PGBA (S4) 03-1

Industrial And Rural Marketing

SEMESTER - 4

BUSINESS ADMINISTRATION
BLOCK - 2

KRISHNA KANTA HANDIQUI STATE OPEN UNIVERSITY

Subject Experts
Prof. Nripendra Narayan Sarma, Maniram Dewan School of Management, KKHSOU.
Prof. U. R Dhar, Retd. Professor, Dept of Business Administration, GU.
Prof. Mukulesh Baruah,Director, Assam Institute of Management.

Course Co-ordinator : Dr. Smritishikha Choudhury, Asst. Prof., KKHSOU

SLM Preparation Team Dr. Chayanika Senapati, Asst. Prof., KKHSOU

UNITS CONTRIBUTORS
8-14 Mr. Rajdeep Deb, GIMT
8 Prof. N.N. Sarma, KKHSOU (co-author)
Editorial Team
Content :
8-14 Dr. Smritishikha Choudhury, KKHSOU

Language:
8-14 Prof. Rabin Goswami (Retd. Prof Cotton College)

Structure, Format & Graphics: Dr. Smritishikha Choudhury,KKHSOU

Dr. Chayanika Senapati, KKHSOU

January, 2019

ISBN :

This Self Learning Material (SLM) of the Krishna Kanta Handiqui State Open University
is made available under a Creative Commons Attribution-Non Commercial-Share Alike 4.0 License
(international): http://creativecommons.org/licenses/by-nc-sa/4.0/

Printed and published by Registrar on behalf of the Krishna Kanta Handiqui State Open
University.

Headquarters: Patgaon, Rani Gate, Guwahati-781017

City Office: Housefed Complex, Dispur, Guwahati-781006; Web: www.kkhsou.in

The University acknowledges with thanks the financial support provided by the Distance
Education Bureau, UGC for preparation of this material.
 MASTER IN BUSINESS ADMINISTRATION

INDUSTRIAL AND RURAL MARKETING

Block 2

DETAILED SYLLABUS

Unit 8: Segmenting, targeting and positioning of Rural Markets: Page No. : 7 – 16

Conditions for Effective Market Segmentation, Approaches for
Segmenting the Rural Market, Rural Market Segmentation Tools.
Unit 9: Product , Pricing and Promotion strategy of Rural Markets : Page No. : 17 – 40
Product mix decisions, competitive product strategies for rural
markets. Pricing strategy – pricing policies, innovative pricing
methods for rural markets. Promotion strategy – appropriate media
and designing right promotion mix.
Unit 10: Distribution and logistics management: Page No. : 41 – 61
Selection of appropriate channels – new approach to reach out rural
markets.
Unit 11: Principles of Innovation for Rural Market: Page No. : 62 – 81
Need for Innovation in Rural Market, Role of Government & NGOs in
Rural Marketing.

Unit 12: Rural and Urban Markets: Page No. : 82 – 100

A Comparative Analysis, Parameters Differentiating Urban & Rural
Markets, Similarities and Differences in Consumer behaviour in Rural
& Urban Markets.

Unit 13: e-Rural Marketing: Page No. : 101 – 109

e-Choupal Model of ITC, IT for Sustainable Rural Development and
E-Governance in rural market Corporate Sector in Agri-business:
Cultivation, Processing & Retailing Organized Rural Retailing

Unit 14: Social Marketing: Page No. : 110 – 117

Corporate Social Responsibility and Rural Marketing, Consumer
Education: Consumer Education and consumer movement in rural
India. Role of government in Rural Marketing, Role of NGOs in Rural
Marketing
BLOCK INTRODUCTION:

This is the second block of the course ‘Industrial and Rural Marketing. The Block is divided into7 units
and is primarily a learner oriented Self learning material, as it satisfies the requirements of the learners
in the filed of Marketing.
This block comprises of the following seven units:
The first unit of this block that is eighth unit of this course introduces us to segmentation and positioning
of rural marketing, conditions of effective market segmentation, approaches for segmenting the rural
market etc.
The ninth unit gives us a broad idea of marketing strategies such as product, pricing and promotion
strategy of rural markets.
The tenth unit gives us an idea of distribution and logistics management.
The eleventh unit will help us in describing innovations for rural market.
The twelveth unit gives us a comparative structure of rural and urban markets.
The thirteenth unit will help us in understanding the e- rural marketing concepts.
The fourteenth and the last unit of this block explains about the concept of social marketing.

Each unit of these blocks includes some along-side boxes to help you know some of the difficult, unseen
terms. You may find some boxes marked with: “LET US KNOW”. These boxes will provide you with
some additional interesting and relevant information. Again, you will get “CHECK YOUR PROGRESS”
questions. These have been designed to self-check your progress of study. It will be helpful for you if you
solve the problems put in these boxes immediately after you go through the sections of the units and
then match your answers with “ANSWERS TO CHECK YOUR PROGRESS” given at the end of each
unit. And, at the end of each section, you will get “CHECK YOUR PROGRESS” questions. These have
been designed to self-check your understanding.

The Block is devided into seven units:

Unit 8: Segmenting, targeting and positioning of Rural Markets
Unit 9: Product , Pricing and Promotion strategy of Rural Markets
Unit 10: Distribution and logistics management
Unit 11: Principles of Innovation for Rural Market
Unit 12: Rural and Urban Markets
Unit 13: e-Rural Marketing
Unit 14: Social Marketing
UNIT 8: SEGMENTING, TARGETING AND
POSITIONING OF RURAL MARKETS
UNIT STRUCTURE
8.1 Learning Objectives
8.2 Introduction
8.3 Segmentation-The Concept
8.4 Reasons for Market Segmentation
8.5 Bases for Market Segmentation
8.6 Conditions for Effective Market Segmentation
8.7 Approaches for Segmenting the Rural market of India
8.8 Rural Market Segmentation Tools
8.9 Rural Product Positioning
8.10 Let Us Sum Up
8.11 Further Reading
8.12 Answers to Check Your Progress
8.13 Model Questions

8.1 LEARNING OBJECTIVES

After going through this unit, you will be able to:
• define the conceptual background of segmentation
• know the importance of segmenting the rural market
• explain the different approaches for segmenting the rural market of
India
• describe the different rural segmentation tools

8.2 INTRODUCTION
Rural marketing poses a unique situation and calls for a unique
strategy and unique handling in practically every function of marketing.
Therefore, it is advisable to segment the rural market to tap it profitably.
Marketers cannot treat the rural market as one homogeneous market and
try to tap it by a single offer or a single product-price-promotion combination.
Companies are today developing different brands in different pack
sizes and formulations to win over the consumers. Different people want
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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.

8.3 SEGMENTATION-THE CONCEPT

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.
A segment represents a set of consumers who respond in a similar way to
a given marketing mix and marketing stimuli. 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.
It is obvious that the market for a product is essentially
heterogeneous. After all, market for a product is nothing but the aggregate
of the consumers of the product. And, consumers of a product vary in needs,
motives, characteristics and buying behavior. For example, all consumers
do not like the same soap, the same toothpaste or the same car. Marketers
break the heterogeneous market for the product into several sub units of
consumers, or sub-markets, each relatively more homogeneous within itself,
compared to the market as a whole. This breaking up helps tap the market
better. This act of disaggregating a market into a number of distinct sub-
markets/sub-units of consumers, each with relatively more homogeneous
characteristics, is known as market segmentation.
As already mentioned, a company cannot possibly satisfy all the
customers ina market because their needs vary. Most organizations do not
have the capability to serve widely varying needs. An organization has to
select customers whose needs can be matched with its capability to serve
them.

8.4 REASONS FOR MARKET SEGMENTATION

Market segmentation confers several benefits on the marketer. The

following are the benefits market segmentation confers on a firm/marketer.
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(i) Facilitates Right Choice of Target Market:

In the first place, segmentation helps the marketer to pick up his target
market properly. It does this by enabling him to distinguish one customer
group from another within the market and by showing him, which segments
of the market match his situation and should, hence, form his target market.
(ii) Facilitates Effective Tapping of the Chosen Market:
Segmentation enables the marketer to crystallize the needs of each of the
chosen segments and make offers that match them. When buyers are
handled after segmentation, the responses from each segment will be more
homogeneous.
(iii) Makes Marketing Effort More Efficient and Economic:
Segmentation also makes the marketing effort more efficient and economi.
It ensures that the marketing effort is concentrated on selected and well-
defined segments. The firm would benefit if its efforts were concentrated
on selected segments-the ones that match the firm’s resources and are
most productive and profitable.
(iv) Helps Identify Less Satisfied Segments and Concentrate on Them:
Segmentation also helps the marketer to assess:
• to what extent existing offers in the market match the needs of
different customer segments
• which are the less satisfied segments.
In other words, he locates ‘segments waiting to be served’ and grab
them as his unique opportunity.
(v) Benefits the Consumer as Well:
Segmentation benefits the consumer as well. Segment oriented offer and
communication invariably helps the consumer to come to his buying decision
without wasted efforts.It saves him the search time.

8.5 BASES FOR MARKET SEGMENTATION

A market/consumer population for a product can be segmented

using several relevant bases. Segmentation variables are the parameters
and characteristics of people comprising total market for a product category
on which the marketer can segment them into groups that are homogeneous

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internally but heterogeneous across the groups. The major segmentation

variables-geographic, demographic, psychographic, and behavioral
segmentation.
(i) Geographic Segmentation
Geographic segmentation divides the market into geographical units such
as nation, states, regions, countries, cities, or neighborhoods.
(ii) Demographic Segmentation
Demographic variables include age, family size, family life cycle, gender,
income, occupation, education, religion, race, generation, nationality, and
social class.
(iii) Psychographic Segmentation
In psychographic segmentation, buyers are divided into groups on the basis
of psychological/personality traits, lifestyles, or values.
(iv) Behavioral Segmentation
In behavioral segmentation, marketers divide buyers into groups on the
basis of their knowledge of, attitude toward, use of, or response to a product.

8.6 CONDITIONS FOR EFFECTIVE MARKET

SEGMENTATION

To be effective, market segments must rate favorably on five key criteria:

(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. The segment that is
to be used must be measured. 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) Substantial
The segments are large and profitable enough to serve. A segment should
be the largest possible homogeneous group worth going after with a tailored
marketing program. For example, it would not pay for an automobile
manufacturer to develop cars for people who are under four feet tail.

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(iii) Accessible
Reach is important to serve the segments. The segment chosen must be
accessible. 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 hats or mandis organized weekly.
Also, there is considerable improvement in the infrastructure that makes
several villages accessible.
(iv) Differentiable
The segments are conceptually distinguishable and respond differently to
different marketing-mix elements and programs. Rural markets 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 urban consumers.
(v) Actionable
Effective programs can be formulated for attracting and serving the
segments.

8.7 APPROACHES FOR SEGMENTING THE RURAL

MARKET OF INDIA

Various experts, advertising agencies, and consultancy and research

organizations have suggested different parameters for segmenting the rural
market. Even some corporate organizations have defined and divided the
rural market into different segments by calculating the overall Market
Potential Value (MPV) of various rural market segments.
The different classifications or approaches suggested to segment
the rural market are mentioned below:
(i) Based on Size of Village Population
The size of population residing in a village is a significant factor which
determines the overall potential demand for a product or service in that
village. It also provides an indication about the viability of marketing operations
to a great extent.

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(ii) Based on Location with Respect to Nearby Town

Villages can also be classified in the three following categories on the basis
of their location with respect to the nearby town. The village location itself is
a major determinant and has considerable impact on both the earning
potential and consumption attitude of its residents.
• Villages near urban centres
These villages because of their proximity to the urban areas are somewhat
urbanized. Their residents’ education profile, shopping habits, and brand
choices resembles to a great extent with those of urban consumers. They
are in a position to make most of purchases from the nearby towns.
• Villages in developing districts
These are somewhat developed villages with consumers being aware of
various marketing promotions to some extent. The income profile of these
• Immobile and self-sufficient Asiatic villages
These are the remote villages located in the less developed districts. The
income and education profile of the consumers in these villages is not very
attractive from the marketing point of view.
Therefore, marketers can use the knowledge about the village location in
the target markets to develop different promotional and distribution strategies
for different types of villages.
(iii) Based on Size of Farmland
Income is also an important factor which determines consumption. With
more than 50% income in rural areas coming from agriculture, land holding
pattern can be a basis for segmentation of the rural market. Although, in the
present context, a significant part of the rural income ha started to come
from non-agricultural activities, and this segmentation strategy does not
take this trend into account.
(iv) Based on Sociological Characteristics
V R Gaikwad (1973) suggested the segmentation of the rural market into
six categories on sociological basis. These are as follows:
• Proprietors of Land
These include zamindars, rich money lenders and traders, who have large
tracts of land.

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• Rich Farmers
These farmers belong to the dominant caste opf the area.
• Small Peasants or Marginal farmers
These farmers own uneconomic land holding of 1-2 hectares.
• Tenant Farmers
These are the farmers who operate on rented lands belonging to the
proprietors of land.
• Agricultural Labourers
These constitute landless labourers who work on the lands of landlords or
rich farmers for annual labour charges or on-daily-wage basis.
• Artisans and Others
These include rural craftsmen involved in different types of craft and also
the unemployed. Petty traders and shopkeepers in the villages are also
included under this category.
(v) Based on Income
The Indian rural market can be segmented into four main categories on the
basis of the income earned by different rural segments. These categories
are as follows:
• Rural rich consumer
This segment is further sub divided into two segments:
a) Concentrated rich consumers
These consumers are mainly found in green pockets of the country, such
as parts of Punjab, Haryana, Andhra Pradesh etc.
b) Scattered rich consumers
These consumers are found in almost every village of the country. These
people are basically zamindars and money-lenders.
• Rural consumers around urban area
These consumers shop in towns and cities.
• Rural consumers above poverty line
There are large numbers of households in rural areas, which are above the
poverty line. They would purchase manufactured goods.
• Rural consumers below poverty line
This segment does not have a significant and regular source of income.
Therefore, at present, it is not a market for majority of marketers.

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(vi) Based on Age Group Perspectives

A group of people, born at the same time in same place or country, have
similar experiences. This similarity of experience leads to some
commonalities in their personality and their worldview, which is manifested
in their choice and purchase. People belonging to various age-group
categories are significantly different from one another because of diverse
socio-politico-economic environment in which they were born and brought
up.
(vii) Based on Distribution and Internal Structure of Villages
The rural areas in India show lot of variety in their pattern of distribution and
internal structure. Four types of distribution and internal structure are found
in the country:
(a) Nuclear
(b) Linear villages
(c) Irregularly clustered villages
(d) Scattered homesteads
As discussed above, there are varied parameters for segmenting
the rural market. Marketers have to carefully select an appropriate parameter
or design a combination of parameters in accordance with the product
category for which segmentation is intended. But the segmentation of the
rural market is the first and foremost step for any organization that intends
to tap the rural market potential in a sincere manner.

8.8 RURAL MARKET SEGMENTATION TOOLS

Various consultancy and advertising organizations have developed

indices and tools on the basis of a host of indicators to effectively classify
and segment the rural market. These tools provide classified and actionable
information on the overall rural market potential for different regions, districts
and villages of India. They identify the media dark and media grey areas in
order to guide the development of a promotion strategy. Some of the indices
are outlined below:
(i) Thompson Rural Market Index
(ii) Mica Rural Market Rating
(iii) Linquest
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(iv) Indian Market Demographics

(v) Business Intelligence Unit
(vi) Lincompass
(vii) ARCVIEW

CHECK YOUR PROGRESS:

Q.1: Define ‘Segmentation’.

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Q.2: Mention at least two psychographic variables.
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8.9 RURAL PRODUCT POSITIONING

“Positioning” is a common marketing buzzword. It means “how is

your product positioned compared with the competition” There can be no
positioning without something else to position against.
Product positioning is closely related to market segment focus.
Product positioning involves creating a unique, consistent, and
recognizedcustomer perception about a firm’s offering and image. A product
or service may be positioned on the basis of an attitude or benefit, use or
application, user, class, price, or level of quality. It targets a product for
specific market segments and product needs at specific prices. The same
product can be positioned in many different ways.
Product positioning requires an understanding of the
interrelationships of different factors which influence marketer’s positioning
and customers’ perception of the product. Because customers develop
mental picture of the product which may not be the same as the marketers
may expect to get developed.

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Product positioning in the rural contexts requires specific

considerations. Some of them are discussed below.
a) Rural Product Development:
Rural product development has the strong edifice on a great deal of
research like feasibility studies, rural aspiration, rural profiling and so on.
Understanding the need of the rural markets helps the marketer to develop
the right kid of the products. Products have to be specifically developed to
meet the needs of rural markets. Sometimes, existing products might have
to be modified to suit these markets too accordingly. Most often we find
smaller sizes of products in the rural areas. We can cite the example of the
sachet shampoos. In the rural markets dominated by the joint families we
may find that larger pack size of tooth paste sells more. Marketers have to
modify their products to take care of the specific needs of the rural market.
b) Rural Branding:
Rural branding bears quite different stand from urban branding.The
first step towards rural branding is to research and gain insight into the
working of rural markets. Based on this communication campaigns have
to be developed with a lot of rural sensitivity.
Rural branding is attained by way of opting to a greater percentage
of local media and a smaller percentage of the mass media. Rural gatherings
like temple festivals, melas, cinema halls and so on can be used as venues
to promote brands. Direct Marketing and events like road shows; film shows,
melas, street theatre can also be used to promote brands.
A well-planned rural branding campaign can create brand awareness
and helps in promoting sales.
c) Rural Market Research:
Rural markets behave differently from urban markets. While many
marketers have tried to market their products in rural areas, just a handful
of the same has succeeded. A strong insight into rural consumer behavior
and sensitivity to their values and beliefs is essential; to upgrade the rural
market rural market research encompasses not just gathering data but
analyzing them and linking the findings to promoting your products.
Developing the rural data base is very difficult. Data are not uniform.

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Developing primary data is also a costly proposition. Tools deployed in urban

markets may not work in rural areas.
d) Rural Communication Campaigns:
Communication for rural markets calls for a different kinds of outlook.
The entire communication and media strategy has to devise a system based
on research findings. These have to be developed in the regional vernacular
languages and set in the local culture for easier acceptance and reach.
Unlike communication campaigns in urban areas that rely greatly on the
mass media, the strategy will be of crying in the wielderness in rural areas.
Besides mass and outdoor media, rural extravaganzalike temple festivals,
melas and other events where the villagers come together can be used for
promotions. The rural choupal i. e. the meeting place in the villages is an
ideal location to reach to the rural people.
e) Rural Events:
In the rural context, one of the best ways to capture the attention of
the audience is through Event-management. Since rural areas have limited
venues for entertainment, conducting an event in rural areas can bring a
good response.
A well-planned event can get the product the mileage that we want.
Some of the interesting events that can be conducted are Road Shows,
Melas, Street-Theatre, Film Shows and so on. These make a visually strong
impact and build long term brand recall. Rural public are the target audience
and hence the portfolio of event management has to be handled
professionally with diligent care and broad perspective.
f) Rural Direct Marketing Campaigns:
Direct Marketing (DM) is one of the most powerful ways to meet the
target on their turf and build product awareness as well as promotion. The
success of any DM campaign depends on the field workers and their
sensitivity and emotional connectivity to rural markets.
In the area of Direct Marketing, rural team has to be trained, to be
sensitive to rural culture and beliefs. They can handle activities like Door-
to-Door sampling, marketing and product promotion. These activities can
also be carried out innovatively at places like local cinema halls, melas and

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festivals, in the midst of cross-cultural gatherings and conglomerations.

8.10 LET US SUM UP

It is up to the organization to select or employ any tool or methodology

according to its requirement, but a strategy to tap the rural market cannot
be developed without segmenting the rural market. If the target market is
selected properly, which is a right product-market fit, then there definitely is
a viable rural market for a given product category, otherwise the failure is
quite likely. One cannot even think of profitability or success in a highly
scattered and heterogeneous market called rural India without an appropriate
segmentation plan.

8.11 FURTHER READING

1) Introduction to Rural Marketing by R Krishnamoorty, Himalaya

Publishing House, 2008.
2) Marketing Management – Indian Context, Global Perspective by V S
Ramaswamy & S Namakumari, McGraw Hill, Fifth Edition, 2013.
3) Rural marketing: Concepts and Practices by B. Dogra and K. Ghuman,
McGraw Hill, 2012.
4) Rural Marketing in India: Opportunities, Challenges and Strategies by
Dr. N S Mohamed, www.alliancebschool.com.
5) The Rural Marketing Book by P Kashyap and S Raut, Biztantra, 2005.

8.12 ANSWERS TO CHECK YOUR

PROGRESS

Ans to Q No 1: Segmenting is the process of dividing or categorizing market

into different groups based on one or more variables. A segment
represents a set of consumers who respond in a similar way to a
given marketing mix and marketing stimuli.
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Ans to Q No 2: Personality and Lifestyle are the two psychographic

variables.

8.13 MODEL QUESTIONS

1. Identify and explain the reasons which make the segmentation of

the rural market extremely necessary for serving this market in an
effective manner.
2. Explain the different approaches for segmenting the rural market of
India.
3. Identify the various tools for rural market segmentation.

*** ***** ***

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 UNIT 9: PRODUCT, PRICING AND PROMOTION
STRATEGY OF RURAL MARKETS
UNIT STRUCTURE

9.1 Learning Objectives

9.2 Introduction
9.3 Problems in Rural Marketing
9.4 Product Strategy of Rural markets
9.5 Pricing Strategy of Rural markets
9.5.1 Pricing Policy
9.5.2 Innovative Pricing Methods for Rural Markets
9.6 Promotional Strategy of Rural Markets
9.6.1 Selecting the Media Mix/Promotion Mix
9.6.2 Promotion Strategies in the Rural market
9.7 Let Us Sum Up
9.8 Further Reading
9.9 Answers to Check Your Progress
9.10 Model Questions

9.1 LEARNING OBJECTIVES

After going through this unit, you will be able to:

• comprehend the reasons behind the requirement of a modified
marketing mix for the rural market
• explain the various product, pricing and promotion strategies
• gain an insight into the pricing policy
• know the various innovative pricing strategies in the rural market

9.2 INTRODUCTION

Rural India is on the threshold of momentous change. With a rural

population of 790 million 50% of India’s income contribution comes from it.
Nearly 100 million people have evolved out of poverty in the last 10 years.
Rural India will be a market worth USD 500-600 billion by 2020, according

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to McKinsey report. Rural consumption levels are also anticipated to equal

the current urban levels by 2017. The economy is vibrant, incomes are
rising; and the habits, references and attitudes are changing rapidly.
A sensitization to the rural environment is absolutely vital, to ensure
effective implementation of strategies, in the framework of new paradigms
that are emerging, due to the transformations taking place in rural India.
This has to be further supported by an on-line monitoring mechanism. Online
monitoring mechanism enables timely mid-course fine tuning. The earning
cycle becomes complete only when the knowledge and experience gained
from every implementation can be systematically transferred through
effective training and dissemination. The central decision in marketing mix
strategy is product decision. In the emergent dynamic, competitive
environment, multi-product firms are fighting hard to gain commanding
market through their product strategies. It is through continuous design
and redesign of product mixes a company lays its way to success and
fame.

9.3 PROBLEMS IN RURAL MARKETING

Although the rural market does offer a vast untapped potential, it

should also be recognized that it is not that easy to operate in rural market
because of several problems. Rural marketing is thus a time consuming
affair and requires considerable investments in terms of evolving appropriate
strategies with a view to tackle the problems.
The major problems faced are:
1. Poor People and Underdeveloped Markets: The number of people
below poverty line has not decreased in any appreciable manner. Thus
poor people and consequently underdeveloped market by and large
characterize the rural markets. Vast majorities of the rural people are
tradition bound, fatalistic and believe in old customs, traditions, habits,
taboos and practices.
2. Lack of Proper Physical Communication Facilities: Nearly fifty
percent of the villages in the country do not have all weather roads.
Physical communication of these villages is highly expensive. Even
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today most villages in the eastern parts of the country are inaccessible
during the monsoon.
3. Media for Rural Communication: Among the mass media at some
point of time in the late 50’s and 60’s radio was considered to be a
potential medium for communication to the rural people. Another mass
media is television and cinemas and mobiletheatres, which is far less
when compared to the number of villages.
4. Many Languages and Dialects: The number of languages and
dialects vary widely from state to state, region to region and probably
from district to district. The messages have to be delivered in the
local languages and dialects. Even though the number of recognized
languages are only 16, the dialects are estimated to be around 850.
5. Dispersed Market: Rural areas are scattered and it is next to
impossible to ensure the availability of a brand all over the country.
Seven Indian states account for 76% of the country’s rural retail outlets,
the total number of which is placed at around 3.7 million. Advertising
in such a highly heterogeneous market, which is widely spread, is
very expensive.
6. Low Per Capita Income: Even though about 33-35% of gross
domestic product is generated in the rural areas it is shared by 74%
of the population. Hence the per capita incomes are low compared to
the urban areas.
7. Low Levels of Literacy: The literacy rate is low in rural areas as
compared to urban areas. This again leads to problem of
communication for promotion purposes. Print medium becomes
ineffective and to an extent irrelevant in rural areas since its reach is
poor and so is the level of literacy.
8. Prevalence of spurious brands and seasonal demand: For any
branded product there are a multitude of ‘local variants’, which are
cheaper, and, therefore, more desirable to villagers.
9. Different way of thinking: There is a vast difference in the lifestyles
of the people. The kind of choices of brands that an urban customer
enjoys is different from the choices available to the rural customer.

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The rural customer usually has 2 or 3 brands to choose from whereas

the urban one has multiple choices. Thedifference is also in the way
of thinking. The rural customer has a fairly simple thinking as
compared to the urban counterpart.
Because of these differences the marketing strategies for rural
customer is different from urban marketing strategies. In the following
sections we will discuss the product, price and promotion strategies for
rural marketing.

9.4 PRODUCT STRATEGY OF RURAL MARKETS

A prime need for any firm to emerge as a strong player in the rural
market is by carefully identifying the gaps in the rural market and crafting
the right product offering for consumers. The prime objective is to design
products to suit rural requirements. The first decision to be made in product
strategy in the rural context is whether the product being sold in the urban
market should be offered as it is to the rural market or whether it must be
adapted and offered. It depends on the situation and the nature of the product.
In some cases, the product that is offered to the urban market could be
offered as it is to the rural market. In some other cases, some adaptation
will be advantageous. In yet other cases, the product could be offered as it
is to one segment of the rural market, and an adapted product could be
offered to another. Income and socio-cultural-technological realities of the
target segment ought to determine the product strategy. Adapted, lower-
priced, product-versions do help in rural markets.
Rural consumers like to buy products for need-based consumption;
which preferably has a refill option. They are very adept at recycling and
putting a product to all possible practical uses before the decision of
discarding is taken. Therefore, while designing a product, the organization
needs to consider and integrate the refill, reuse and recycle options in the
product design.
The product must also prove to be useful and easy to use. It must
appear to be tough and rugged in its overall outlook. Indian villagers may be
less educated but they are innovative and they do not accept any new
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technology introduced to them just like that. They can be found purchasing
shampoos and even using cellular phones, while they may be completely
opposed to washing machines. Therefore, the conditions for acceptance
for the product is that it must solve their problems, suits their culture and
their pocket and it must be proved to them that it’s worth the price.
The specific strategies, which can be employed to develop or modify
the products to target the rural market, can be explained with the following
points.
(i) Specifically-Designed Products
Apart from the adapted, lower-priced product-versions, the rural markets
may, in some cases, need specifically-designed products. In some cases
the situations in which the consumers use/consume the products influence
the choice of specific types of products with a category. In some cases, the
rural market may need products that can deliver in sub-optimal conditions
an deficient infrastructure environment. The products currently marketed
by a company in the urban market may not be usable at all in the rural
markets. In such cases, specifically-designed products serving the same
need are required.
(ii) Sturdy Products
The products meant for rural areas should be sturdy enough to stand rough
handling, transportation and storage.
(iii) Utility Oriented Products
The rural consumers are more concerned with the functional utility of the
product than its appearance and sophistication. Therefore, unnecessary
frills can be taken off the product for the rural market as the rural consumer
is not likely to use them and this will make the product more affordable too.
(iv) Refill Packs/Reusable Packaging
These packages signify value for money as the rural folks perceive it to be
preventing the wastage of money.
(v) Application of Value Engineering
To evolve cheaper but quality products, companies need to go for value
engineering and substituting the costly raw material with the cheaper one.

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(vi) Brand Name

Brand awareness in the rural areas is fairly high. The only issue is that the
brands are known differently than they are known in the urban market.
(vii) Offering the Colours that are Preferred
The rural consumers have their colour preference. Firms can exploit this
fact to their advantage, especially in the case of products for which colour
matters very much. In the paint business, Asian Paints understood the
difference between the urban and rural buyer in colour preference and is
benefited by the understanding. Asian paints introduced paints in many bright
colours for the rural markets. It also communicated this feature well through
its campaigns.
(viii) Package has to be appropriate
In some cases, the product can be the same, but the package may have to
be different for the rural market. Three relevant aspects need attention I
packaging – design, colour and size. Package design and colour help
identification of brands by rural buyers. Many rural consumers, even though
not quite conversant with the various brands, manage to pick the brand
they want, recognizing it by its packaging. This is one reason why many
local brands in rural areas imitate the packaging of big national brands.
• Pack Size
As regards the choice of pack size for the rural market, smaller packs are
more effective in rural areas. Lower purchasing power and limited availability
of cash for shopping force the consumers to go for smaller packs with low
unit price.
• Logos, Symbols, and Mnemonics
Brand identity in rural markets is often created through the visual logo of a
product. Image is far more potent in the rural market and symbols dominate
brand recall there. For example, the Nirma girl in frock prominently displayed
on the packs of Nirma washing powder is a well recognized logo among
the rural buyers.
Marketers face some unique problems on the product front in the rural
markets. For example, they have to guard against the “fakes”. There are
spell-alikes, pack-alikes and logo-alikes. Sometimes, the unorganized sector

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dumps in the rural markets very low-priced substitutes.

9.5 PRICING STRATEGY OF RURAL MARKETS

Price is the most important phenomenon affecting rural markets.

The villagers, due to their limited resources, are very very price sensitive
by nature. Marketers have to study not only the income levels, but also
when the money is received and in what quantity it is received and along
with that, how it is used and what are the spending priorities in order of
needs. There are several views with regard to pricing strategy for the rural
market. One view is that pricing for the rural market must be affordability
based and hence, low unit price must be the preferred option. The second
view is that products must be sold at common prices in both the rural and
urban markets. Many companies go for common models and common
prices for the two markets. For example, Samsung and LG have given up
their rural specific pricing approach. They have also thought it an appropriate
bet to sell both high-end and low-end models in the rural market without
any special price point models for the rural market. The choice is to be left
to the consumer. The policy is to ‘sell similar models at similar prices to
similar consumers’ across urban and rural markets. The third view on
pricing strategy for the rural market is that a slightly modified, no frill brand
at a lower price will be the right strategy for the rural market.
Price substitutes also must be studied along with the pricing of the
competitors before deciding on the launch price of a product.

9.5.1 Pricing Policy

A price policy is the standing answer of the firm to recurring

problem of pricing. It provides guidelines to the marketing manager
to evolve appropriate pricing decisions. If competition is mainly on a
price basis, then each company generally prices its products at the
same level as its competitors. If there is non-price competition, each
marketer chooses from among the three alternatives:
(i) Price in Line (Pricing at the Market)
The sale at current market price is desirable under free competition

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and when a traditional or customary price level exists. It is preferable

when product differentiation through branding is minimum, buyers
and sellers are well-informed, and we have a free market economy.
Under such conditions price loses its importance as a weapon of
competition and sellers have to adopt other means of non-price
competition, e.g., branding, packaging, advertising, sales promotion,
credit, etc., to capture the market.
(ii) Market-Plus (Pricing above the market)
The sale above the market prices under free competition is profitable
only when your product is distinctive, unique and it has prestige or
status in the market. Customer is inclined to put a greater value on
the product if the package is very good or the brand is well-known.
Otherwise, it will be a killing price policy, especially if the customer
is price conscious. Reputed brands have higher prices. Price of a
product is associated with value, quality, durability, performance,
and service after sale, credit, and many other attributes. Product-
differentiation through branding introduces monopoly element in
pricing and established brands can afford higher prices without
reducing volume of sales. In foreign countries, such as the U.S.A.
and the U.K., almost all consumer goods are branded and large
national concerns have used branding as an instrument of monopoly.
(iii) Market-Minus (Pricing below the market)
The sale below the market price, particularly at the retail level, is
profitable only to large chain stores, self-service stores and discount
houses. These large retailers can sell well-known nationally
advertised brands 10 to 30 per cent below the suggested retail
prices, list prices or fixed resale prices by the manufacturers. If you
have lower costs because your product is of inferior quality, you
may have to fix lower price. Similarly, you may prefer a lower price
without promotion expenses (which your rivals are undertaking on
a large scale). A lower price is a substitute for sales promotion and
advertising. Prices of national brands are higher as there is heavy
expenditure on advertising and sales promotion to maintain the brand

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loyalty.
(iv) One-Price
Under one-price policy, a seller will charge all similar types of buyers
exactly the same price and there will be no discrimination or
difference among the buyers of the same commodity. There is no
question of negotiation, bargaining or haggling. No favoritism is shown
to any buyers. Terms of sale are the same for similar quantities of
the product. Discounts and allowances are granted on equal terms
to all buyers. It is a fair trade practice. It gains customer confidence.
A fair and fixed policy in line with the normal market price and
providing for normal margin of profit is the best pricing policy. Through
efficient management and best marketing mix, the manufacturers
and dealer should bring down marketing costs and improve quality
of services to the ultimate consumers. The consumers should be
offered lower price and better quality under any normal pricing policy.
(v) Variable Price Policy
Under variable-price or negotiated price policy, the seller will sell the
same quantities to different buyers at different prices. Certain
favoured customers are offered lower prices. The terms of sale,
e.g., discounts and allowances are granted on unequal terms to
buyers. Especially in developing countries, sellers commonly use
variable pricing for most consumer items. In retail trade the price
discrimination is usual. A foam leather handbag was quoted by a
well-known retailer at ‘ 300/- in the first instance. The price was
reduced to ‘ 250/- and then to ‘ 225/-. On sensing that the customer
was aware of its real price, the price was scaled down ultimately to
‘ 200/- only. Street sellers use this pricing.

9.5.2 Innovative Pricing Methods for Rural markets

Analysis of the relatively more effective practices in the rural

context indicates that combining price, product and packaging may
be useful in working out innovative pricing strategy in the rural
context.

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In the first place, pricing strategy in the rural market has to

follow the pattern of income in the rural areas. Per capita income is
small, and it comes in small installments. This, obviously, is one
main reason why rural India is happy to buy the product in small
packs or low unit packs (LUPs) and marketers are happy to supply
their products in such packs, and go for the low unit price strategy.
Small packs, however, need not necessarily mean sachets. Any
appropriate smaller pack size, including sachets, that makes the
unit price lower and affordable for the particular single purchase,
will be useful. They are happy when their ‘at a time cash outflow’
remains small. In some cases, they also prefer smaller packs so
that they can make a trial on a small scale and after satisfaction
can go in for regular purchases. Many companies have introduced
coinage pricing to suit this reality.
Besides low unit price, overall-economy is also important to
rural buyers. In rural marketing, it can be said that companies must
innovatively change the value-paradigm and alter the product’s price-
performance-value relationship to suit the needs of the target
segment. Innovating on package size seems to be the more
common strategy towards making the offer look this way.
In diverse categories – shampoos, chocolates, coffee,
cooking oils – companies have broken into buyer groups in the rural
market for whom a high price was the sole barrier. Thus came the
new differentiator – the single use pack and the mini bottle. Pack
size became the differentiator – bring it down to as low a unit as
possible so that a mini price could be tagged on to it. The objective
was to break the price barrier that prevented even a trial among the
lower-end segments.
In 2002, Coca-cola India launched 200 ml bottles of coke
(Chota coke) priced at Rs. 5. Coca-cola India strategy was to push
the 200 ml bottles more in rural areas, as the rural market was very
price-sensitive. It was widely felt that the 200 ml bottles priced at
Rs. 5 would increase the rate of consumption in rural India. The

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Rs. 5 – Chota coke strategy not only brought in new sales, but also
helped the spread of the brand.
In order to be successful on a large scale in the vast rural
market of India, organizations have to consider the following
innovative pricing strategies:
(i) Special Occasion Pricing
There is a good scope for special occasion pricing in the rural
market. Companies may, either on their own or in tandem with the
trade/retailers offer specially discounted prices and concessions
during festivals and marriage seasons and during harvest times.
(ii) Large Volume-low margin: Rapid or Slow Penetration
Strategy
Marketers have to focus on generating large volumes and not big
profit margins on individual products. If they price their product at a
level which can lead to good volumes, then they can still generate
good returns on the capital employed.
(iii) Overall Efficiency and Passing on Benefits to Consumers
For rural products, the strategy should be to cut down the production,
distribution and advertising costs and passing on these benefits to
the customers to further increase the turnover. If an organization
gets the price point right, then it can work in the rural market.
(iv) Low Cost/Value for Money Products
This follows from the product strategy. The price can be kept low by
smaller unit packaging or reengineering. No frill functional products
at a low cost are perceived to have better value in the rural market
than higher priced, value added products, with features than a rural
consumer is not going to use.
(v) Low Volume – Low Price Strategy
This strategy of reducing prices by reducing the package size in
order to make it appear more affordable is delivering very good results
for a large number of FMCG product categories, in the rural market
of India. In categories where maintaining the price point is extremely
critical, this strategy is delivering very good results.

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(vi) Ensuring Price Compliance

Rural retailers, most of the times, charge more than the MRP. The
manufacturer has to ensure price compliance either through
promotional campaigns or by ensuring the availability of products at
the retail outlets directly.
Many rural consumers prefer to buy high priced brands. They are
not votaries of low-price. They are quality savvy, brand savvy and
price savvy. They can buy the “best” brands as well as the value for
money ones. They have their own status symbols.

9.6 PROMOTION STRATEGY OF RURAL MARKETS

We have discussed earlier the constraints in the rural market in

communication infrastructure and in facilities for promotion as well as access
to media. To put it in graphic terms, about 40 percent of the population is
illiterate while 50 percent of the population live in media dark areas. The
challenge is to overcome the constraints and communicate effectively the
desired message to the rural consumers, . More importantly, the challenge
is to engage with and understand the rural consumers, and their shopping
and consumption behaviour. For this, the marketers have to develop
communication that would connect with the consumers.

9.6.1 Selecting the Media Mix/Promotion Mix

The rural communicator will do well to choose a combination of

formal and non-formal media. The possibilities are indicated in the
following Chart.

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Chart 9.1 Possible Media Mix in the Rural Context

I. Formal/Organized Media II.Non-formal/Rural-specific Media

TV Audio-visual/publicity vans
Cinema Rural specific art forms like puppet
shows and Harikaths
Radio Demonstrations
Print-media – press Meetings, announcements,
processions
Other print media Caparisoned elephants and
decorated bullock carts
Outdoor carrying advertisement panels
POPs Music records

z TV
With the expansion in TV coverage, ownership of TV sets, cable
and satellite connections and community TV viewing facility in rural
areas, TV is gradually becoming the major medium for rural
communication. The reach of television programmes is now quite
high.
z Radio
The radio is a well-established medium in rural areas. A big expansion
in broadcasting facilities has taken place in the country over the
years. The availability of radio sets has also expanded. While radio
as a medium cannot match TV in potency and effectiveness, it can
certainly play a significant role in rural communication.
z Cinema
The cinema is a particularly useful medium in the rural context.
Cinema is relatively a more available medium in rural areas. Most
large and medium villages have one or more cinema houses, though
most of them are temporary constructions. More than one-third of
all rural people do see cinema regularly. Advertisement films, short
feature films with disguised advertisement messages and
documentaries that combine education and promotion are all useful

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communication vehicles that can work through the medium of

cinema.
z Print media
Print media too has responsible scope. While compared to the
urban area, the role of print media is limited in the rural context and
yet its scope cannot be belittled. Even the remotest rural parts have
groups of newspaper readers. Moreover, while the groups may be
numerically small, the members usually happen to be the opinion
leaders, influencing the purchasing behavior of a large segment of
the rural consumers.
z Outdoors
The outdoors, which includes hoardings, wall paintings, illumination
and other displays, also lend well for rural communication. In fact,
many companies are using them imaginatively in their rural
communication. Wall paintings score particularly high in potency.
They will be particularly effective at haats, mandis ad mela.
z PoPs
The PoPs – point of purchase (or point of sale) promotion tools –
are also quite useful in the rural markets. The PoPs meant for the
rural market should be specifically designed to suit the rural context
and requirements. Symbols, pictures and colours must be used
liberally. As a general rule, rural people love bright colours. The rural
communicator must utilize such cues.
z Audio-Visual Units/Publicity-Vans
The AV unit or the publicity van is a very useful facility iin rural
communication. The van is a comprehensive mobile promotion
station at the exclusive command of the concerned firm. The firm
can exhibit its films and other audio-visual presentations, such as
slide shows, sound and sight presentations, puppet shows, etc.,
from this instant promotion station. In short, the van can be used for
carrying and delivering a tailor-made, total communication
programme to the rural target audience.

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z Puppet Shows, Harikathas

Popular entertainment programmes like puppet-shows, dance,
dramas, and Harikathas, specially developed for product-promotion
purpose, are commonly used in rural markets. These traditional art
forms readily lend for communication with the rural society. Village
fairs, festivals and melas are ideal venues for projecting these
programmes. In certain cases, public meetings too may be used
for rural promotion.
Media selection is not the only aspect that calls for special
care in rural communication. The communication as a whole needs
unique handling. There is need for specialization in developing and
delivering the message. A prototype of a communication that works
well in the urban context may not work in the rural context.
Many rural consumers feel inhibited and ill equipped to buy
confidently. Hence, there is a strong need to build reassurance and
trust about product benefits, quality, service support and company
credentials in the minds of rural consumers. While the mass media
may serve the purpose of achieving awareness and interest, for
creating conviction, the marketer must have ‘face to face’, interactive,
communication with the consumer. Physical demonstration too must
form a part of the communication to rural consumers.

9.6.2 Promotion Strategies in the Rural Market

Customized promotional media and messages need to be

developed by the organizations to effectively target the rural market.
The traditional media like radio, TV and newspaper, although reach
the rural audience directly or indirectly, are not sufficient. The
following strategies can be considered while developing promotional
campaigns for the rural markets.
(i) Think Global Act Local
Rural population is diverse, but the commonalities of their ethos
and simple living habits need to be understood for advertising to
succeed. For that, the theme of an advertisement needs to revolve

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around universal themes, such as family-love. But the context, story

line, language ad idioms should be such that the rural audience of
different rural market segments can relate to.
(ii) Think in Local Idiom
There is need of advertising professionals who can think like the
rural people. Then only can we have insights like ‘Thanda matlab
Coca-Cola’.
(iii) Simplicity and Clarity
All promotional messages targeted at rural audiences need to be
simple and clear, which can be easily understood, and they should
not include any confusing elements. It is preferable that it has only a
few propositions at one time. Bombarding rural consumers with too
much, in less time can easily confuse them and leave them
bewildered. Promotional messages should highlight only the
functional values of the product and explain how those values can
make the consumer’s life even better and solve any of his problems.
(iv) Narrative Story Style
The promotional message can be delivered in the form of an
entertaining story with a message depicting how the brand delivers
“larger good” to the family and society. The theme of the story line
can be about how the product can solve the problems of rural
consumers.
(v) Choice of Brand Ambassadors
Brand ambassadors for rural markets need to be picked carefully
as urban successes might not get replicated in the rural markets.
That is why actor Govinda in the Mirinda ad boosted the sales of the
drink in the rural markets. An organization might spend a lot of money
in hiring a brand ambassador only to find out later that it had little
impact on the rural consumer.
All the elements of the marketing mix influence each other. They
make up the business plan for a company. If handled right, they can
give a great success. But if implemented incorrectly, then the
business could take years to recover.

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CHECK YOUR PROGRESS:

Q.1: Define ‘Pricing Policy’.

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Q.2: What do you mean by One-price policy?.
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9.7 LET US SUM UP

Marketers need to research the rural market thoroughly and then

customize the marketing mix for the rural market. The new modified
marketing mix, which can be termed as the rural marketing mix, once
employed for rural markets as per the needs and lifestyle of the rural
consumers, is more likely to be successful as it provides the benefit sought
by the rural market.
Therefore, product, pricing and promotion are like puzzle and the
marketing practitioner has to fix different element of the marketing mix. Firms
targeting rural markets need to evolve innovative strategies to tap the market
effectively and efficiently. Also pricing policies provide guidelines to the
marketing manager to evolve appropriate pricing decisions. If competition
is mainly on a price basis then companies fix the price at the same level of
its competitors.
But no doubt, the future lies in the rural markets, since the size of
the rural market in quantitative and qualitative terms, is growing at a good
pace. This is a road which the corporate world cannot afford not to take.

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9.8 FURTHER READING

1) Introduction to Rural Marketing by R Krishnamoorty, Himalaya

Publishing House, 2008.
2) Marketing Management – Indian Context, Global Perspective by V S
Ramaswamy & S Namakumari, McGraw Hill, Fifth Edition, 2013.
3) Rural marketing: Concepts and Practices by B. Dogra and K. Ghuman,
McGraw Hill, 2012.
4) Rural Marketing in India: Opportunities, Challenges and Strategies by
Dr. N S Mohamed, www.alliancebschool.com.
5) The Rural Marketing Book by P Kashyap and S Raut, Biztantra, 2005.

9.9 ANSWERS TO CHECK YOUR

PROGRESS

Ans to Q No 1: It provides guidelines to the marketing manager to evolve

appropriate pricing decisions.
Ans to Q No 2: Under one-price policy, a seller will charge all similar types
of buyers exactly the same price and there will be no discrimination
or difference among the buyers of the same commodity.

9.10 MODEL QUESTIONS

1. Discuss the unique possibilities in the rural markets in pricing

strategies.
2. Explain the specific strategies which can be employed to develop
or modify the products to target the rural market.
3. Identify and explain the various strategies that can be considered
while developing promotional campaigns for the rural markets.

*** ***** ***

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 UNIT 10: DISTRIBUTION AND LOGISTICS
MANAGEMENT
UNIT STRUCTURE

10.1 Learning Objectives

10.2 Introduction
10.3 Distribution Management3
10.3.1 Problems Related to Channel Management in the Rural
Context
10.3.2 Developing a Distribution & Channel Strategy
10.4 Distribution Strategies for Indian Rural Market
10.5 New Approach to Reach out Rural Market
10.6 Let Us Sum Up
10.7 Further Reading
10.8 Answers to Check Your Progress
10.9 Model Questions

10.1 LEARNING OBJECTIVES

After going through this unit, you will be able to:

• define channel management in rural market
• explain regarding the problems in the rural distribution management
• gain an insight into the innovative ways of reaching out rural market

10.2 INTRODUCTION

Distribution decisions are critical in nature as they affect the viability

of the firm and the product. These decisions affect the market share of the
firm and hence great care has to be taken in selecting distribution
alternatives. We have already referred to the size and diversity of the
Indian rural market. The heterogeneity is not just on account of culture and
demographic profile of the population but also due to the infrastructure
existing in the rural market.

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This diversity in terms of accessibility of rural markets today poses

a major marketing challenge. Increasingly, marketers realize that if they
were to make their brands available in the right size, at the right time, and at
the right price, the Indian rural consumers can be motivated to buy and
consume them. Reaching out to the rural market involves planning and
strategizing at two levels – distribution structure and logistics. The
distribution structure refers to the channel design and structure, and
management of channels. Logistics refers to the physical aspect of
distribution. In this unit, we shall first study about the selection of appropriate
channels in rural market and then about new approaches to reach out rural
markets.

10.3 DISTRIBUTION MANAGEMENT

Distribution is a crucial function in the rural context. Distribution

strength perhaps is a greater competitive advantage to a brand than brand
clout. There is an inadequacy in distribution infrastructure, the problems in
transportation and warehousing and the cost-service dilemma. To confirm
the lack of good transportation infrastructure in India, Pradeep Kashyap
writes in “The Rural Marketing Book” that “68 per cent of the rural market [in
India] still lies untapped primarily due to inaccessibility,” and C.K. Prahalad
offers further insight beyond the borders of India when he writes more
generally that “access to distribution in rural markets continues to be a
problem.”
The brands seeking to tap into India’s fast-growing rural markets
will need to focus primarily on their logistics if they are to reach, acquire
and retain customers. An efficient sales and distribution model is considered
to be the most critical factor for successful rural expansion in India. An
efficient sales and distribution model is the most critical factor to achieve
profitable and sustainable growth in rural markets. A hallmark of success
in rural India is overcoming challenges in the three stages of the consumer
lifecycle, that is reaching, acquiring and retaining the rural customer. In
terms of reaching the rural consumer, the biggest obstacles facing
companies are inadequate distribution networks, partnering with limited
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capabilities, long payment cycles, and weak marketing channels. Not

surprisingly, high cost to serve the rural markets is the number one challenge.
As far as rural customer acquisition is concerned, understanding and
meeting the diverse, specialized needs and preferences of such customers
pose major challenges to companies. Organizations often make the biggest
mistakes by treating rural consumers as a homogeneous market and offering
them the same value proposition they offer to urban markets. Although
companies are focusing heavily on rural market customer acquisition and
reach, bolstering customer retention efforts has become more important
as competitors improve their market penetration.
With increasing rural competition and high cost-to-serve, providing
reliable and consistent after-sales service and optimizing the costs of a
high-quality experience remain major obstacles. The wide geographic
dispersion of a small number of customers drives high sales-service costs,
and many businesses cannot provide a dedicated after-sales service
network.
Rural masters are profitable companies that have secured a
significant rural market share. They excel at execution. They apply rigour to
governance and control to make sure their strategies translate into required
actions. They have developed novel strategies to serve rural consumers
and draw on an intimate understanding of consumers cultures and needs
to enter rural markets. They have well-conceived expansion strategies that
they support with significant capital and resources. In most cases,
distribution is one of the biggest nightmares; the task of reaching products
to 6000,000 plus villages is indeed a big challenge.

10.3.1 Problems Related to Channel Management in the

Rural Context

As rural markets evolve and competition in rural markets

intensifies, companies will have to look for new approaches to
harness this opportunity in ways that protect their margins while
also growing revenue. Deploying the correct sales and distribution
model can assist companies in driving profitable growth in a relatively

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short span of time. Rural champions will have to find ways to scale
operations without hurting their bottom line. For a rural performer,
the challenge will be to create differentiated offerings and brand loyalty
to retain customers and sustain their business models. Rural
voyagers will build their own ecosystems and brand awareness to
acquire new customers. New entrants will travel their own paths to
penetrate the rural markets. By focusing on the specific needs,
behaviours and preferences of the rural consumers, and by applying
a systematic approach to market expansion, companies can
accelerate their rural expansion journey.
Organizing and managing the needed marketing channels
is an important part of the distribution task. Some of the unique
problems in the rural context are:
(i) Multiple Tiers Add to the Costs
Distribution in the rural context requires more tiers as compared to
the urban. It needs three tiers at the minimum, viz., the village
shopkeeper, the mundi-level distributor/redistribution stockiest and
the wholesaler/C&F agents in the town. The multi tiers push up the
costs and also makes channel management a more challenging
task.
(ii) Non-Availability of Outlets
Non-availability of outlets in many villages is also a problem. The
scope for appointing fresh, exclusive, or non exclusive dealers of
the company is also limited due to the non-availability of suitable
candidates.
(iii) Poor Viability of the Outlets
Many retail outlets in the rural market suffer from poor viability. A
familiar paradox in rural distribution is that, on the one hand, the
manufacturer shells out more on distribution margins and, at the
same time, the outlets find the business un-remunerative to them!
(iv) Rural Channels Generally Need Larger Stock Cover
It is more so during the monsoons season, since many of these
markets cannot be serviced effectively during the monsoons.

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However, their financial capacity being limited, they cannot shell out
the cash needed for the larger stock cover.
10.3.2 Developing a Distribution & Channel Strategy

Establishing cost-effective ways to get goods to India’s rural

population is the critical first step in penetrating these markets. Smart
companies have found that they need to focus on distribution even
before making the seemingly commonsense moves of identifying
and approaching target customers.
Companies are using a variety of strategies to extend their
distribution networks into the villages. The most successful
companies, though, have adopted a multipronged approach. For
instance, the $7 billion conglomerate ITC, for instance, has added
three layers to its urban food distribution network, which conforms
to the conventional distributor–stockist (wholesaler–retailer) model.
In rural areas with populations of 10,000 to 20,000, where there’s
adequate transportation infrastructure but not enough demand to
support a traditional distributor, ITC relies on smaller-scale sub-
distributors who carry a narrower assortment of products geared to
local tastes.
A company’s channel decisions directly affect every other
marketing decision. But often they pay too little attention to their
distribution channels, sometimes with damaging results. Distribution
channel decisions often involve long-term commitments to other
firms. Therefore, the management must design its channels
carefully, with an eye on tomorrow’s likely selling environment as
well as today’s.
Companies can design their distribution channels to make
products and services available to customers in different ways. Each
layer of marketing intermediaries that performs some work in bringing
the product and its ownership closer to the final buyer is a channel
level. Because the producer and the final consumer both perform
some work, they are part of every channel.

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The number of intermediary levels indicates the length of a

channel. Figure 10.1 shows several consumer distribution channels
of different lengths. Channel 1, called a direct marketing channel,
has no intermediary levels; the company sells directly to consumers.
The remaining channels in Fig. 10.1 are indirect marketing channels,
containing one or more intermediaries.
Distribution (also known as the place variable in the
marketing mix, or the 4 Ps) involves getting the product from the
manufacturer to the ultimate consumer. Distribution is often a much
underestimated factor in marketing. Many marketers fall for the trap
that if you make a better product, consumers will buy it. The problem
is that retailers may not be willing to devote shelf-space to new
products. Retailers would often rather use that shelf-space for the
existing products that have proven records of selling.

Manufacturer Consumer
Channel 1

Channel 2 Manufacturer   Retailer Consumer

Channel 3 Manufacturer Wholesaler

  Retailer Consumer

Channel 4 Manufacturer Wholesaler Jobber  Retailer Consumer

Customer Marketing Channels

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Channel 1 Manufacturer Business

customer

Channel 2 Manufacturer Business Business

distributor customer

Channel 3 Manufacturer Manufacturer’s Business

representatives or sales customer
branch
branch

Channel 4 Manufacturer Manufacturer’s Business Consume

representatives or sales distributor
branch
branch

Business Marketing Channels

Source: Armstrong & Kotler, 2007
Fig. 10.1: Consumer and Business Marketing Channels

10.4 DISTRIBUTION STRATEGIES FOR INDIAN

RURAL MARKET

There are various ways through which companies have succeeded

in their efforts to reach out to target markets in rural areas. Some of them
are described below:
(i) Segment villages before expanding:
With numerous villages in India, it is impossible for an organization to hit
the rural market all at once. Ideally, the coverage of villages with up to 2000
and above population could be the break-even point for a distribution set-
up. By doing so the percentage of villages covered comes to only 10%,
however the percentage of all the rural population covered will be substantial.
(ii) Use of co-operative societies:
There are over 3 lakhs co-operative societies operating in rural areas for
different purposes like marketing cooperatives, farmers’ service cooperatives
and other multi-purpose cooperatives. These cooperatives have an
arrangement for centralized procurement and distribution through their
respective state level federation. Such state level federation can be
motivated to procure and distribute consumables items and low value
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durable items to the members to the society for serving to the rural
consumers.
(iii) Utilization of public distributory system:
The PDS in the country is fairly well organized. The revamped PDS places
more emphasis on reaching remote rural areas like the hills and tribals.
The purpose of PDS is to make available essential commodities like food
grains, sugar, kerosene, edible oils and others to the consumers at a
reasonable price. The shops that distribute these commodities are called
fair price shops. These shops are run by the state civil Supplies Corporation,
co-operatives as well as private entrepreneurs. Here again there is an
arrangement for centralized procurement and distribution. The
manufacturing and marketing men should explore effective utilization of
PDS.
(iv) Utilisation of multi-purpose distribution centres by petroleum/oil
companies:
In order to cater to the rural areas the petroleum/oil companies have evolved
a concept of multi-purpose distribution centres in rural areas. In addition to
petrol/diesel, lubricants, these outlets also stock consumables agricultural
inputs like fertilizers, pesticides and seeds. It is estimated that there are
about 450 such outlets in operation in the country. The rural consumer who
has tractors, oil-engine pump sets and mopeds frequent these outlets for
their requirement. These outlets can be profitably utilized for selling
consumables and durable items also.
(v) Distribution upto feeder markets/mandi towns:
Keeping in view the hierarchy of markets for the rural consumers, the feeder
markets and mandi towns offer excellent scope for distribution. The rural
customers visit these towns at regular intervals not only for selling the
agricultural produce but also for purchasing cloth, jewellery, hardware,
radios, torch cells and other durables and consumer products. From the
feeder markets and mandi towns the stockist or wholesaler can arrange
for distribution to the village shops in the interior places. This distribution
can be done by mopeds, cycles, bullock-carts, camel-backs etc. depending
upon the township.

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(vi) Haaths/Jathras/Melas:
These are places where the rural consumers congregate as a rule. While
haaths are held on a particular day every week, Jathras and melas are held
once or twice a year for longer durations. They are normally timed with
religious festivals. Such places attract large number of itinerant merchants.
Only temporary shops come up selling goods of all kinds. It can be beneficial
for companies to organize sales of their product at such places. Promotion
can be taken, as there will be ready captive audience. For convincing the
manufacturing and marketing man with regard to the importance of these
places from rural marketing point of view a visit to such places is necessary.
It is estimated that over 5,000 fairs are held in the country and the estimated
attendance is about 100 million rural consumers. The biggest fair ‘Pushkar
Mela’ is estimated to attract over 10 million people. There are 50 such big
rural fairs held in various parts of country, which attract urbanite also like
‘Mankanavillaku’ in Malappara in Kerela, Kumbh Mela at Hardwar in U.P.
‘Periya Kirthigai’ at Tiruparunkunaram in Tamil Nadu.
(vii) Delivery Van
The delivery van has a key role in the rural context. The companies
concerned or their C&F agents/stockiests/distributors operate these vans.
In some cases, independent third parties operate them and provide the
service for a fee. For example, Eveready, the market leader in batteries
and flashlights, operates a fleet of over a thousand-owned vans and is
servicing over 4000 distributors and six lakh retail outlets. Besides facilitating
product delivery, the van also enables the firm to establish direct contact
with rural dealers and consumers, and helps in promotion. However,
operating the vans incurs big costs.
(viii) Agricultural Input Dealers
Fertilizers should be made available to the farmers within the range of 4-5
km from their residence, as per the Essential Commodities Act. This is
why there are about 2 lakh fertilizer dealers in the country, both in cooperative
& private sector.

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10.5 NEW APPROACH TO REACH OUT RURAL

MARKETS

More sparsely populated areas (5,000 to 10,000 people) with good

roads are served by vans that bypass the distributors and supply the ITC’s
products to retailers directly. The retailers use mobile technology to order
appropriate stock for their local customers, and the vans make regular visits
up to three times a week.
Still smaller and less accessible micro markets (with populations
below 5,000 and no paved roads) are served by two- or three-wheelers.
The drivers deliver one, two, or three times weekly to retail kiosks that
generally carry ITC’s goods in small sizes for lower prices. ITC thus gains
exposure for its products in highly remote areas and seeds demand.
Tata Motors, India’s largest automaker, has added two indirect
channels to augment its existing dealer network (which focuses on urban
and semi-urban towns with populations greater than 100,000). Since 2010
the company has hired and trained local residents to become Tata
Motors gram mitras (“village advisers”), who work on commission to
generate leads for existing dealers’ sales teams. In addition, Tata Motors
has formed partnerships with local gas station owners, who similarly earn
commissions by feeding leads from their customers to the automaker’s
dealer network. Supplementing its direct dealer channel in these ways has
increased sales of Tata Motors’ small commercial vehicles (SCVs) by 20%.
After piloting the program in six states, the company rolled it out nationally
and expected to sell an additional 70,000 vehicles in rural markets annually,
bringing in $500 million in revenue.
Other companies, such as the telecom service provider Idea
Cellular, have found cost-effective ways to build entirely separate rural
sales forces. To replicate its urban direct-distribution model, Idea has
recruited and trained some 4,000 youths (dubbed “sons of the soil”) who
reside in the villages near its cell towers. To extend its reach even further,
Idea supplements these local workers with travelling grameen
pratinidhis (“village representatives”) who need extra income and are already
visiting remote villages on business of their own.

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Some companies have adopted the village entrepreneur model,

partnering with (and sometimes helping establish) independent businesses.
Vodafone India has set up a network of mini stores known as laal dukaan, or
“red stores,” for the color of Vodafone’s logo. The shops are run by locals
who’ve invested Rs 35,000 to Rs 50,000 (around $580 to $830) to open
them. They are designed to meet all the telecom needs of the customers
within an 18- to 32-kilometer radius, from sales to connectivity to technical
support. The network has been so successful that the 94 million rural
subscribers served by nearly 5,500 red stores now constitute 60% of
Vodafone’s customer base.
A marketer can follow the below mentioned approaches:
(i) Identifying Prospective Customers
Once they’ve forged a distribution path into a region, leading firms focus on
expansion by targeting clusters of villages within the region. A few large
clusters in four or five big states could have the same market potential as a
large number of villages are scattered across the country, and it can be far
more cost-effective to serve. Companies are investing considerable
resources in detailed market surveys to identify promising clusters with
enough demand to generate profits quickly.
In the process, they are discovering novel customer segments. For example,
when the automaker Maruti Suzuki India initiated its rural foray, in 2007, it
identified several distinctive clusters for potential car sales—including
turmeric farmers in Tiruchengode (a town in Tamil Nadu) and apple growers
in Himachal Pradesh. Today these segments consistently yield sales of 35
to 50 vehicles in most months, with that number doubling during harvest
season.
Similarly, when Tata Motors interviewed more than 2,000 rural users of its
SCVs in its target areas, it discovered three new customer segments:
underemployed and unemployed 21- to 30-year-olds, who see owning and
operating an SCV as a viable means of self-employment; families involved
in large-scale agriculture who seek additional income; and shopkeepers,
small businesses, and schools looking for local transport for students and
supplies.

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Many leading firms are using sophisticated technologies to build a

comprehensive and multidimensional picture of likely markets. GIS mapping,
for example, makes it possible to combine and analyze a wealth of
information: like demographic data from government sources and private
vendors; physical indicators of community wealth, such as post offices,
bank branches, schools, and hospitals; and data on different groups’ values,
attitudes, and behavior.
Dabur, the world’s largest alternative and natural health care company,
used GIS tools to identify 287 prosperous districts in 10 states as potential
markets. After establishing a foothold in an area, in a test-and-learn approach
to building scale, Dabur uses GIS maps integrated with economic data to
identify a fresh cluster for its distribution network each month, deploying
route-planning software to optimize deliveries. In this way, Dabur has scaled
up quickly and exceeded its original goal of serving 30,000 villages within
18 months. Sales growth is now 42% higher in its rural markets than in its
urban ones, even as overall gross margins have improved.
(ii) Forging Tight Bonds with Channel Partners
As competition intensifies in rural markets, building relationships with
capable channel partners becomes more important. Savvy engagement
helps the most successful companies develop valuable partners, retain
them, and keep them motivated.
Idea Cellular, for instance, is able to compete for sales talent with higher-
margin auto dealers and product manufacturers by granting its sons of the
soil larger territories, consisting of villages clustered near its cell towers.
Distributors who previously earned an average of Rs 4,000 ($66) a month
with other companies can earn Rs 10,000 ($166), even as they lower Idea’s
selling costs.
Many companies underestimate the time, financial resources, and
management attention that are required to build truly symbiotic relationships
with channel partners. Coca-Cola, however, understands the importance
of this activity. To build loyalty by increasing its partners’ skills, the firm set
up its Parivartan (“Improvement”) program, aimed at teaching India’s rural
retailers to manage shops, stock, customers, financials, and merchandizing.

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The training is delivered in classrooms and through Coca-Cola University

on Wheels—customized buses that travel the hinterlands to reach mom-
and-pop retailers.
As a follow-on, Coca-Cola launched a training program for the owners and
managers of small roadside eateries, teaching them about hygiene,
customer satisfaction, branding, and more. The pilot sessions for this
program have been carried out in four cities, and there are plans to extend
it in the next few months.
Coca-Cola has also equipped many rural retailers with large, bright-red
solar-powered coolers sporting the familiar company logo. These are a
boon in areas with nonexistent or unreliable power supplies, where
merchants cannot otherwise keep drinks cold. The provision of solar coolers
has led to a fivefold increase in Coca-Cola’s rural retail sales.
(iii) The Village Shop is the key to a Full-fledged Rural Distribution
For a large number of consumer products, the village shop holds the key to
marketing in the rural markets; it has not been replaced by any other retailing
model. There are an estimated more than eight million such shops in rural
India. The shopkeeper operates against several odds. He has to deal in a
large number of products in order to serve his customers properly as well
as to make his operation viable.
(iv) Creating Durable Ties with Customers
To a large degree, rural residents base their purchase decisions on personal
bonds and mutual trust. In this respect, rural markets are different from the
more transactional urban ones, and they demand strategies that integrate
companies and their offerings into the social fabric.
(v) Building trust through an ecosystem of stakeholders.
The most successful firms have engaged with a wide set of community
members to build a reputation for caring about consumers’ needs, rather
than just corporate profits. Through its Arogya Parivar (“Healthy Family”)
initiative, Novartis has created just such a cohesive ecosystem. In urban
markets Novartis is India’s leading provider of pharmaceuticals connected
to pain management, organ transplants, immunology, cardiovascular
disease, and oncology. Arogya Parivar, by contrast, focuses on health

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issues affecting rural women and children—primarily clean water and

sanitation, undernourishment, iron deficiency, vaccinations, tuberculosis,
and diabetes.
To teach rural residents about these issues, Novartis recruits and trains
travelling health educators. Visiting two villages a day, on foot or by bike,
these educators are usually local women trusted by the community. They
build lasting bonds with their neighbours because they address the most
common health threats—not just those for which Novartis provides
remedies.
To sell its products, Novartis employs a separate sales force of health
supervisors. They ensure that the company’s pharmaceuticals are available
in the most remote locations by conducting itinerant “health camps” that
bring together the services of pharmacies, doctors, and hospitals to treat
villagers and provide preventive care.
With 530 educators and supervisors working in 10 states, Arogya Parivar
is now one of the largest private health care initiatives in India. The health
educators have reached into 33,000 villages, where they have helped
millions of people. The supervisors have distributed pharmaceuticals—not
only Novartis’s own drugs but also generics, vaccines, and over-the-counter
remedies—to almost 39,000 doctors and more than 29,000 pharmacies.
Despite its complexity, the program broke even in 30 months, and Novartis
estimated its 2013 revenue at $4.8 million. Encouraged by Arogya Parivar’s
success in India, Novartis has expanded the concept to other emerging
markets, including Kenya, Indonesia, and Vietnam.
(vi) Engaging influencers.
In rural India, word of mouth plays a strong role in building brands, far more
so than in urban areas. Gaining the trust of respected teachers, health care
professionals, and others with high standing in the community can reinforce
marketing messages.
Smart companies determine which stakeholders are likely to be the most
influential and supportive, and then they find ways to earn their loyalty. Tata
Motors, for instance, has tapped local teachers, health professionals, and
mechanics to refer potential customers to its dealers, furnishing them with

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detailed product manuals and shingles they can place outside their homes
designating them as motor dadas (“auto experts”). Another automaker,
Ashok Leyland, engages truck drivers by asking their opinion on vehicle
designs. The outreach makes the drivers feel important, empowered, and
favorably disposed toward the Ashok Leyland brand. The company
capitalizes on this goodwill with a program called Ban Jao Maalik (“Become
an Owner”), which helps drivers achieve self-employment by buying their
own vehicles. In addition, Ashok Leyland trains mechanics on new products,
provides tools, and certifies participants.
(vii) Retaining customers
As companies deepen their penetration into rural markets, they must bolster
customer retention efforts. Leading firms are doing so by providing reliable,
consistent, and cost-effective after-sales service and by investing in the
longer-term welfare of their customers.
After-sales service is critical in rural markets. A product that breaks and
can’t be fixed is tantamount to a promise made and broken. In rural
communities, that may permanently lose you an entire village, since word
of mouth carries so much weight. While most firms depend on their sales
staff to assist rural customers after a purchase, the market leaders are
building dedicated service infrastructures by hiring locals to furnish no-frills
support in their villages and by taking innovative approaches to lowering the
costs of delivering service.
Idea Cellular, for instance, relies on mobile vans, which it previously used
for marketing purposes, to provide customer service. Each van typically
carries a photocopy machine, a camera, and a representative to help the
villagers with documentation verification. If, say, a SIM card is not working
or gets locked, customers can go to these mobile vans to have the problem
resolved.
In addition to paying careful attention to fulfilling their brand promises, leading
firms are sustaining the trust of rural populations by aligning their long-term
interests with the development of local communities in both small and large
ways. Part of Ashok Leyland’s driver care program, for instance, is a medical
centre set up in the city of Hosur, in Tamil Nadu, where drivers can get free

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checkups and consultations. Another initiative is “All the Best,” a scholarship

program for top-performing children of drivers. Launched in 2010, this
scheme has benefited 650 deserving children in two states so far.
In 2007 the vehicle manufacturer Mahindra began its Samriddhi
(“Prosperity”) initiative to deepen the relationships between its tractor dealers
and customers. Mahindra upgraded the dealer infrastructure to provide
farmers with a host of services and information on topics including the
weather, pests, crop prices, soil and irrigation-water testing facilities, and
farm productivity. Through 162 Samriddhi centers, Mahindra has already
helped more than 300,000 farmers; it aims to increase that number to one
million by 2020.
(viii) Chain Stores in Rural Market
In recent years, there have been some attempts at establishing retail chains
in the rural market. Some of the retail chains are DCM Hariyali Kisan Bazaar,
ITC Choupal-Sagar etc.

CHECK YOUR PROGRESS:

Q.1: Define ‘Distribution’.

———————–————————————
———————————————————
———————————————————————————
———————————————————————————–
Q.2: Mention at least two chain stores in rural market.
———————————————————————————
———————————————————————————
———————————————————————————
———————————————————––––––—————-

10.6 LET US SUM UP

In this unit we have discussed about distribution and logestics

management.

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Distribution is one of the key marketing decisions in any market,

more so in the rural market where infrastructure, like roads, means of
transportation, and warehousing, is not as developed as it is in the urban
market. It is necessary for the marketer to ensure availability of his or her
brands across the length and breadth of the rural areas. This is also important
for the growth of the firm as intensity in inter-firm rivalry is increasing following
the opening up of the India rural economy.
The marketer also has to then understand the task of intermediaries
as that will help him or her plan, manage, and control market driven
distribution functions in the firm. Leading firm today focus on managing
their entire supply rather than on transportation and warehousing decisions
alone, which were the main focus of logistics decisions earlier.

10.7 FURTHER READING

1) Introduction to Rural Marketing by R Krishnamoorty, Himalaya

Publishing House, 2008.
2) Marketing Management – Indian Context, Global Perspective by V S
Ramaswamy & S Namakumari, McGraw Hill, Fifth Edition, 2013.
3) Rural marketing: Concepts and Practices by B. Dogra and K. Ghuman,
McGraw Hill, 2012.
4) Rural Marketing by R V Badi and N V Badi, Himalaya Publishing House,
New Delhi, 2006.
5) The Rural Marketing Book by P Kashyap and S Raut, Biztantra, 2005

10.8 ANSWERS TO CHECK YOUR

PROGRESS

Ans to Q No 1: Distribution refers to reaching out to a target market

Ans to Q No 2: Two of the retail chains are DCM Hariyali Kisan Bazaar,
ITC Choupal-Sagar etc.

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10.9 MODEL QUESTIONS

1. Discuss the problems associated with channel management in the

rural context.
2. Discuss the various ways a firm has to succeed in reaching out to
its target market.
3. Why is innovative or new channel approach important in reaching
out to the rural market?
4. Discuss some of the approaches to be taken up by a firm in reaching
out to the rural market.

*** ***** ***

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 UNIT 11: PRINCIPLES OF INNOVATION FOR
RURAL MARKET
UNIT STRUCTURE

11.1 Learning Objectives

11.2 Introduction
11.3 Need of Innovation for Rural Market
11.4 Principles of Innovation for Rural market
11.5 Role of Government in Rural marketing
11.6 Role of NGOs in Rural Marketing
11.7 Let Us Sum Up
11.8 Further Reading
11.9 Answers To Check Your Progress
11.10 Model Questions

11.1 LEARNING OBJECTIVES

After going through this unit, you will be able to:

• identify the reasons for companies to be innovative in the rural
market
• know the basic principles and guidelines to be innovative in the rural
market
• explore the role of government and NGOs in rural marketing

11.2 INTRODUCTION

This chapter is devoted to one of the most important marketing tools,

innovation, which has over a period of time acquired a significant role in
different aspects of marketing mix in order to gain the competitive edge.
With increasing movement of students and the working segment of the
rural society to urban areas, rural consumers are no longer ignorant, rather
they are becoming well informed of the new brands available in the urban
markets. In this scenario companies can no longer ignore the rural markets
and they should attempt to be more innovative to gain acceptance in rural
markets.
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11.3 NEED OF INNOVATION FOR RURAL MARKET

According to the great management guru Peter Ducker “the
organizations’ have only two functions, one is marketing and other is
innovation. Innovation implies doing new things or doing of things that are
already being done in a new way. It includes introduction of new products,
creation of new markets, application of new methods of production, discovery
of new and better sources of raw materials and developing new and better
form of industrial organization. With increasing competition in the rural
markets there is a strong need to develop competitively priced products as
per the needs and requirements of the rural consumers. Those who are
first time buyers and non-consumers of past years are also entering into
the rural market in large numbers for a variety of products. This demographic
change necessitates a shift in management thinking from gross margin to
higher profit, from high value unit sales to state of high volumes, capital
efficiency and from one solution fits all thinking to market innovation.
Success in India’s rural markets hinges on the performance of
companies on two key measures: (a) rural performance that is the degree
to which rural markets are strategically important to a company’s growth
agenda, defined by the contribution of rural markets to the enterprises top
and bottom lines. (b) Rural innovation, or the level of rural focused
innovations, in a company’s product, packaging, pricing, channels and
operating models.

11.4 PRINCIPLES OF INNOVATION FOR RURAL

MARKET

As a country we are still accepting products and services designed

for other markets. When the Indian rural market starts demanding products
unique to its needs, lifestyles and behavior the innovation will grow around
it. Therefore, the principles and practices of innovation to be employed in
rural market has to take into consideration these aspects of the rural
population. Also along with innovative product, pricing, promotion and
distribution strategy it is also imperative that organizations ensure that

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product value propositions are attractive and relevant for rural consumers.
Let us discuss below some of the principles to develop innovations for
tapping the rural markets ;
(I) Speed of the innovation:
It concentrates on shortening the time taken by the product from conception
to delivery to the retailer’s shelf. It will enable the firm to respond quickly to
the changing environment. In order to be the first on the retailer shelf in the
rural market it is important for organizations to find ways to anticipate, meet
and exceed customer needs faster than ever before.
(II) Scale of innovation:
Scalability is another important principle of innovation. Solutions that are
developed by companies must be scalable across cultures, geographical
regions, languages etc with little adaptation as per the variations of different
parts of the country. This is a key aspect of gaining scale.
(III) Product innovation:
Innovation in product development begins from a deep understanding of
functionality, not just form. Products with marginal changes developed for
urban customers might not be that effective in rural market. The environment
and infrastructure set up, in which the rural consumers live and work demand
a new thinking on functionality in the product. For e.g. if we take the case of
Ghadi detergent what Ghadi did was they formulated their product
according to the quality of the water (i.e. mapped the quality of the water
region wise), if water for a particular region was found to be a little hard
than normal, they added a little more solvent chemicals to make washing
easier. Thus this is how they became the market leaders in the Indian
detergent market.
(iv) Process innovation:
Process innovations are as necessary as products innovation in rural
market. Innovation must focus on providing logistics support, including
manufacturing keeping in mind the prevailing conditions and delivering
solutions in a cost effective manner. Examples of process innovation in
rural market are ITC’s e-choupal Internet portal and HUL’s Project Shakti.

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(v) Price innovation:

People living in rural areas generally have low or irregular income and due
to this they are more price sensitive than the urban people. The mantra for
rural market is the conservation of resources; the product meant for rural
market must eliminate or reduce, the various recurring costs and thus
should reduce resource intensity. The option of reuse, refill and recycle are
critical principles in product development for rural market as they reduce
the overall cost of the product. For example, FMCGs came up with soaps
at Rs.5, hair oil and shampoo sachets at Rs.1 and small coke at Rs.5, etc.
(vi) Promotional innovation:
Rural market is undergoing a change in demographics and spending profiles
which present vast opportunities for a creative response by the corporate
sector. Promotional campaigns launched by companies need to be
innovative to get the attention of rural population. For example, Asian Paints
used wall paintings as an effective and economical medium for advertising
in rural areas. Also, Life Insurance Corporation of India used puppets to
educate rural masses about life insurance. These plays were shown to the
audience in villages in UP, Bihar & MP. The number of inquiries at local Life
Insurance Companies during the period immediately following the
performance was compared with normal frequency and was found to be
considerably higher.

11.5 ROLE OF GOVERNMENT IN RURAL MARKETING

The rural economy, a key driver of demand and a support for the
broader economy, has taken a knock from the two back-to-back seasons
of patchy monsoon rains. The segment drives demand for everything from
motorcycles to tractors, televisions and refrigerators.
India is a land of villages and the Government of India has been
implementing numerous rural development programmes for the upliftment
of rural Communities. The investment by government in infrastructure in
2015-16 was estimated to have gone up by Rs. 70,000 crore, including
funds from the centre and state-run undertakings. Highways and roads
have proved to be a success area of infrastructure investment and in the

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absence of private investment, indications are that the sector will receive
special attention, including unveiling of some innovative financing schemes.
The health of the banking sector has been a sources of worry. The
government has taken several measures, including pumping in Rs. 70,000
crore to recapitalize the state-run banks. In the Union budget 2016, the
Finance Minister Arun Jaitley focuses on doubling farmers’ income in five
years and boosting the rural sector, with emphasis on employment and
infrastructure.
The following are the various steps initiated by the Indian Government
to develop the rural markets:
1) Regulated markets
2) Infrastructure development
3) Co-operative Agricultural Marketing Societies
4) MSP Policy
Other Government initiatives include,
1) Credit cards (Kisan credit card) to farmers from the public sector
banks which helped them to take short and medium term loans to
buy seeds, fertilizers, etc. This enabled them to produce more thus
increasing their income.
2) Large inflow of investment for rural development programmes from
the government.
3) Schemes like IRDP (Integrated Rural Development Programme) and
REP (Rural Electrification Programme) in the 1970’s gave a boost to
the agrarian economy. This resulted in changes in people’s habits
and social life. REP gave impetus to the development of consumer
durable industry.
Government has laid various plans and policies to increase the
standard of living of the rural people like rise of agricultural wages,
PMERY, PMEGP, etc. It was found that NREGA (National Rural
Employment Guarantee Act ) and SGSY(Swaranjayanti Gram
SwarojgarYojana) both policies have played a role in developing the
rural markets. NREGA emphasis is on the increase in purchasing
power of the rural people, so that the demand of people rises and as

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a result marketer’s interest towards rural areas also rises. SGSY

provides incentive to start your own enterprises and it was found that
the number of SHGs has been increasing every year. This means
both the policies are showing an upward trend in support of rural
marketing.
Beside this, the development and welfare activities by Government in rural
areas were also strengthened in past five years. The increasing development
of the rural area captures the attention of large number of marketers and
thus the rural community has become the target market for every business
concern. Every business enterprise wants to capture the significant portion
of rural area.

11.6 ROLE OF NGOs IN RURAL MARKETING

In India, the scope of development is not narrow but very wide, as it

includes not just the economic development but the growth on social front,
quality of life, empowerment, women and child development, education and
awareness of its citizens. The task of development is so huge and
complicated that just implementing government plans is not sufficient to fix
the problem. To achieve this, a holistic vision and collaborative efforts
involving various departments, agencies and even NGOs is required. Owing
to such a great need, the number of NGOs in India is increasing rapidly
and, at present, there are about 25,000 to 30,000 active NGOs in India.
Superficially, rural development seems to be a simple task but, in
reality, it is not. Post Independence era has seen many rural development
programmes through different five-years plans. Alleviating poverty,
employment generation, more opportunities for generating income, and
infrastructure facilities are emphasized through the policies and
programmes of the government. Along with this, the panchayat raj institutions
have also been initiated by the government to strengthen democracy at
grass roots level. But in spite of all the efforts rural poverty, unemployment
rate, low production etc. still exist. The fight is still on for the basic facilities
such as livelihood security, sanitation problem, education, medical facilities,
roads, etc. Still there is a huge gap in terms of infrastructure that is available
in urban and rural areas. The basic rural development should include all
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these apart from employment, proper water supply and other basic facilities.
NGOs or Non Governmental Organizations have more benefits of
working in rural areas as compared to governmental organizations because
NGOs are more flexible, NGOs are specific to a particular locality and
moreover these are committed towards serving the public and community
as a whole. As the task of development is massive, many NGOs are playing
a catalytic role in developing rural markets.
The role of NGOs in rural development includes:
i) The majority of NGOs are small and horizontally structured with short
lines of communication and are therefore capable of responding flexibly
and rapidly to clients’ needs and to changing circumstances. They
are also characterized by a work ethic conducive to generating
sustainable processes and impacts.
ii) NGOs’ concern with the rural poor means that they often maintain a
field presence in remote locations, where it is difficult to keep
government staff in post.
iii) One of NGOs’ main concerns has been to identify the needs of the
rural poor in sustainable agricultural development. They have therefore
pioneered a wide range of participatory methods for diagnosis and, in
some contexts, have developed and introduced system approaches
for testing new technology.
iv) NGOs’ rapport with farmers has allowed them to draw on local
knowledge systems in the design of technology options and to
strengthen such systems by ensuring that the technologies developed
are reintegrated into them (Chaguma & Gumbo, 1993).
v) NGOs have also developed innovative dissemination methods, relying
on farmer-to-farmer contact, whether on a group or individual basis
(Sollows, Thongpan, & Leelapatra, 1993).
As economic reforms and liberalization saw the government
vacating several areas to let private sector entrepreneurship flourish and
contribute to the high growth rate of the economy, in recent years, a similar
paradigm shift is needed to transform the NGOs from their dependence on
aid and grants from within and outside for transforming the rural scenario in
the country. It is worth noting that NGOs play a fundamental role in

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enhancing development in rural areas, especially in the developing world.

They initiate programs aimed at transforming the lives of the people in
rural areas from being miserable to a better status.

CHECK YOUR PROGRESS:

Q.1: Mention the two functions of organizations,

according to Peter Drucker.
———————————————————
———————————————————————————
Q.2: Define “Innovation”.
———————————————————————————
———————————————————————————

11.7 LET US SUM UP

The world is changing like never before. This change is more attributed
to the way business practices and strategies are changing across the globe.
Rural marketing endeavors have to be seen and implemented as investment
for better tomorrow. In this unit, we have discussed innovation, need for
innovation in rural markets and principles of innovation for rural market.
The key challenge that companies face in rural market is to identify
and offer appropriate products without hurting the company’s profitability or
margins. At the same time, companies should also recognize that rural
consumers are quite discerning about their choices and customize products
and services. Accordingly, product awareness and campaigns and
advertising communications too need to be designed and executed keeping
in mind the context. The products should not only be made available at the
right time and at the right place but should also be affordable and acceptable
to the rural people. Lastly, rural market consisting of approx.70% of the
Indian population with thin density and inadequate infrastructure with low
per household income poses unique challenge to marketers and calls for
innovative marketing solutions.

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11.8 FURTHER READING

1) Introduction to Rural Marketing by R Krishnamoorty, Himalaya

Publishing House, 2008.
2) Rural marketing: Concepts and Practices by B. Dogra and K. Ghuman,
McGraw Hill, 2012.
3) Rural Marketing by R V Badi and N V Badi, Himalaya Publishing House,
New Delhi, 2006.
4) The Rural Marketing Book by P Kashyap and S Raut, Biztantra, 2005

11.9 ANSWERS TO CHECK YOUR

PROGRESS

Ans to Q No 1: According to the great management guru Peter Drucker

“the organizations’ have only two functions, one is marketing and other
is innovation.
Ans to Q No 2: Innovation implies doing new things or doing of things that
are already being done in a new way. It includes introduction of new
products, creation of new markets, application of new methods of
production, discovery of new and better sources of raw materials
and developing new and better form of industrial organization.

11.10 MODEL QUESTIONS

1. Identify and discuss the areas for developing innovations for success
in the rural market.
2. Discuss the importance of innovation for the products and services
to be marketed in the rural areas.
3. Justify how government and NGOs role are important in developing
rural markets.

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182
UNIT 12: RURAL AND URBAN MARKETS
UNIT STRUCTURE

12.1 Learning Objectives

12.2 Introduction
12.3 Parameters differentiating Urban and Rural Markets
12.4 Similarities and differences in Consumer Behaviour in Rural and
Urban Markets
12.5 Let Us Sum Up
12.6 Further Reading
12.7 Answers to Check Your Progress
12.8 Model Questions

12.1 LEARNING OBJECTIVES

After going through this unit, you will be able to:
• identify the variables that distinguish between urban and rural
markets
• explore why these factors make a rural market different from an
urban one
• gain knowledge of the similarities and differences in urban and rural
consumer behaviour

12.2 INTRODUCTION
Many professionals feel that rural population with increasing incomes
and aspiration levels are increasingly becoming like their urban counterparts.
But, India’s rural consumers are fundamentally different from their urban
counterparts. The lower levels of literacy and limited exposure to product
and services are well-known, but there are also differences in occupation
options, with a direct impact on income levels and income flows, and a
high level of inter-dependency affecting the dynamics of rural community
behavior. All contribute to make rural consumer behavior starkly distinct
from the urban. In this unit, we mainly attempt to understand the consumer
behavior in rural and urban markets.
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12.3 PARAMETERS DIFFERENTIATING URBAN AND

RURAL MARKETS

The rural consumer differs in significant ways from the urban consumer.
(I) Infrastructure
While the rural market of India does constitute an attractive, sizeable and
high potential market, it is tough one to crack. The infrastructure in all forms
– roads, connectivity, electricity, education, presence of organized markets,
etc. is a major differentiating factor between the urban and rural markets.
The McKinsey study too touches on the infrastructure challenges in reaching
and serving the rural market. Inadequate distribution infrastructure and poorer
access to media are also the critical ones among the infrastructure
constraints.
(II) Difference in Pattern of Consumption
In consumption pattern and consumption habits too, there is variation
between rural and urban consumers. Occupation, income, caste and other
socio-economic attributes are the factors that influence the consumption
pattern. Seasonality factor too plays a role. Rural income being more
seasonal, rural consumption also turns out more seasonal. Rural income
is also relatively more unstable and irregular. It impacts the consumption
pattern.
(III) Rural Demand, Highly Scattered
The villages vary widely in population size, thereby making the rural
consumers a scatterred lot. Whereas the urban population is concentrated
in 3,200 cities and towns, the rural population is scattered across six lakh
villages.
(iv) Socio-cultural Background
Different socio-cultural background and different set of priorities in the rural
and the urban markets make it imperative to develop different promotional
messages for these markets. The daily lifestyle due to diverse occupations
and socio-cultural backgrounds is also quite different in the two markets.
(v) Caste, a Significant Factor with the Rural Consumer
In recent years, caste has been losing its hold in the urban areas, while it
still works as a force in the rural areas. Unlike in the urban areas,

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households-settlements in rural areas are still damarcated on the basis of

caste affiliations.
(vi) Difference in Buying Behaviour
The rural consumer does differ significantly from the urban consumer in
their buying behaviour. Relative to the urban consumers, the rural
consumers as a class are a tradition-bound community, with religion, caste
and culture strongly influencing their living styles and buying behavior.
(vii) Accessibility
Accessibility is another variable that differentiates rural and urban markets.
It is easier and economical to serve the urban cluster as a large number of
potential customers are living in the same geographical area, making it
economical for the companies and their distributors to reach them. But, the
rural population is highly scattered and heterogeneous, making it extremely
difficult for any corporate to serve it with a single distribution plan.
(viii) Media Reach and Habits
As both the media reach and media habits are very different in urban and
rural markets, there is a wide gap between the two markets with respect to
overall media behavior. The rural marketer needs to develop an innovative
package of promotional strategies and tactics to convey the marketing
message to the rural audience. The rural customer is also fond of music
and folklore.

12.4 SIMILARITIES AND DIFFERENCES IN

CONSUMER BEHAVIOUR IN RURAL AND URBAN
MARKETS

The principles of consumer behavior remain basically same in rural and

urban markets. Rural consumers like their urban counterparts are directed
by their family needs and they consult with their family while reaching a
purchase decision. Otherwise, the rural consumer is quite different from
his urban counterpart on a good number of demographic variables. The
differences are so significant that the rural market potential can be tapped
effectively only by treating it as a distinct market. The differences in the
rural consumer behavior as compared to the urban buyer behavior can be
understood on the basis of the following parameters:

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(I) Need-based Buyer Behaviour

It is the needs that drive the rural consumer unlike his urban counterpart
who is turning towards consumerism. The rural consumer therefore is
rational and cost conscious in his spending. The rural and urban consumers
represent two different markets as is evident from their current consumption
baskets and their attitude towards essential and luxury items.
(ii) Conscious Decision-making
In a broad sense, the rural consumers are cautious spenders. They, by
and large, are also more of value maximizers as compared to their urban
counter parts. They make a good deal of consultations before buying. The
urban consumer may be an impulse buyer, but the rural consumer is more
discerning because of income limitations. The rural consumer is very suspect
of being fooled and does not make the decision very fast.
(iii) Value for Money
Rural consumers are shoppers for products with high value for money. It is
not that they prefer cheap products, but they buy products and brands which
promise to deliver higher value. Functionality, rather than aesthetics alone,
is more important to the rural buyers. Further, rural buyers do not buy from
sellers whom they do not trust.
(iv) Consensus Decision Making
The rural buyer has to ensure social acceptance of his decision and the
products he is buying. Therefore, the rural buyer’s behavior is mostly family-
driven and is a collective process whereas the urban buyer’s behavior is
individual. Therefore, the rural buyer prefers consensus decisions.
(v) Innate Resistance to Change
Sociological distinctiveness and innate resistance to change make the rural
consumers suspicious of all changes as they have a strong fear of ridicule
from others. The rural people are wary of being fooled or laughed at,
therefore they try to avoid any type of unnecessary risk in their purchase
behavior. The urban consumer prefers to try new things and appear different,
whereas the rural consumer is happy with his conformity.
(vi) Different Lifestyle and Product Usage Environment
The product-usage environment shapes the wants of the consumers. Thus,
solutions to the different needs of the consumer are different in many cases

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for the urban and rural markets. Convenience and comfort may be the key
requirement for the comfort seeking working couples in urban areas while
making a purchase decision. But, these are not the requirements for the
rural people who are usually very hard working by nature.
(vii) Different Perceptions with Regard to Marketing Stimuli
Culture influences the perceptions and behavior; therefore preferences for
colour, size, shapes and taste lead to a situation where the same product/
promotion is perceived differently by in different socio-cultural settings. For
instance, if the urban consumer looks for light colours, the rural one goes
for bold and primary colours. Culturally, if red means trendy and danger in
the urban areas, it is seen as associated with happiness and considered
auspicious in the rural areas.
(viii) Brand Conscious Customer
The rural consumer today is aware of brands. This awareness has been
created by the mass media. Many national and regional brands are today
building a strong rural base without much advertising support. For example,
Ghadi detergent powder is today the second largest brand in rural India.
(ix) Rising Aspirations
The rural consumers are becoming conscious about their lifestyle and their
right to live a better life. They are becoming more demanding and choosy in
their purchase behavior than ever before because of increase in awareness,
aspirations and disposable income.
(x) Brand Loyalty
Several studies have shown that rural consumer is more brand loyal than
the urban consumer. Once the rural consumers become loyal to an
organization, it will be a challenge for its competitors to take them away.
(xi) Innovative Uses of Products
To know the innovative use of products in rural markets, it is essential to
conduct a careful and thoughtful study of the psyche of the rural consumers.
For example, in some villages, wall paint is used for painting the horns of
cattle for identification and protection against theft. Iodex is also rubbed into
the skin of animals after hard day’s work to relieve them of muscular pain.

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CHECK YOUR PROGRESS

Q.1: Mention at least two parameters that

differentiate rural from urban market.
———————————————————
———————————————————————————
———————————————————————————
————————————————————––––––––––––—
Q.2: Identify at least two similarities between rural and urban consumer
behavior.
———————————————————————————
———————————————————————————
——————————––––––——————————————-

12.5 LET US SUM UP

In this unit, we have mainly discussed the difference in buying

behavior between rural and urban consumers. Rural marketing cannot
succeed if the strategies and action plan are merely extension to urban
marketing strategies and plans. In order to make the most of the untapped
rural market in India, companies need to understand the dynamics of rural
consumers to formulate marketing strategies specifically for rural
consumers.
Thus, it is clear that the urban-rural divide continues to exist and
the marketers, who want to succeed in the rural market, have to understand
the region-specific requirements and attempt to cater to the typical tastes
of the regional consumers, both in terms of product offerings and
communication packages. Marketers hardly can take rural markets lightly
and also considering rural market as an extension of urban market is
erroneous. Although, it is also a fact that buying behavior of rural consumers
is undergoing a change and it has been found that the buying behavior of
rural and urban consumers have started to converge in recent years.

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12.6 FURTHER READING

1) Brand Communication in Rural India by R V Rajan, The Hindu

Business Line, February 10, 2005.
2) Rural marketing: Concepts and Practices by B. Dogra and K. Ghuman,
McGraw Hill, 2012.
3) Rural Marketing by R V Badi and N V Badi, Himalaya Publishing House,
New Delhi, 2006.
4) The Rural Marketing Book by P Kashyap and S Raut, Biztantra, 2005.

12.7 ANSWERS TO CHECK YOUR

PROGRESS

Ans to Q No 1: Infrastructure and socio-cultural are the two parameters

among many that differentiate rural from urban.
Ans to Q No 2: The principle of consumer behavior remains the same in
both the markets. Also both the markets are guided by needs of the
family.

12.8 MODEL QUESTIONS

1. Evaluate critically the distinction between urban and rural markets.

2. “Urban and rural consumers differ in their behavior” – Do you agree?
Justify.
3. Identify and explain the reasons why an organization needs to modify
the product and promotion-mix when it is targeting the rural market?

*** ***** ***

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 UNIT 13: E-RURAL MARKETING
UNIT STRUCTURE

13.1 Learning Objectives

13.2 Introduction
13.3 e-Marketing: A Conceptual Background
13.3.1 e-Rural Marketing: Introduction
13.3.2 e-Choupal Model of ITC
13.4 IT for Sustainable Rural Development
13.4.1 Select Applications of IT for Sustainable Development
13.5 e-Governance for Rural Market
13.5.1 Benefits of e-Governance
13.5.2 Challenges of e-Governance
13.5.3 Select e-Governance Projects
13.6 Corporate Sector in Agri-business
13.6.1 Reasons for Increased Interest of Corporate Sector in
Agri-business
13.6.2 Benefits of Corporate-driven Agri-business System
13.6.3 Challenges for Corporate-driven Agri-business System
13.6.4 Involvement of Corporate Sector in Agri-Business:
Select Case Studies
13.7 Organized Rural Retailing
13.7.1 Drawbacks of Traditional Distribution Channel
13.7.2 Opportunities for Organised Rural Retailing
13.7.3 Organized Rural Retailing: Select Case Studies
13.8 Let Us Sum Up
13.9 Further Reading
13.10 Answers To Check Your Progress
13.11 Model Questions

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13.1 LEARNING OBJECTIVES

After going through this unit, you will be able to:

• gain insight into the concept of e-rural Marketing
• apply IT as a tool for rural marketing
• explain how IT can enable and empower the rural consumer and
producer
• discuss the reasons behind increased interest of corporate sector
in the entire agri-business chain
• examine the opportunities, threats and challenges for organized rural
retailing

13.2 INTRODUCTION

Evolving of rural markets and corresponding recent developments

occurring gradually in the domain of rural marketing calls for positive
changes in attitude and approach of corporate sector and the methods of
applying research and technology to rural market.
Traditional marketing strategy of cutting down on prices by 5 to 10
percent may not be that effective in the current scenario for the organizations
putting in efforts to explore and exploit the rural market potential. This calls
for a turnaround in the ways things were done traditionally and to adopt
innovative ways to target rural markets. Internet could offer one such solution
and enable and empower the rural consumer and producer. A large number
of players across sectors have targeted the rural market with innovative
business models such as an e-market place.
At the same time, the potential of the agricultural sector has been
recognized by corporate India. The second green revolution, which is being
driven by corporate sector, is slowly emerging in the country. The stage is
getting ready for corporate India’s thrust into this agri-business by building
the infrastructure that connects Indian farms to national as well as
international supermarkets.
To tap the rural market more effectively, the corporate sector is
making entry into the semi urban and rural areas with the large format
branded retail stores for the rural market as forward integration strategy.

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Some of the investment and retail infrastructure is already in place and

large part is in the pipeline for future. This is a big change from the time
when rural consumers were served from the tiny and dingy dukaans (retail
outlets) with almost no additional or value added facilities. The retail stores
set up by corporate sector are banking on the strategy to present their
stores as a solution to the problems associated with the traditional
distribution channel.

13.3 e-MARKETING: A CONCEPTUAL BACKGROUND

Electronic Marketing (e-Marketing) can be viewed as a new

philosophy and a modern business practice involved with the marketing of
goods, services, information and ideas via the Internet and other electronic
means. Smith and Chaffey defines it as: “Achieving marketing objectives
through applying digital technologies” (Smith and Chaffey, 2005: 11), Strauss
and Frost define it as: “The use of electronic data and applications for
planning and executing the conception, distribution and pricing of ideas,
goods and services to create exchanges that satisfy individual and
organizational goals” (Strauss and Frost, 2001: 454).
In global view, Electronic Marketing (e-marketing) mostly defines as
new attitude and modern realistic involvement with marketing of goods,
services, information and even ideas via internet and other electronic means
(El-Gohary 2010).

13.3.1 e-Rural Marketing: Introduction

In simple words, e-Rural Marketing refers to customized

application of e-marketing for the rural markets (Dogra & Ghuman,
2008). As the technology usage environment and the corresponding
benefits that are sought in the rural markets are very different from
urban markets, the overall implementation of e-marketing in the rural
areas becomes quite different from that of the urban markets.
Therefore, e-rural marketing represents application of Internet
enabled technologies as a tool, to enable efficient and effective
exchange with and from the rural market.

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Internet is expected to deliver the desired results in the rural

areas. It offers an opportunity to develop a direct contact with rural
consumers as the traditional distribution network being not that
effective. It has the potential to solve many of the distribution
problems which were acting as obstacles in the way of the
development of rural market. This whole approach can act as catalyst
in the development of rural markets.
Integration of the rural marketing efforts and practices online
can also prove to be effective. Different things faced by the
companies that employed the Internet tool in the rural market is that
illiteracy, unawareness and existing digital divide is not as big a
barrier as its is perceived to be.

13.3.2 e-Choupal Model of ITC

E-Choupal is an initiative of the International Business

Division (IBD) of one of India’s leading private companies, ITC Ltd.
Beginning in 2000, ITC set up a network of ICT kiosks around the
country, called e-Choupal (an open meeting place in a village).
According to Sachin Sahay, General Manager at IBD, the aim was
to ‘build an intelligent first mile and a low cost last mile for agricultural
products and services’. ICTs are the primary means of
operationalising this vision. Every e-Choupal centre is equipped with
a computer, Internet connectivity through satellite technology and
solar power. In addition, it provides access to a web portal with
current agriculture commodity prices at the village level for produce
transactions. Additionally, e-Choupal supports best practices in
farming through training sessions, provides information on weather
conditions, and supplies quality agricultural inputs like seeds and
fertilisers.
The e-choupal model worked in the following way. It had
processing and collection centers as hubs and ‘Sanchalaks’ as
conveners. These sanchalaks were chosen from among the
farmers and were trained on using the PC. Farmers were provided

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with information like daily mandi prices, weather reports, global

prices, best farming practices and water, soil, PCR testing etc. The
farmers sold their produce in the collection centers for cash. It helped
farmers in getting better prices, while ITC could directly procure
from farmers and remove the intermediaries. It benefited the
company by reducing its sourcing cost and gaining wider reach
and networks. It helped in creating new markets for own and third
party goods.
ITC also used this model to sell FMCG products like
packaged vegetable oil, salt, wheat flour and sugar, agri-related goods
of other companies like Monsanto (seeds), BASF etc.ITC’s e-choupal
network has reached out to over four million farmers growing a range
of crops such as soyabean, coffee, wheat, rice and pulses in over
40,000 villages through 6,500 kiosks across 10 states including
Madhya Pradesh, Uttar Pradesh, Rajasthan, Maharashtra,
Karnataka, Andhra Pradesh and Tamil Nadu.
e-choupal is helping ITC building a strong relationship with
the rural populace, which is one of the biggest growth drivers for the
FMCG industry. It enables ITC to source commodities at a much
lower cost than competitors. This is because it buys directly from
farmers, which eliminates intermediates and multiple handling,
thereby reducing transaction costs. Direct sourcing from farmers
has enabled ITC to preserve the identity of the commodity. The e-
choupal network comprises 24 Choupal Saagars (rural hypermarts),
which are owned by ITC, and 70 warehousing hubs outsourced
through service providers. Choupal Pradarshan Khets act as
demonstration and selling points for agriculture companies; and
companies sell their products and services through Choupal Haats.
ITC typically organizes 60,000 Pradarshan Khets and 6,000 Choupal
Haats in a year. Today, more than 160 companies ride on the e-
choupal network including Bayer, BASF, SBI, Bharat Petroleum,
Nokia, TVS Motors, Maruti Suzuki India, Tata Motors and many more.

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There are several problems faced by the E-choupal model,

most of which were unique and hence all the more challenging. ITC
faced many problems like Intermediary unrest, lack of awareness,
outdated infrastructure, problem in electricity supply etc. But
gradually ITC tried to overcome these problems. ITC upgraded the
telephone lines using RNS kits. The company made use of specially
devised technical solutions to manage data along with new imaging
techniques, to deal with the bandwidth-related problems. To handle
the problem of sporadic electricity, ITC made use of backup batteries,
which could be recharged with solar panels.
The key success to the e-choupal model lies in its scalability.
E choupals have been very successful in states like Madhyapradesh
and Maharastra. Now ITC has to work further in its expansion to
various states and use of the e-choupals at retail chains for selling
different products.

CHECK YOUR PROGRESS:

Q.1: Define “e-Marketing”.

———————————————————
———————————————————————————
———————————————————————————
———————————————————————————–
Q.2: Mention at least two services offered to the farmers by ITC’s e-
choupal.
———————————————————————————
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13.4 IT FOR SUSTAINABLE RURAL DEVELOPMENT

One of the most significant change drivers in rural India, after

television, is the spread of Information technology. This change is being led

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by both government and private sector firms. Sustainable rural development

is generally recognized as the product of those human activities that use
the resources of rural territories to increase welfare. Development can be
considered as sustainable if it meets the needs of the present generation
without compromising the ability of future generations to meet theirs. The
spread of the Information Technology (IT) happened to be the next big thing
after the telecom revolution for the benefit of the masses. The following are
the advantages of implementation IT for sustainable development in rural
areas:
(i) Costs Reduce Significantly When Operation Scales Up
The nationwide integration programme of villages through the information
and communication technology tools can empower the rural population by
enabling them to access to much needed information in a cost effective
and transparent manner. With the scaling of the IT model, huge returns are
possible even on the small margins, because of the vast untapped rural
market. What really matters is capital efficiency for getting the highest
possible returns on capital employed (ROCE).
(ii) Convergence
The convergence of technologies and its widespread usage has not only
made it a very powerful tool, but also one that is very cost effective.
IT solutions are considered having huge potential for achieving the goal of
sustainable rural development. If implemented judiciously they can play a
major role to transform rural India from the stage of underdeveloped region
to a highly productive territory. Rural communities to a large extent are
adopting new technologies that improve their economic opportunities or
standard of living.

13.4.1 Select Applications of IT for Sustainable

Development

Few of the initiatives of application of IT for the sustainable

development of rural population by the corporate world are mentioned
below.

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(i) DakNet
DakNet, an ad hoc network that uses wireless technology to provide
a digital connectivity prove that the combination of wireless and
asynchronous service can lead to universal broadband connectivity.
DakNet has been successfully deployed into remote parts of India
at a cost of two orders of magnitude less than that of traditional
landline solutions.
(ii) Hewlett Packard’s i-community Initiative
Hewlett Packard’s (HP), i-community initiatives aim to transform
lives of ordinary rural citizens by employing IT tools. Some of the
initiatives implemented by the HP in the rural market are listed below:
(a) Village Photography Initiative
It provides the selected member with especially designed self-
contained photography kit, which includes a digital camera, a portable
printer, battery charger and solar panel. Armed with the kit, a person
can click photographs of villagers and provide printouts on the spot.
They can earn a net of Rs.500 to 1000 a month after paying rent of
Rs.400 to HP, depending on the demand. Thus, this model not only
provides meaningful employment opportunity to the rural people in
the village itself, but also is perfectly viable for the company.
(b) Multi-user 441 Desktop Project
HP’s multi-user 441 desktop, latest solution for emerging markets
is unique and very relevant for rural consumers who are looking for
value for money solutions.
(c) Project Yojanalu
It has also developed a solution implemented as the Project Yojanalu,
which acts as an interface between government and the citizens.
This solution can help in spreading awareness about the
government’s schemes for citizens. This solution will empower the
rural world with the information through which they can seek for
their rights.

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It is quite clear from the initiatives given above that if the product is
delivering the result by solving the problems of the rural masses
then lack of knowledge is not going to be a big barrier as the
softwares are now available in local language, and along with that
there are audio and touch screen options which are making the
usage of IT tools very user friendly, even in the context of rural
environment of India.

13.5 e-GOVERNANCE FOR RURAL MARKET

The total number of e-governance transactions in India has crossed

1,000 crore in 2016, according to government web portal eTaal. The portal
which disseminates e-transactions statistics of national and state level e-
governance projects mentioned that the transactions increased by 33
percent from last year’s 760 crore. Not only the corporate sector, but also
the centre and state governments are trying innovative ways to carry
developmental programmes to rural areas. IT is being applied for
development of land records in electronic form, or putting information about
governmental schemes on the internet and intranet.
The concept of electronic governance chosen by the council of
Europe covers the use of electronic technologies in three areas of public
action:
• Relations between the public authorities and civil society
• Functioning of the public authorities at all stages of the democratic
process (electronic democracy)
• The provision of public services (electronic public services)
In the year 2005, UNDP defined, “e-Governance is the Information
and Communication Technologies with the aim of improving information
and service delivery, encouraging citizen participation in the decision-making
process and making government more accountable, transparent and
effective.”
e-Governance or “electronic Governance” refers to the use of
Information and Communication Technologies (ICTs) to provide citizens
and organizations with more convenient access to the government’s
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services and information. In other words, eGovernance involves ICTs,

especially the internet, to improve the delivery of government services to
citizens, businesses and government agencies. It is not limited to the public
sector only but also includes the management and administration of policies
and procedures in private sector as well. The use of internet not only delivers
the services faster but also brings more transparency between the
government and the citizens. But in developing countries like India, where
literacy level is very low and most of the people are living below poverty
line, it is very much difficult for the government to provide its services to
such citizens via means of internet.
According to the World Bank, 2001, e-Government is the
government owned or operated systems of information and communication
technologies that transform relations with citizens, the private sector and/
or other government agencies so as to promote citizens’ empowerment,
improve service delivery, strengthen accountability, increase transparency,
or improve government efficiency
According to UNESCO-CI, e-governance may be understood as
the performance of the governance via the electronic medium in order to
facilitate an efficient, speedy and transparent process of disseminating
information to the public, and other agencies, and for performing government
administration activities. e-Governance is generally considered as a wider
concept than e-government, since it can bring about a change in the way
how citizens relate to governments and to each other.
e-governance can also be defined as a set of technology-mediated
processes that are changing both the delivery of public services and the
broader interactions between citizens and government.
The fields of implementation of e-governance are:
• E-Administartion
It refers to improving of government processes and of the internal
workings of the public sector with new ICT-executed information
processes.
• E-Services
It refers to improved delivery of public services to citizens.

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13.5.1 Benefits of e-Governance

The purpose of implementing e-governance is:

(i) to enhance good governance: through participation,
transparency and accountability
(ii) to increase the bro
(iii) fast, Convenient and Cost Effective Service Delivery
(iv) transparency, Accountability and Reduced Corruption
(v) increased Participation by People

13.5.2 Challenges of e-Governance

E-governance was introduced for the better communication

between citizens and government. But the government faced lots
of problems in introducing it. Few of the problems or challenges
faced by government are listed below
(i) Illiteracy
The government is making effort in increasing the literacy rate in
rural population but still much needs to be done as it is far less than
the literacy rate in urban population.
(ii ) IT Illiteracy
This is a major drawback in which the users are not technically
literate to use the technology.
(iii) Language Differences
Rural population is not very fluent in English and all the e-governance
projects basically use English, so majority of the rural population
find it difficult to understand.
(iv) Lacks Awareness
People are unaware about the facilities provided by the government
for their use.
(v)Hesitation to change
People are reluctant to change. As e-governance means change of
the system from manual to computerize based.
(vi) Infrastructure & Running Cost
It is difficult to connect all rural areas through internet and at times it
is difficult to lay wires at these places. In remote areas generally till
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now there is no basic infrastructure available like connectivity and

electricity.

13.5.3 Select e-Governance Projects

Some of the state governments are very much proactive in deploying

the IT tools to deliver better governance for the citizens specially
the rural ones. This usage of IT is not only bringing information to
the doorstep of rural population but is also reducing the transaction
cost that had become almost a custom in the past.
Government has undertaken many projects for the benefit of rural
India. Given below are some examples with regard to application of
IT tools for establishment of e-governance projects by select state
governments of India:
(i) Gyandoot
Gyandoot is a government to citizen intranet based project launched
in Thar district of Madhya Pradesh on 1st January 2000, with the
installation of a low cost rural intranet covering twenty villages that
has expanded to 39 kiosks covering 311 panchayats over 600 villages
and serves the population of around 5 lakhs. Gyandoot serves as a
government-to-citizen platform and connects the district
headquarters to multimedia kiosks or rural cyber cafes, called
soochnalaya. Each soochnalaya serves 20 to 30 villages, which is
between 20,000-30,000 people. For running these soochnalayas, a
local youth from the village was selected as soochaks. The soochak
was not given any salary. In fact they operated the kiosks and charged
for the services they provided. They charged Rs.5/- for providing
information about the agricultural produce. A fee of Rs. 15/- per
extract is charged for providing documents related to farmer’s land
which is considered valid by banks. Rs. 10/- is charged for submitting
applications for obtaining certificates as and when required by the
villagers. A charge of Rs. 10/- is taken for lodging any complaint like
mid day meal etc. Auction facility is also provided. For a charge of
Rs. 25/- for 3 months anyone can put the commodity on sale. Further,

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Rs. 10/- is charged for viewing all the salable commodity. Of the
total earning the soochak pays 10% of income as commission to
the zila panchayat. So, the scheme is self-sustainable. Gyandoot
was given the ‘Stockholm Challenge IT Award’ in 2000 in the ‘Public
service and democracy’ category. Initially this was considered very
successful but with passing of time in long run it did not prove to be
too good. Only the use of ICT does not help the backend working
and processes needs to be changed for any project to be successful.
(ii) Karnataka’s Bhoomi (land)
Revenue department of the Government of Karnataka along with
NIC implemented this computerization of land records called the
Bhoomi project, which has put most of 1.7 crore land records on
the Internet since July 2000, at a cost of Rs. 1.8 crore.. A farmer
requires his official land records for many purposes like for getting
loan on crop from any financial institution or any legal dispute, etc.
Problems with the earlier manual systems like the registers of land
record not properly maintained, or not very legible lead to its
computerization. Any farmer can now readily get their land record
from land record kiosks available. Also, farmers get an
acknowledgement number if they submit a request for mutation on
land records. So, now farmers can track the process of mutation
on the touch screen kiosk available and in case of any delay can
report to higher officials also. Thus, this leads to transparency. Seeing
the success of Bhoomi other states like Andhra Pradesh, Haryana,
Madhya Pradesh has also implemented a similar system.
(iii) Electronic Land Record Systems
Farmers who were earlier at the mercy of village patwari (revenue
official) for their land records has no longer to depend on them in
Andhra Pradesh, Punjab and Karnataka. They can access this
information in electronic form on the Internet and can take a printout.
This made the system to be corrupt free and also resulted in time
saving practice.

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(iv) Andhra’s CARD

In Andhra Pradesh a CARD (Computer-Aided Administration of
Registration Department) is the pioneering effort in registering real-
estate transactions. Starting with two centres in 1997, the Rs 25-
crore project now covers 239 offices and more than 24 lakh
transactions have been registered till date. The entire process of
registration of land now takes on ehour (from initiation to completion),
compared to 7 to 13 days in the old system. Title searches over the
past 20 years from different offices can be done in 13 minutes versus
three days.
(v) Punjab’s PRISM
Punjab also launched PRISM (Punjab Registration Information
System Module) project. Instead of pleading and bribing the patwari
for registration documents which were needed for applying for loans,
farmers now pay Rs 10 and instantly get the necessary documents.
(vi) Karnataka’s Bhoomi
Bhoomi project is an initiative of Karnataka government to
computerize land records. In Karnataka, the project, has put most
of 1.7 crore land records on the Internet since July 2000, at a cost of
Rs 1.8 crore. Farmers now pay just Rs 15 for a printout of their
papers, in comparison of Rs 100-500 bribe they had to pay to patwari
earlier.
(vii) National e-Governance Plan
The government approved the National e-Governance Plan (NeGP),
comprising 27 Mission Mode Projects and 8 components, on May
18, 2006, 4 projects – Health, Education, PDS and Posts were
introduced to make the list of 27 MMPs to 31 Mission Mode Projects
(MMPs). NeGP takes a holistic view of e-Governance initiatives
across the country, integrating them into a collective vision, a shared
cause. The major core infrastructure components are State Data
Centres (SDCs), State Wide Area Networks (S.W.A.N), Common
Service Centres (CSCs) and middleware gateways. This plan is
aimed at improving the quality, accessibility and effectiveness of

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the government services to the rural citizens with the help of

convergence of Information and Communication Technology (ICT).
(viii) E-post
“Send mail from anywhere in the globe.” Internet and email are a
main part of e-governance. E-post service was launched by the
secretary of the Department of Posts on 30th January 2004. But in
rural areas these facilities are not available. Keeping this in mind,
the Department of posts introduced the facility of e-post. It is a very
simple service where people can send the messages anywhere in
India. In this a person who has to send the message simply
approaches the post office, where the person scans the handwritten
or printed document and sends it via email to the nearest destination
post office. There the printout of the document is taken out, sealed
in an envelope and delivered at the destination address. The
document can be in any language. A fee of Rs. 10/- per A4 page is
charged. For encouragement to the corporate customers post office
gives them special e-post rates and other value additions. For
Corporate customer e-post costs Rs. 6 per page of A4 size & for
bulk it costs Rs. 5/ - per page. This service tries to bridge the digital
divide [10].
(ix) E-panchayats
Panchayats are a local village based self government. As majority
of the population of India lives in villages the panchayats play a major
role. Government thus felt the need to improve it and transform it,
and so e-panchayat was introduced. In fact e-panchayat was
identified as the Mission Mode Project (MMP). In this 2,50,000
panchayati raj institiutions at the gram panchayat, block and zila
parishads were identified which were to be joined with ICT. NIC
developed e-panchayat for Hyderabad, Andhra Pradesh. All the
information of the gram panchyats was collected and based on that
the e-panchayat was initiated. The e-panchayat comprised of 30
modules with about 150 sub-modules. These modules were based
on providing the information to the villagers on various products like

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agriculture, irrigation, fisheries etc. and also on other problems

relating to loans from industries, housing, water etc. It also dealt
with various other services like property tax, registration and
issuance of death and birth certificates, disbursement of old age /
widow and disabled pensions, building approvals for residential
purpose etc. An important module in this was the grievance redressal
where any grievance could be registered and also later on monitored
for solution. Thus the project caters to all aspects of panchayat’s
functioning including planning, monitoring, implementation,
budgeting, accounting, social audit and delivery of citizen services.
As the usage of Information Technology is growing very fast,
Indian government is making many efforts to provide services to its
citizens through e-Governance. Although Indian government is
spending a lot of money on e-Governance projects but still these
projects are not successful in all parts of India. Unawareness in
people, local language of the people of a particular area, privacy for
the personal data of the people etc. are main challenges which are
responsible for the unsuccessful implementation of e Governance
in India. Government must take some actions to make the people
aware about the e-Governance activities so that people may take
full advantage of these activities and e Governance projects can be
implemented successfully. The participation of people can play a
vital role in implementation of e-Governance in India.

CHECK YOUR PROGRESS

Q.3: Define “e-Governance”.

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Q.4: Mention the at least two benefits of e-Governance..

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13.6 CORPORATE SECTOR IN AGRI BUSINESS:

CULTIVATION, PROCESSING & RETAILING

Corporate sector has begun to give importance to agricultural sector

because of its vast potential. It is also driving the emergence of second
green revolution in the country. . A number of large players across sectors
have looked at the rural market with innovative business models – either an
E-market place or a one stop shop for agri-products.

13.6.1 Reasons for Increased Interest of Corporate Sector

in Agri-business

A number of large MNCs and even a greater number of local

enterprises active in the agribusiness sector in India. These
companies are widespread across the supply of inputs and farm
equipment and machinery, agricultural production, manufacturing
and processing (value addition), and retailing. The main reasons
are:
(i) The size of the Indian rural market and untapped potential has
been found to be a major determinant of investment. With nearly
70 percent of the country’s population residing in villages makes
it a market which companies hardly can afford to ignore. 25 to
40 percent food products in India are destroyed due to lack of a
supply chain, improper packaging, sorting, processing, storage
and transportation. This problem of agriculture in India creates
an opportunity for corporate India.
(ii) The abundance of natural agricultural resources is a major pull
factor for investment in the agribusiness sector.

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(iii) Developed states such as Punjab and Maharashtra have

realized that large companies can bring in technology,
investment, modern best practices and crop diversification
techniques. This integrated effort will be in the in the interest of
farmers as well as state governments. Therefore, they are
encouraging the participation of corporate sector in this field on
a large scale.
(iv) Maintaining procurement at Minimum Support Price (MSP) levels
increasingly becoming difficult for state governments. Along with
this, political pressure is also mounting on state governments
to increase MSP every year, which it was finding extremely
difficult to do. The system of corporate sector getting involved
in diversified procurement relieves the state governments of
the legacy of minimum support prices given to paddy and wheat
growers across the country.

13.6.2 Benefits of Corporate-driven Agri-business System

(i) The corporate sector’s involvement can play a big role in

enhancing the quality of produce and delivery, creating significant
development for India. To make the farms more profitable, it is
important to make Indian farmers more efficient.
(ii) The investment by corporate world in agri-business would help
to achieve better alignment of consumption and farming
patterns by bringing in the marketing linkages, especially for
the fruits and vegetables and many of the crops not covered
under the Minimum Support Price (MSP) mechanism.
(iii) This may result in making farmers prosperous, as they will be
well informed about the emerging technology, seeds and farming
practices, which they can employ in their fields. This will create
a large number of consumers for all products.
(iv) With more than 65 percent of India’s population depending on
agriculture for their livelihood, improvements in efficiency and
new markets have the potential to benefit large number of people.

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(v) The companies are experimenting with crop diversification. In

Rajasthan, tjey introduced technology to grow kalonji in place
of wheat, which resulted in farmers getting an extra Rs 6,000
per acre.
(vi) When one member of the family, under traditional crops, is
employed over a typical holding of 4 acres, then on the same
land 4-6 persons can be employed under horticultural produce
for longer periods, thereby raising the employment scope 16
times and income levels 2-3 tmes.
(vii) The improved cropping methods and practices and low water
consuming varieties can result in solution to problems like falling
water table that has affected the productivity of the farmers.
(viii) This model may play a major role in bringing down the increasing
suicide cases by farmers in many states in India.

13.6.3 Challenges for Corporate-driven Agri-business

System

The corporate driven agriculture scenario can face the following

challenges:
(i) The consolidation of land with corporate world or farmers being
displaced from their land is an issue of political sensitivity
especially at a time when farmers of many state committing
suicides over issues of debt and their inability to repay it.
(ii) Poor infrastructure and the monopoly of mandis need to be
overcome for the smooth functioning of corporate driven agri-
system.
(iii) Inadequate infrastructure in terms of cold storage facility for
transportation and storage, transportation bottlenecks, lack of
efficient availability of airport facilities can, to a great extent, slow
down the movement of goods from farm to the export markets.

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13.6.4 Involvement of Corporate Sector in Agri-Business:

Select Case Studies
Some of the initiatives of the corporate world in the field of agri-
business which are transforming the agriculture ecosystem are
mentioned below:
(i) Pepsi
Pepsi’s venture of contract farming, processing and marketing in
horticulture sector is a perfect example of an obligation turned into
an opportunity. Investing into farming and food processing were
preconditions for Pepsi’s entry into India. Pepsi Co. has
demonstrated that corporate initiatives could help farmers shift from
traditional low return crops to the one providing higher yield and
income for the benefit of all the stakeholders in Indian agriculture.
(ii) Bharti
Indian telecom giant Bharti, has moved into the global fruit and
vegetable market through a joint venture with a unit of UK finance
group Rothschild. FieldFresh Foods incorporated in September
2004, is an equal partnership joint venture between Bhart
Enterprises, and ELRO Holdings India Ltd. an investment company
of the Rothschild family. The business model is to link Indian fields
tot he world market, by providing premium quality fresh produce to
the markets worldwide through contract farming.
(iii) Reliance
Reliance Industries, one of India’s largest industrial group, in June
2006 announced a $5.6 billion (Rs. 25,200 crore) multiyear
investment in agriculture and retail sectors.
(iv) ITC
ITC is facilitating farmers through e-choupal model (discussed in
Chapter on e-Rural Marketing). It is now getting into larger format
retail stores branded as Choupal Sagars, at a cost of Rs. 5 crore
each. ITC’s business model is that of empowering the farmers.

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13.7 ORGANIZED RURAL RETAILING

For a large number of consumer products, the village shop holds

the key to marketing in the rural markets; it has not been replaced by any
other retailing model. In fact, it seems irreplaceable. Analysis indicates that
it is the cheapest and the most effective formulation. There are an estimated
eight million such shops in rural India. The shopkeeper operates against
several odds.
Firms seeking a full-fledged presence in the rural market need to
embrace the village shops as the key component of their distribution outfit.
Organizing a large marketing channel out of these shops, however, requires
concerted effort on the part of the firm.
The corporate sector is entering the semi urban and rural areas
with the large format branded retail stores for the rural market as forward
integration strategy. Now, there is a gradual shift from tiny and dingy dukaans
(retail outlets) to new style of retail outlets.
The retail stores set up by corporate sector are banking on the
strategy to present their stores as an innovative solution to the problems
associated with the traditional distribution channel.

13.7.1 Drawbacks of Traditional Distribution Channel

Traditional distribution channel has certain limitations with reference

to rural market which can be discussed as following:
(i) In the traditional distribution channel the push strategy was
employed and the consumer interest was not the driver.
(ii) Lack of display of the available brands and consumer most of
time had to buy brands recommended by retailer.
(iii) A large percentage of products available are spurious along with
the original products. Rural consumer has limited ability to
distinguish between the two and hence suffers as a result.
(iv) Rural consumers have less choice both in terms of product
range and brand choice. He has to choose from whatever is
available.

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The above limitations of traditional distribution channel give rise to

teh importance of a system which ensures that rural consumer
purchases genuine products and the retailer does not dictate brand
choice but consumers are enabled to exercise their own choice.

13.7.2 Opportunities for Organised Rural Retailing

In the current scenario, the corporate sector is planning and

implementing integrated solution to the rural consumers through
these integrated stores. There are opportunities for such like stores
on account of the following reasons:
(i) Rising aspiration of the rural consumers; to have urban like
experience while shopping.
(ii) Integrated package of products and enablers are available under
single roof.
(iii) Provision of advisory services along with the products can build
the association with these stores.
(iv) Increasing desire in rural areas to buy quality products and
frustration with these stores.
(v) Rural retailers are charging more for the same products.

13.7.3 Organized Rural Retailing: Select Case Studies

Corporate sector’s association with organized retail for rural

India may be understood with the help of examples. Some of them
have the model of company owned stores and some have moved
from company owned to franchisee in order to reduce the cost of
operation. In recent years, there have been some attempts at
establishing retail chains in the rural market.
(i) DCM Hariyali Kisan Bazaar
DCM Sriram Consolidated (DSCL) with many years of experience
in selling fertiliser and other agri-products has set up a 54-outlet
strong chain of rural supermarkets, Hariyali Kisan Bazaar, that offer
everything the rural consumers may need. DSCL Hariyali Kisan
Bazaar sells agri inputs, offers insurance and banking services,

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and has officers, who offer free advice to farmers on agriculture

practices. One centre operates in a catchment area of about 20 km
radius.
(ii) The Rural Hyper Markets – ITC Choupal-Sagar
ITC has taken the hyper markets format to rural India. ITC has been
setting up a multi-store retail chains in rural areas, selling a variety
of items ranging from daily requirements to durables and farm
equipments required by the villagers. The range includes bikes,
tractors, clothes, cement, steel, diesel and financial products. Named
Sagar, the chain of hyper markets is being set up across 15 states.
On an average, a hyper market under this scheme occupies five
acres of area and takes an investment of Rs 4-5 crore as set up
cost. The first mall came up in MP. For companies finding it hard to
reach out to customers in villages, ITC Sagar offers a readymade
channel. The Sagar chain serves as the physical infrastructure
support to ITC’s e-Choupals.
(iii)Tata Kisan Sansar
Till 2003, the TATA Group’s two companies TATA Chemicals and
Rallis India ran separate rural retail initiatives. TATA chemicals had
a chain called Tata Kisan Kendras in Uttar Pradesh, Haryana and
Punjab. The centres offered farmer a host of products and services
ranging from agri-inputs (seeds, fertilisers), financing to advisory
services.
Rallis, another Tata company manufacturing chemicals for
agriculture was running Kisan Kendras. It was involved in an
integrated programme with select farmers of Madhys Pradesh. The
company partnered ICICI Bank and HUL (then HLL) in offering
solutions to farmers that covered operation from pre-harvest stage
to post-harvest stage. Farmers were first provided with seeds,
pesticides and other farm inputs, through Rallis, but mostly funded
through loans offered by ICICI Bank. Once the crop was ready, it
was bought by HUL and ICICI Bank loan was repaid through the
income from sale. But the experiment did not sustain for long.

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In April 2003, Rallis’ operations were merged with TATA Chemical’s

TATA Kisan Kendras and on October 26, 2004 the company
relaunched its Kisan Kendras as TATA Kisan Sansar (TKS). These
are planned to evolve as networks of one-sto shops for farmers
providing everything from inputs, loans to know-how.
This comprehensive pool of services available under one roof serves
the needs of farmers in an integrated manner. Not only solutions
are available at these retail outlets but the banks as enabling forces
and insurance companies to cover the risk, are also0 available to
make the purchases feasible.
(iv) Aadhaar from the Stable of Godrej Agrovet (GAVL)
The Aadhaar chain from Godrej group is another example. Aadhaar
is a joint venture between The Future Group and Godrej Agrovet
Ltd. Aadhaar is positioned as a rural supermarket and currently has
more than 40 stores spread more than over 1,00,000 sq. ft. Across
states. Aadhaar also operates Cash & Carry stores by the name
Aadhaar Wholesale Market. Aadhaar focuses on retail distribution
of agricultural inputs and consumer products for personal and
household use in rural and semi-urban India. Food and groceries
dominate the consumer products category. The stores are fairly
large by rural standards, spread over a floor space of about 1000
sq. ft.
(v) Mahindra’s Shubhlabh
In order to sell farm inputs and equipment including M&M brands,
Mahindras established Shubhlabh, which is a chain of franchised
store for the rural market. It provides rural financing and borrowing
support through these stores as Mahindra Krishi Vihar, a platform
for banks to provide loans to farmers with minimum documentation,
quick sanction and attractive interest rates. Farmer’s access to funds
gets easier and for bank’s loan is relatively safer.
All these business models have their inherent problems and
challenges. The main problem stems from inconsistent revenues
and poor growth. Most organisations were unable to sustain the

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investments made. Several reasons for the same can be – a lack

of trust on the part of the farmers, a significant dependence on
intermediaries, a high fixed cost model, high operating costs and
low volumes, channel conflict resulting in undercutting and parallel
sales models and a lack of procurement knowledge.

CHECK YOUR PROGRESS

Q.5: Mention two reasons for increased interest of

corporate sector in agri-business.
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Q.6: Mention at least two limitations of traditional distribution channel.
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13.8 LET US SUM UP

In this unit, we have discussed the role of IT in achieving sustainable

rural development, entry of corporate world in rural market with different
business models, organized rural retail formats etc.
There is a need to take the application of information and
communication seriously as it plays a vital role in delivering benefits to the
rural masses. It has tot of potential and if implemented properly then rural
India can see a shift from the perception of poor masses to emerging rural
economy without putting undue pressure on the cities and governments for
their development. The companies need to plan and execute their Internet
model in the right way and ensure that their Internet strategy is integrated
with the needs and the lifestyle of the rural population. Corporate world by

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implementing small and big initiatives in rural India has made a significant
contribution to the sustainable development of rural society. It can be said
that IT can deliver results not only for the corporate sector; but can be used
for making the process of governance transparent corruption free and citizen
friendly. The important outcome is that the lack of literacy and knowledge
might not be a barrier if the purpose of implementation of IT tools is of
relevance for the rural population.
The corporate involvement in agri-business at all levels in the food
chain will not only provide much needed assured markets to the farmers
but will also bring the latest technology, know-how to the farmers. It will
also help the farmers to rise their income.
Lastly, the introduction of organized retail formats in rural market is
offering good quality branded products and the value added services for
the rural consumers. The success of such formats will depend on the
response of the villagers who still prefer to purchase from traditional retail
outlets.

13.9 FURTHER READING

1) Introduction to Rural Marketing by R Krishnamoorty, Himalaya

Publishing House, 2008.
2) ITC’s e-Choupal: A case study on Rural Marketing Initiative by Rajesh
Panda, Management Case, Volume III, September 2011.
3) Rural marketing: Concepts and Practices by B. Dogra and K. Ghuman,
McGraw Hill, 2012.
4) Rural Marketing by R V Badi and N V Badi, Himalaya Publishing House,
New Delhi, 2006.
5) The Rural Marketing Book by P Kashyap and S Raut, Biztantra, 2005

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13.10 ANSWERS TO CHECK YOUR

PROGRESS

Ans to Q No 1: Electronic Marketing (e-Marketing) can be viewed as a new

philosophy and a modern business practice involved with the
marketing of goods, services, information and ideas via the Internet
and other electronic means.
Ans to Q No 2: e-Choupal supports best practices in farming through
training sessions, provides information on weather conditions, and
supplies quality agricultural inputs like seeds and fertilisers.
Ans to Q No 3: In the year 2005, UNDP defined, “e-Governance is the
Information and Communication Technologies with the aim of
improving information and service delivery, encouraging citizen
participation in the decision-making process and making government
more accountable, transparent and effective.”
Ans to Q No 4: The two benefits of e-Governance are increased
transparency and improved accountability.
Ans to Q No 5: The main reasons are:
(i) The size of the Indian rural market and untapped potential has
been found to be a major determinant of investment.
(ii) The abundance of natural agricultural resources is a major pull
factor for investment in the agribusiness sector.
Ans to Q No 6: Traditional distribution channel has certain limitations with
reference to rural market which can be discussed as following:
(i) In the traditional distribution channel the push strategy was
employed and the consumer interest was not the driver.
(ii) Lack of display of the available brands and consumer most of
time had to buy brands recommended by retailer.

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13.11 MODEL QUESTIONS

1. Discuss the role of internet in the development of rural market in India.

Give examples.
2. Discuss the model e-choupal applied by ITC in the rural markets of
India.
3. Explain different IT models developed by the corporate sector for the
sustainable development in the rural areas.
4. How does the IT tools can lead to better governance in the rural areas?
5. Discuss some of the e-Governance projects undertaken by state
governments.
6. Discuss the advantages from the integrated involvement of corporate
sector at different steps in India’s agri-business chain.
7. Identify and explain the various challenges organized retailing initiatives
likely to face in the rural markets.
8. Examine the opportunities for organized rural retailing to the rural
markets in India.

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 UNIT 14: SOCIAL MARKETING
UNIT STRUCTURE

14.1 Learning Objectives

14.2 Introduction
14.3 Social Marketing: Corporate Social Responsibility in Rural Market
14.3.1 Meaning of Social Marketing
14.3.2 Benefits of CSR Campaigns in Rural Market
14.3.3 Implementation of CSR Campaigns in Rural Areas
14.4 Consumer Education and Movement in Rural India
14.5 Role of Government & NGOs in Rural Marketing
14.5.1 Role of Government in Rural marketing
14.5.2 Role of NGOs in Rural Marketing
14.6 Let Us Sum Up
14.7 Further Reading
14.8 Answers to Check Your Progress
14.9 Model Questions

14.1 LEARNING OBJECTIVES

After going through this unit, you will be able to:

• define the concept of social marketing
• comprehend the benefits of social marketing in rural areas
• gain insight into the implementation of CSR campaigns in rural areas
• describe the importance of consumer education and movement in
rural India
• describe the role of government ad NGOs in rural marketing

14.2 INTRODUCTION

Major part of the India’s poorest people lives in rural areas which
are in a state of neglect and underdevelopment with impoverished people.
The difficulties of hunger, ignorance, ill health, high mortality and illiteracy
are most acute in rural areas. This is not only because of shortage of material

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resources but also because of flaws in our planning process and investment
pattern. India has the capabilities to meet these challenges in rural areas.
However, the efforts of Governments of India may not be adequate to provide
basic services to its citizens. It is being increasingly recognized that
progress and welfare of a society is not only the responsibility of the
Government alone, but many more participants need to be involved to attain
the development goal.
Rural consumer is a victim of numerous malpractices. He is often
made to buy adulterated or substandard goods. Second hand goods are
passed on to him as new. Greedy businessmen through misleading
salesmanship and advertisements and tall claims about their products, often
cheat the consumer of his hard-earned money. These happens to him
because of illiteracy, lack of knowledge about consumer rights etc. This
calls for consumer movement and consumer education in rural areas. At
the same time the role of government and different NGOs become immense.
They have to play a catalytic role and aware them about the rights of the
consumers. This unit mainly discusses about the social responsibility of
companies operating in rural market, consumer movement and education
in rural areas, and also the role of government and NGOs in facilitating
these community welfare measures.

14.3 SOCIAL MARKETING: CORPORATE SOCIAL

RESPONSIBILITY IN RURAL MARKET

A new model is being adopted by corporate world to build brands in

the rural market. Several organizations have started social responsibility
campaigns in the rural areas, which is also done to exhibit the value that
the brand depicts. These kinds of campaigns help the organizations to create
favorable word of mouth publicity for the brand in the rural markets. These
social obligations integrated with the marketing efforts of the organization
have given a new perspective to the application of marketing, known as
Social Marketing.

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14.3.1 Meaning of Social Marketing

Kotler (1985) defined Social Marketing as design,

implementation and control of programmes, seeking to increase
the acceptability of a social idea or cause in a target group(s). It
utilizes the concept of market segmentation, consumer research,
concept development, communication, facilitation, incentives and
exchange theory to maximize target group response.
The corporate sector, government and NGOs have a pivotal
role to play in ensuring private investment flows to those rural areas
that have been excluded of the development process so far and
also to work for sustainable development of rural areas in general.

14.3.2 Benefits of CSR Campaigns in Rural Market

Corporate Social Responsibility (CSR) is a concept that

encourages organizations to consider the interests of society by
taking responsibility for the impact of the organization’s activities on
customers, employees, shareholders, communities and the
environment in all aspects of its operations.
CSR has two fold meaning. On one hand, it exhibits the
ethical behaviour towards its internal and external stakeholders. On
the other hand, it denotes the responsibility of an organization towards
the environment and society in which it operates. CSR is regarded
as tool through which companies give something back to the society.
It involves providing innovative solutions to societal and
environmental challenges. But the challenge work of development
professional and business community is to identify CSR priorities
and the areas of interventions which are meaningful in the context
of rural development sector.
Corporate social responsibility (CSR) isn’t just about doing
the right thing. It offers direct business benefits. Building a reputation
as a responsible business sets you apart. Many consumers prefer
to buy from ethical businesses. Companies often prefer suppliers
who demonstrate responsible policies, to minimize the risk of any
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damage to their own reputations. Some customers don’t just prefer

to deal with responsible companies, but insist on it. For example,
sales of “environmentally friendly” products continue to grow - and
these products often sell at a premium price. Amul India became as
famous for its approach to responsible business as for its products.
Building relationship with the consumer in rural market is
crucial since rural consumer is relationship oriented, he has to be
involved in a long-term relationship with the brand and the
organization through the application of CSR strategies firms are
able to receive different benefits like enhancement of company’s
competitive advantage, customer recognition, cost reduction by eco-
efficiency and recycling as well as an increase in the personnel’s
morale and reduction of labor turnover.
As we have already seen that ordinary commercials and
promotional campaigns may not deliver the intended results;
innovative promotional and developmental tools have to be adopted.
Social responsibility initiatives place the brand names in the hearts
and minds of relationship seeking rural consumers. This is a
competitive advantage which others will find difficult to defeat in the
fight for supremacy in the rural market.

14.3.3 Guidelines for Implementation of CSR Campaigns

in Rural Areas

CSR perceived to be a very costly proposition if it has to be

scaled up to national level. Therefore, corporate world has to find
out a way to involve other stakeholders such as government and
NGOs for making it both possible and successful, implementable
and also cost effective. This will allow the organization to scale up
the campaign for a vast rural market without raising the costs too
much.
Companies need to build social responsibility campaigns
around the business model of the organization and strengths and
values that are depicted by the brand. Then only the campaign can

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be useful to build brand in the rural areas. On account of brand

building benefits the organization will also be keen to scale up the
campaign to a regional or national level.
At the same time, it is quite important that the brand that is
being promoted through CSR campaign needs to offer right product
price performance and good value proposition, which is acceptable
to the rural consumers. Then only the brand building effort will be of
some use to take the brand on top of preference in list of brands
under consideration and register sales at cash counter.

Select CSR Campaigns of Corporate Sector in

Rural Areas

Few of the CSR campaigns launched by the corporate

sector are discussed below:
(i) Amaron-Amaragaon (Our Village)
Amaron Harvest tractor batteries from Amara Raja has initiated a
programme ‘Amaragaon’ to empower rural people by giving them
access to knowledge through Internet connectivity. “Gyaan ke Sang,
Unnati ki Umang” is the tagline of Amara Raja Batteries’ new corporate
social responsibility (CSR) campaign, Amaron-Amaragaon. This
campaign aims to take rural digital, by bringing in Internet solution to
the villager’s doorstep. Amaron Harvest has now, top of mind recall
and has become a household name in the targeted villages.
(ii) ITC’s CSR Initiative in Rural Areas
ITC has adopted a good number of social initiatives in rural areas
around its plants, which are helping both the population of nearby areas
and the organization itself as a by-product. These developmental efforts
are providing meaningful employment opportunities in the village itself.
They are also increasing overall income and productivity of the people
influenced by them.
(i) Sunehra Kal (Better Tomorrow)
ITC has started comprehensive natural resource management initiative
called ‘Sunehra Kal’ in the vicinity of choupals. Sunehra Kal is a social

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forestry programme, launched by ITC in 224 villages in 14 mandals

around its Bhadrachalam plant in Andhra Pradesh. It has provided
earning opportunity to 6,405 households by the March 2005 after four
years of its launch in 2001. This is a part of ‘Triple Bottomline’ concept
of ITC covering economic, social and ecological goals of the
organization.
(ii) Live Stock Development Programme
ITC’s live stock development programme, in collaboration with an NGO
has created 32 cattle development centre covering 635 villages in Bihar,
Uttar Pradesh and Madhya Pradesh by 2005 and planned to add 600
new villages every year to its ambit. The aim of the programme is to
create the high yielding progenies through genetic improvements.
• HUL’s Vindhya Valley Project
In the year 2000 HUL (then HLL) helped state owned Khadi Board
through an advisory relationship with the government of Madhya
Pradesh. It helped the board to brand local produce from villages and
tribal areas, such as natural honey collected from forests in the state
under the brand name ‘Vindhya Valley’. The product range including
edible products like papads, pickles, masala, turmeric, was launched
in 2002.
• Colgate’s Project Jagruti
Colgate executes this rural oral hygiene drive along with the IDA (Indian
Dental Association). In 1998, 60 lakh people in 20,000 villages were
contacted under this project, of which 15,000 villages had no experience
to the availability of toothpaste and toothpowder let alone toothbrushes.
Though the aim of this drive is to promote the brand in rural areas, but
the overall strategy is also spreading the vital information on oral hygiene
among the lesser aware rural folks.

14.4 CONSUMER EDUCATION & CONSUMER

MOVEMENT IN RURAL INDIA

It was thought that passage of the Consumer Protection Act in India

in 1986 would encourage consumers to stand up for their rights and lead to

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an overwhelming number of disputes in consumer courts. Although a

consumer movement has yet to get going in India, existence of the act has
stimulated the creation of many consumer organizations across the country.
The number has such organizations has more the doubled in the last few
years so that there are now 600-800 organizations in the voluntary sector.
The movement has not blossomed because not all of the organizations are
active enough to make an impact, there has hardly been any unified action
which would demonstrate their strength, and there has been no active
consumer participation in the movements. Consumers claim that the lack
of consumer education makes them passive and apathetic, and blame
consumer organizations. The majority of consumers in the country are even
unaware of the existence of consumer courts to which they make take their
grievances. Consumer rights organizations, however, counter that they lack
sufficient funds and blame the government for their inaction. The author
acknowledges criticism that the Indian consumer movement is elitist and
considers the need to focus upon rural consumers, the significant
contributions that organizations have made in laying the foundations for
change, the need for consumer education, the need for specialists, the
particular need for consumer protection with regard to health-related
products, and support by voluntary health groups.
Rural consumers are often a victim of numerous malpractices. He
is often made to buy adulterated or substandard goods. Second hand goods
are passed on to him as new. Clever businessmen, through glossy
salesmanship, misleading advertisements and tall claims about their
products, rob the consumer of his hard-earned money. The consumer
knows what is happening to him. But except making a loud, individual kind
of protest, which has no effect on the mammon-worshipping businessmen,
there is very little that he can do to check his systematic exploitation. Since
a majority of our consumers, particularly in the rural areas, are illiterate,
they are not able to distinguish between the genuine and the spurious or
the good and the bad. It is mainly these consumers who suffer at the hands
of unscrupulous business-men. Our consumers also suffer from a total
absence of awareness among them. They know nothing about their rights,

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they are ignorant of the laws. First of all, the laws on trademarks, essential
commodities, drugs, weights and measures etc., are not very effective.
Secondly, the standard of morals in our country being what it is, the
businessmen do not find it difficult to steer clear of laws through greasing
the palms of the inspection staff. Besides, litigation is such a costly and
time consuming affair that no con-sumer has the courage and patience to
throw cudgels on behalf of his ever suffering community.
The consumer movement in India, unfortunately, has deve-loped
very slowly. Periodic efforts are made to organize a network of consumer
societies, but the impact has been minimal. Again it is ironical that while
defects in automobiles, freezers, fans, packed foods etc. have been,
highlighted, not much attention has been given the people’s essential
requirements. The masses are virtually voiceless in this field; they accept
whatever is given by the ‘grocer’. Owing to their general ignorance, they
are the most common victims of the force of capitalist’s exploitation.
Consumer protection should start at the lower levels and work upwards.
The laws of the land should be adjusted accordingly.
The Indian consumer also needs to be educated about his rights,
as has been done in the U.S.A., Britain and other advanced coun-tries.
Literacy rate in rural areas was pegged at 71 per cent in 2014, compared to
86 per cent in urban areas, while among the age group of seven years and
above, male literacy rate was found higher than the female literacy rate
(NSSO survey, 2015). Awareness of consumers about market and product
is essential against cheating and wrong choice-making. Consumer
awareness is a very comprehensive phenomenon, the roots of which touch
every aspect of development. A vigilant and well-aware consumer is an
asset to the nation. The consumers in rural market must have education
and awareness in a globalized world. According to the Census 2011, 69%
of the total population living in rural areas, which are unaware and ignorant
about their rights. Due to unawareness, rural consumer in India is exploited
in so many ways. In the liberalized and globalised world, it is necessary to
protect the rural consumers about their rights enabling them to make
decisions based on information about the goods and services.

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In this context, education can play an important role, by either formal

or non-formal approach. Various methods may have to be adopted to make
the programme effective and interesting. Good consumer education material
resources are made available by government departments, consumer
organisations, environmental protection groups, etc.
Looking into the account of present status of consumer education,
some steps have to be taken to improve the consumer awareness. In rural
areas, meetings and awareness camps should be organised by school-
and college-level students. More advertisements should be given on TV,
newspaper, magazines, etc. for creating awareness of rural consumer.
More emphasis may be given on the training through block level. Specific
projects should be sanctioned for the consumer’s welfare by different
institutions and so on.
Quality should become the norm instead of being the excep-tion in
this country. Every possible effort should be made to enable the consumer
to get full value for his money. In this venture the co-operation of all sections
of the people and also of the industria-lists is essential. If industry exercises
self-discipline and persuades all the manufacturers and businessmen to
ensure quality and correct weights, much of the difficulty will vanish.
Consumer’s organizations exist in some towns of the country, but after the
initial flush of enthusiasm they become silent and cease to function.
Obviously, consumers’ protection is possible in India, but effec-tive
enforcement by legislation and a sustained ‘drive to educate the people are
necessary.

14.5 ROLE OF GOVERNMENT & NGOs IN RURAL

MARKETING

The rural economy, a key driver of demand and a support for the
broader economy, has taken a knock from the two back-to-back seasons
of patchy monsoon rains. The segment drives demand for everything from
motorcycles to tractors, televisions and refrigerators.

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14.5.1 Role of Government in Rural Marketing

India is a land of villages and the Government of India has

been implementing numerous rural development programmes for
the upliftment of rural Communities. The investment by government
in infrastructure in 2015-16 was estimated to have gone up by Rs.
70,000 crore, including funds from the centre and state-run
undertakings. Highways and roads have proved to be a success
area of and in the absence of private investment, indications are
that the sector will receive special attention, including unveiling of
some innovative financing schemes.
The health of the banking sector has been a sources of worry.
The government has taken several measures, including pumping
in Rs. 70,000 crore to recapitalize state-run banks. Arun Jaitley’s
(Union budget 2016), the Finance Minister, focuses on doubling
farmers’ income in five years and boosting the rural sector, with
emphasis on employment and infrastructure.
The following are the various steps initiated by the Indian
Government to develop the rural markets:
1) Regulated markets
2) Infrastructure development
3) Co-operative Agricultural Marketing Societies
4) MSP Policy
Other Government initiatives include,
1) Credit cards (Kisan credit card) to farmers from the public sector
banks which helped them to take short and medium term loans
to buy seeds, fertilizers, etc. This enabled them to produce more
thus increasing their income.
2) Large inflow of investment for rural development programmes
from the government.
3) Schemes like IRDP (Integrated Rural Development
Programme) and REP (Rural Electrification Programme) in the
1970’s gave a boost to the agrarian economy. This resulted in

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changes in people’s habits and social life. REP gave impetus

to the development of consumer durable industry.
Government laid various plans and policies to increase the
standard of living of rural people like rise of agricultural wages,
PMERY, PMEGP, etc. It was found that NREGA (National Rural
Employment Guarantee Act ) and SGSY(Swaranjayanti Gram
SwarojgarYojana) both policies has played a role in developing the
rural markets. NREGA emphasis on increase in purchasing power
of rural people, so that demand of people rises and as result
marketers interest towards rural areas also rises. SGSY provides
incentive to start your own enterprises and it was found that number
of SHGs has been increasing every year. This means both policies
showing an upward trend in support of rural marketing.
Beside this, the development and welfare activities by
Government in rural areas were also strengthened in past five years.
The increasing development of rural area captures the intention of
large marketers and thus rural community becomes the target
market for every business concern. Every business enterprise wants
to capture the significant portion of rural area.

14.5.2 Role of NGOs in Rural Marketing

In India, the scope of development is not narrow but very

wide, as it includes not just the economic development but the growth
on social front, quality of life, empowerment, women and child
development, education and awareness of its citizens. The task of
development is so huge and complicated that just implementing
government plans is not sufficient to fix the problem. To achieve
this, a holistic vision and collaborative efforts involving various
departments, agencies and even NGOs is required. Owing to such
a great need, the number of NGOs in India is increasing rapidly and,
at present, there are about 25,000 to 30,000 active NGOs in India.
Superficially, rural development seems to be a simple task
but, in reality, it is not. Post Independence era has seen many rural

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development programmes through different five-years plans.

Alleviating poverty, employment generation, more opportunities for
generating income, and infrastructure facilities are emphasized
through the policies and programmes of the government. Along with
this, the panchayat raj institutions have also been initiated by the
government to strengthen the democracy at grass roots level. But
in spite of all the efforts rural poverty, unemployment rate, low
production still exists. The fight is still on for the basic facilities such
as livelihood security, sanitation problem, education, medical
facilities, roads, etc. Still there is a huge gap in terms of infrastructure
that is available in urban and rural areas. The basic rural development
should include all these apart from employment, proper water supply
and other basic facilities.
NGOs or Non Governmental Organizations have more
benefits of working in rural areas as compared to governmental
organizations because NGOs are more flexible, NGOs are specific
to a particular locality and moreover these are committed towards
serving the public and community as a whole. As the task of
development is massive, many NGOs are playing a catalytic role in
developing rural markets.
The role of NGOs in rural development includes:
i) The majority of NGOs is small and horizontally structured with
short lines of communication and is therefore capable of
responding flexibly and rapidly to clients’ needs and to changing
circumstances. They are also characterized by a work ethic
conducive to generating sustainable processes and impacts.
ii) NGOs’ concern with the rural poor means that they often maintain
a field presence in remote locations, where it is difficult to keep
government staff in post.
iii) One of NGOs’ main concerns has been to identify the needs of
the rural poor in sustainable agricultural development. They have
therefore pioneered a wide range of participatory methods for
diagnosis and, in some contexts, have developed and

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introduced systems approaches for testing new technology.

iv) NGOs’ rapport with farmers has allowed them to draw on local
knowledge systems in the design of technology options and to
strengthen such systems by ensuring that the technologies
developed are reintegrated into them (Chaguma & Gumbo,
1993).
v) NGOs have also developed innovative dissemination methods,
relying on farmer-to-farmer contact, whether on a group or
individual basis (Sollows, Thongpan, & Leelapatra, 1993).
As economic reforms and liberalization saw the government
vacating several areas to let private sector entrepreneurship flourish
and contribute to the high growth rate of the economy. In recent
years, a similar paradigm shift is needed to transform NGOs from
their dependence on aid and grants from within and outside for
transforming the rural scenario in the country. It is worth noting
that NGOs play a fundamental role in enhancing development
in rural areas, especially in the developing world. They initiate
programs aimed at transforming the lives of people in rural areas
from miserable to better status.

CHECK YOUR PROGRESS:

Q.1: Define ‘Social Marketing’.

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Q.2: What are the benefits of CSR campaigns in rural markets?
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Q.3: Mention at least two steps initiated by government to develop rural

markets.
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14.6 LET US SUM UP

Corporate Social Responsibility is regarded as a feasible driver for

rural development. The information in this article showed how companies
are collaborating to foster the socio-economic improvement of their rural
stakeholders. Although focusing on rural development probably is not
relevant for all types of companies, managers interested in supporting rural
development through CSR strategies could use the identified strategies as
a reference when designing their own strategies, considering of course,
their particular case and needs. At the same time, consumers’ protection is
possible in India, but effective enforcement by legislation and a sustained
drive to educate the people are necessary. The need of the hour is to focus
upon rural consumers, the significant contributions that organizations have
made in laying the foundations for change, the need for consumer education,
the need for specialists, the particular need for consumer protection with
regard to health-related products, and support by voluntary health groups.
To make this happen, the role of government and different NGOs are crucial.

14.7 FURTHER READING

1) Introduction to Rural Marketing by R Krishnamoorty, Himalaya

Publishing House, 2008.

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2) Rural marketing: Concepts and Practices by B. Dogra and K. Ghuman,

McGraw Hill, 2012.
3) Rural Marketing by R V Badi and N V Badi, Himalaya Publishing House,
New Delhi, 2006.
4) The Rural Marketing Book by P Kashyap and S Raut, Biztantra, 2005

14.8 ANSWERS TO CHECK YOUR

PROGRESS

Ans to Q No 1: Kotler (1985) defined Social Marketing as design,

implementation and control of programmes, seeking to increase the
acceptability of a social idea or cause in a target group(s).
Ans to Q No 2: CSR has two fold meaning. On one hand, it exhibits the
ethical behaviour towards its internal and external stakeholders. On
the other hand, it denotes the responsibility of an organization towards
the environment and society in which it operates. CSR is regarded
as tool through which companies give something back to the society.
Ans to Q No 3: The following are the two steps initiated by the Indian
Government to develop the rural markets:
1) Regulated markets
2) Infrastructure development

14.9 MODEL QUESTIONS

1. “Social responsibility campaigns are effective means of brand building

in the rural areas” – Do you agree? Justify your answer.
2. Explain some of the corporate led social responsibility campaigns in
the rural areas to build their brands.
3. Identify and discuss the challenges that lie ahead in implementing
social responsibility campaigns in the rural areas?
232 Industrial and Rural Marketing
Social Marketing Unit 14

4. Discuss the importance of consumer movement and education in

the rural market of India.
5. Justify how government and NGOs role are important in developing
rural markets.

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Industrial and Rural Marketing 233

 REFERENCES

1) Havaldar Krishna K (2005), Industrial marketing 1st ed., TATA McGraw

Hill Publishing Company Limited, New Delhi.
2) C Krishnamacharyulu& R Lalitha (2008),Industrial Marketing: A
Process of Creating and Maintaining Exchange,JaicoBook House.
3) Govindarajan M. (2003),Industrial Marketing Management,Vikas
Publishing House Pvt Ltd.
4) Ghosh P.K. (2005),Industrial Marketing, Oxford University Press.
5) Krishnamoorty R.(2008),Introduction to Rural Marketing Himalaya
Publishing House
6) Dogra B. and GhumanK. (2012) Rural marketing: Concepts and
Practices, McGraw Hill,
7) Mohamed (Dr.) N. S.,Rural Marketing in India: Opportunities,
Challenges and Strategies, www.alliancebschool.com.
8) KashyapP. and Raut S.,( 2005) The Rural Marketing BookBiztantra
Publications,
9) Advertising in Rural India: Language, Marketing Communication and
Consumerism by T.K.Bhatia, Tokyo Press, Tokyo 2000.
10) Brand Communication in Rural India by R V Rajan, The Hindu
Business Line, February 10, 2005.

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Industrial and Rural Marketing 235
236 Industrial and Rural Marketing