 12.0

Total
12.1 12.0 18.0

FMCGs
 Shampoo  Toothpaste

Urban
66.3 82.2

Rural
35.2 44.9

Total
44.2 55.6

Source: NCAER

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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%  Toothpowder 79%  Shampoo 88%

So this half of the population consumes over 75% of FMCG 28 volumes

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