STP For Rural Markets
STP For Rural Markets
STP For Rural Markets
STP For Rural Markets: Segmenting a rural market – Basis of market segmentation
for rural markets – Target marketing strategies – Product positioning for rural
market.
INTRODUCTION
Companies are today developing different brands in different pack sizes and formulations to win
over the consumers. Different people want different quantities and different mixes of benefits
from the product they buy. Take detergents for example, HUL has Surf, Rin Shakti and Wheel
powder to meet the needs of different income groups. Palmolive has three varieties of toilet
soaps offering skin care benefits to three different types of skins of consumers. In reality they are
dividing the markets into attractive segments to reach them efficiently, serve them effectively
and achieve results economically.
Selecting and attracting markets involves three key decisions, viz., segmenting, targeting and
positioning
• Segmenting is the process of dividing or categorizing market into different groups based on
one or more variables.
• Targeting is selecting the market segments, which can be served efficiently and profitability. It
is, deciding on market coverage strategies.
• Positioning is a market attraction strategy, which involves placing the brand in the minds of
the customers in the target market.
The various steps involved in the market coverage and attraction process are:
Decision Actions
Segmentation 1. Identification of various bases for
segmenting market
2. Developing profiles of the market segments
Targeting 3. Evaluating the market segments for their
attractiveness
4. Deciding the market coverage strategy
Positioning 5. Communicating the chosen competitive
advantage to the customers
6. Identifying a set of possible competitive
advantages of the brand
7. Selecting the right competitive advantage
SEGMENTATION
Segmentation is the process of dividing a heterogeneous market into homogeneous sub-units.
The division is based on the premises that different people have different preferences. The
following are the basic market preferences:
Homogeneous preferences where consumers have roughly the same preferences
Diffused preferences where consumers are scattered throughout the market by their
preferences.
Clustered preferences where consumers are found in distinct preference groups.
DEGREES OF SEGMENTATION
If segmentation is considered as a process with two polar points from zero to complete,
four distinct segmentation approaches are identifiable.
Any process can be effective, if it has a sound philosophy and practical validity. Segmentation
can be effective only if it satisfies the following requirements:
(i) Measurable
Segments are formed with the help of certain variables. These variables should be
distinct, clear and measurable. Only then segments can be described in exact terms and
differences understood. Companies, so far, are not able to reach rural markets due to lack of
proper data. In the absence of information related to size, purchasing power and profiles of rural
consumers, they considered them similar to urbanites.
(ii) Accessible
Reach is important to serve the segments. Till recently, marketers preferred urban
markets to rural ones because of the inaccessibility of the latter. They were dependent on the
mobile vans and nearby town distributors and retail outlets to reach rural consumers. Now,
research has established that effective means of reaching rural folk is possible by participation in
haats or shandis organized weekly. Also, there is considerable improvement in the infrastructure
Making several villages accessible.
(iii) Differentiable
Segments merit consideration of marketers only when they have distinguishing features.
Rural marketers are identified as a different segment, for their responses are different from the
urban in case of some products and programmes. For instance, in case of buying wrist watches,
rural consumers differ with urbans. Rural buyers are more worried about the value for money
and
weigh the watch in hand to know how heavy it is. On the contrary, urban consumers prefer light
ones with latest technology.
(iv) Substantial
A segment is attractive only when it is profitable. A segment should as such possess the
following characteristics:
(a) Homogeneous—It should consist of people, who are similar in perceptions, learning,
preferences, attitudes and action. As such, covering them will be easy.
(b) Large—It should comprise of either large number of light users or small number of heavy
users so that marketing becomes beneficial to the companies. It is observed that rural areas are
not homogeneous. Region-wise differences are found in language, thinking and behaviour.
However, it is difficult to design separate promotional programmes as the size of consumers is
not large enough to make the effort viable.
BASES OF SEGMENTATON
There is no one way of segmenting the market. A marketer may look for one or more
variables viz., geographic, demographic, psychographic and behavioral, to distinguish and
describe their market segments.
(1) Geographic Segmentation
Geographic segmentation is made based on variables like zones/regions, states, districts,
cities/town/ villages by size, density, climate and culture.
(a) Zones: The country is divided into four zones.
East : West Bengal, Assam
West : Maharastra, Punjab, Haryana
North : Delhi, UP, Bihar. Himachal Pradesh
South : Tamil Nadu, Andhra Pradesh, Kerala, Karnataka.
The number of villages with a population of less than 5000 people is:
East : 1,61,982,West : 1,35,936,North : 2,00,106,South : 73,585
(b) States, Districts and Villages: The country is divided into states on the basis of language.
For the convenience of administration each state is divided into districts.
(c) Density: The density of population per square kilometer in the rural areas is very low
(d) Climate: The country is divided by climatic conditions as follows:
• Tropical• Rainy• Cold
(e) Culture: Media will be effective when its messages are fine-tuned to the culture of the
people. As such, the political division is immaterial for the various media. Ogilvy-Rural has
divided the country into 56 Socio-Cultural Regions (SCR).
(ii) Demographic Segmentation
Markets are divided into segments based on variables such as age, lifecycle, gender,
family size, income, occupation, education, religion and nationality.
Age : Under 6, 6—12, 13—19, 20—40, 41—60, 60+.
Life—cycle : Infants, children, teens, young adults, elders, seniors.
Gender : Male—Female.
Marital status : Married—Unmarried.
Family size : 1—2, 3—4, 5+
Income : Rs.25, 000 and below, Rs.25, 001-50,000, Rs.50,001-75,000, Rs. 75,001, Rs. 1
lakh, above Rs. 1 lakh.
Occupation : Farmer, agricultural labourer, artisan, nonagricultural labourer, Business,
Professional employee, retired, student, unemployed.
Education : Illiterate, literate, elementary school, high School, college, university.
Religion : Hindu, Muslim, Christian and Others.
(a) Age and Life-cycle: The age and life—cycle classification applicable to urbans is valid
to rurals as well. The specific products for the age segments are:
(b) Gender: Gender differences are observed in terms of dress, footwear, cosmetics and other
products. The peculiarities of women like gynecological problems and beauty consciousness
offer marketers an opportunity to supply unique products like sanitary napkins, estrogen
medicines, bust creams, and face packs.
(c) Marital Status: The influence of marital status is obvious. Some companies can benefit on
this ground.
Unmarried:
Residence - Small size houses/flats, working women’s hostels
Eat out - Fast food centres
Occasions - Valentine’s Day
Married:
Tourism and Hotels - Honeymoon packages
Events - “Best Couple” competitions
(d) Family size: As family size increases, consumption of consumables will increase. In rural
areas, it is found that large families with low incomes are buying consumer durables like TV.
The promotion of consumables as ‘family roduct’ particularly in economy refill packs works
well with large families. Large families may buy more than one brand of a product to meet
specific individual preferences and tastes. As such, multi-brand consumption of a product may
be there. While, Colgate is family toothpaste, Close-up is more personalized with its focus on the
youth. Naturally, it makes inroads into families with young members and adequate buying power
and co-exists with Colgate.
(e) Income: Rural households fall under different income categories as shown below.
The importance of income in influencing the purchase decisions relating to quantity and
quality need not be over emphasized. The rural rich buy premium brands like the urban rich. It is
interesting, that today even the low income groups buy some brands that the rich rural buy. The
sale of the premium brands to low income groups is made possible through sachet revolution.
Products offered in sachets like Velvettee shampoo, Dairy top and Colgate are highly successful
in rural markets. The high-income group provides market potential to durables like refrigerators,
CTVs and washing machines.
(f) Occupation: Occupational needs vary.
Farmer : Seeds, fertilizers, pesticides, tractors, harvesters, Pump sets, etc.
Employee : Pens, stationery items, etc.
Doctor : Stethoscope, BP kit, medicines, syringes,
Animal husbandry : Feed, medicines, consultancy.
This categorization can be used as a guideline to target the next customer. Purchases in Category
II are made after purchase of 3 or 4 items in category I. Purchases in category III are made after
purchasing 5 to 6 products in category I and II. Some times it can be a straight jump from
category I to category III.
Multi-variable segmentation
Very rarely, marketers depend on a single variable for segmentation. Target market to be
meaningful requires the use of several variables. One of the recent developments in multi-
variable segmentation is geo-demographic segmentation.
(a) Thompson Rural Market Index (TRMI): Hindustan Thompson Associates Ltd. developed
TRMI as a guide to segment markets in the rural areas in 1972 and improved it in 1986. They
compiled a data out of 335 districts, based on 26 variables. Further, they collected the value of
agricultural output data for each district. It is considered to be the overall indicator of rural
market potential as it has strong correlation with 10 selected agriculture-related variables viz.,
• Agricultural labourers
• Gross cropped area
• Gross irrigated area
• Area under non-food crops
• Pump sets
• Fertilizer consumptions
• Tractors
• Rural credit,
• Rural deposits and
• Villages electrified
Based on the index number, the districts have been classified as A, B, C, D and E class of
markets as shown in table below.
TARGETING
Segmentation is the process of identifying and establishing alternative market segments. As a
next step, targeting involves evaluating the various segments and selecting how many and which
ones to target. The three aspects in targeting are evaluation, selection and coverage.
(i) Evaluation of Segments
In evaluating market segments a company has to first identify the criteria for evaluation.
The following criteria may be applied to determine the attractiveness of segments.
(a) Profitability: The Company has to collect information on aspects required to conduct cost
benefit analysis and ascertain profitability of the segment. Relevant information includes:
• Sales volumes
• Distribution costs
• Promotion costs
• Sales revenues
• Profit margins
(b) Attractiveness: Marketers should know whether they should design effective programmes to
attract and serve the market skills. Smaller companies or new companies may lack the skills,
experience and resources needed to serve the larger segments. Some segments may be less
attractive when there is already more competition.
(c) Growth rate: A segment’s attractiveness depends not only on its current profitability but also
future prospects. The growth rate of the segment in terms of growth in population, rise in
purchasing power, and increase in preferences for the use of the products is to be considered.
(d) Company objectives: Company should evaluate the segment opportunity with reference to
their short term and long term objectives. If a company’s objective is to expand the sales, it has
to go rural instead of pulling rural consumers to the nearby town.
(e) Limitations: Finally, a company should examine whether the entry into the segment is
acceptable to the society and government. If its entry provokes unnecessary criticisms, the
company may have to struggle hard to explain its stand and safeguard its image.
(ii) Selection of Segments
Segments may be ranked based on the scores obtained and be considered for selection.
Those with high scores will be accepted and others will be kept aside for future consideration.
(iii) Coverage of Segments
Organization has three alternative coverage strategies to suit their segmentation
approaches.
(c) Concentrated strategy: Concentrated strategy directs all marketing efforts towards one
selected segment. It facilitates specialization in serving the segment
and achieving higher level of consumer satisfaction, delight and loyalty. However, it is not
without risks. In course of time, Preferences of consumers may change, and Large companies
may become competitors seeing the success of this company. Generally, large companies may
prefer to offer specialized services as a part of their diversification move. O& M has set up “O&
M Rural Communication New Work” to implement rural communication packages and devise
distribution strategies.
(iv) Choosing a Coverage Strategy
The following check list guides companies in making their coverage strategy choices,
with reference to the state of the four variables for example, company resources, product
variability, product life-cycle stage and market variability. For instance, undifferentiated strategy
is to be chosen, when company resources are moderate, product variability is less, and product is
in the
introduction stage in a market that has less variability.
POSITIONING
Positioning is the act of finding a place in the minds of consumers and locating the brand
therein. Companies have to plan positions that give their products the necessary advantage in the
target markets.
Positioning involves three tasks—
Identifying the differences of the offer vis-a-vis competitors’ offers.
Selecting the differences that have greater competitive advantage.
Communicating such advantages effectively to the target audience.
Identify Differences
The marketing offer may be differentiated along the following lines:
• Product
• Services
• People, or image
(a) Product differentiation: Products can be differentiated on attributes like shape, size, colour,
quality, composition, and performance. Functional differentiations signify ease in process and
benefits of use.
• Coke has 400 calories where as Diet coke has 1 calorie. Diet Coke is for diabetics.
• ‘Singer’ sewing machine stitches, ‘memory craft’ can even scan designs.
• Usha ‘fighter’ is low priced fan whereas ‘senator’ delivers air to the far corners of a room.
• Cinthol Sandal promises twin benefits of flawless, blemish free complexion and freedom from
perspiration odor owing to TCC. (Trichlora carbanalide content)
• Products come in different sizes, shapes and colours.
Communicating
Once the company has chosen the differences, it has to choose an appropriate marketing strategy.