Sanjay Jain

Associate Professor
IMS, Ghaziabad
 Definitions of Rural Limitation
Village: Basic unit for rural areas is •Term rural is not defined. The
the revenue village, might comprise definition does not define the
Census several hamlets demarcated by population strata.
physical boundaries.
Town: Towns are actually rural areas •Term rural is not defined. The
but satisfy the following criteria: definition does not rule out 5000+
Minimum population>=5000 population villages.
Population Density>=400/sq. km.
75% of the male pop. engaged in non-
agri activity
RBI Locations with population up to 10,000 •It does not include 10,000+ pop.
will be considered as rural and 10,000 Villages in rural definition.
to 1,00,000 as semi-urban •In contrary, the definition
includes 5,000-10,000 pop.
towns in rural.
PLANNING Towns with population up to 15,000 Towns characteristics are not
COMMISSI are considered as rural. defined
ON
All location irrespective of villages or Villages and town
NABARD town, upto a pop. Of 10,000 will be characteristics are not defined.
considered as ‘rural’
The rural and semi-urban area is
defined as all other cities other than
LG the seven metros.
The Census defined urban India as - "All the places
that fall within the administrative limits of a
municipal corporation, municipality, cantonment
board etc or have a population of at least 5,000
and have at least 75 per cent male working
population in outside the primary sector and have a
population density of at least 400 per square
kilometer. Rural India, on the other hand,
comprises all places that are not urban"
(of nearly 6.4 lakh villages, only 20K have
population more than 5K)
 FMCG companies (Ex HUL & ITC) define rural
as any place with population less than 20K
 Agri-input companies & consumer durable

companies consider places with population

less than 50K
 Inhabited Village Classification

Villages in Size group

Number Percentage %age of population

Less than 200 96,855 15.7 1.2

201-500 1,36,454 21.4 5.9

501-1000 1,56,737 24.6 14.5

1001-2000 1,40,751 22.0 25.9

2001-5000 87,206 13.7 37.5

5000+ 20,363 3.2 15.0

Source: Census of India, 2001
 Town Classification
Town Class Population No. of towns % of total towns % of population

Class-I 1 lakh and 423 8.2 61.5

above

Class-II 50,000-99,999 498 9.6 12.3

Class-III 20,000-49,999 1,386 26.9 15.0

Class-IV 10,000-19,999 1,560 30.2 8.1

Class-V 5,000-09,999 1,057 20.5 2.8

Class-VI < 5,000 237 04.6 0.3

TOTAL 5,161 100.0 100.0

Source: Census 2001

Category Dev. Rural Developing Rural
Size (Mn HH) 43 90
% of Pop. 32 68
2 wheeler 10 5
Refrigerator 8 2
Colour TV 12 3
Tooth Paste 45 27
Branded Tea 11 1
Oil 13 7
 PHASE - I (Before the 1960)
 Rural marketing referred to marketing of rural products in rural
and urban areas and agricultural inputs in rural markets. It was
considered synonymous with ‘agricultural marketing’.
 Agricultural produces like food grains and industrial inputs like
cotton, sugarcane, etc. were the primary products marketed
during this period.
 The scope of farm mechanism equipment and agriculture inputs
are very limited.
 The rural market was in a primitive stage, with traditional
farming method being used in agriculture.
 Phase - II (1960-1990)
 The Green revolution changed the phase of rural
India.
 New companies emerged such as Mahindra &
Mahindra, Escorts, Eicher, Sriram Fertilizers and
IFFCO.
 The marketing of rural products received
considerable attention through agencies like
KVIC (Khadi & Village Industries Commission),
Bunkar societies and Handicraft emporiums.
 Phase III (1990 to the Present)
 During the first two phases, the marketing of
consumable and durables to the rural markets was
not considered seriously. The primary reasons for
this were:-
◦ The potential of rural market was not visible.
◦ Rural markets were not very accessible.
◦ The growth in urban markets during this period kept
marketers busy.
Rural Marketing can be defined as a function that
manages all activities involved in assessing,
stimulating and converting the purchasing power of
rural consumers into an effective demand for specific
products and services and moving these products and
services to the people in rural areas to create
satisfaction and a better standard of living and
thereby achieving organizational goals.
Rural marketing is the process of developing,
pricing, promoting and distributing rural-
specific goods and services, leading to
exchanges between urban and rural markets,
which satisfies consumer demand and also
achieves organizational objectives
Rural marketing is a two way process. It
contents inflow of products into rural areas
for production or consumption purposes, and
also outflow of products to urban areas.
 To Rural To Urban

From
Urban

From
Rural
 To Rural To Urban
• Agricultural inputs i.e.
fertilizers, pesticides, seeds,
From tractors --
Urban • FMCG products
• Consumer Durables
• Small agricultural tools, artisan • Food grains, cotton,
services and products artisan products and
From • Farm and non farm goods and services
Rural services (Unorganized sector) • Handicrafts, Handloom
textile, leather products
(semi organized)
 Underdeveloped people and underdeveloped
market
 Lack of proper physical communication

facilities
 Media for rural consumer
 Many languages and dialects
 Vastness and uneven spread
 Low per capita income – price sensitivity,

small quantity
 Logistics, storage, handling and transport
 Low levels of literacy
 Seasonal demand
 Hierarchy of markets
 Product positioning – heterogeneous
customers
 Understanding rural consumers
 Rural specific and region specific strategies

are required.
 Vast size and demand base offers a huge
opportunity
◦ With 150 million households, the rural population is
nearly three times the urban
◦ Large consuming class - 41 % of India's middle
class and 58 % of the total disposable income
 Growing affluence
◦ Good monsoons
◦ Increase in agricultural output to 200m tons from
176 m tons in 1991
 Rural market accounts for close to 70 % of toilet-soap users
and 38 % of all two-wheeler purchased.
 Half the total market for TV sets, fans, pressure cookers,
bicycles, washing soap, blades, tea, salt and toothpowder.
 Rural market for FMCG products is growing much faster than
the urban counterpart. (market size is Rs. 63,500 crores in
rural India as against Rs. 49,500 crores in urban India)
 In urban area most consumer markets were getting cluttered.
◦ there are too many players eating into each other's market share.
◦ The companies, therefore, reduce prices in urban areas and invest
heavily in sales promotion, intensifying the battle for market share.
◦ Operating margins come under pressure and new growth markets
have to be explored.
This is where the rural markets play an important role.
According to a NCAER study:
There are as many 'middle income and above'
households in the rural areas as there are in the urban
areas.
There are almost twice as many 'lower middle income'
households in rural areas as in the urban areas.
At the highest income level there are 2.3 million urban
households as against 1.6 million households in rural
areas.
Number of middle and high income households in rural
India is expected to grow from 80 million to 111 million
by 2007 against 46 million to 59 million in urban India
the absolute size of rural India is expected to be
double that of urban India.
 The NCAER study on ownership of goods indicates
the same trend. It segments durables under three
groups –
1) Necessary products - Transistors, wristwatch and
bicycle,
2) Emerging products - B&W TV and cassette
recorder,
3) Lifestyle products - CTV and refrigerators.
Marketers have to depend on rural India for the
first two categories for growth and size. Even in
lifestyle products, rural India will be significant
over next five years.
According to Anugraha Madison (one of the first
marketing firms to realise the potential of rural India
and decided to focus on rural marketing)
Today rural India is not 100 per cent dependent on
an agrarian economy.
Increasing percent of the rural population is
involved in other businesses.
◦ Some second generation people are getting white-collar
jobs in nearby towns.
◦ Growing middle class with a monthly income in rural India
-- drastic change from the past where their income was
totally dependent on the monsoon, cropping season, etc.
Anugraha Madison….
The divide between urban and rural India is thinning among
the top segment of rural India. The rural rich are almost like
urban India.
Punjab, Haryana, Tamil Nadu, Andhra Pradesh, Kerala and

parts of Maharashtra come under the developed rural India.

Rural youth – important in changing the profile of rural India.

About 40 % graduates of Indian universities are from rural

areas.
Have similar aspirations to the urban youth. Ensure that they

have steady flow of income.

Anugraha Madison….
The total expenditure of urban India is almost equal

to what has been spent by rural India.

◦ i.e. about 25 % of the urban India is spending as much as
75 % of what rural India is spending. This shows the
potential exists in rural India. There is a huge market
waiting to be tapped in rural India.
Between June 2002 and December 2003, rural
per capita consumption expenditure grew by
11.5 % while the urban expenditure grew by
9.6 % .
 After the basic needs of food, cloth and

shelter, they are looking at how to live better

Now for some facts and figures. The Indian
rural market today accounts for only about
Rs 8 billion (53 per cent - FMCG sector, 59
per cent durables sale, 100 per cent
agricultural products) of the total ad pie of
Rs 120 billion, thus claiming 6.6 per cent of
the total share. So clearly there seems to be
a long way ahead.
The rural market is growing at a far greater
speed than its urban counterpart
 Thirteen consecutive good monsoons since
1990 (ex 2002, 03)
 600% increase in five year plan outlay for

rural development from 8th to 10th FYP.

 230% increase in the flow of institutional

credit from agriculture (1997-98 to 2004-

05)
 41mn KCC issued amounting to Rs. 97,700

crores since 1998 (40mn Credit plus Debit

cards in Urban India)
 Consuming class household in rural are equal
to urban, hence disposal surplus in rural is
much higher.
 There are 42,000 rural haats (supermarkets)
in India that exceed the total number of retail
chain stores in US (35,000)
 Nearly 85% of villages have Public Telephone.
 Billing per cell phone in rural AP is more than
in Hyderabad.
 60% of 2 crores who signed up for rediffmail
& 50% of online shopping are from small
towns.
 Market size = 742 million
 Considerable consumption:
FMCG = 53%
Durables = 59%
 Respectable Market Size:
FMCG =Rs. 65,000 Cr
Durables =Rs. 5,000 Cr
Agri-inputs =Rs. 45,000 Cr
2/4 Wheelers =Rs. 8,000 Cr
TOTAL =Rs. 1,23,000 Cr
 There are 42,000 rural super markets (haats) in
India that exceeds the total number of retail chain
stores in the US (35,000).
 In 2001-02, LIC sold 55% of its policies in rural
India
 Of the 20 lakh BSNL mobile phone connections,
50% are in small towns and villages.
 The 41 million Kisan Credit Cards issued in rural
India exceed the 40 million credit-plus-debit cards
issued in urban India.
 Of the 6 lakh odd villages in the entire country,
5.22 lakh has a Village Public Telephone as of
march 2004.
1. Radio
-All India=35.1
-Rural =31.5
-Urban =44.5
2. Television
-All India=31.6
-Rural =18.9
-Urban =64.3
3. Bicycle
-All India=43.7
-Rural =42.8
-Urban =46.0
4. 2 Wheelers
- All India=11.7
-Rural = 6.7
-Urban =24.7