CONTD…

 According to National Commission on Agriculture –

“Rural marketing is a process which starts with a decision to produce a salable farm
commodity and it involves all the aspects of market system, and includes pre and post
harvest operations i.e. assembling, grading, storage, transportation and distribution”.

Rural Profile  / Features of Rural Market in India (Nov. 08)

 Large and scattered market: According to 2001 census rural population is 72% of total
population and it is scattered over a wide range of geographical area.
 Diverse socio-economic background: This is different in different parts of the country
and brings diversity in rural markets.
 Changing demand pattern: Demand pattern of rural customer is fast changing due to
increasing in income and credit facilities offered by banks like ‘kisan credit card’.
 Major income comes from agriculture: About 60% of the rural income is from
agriculture and hence the demand for consumer goods is high during harvesting season.
 Saving habits: Rural consumer is now having saving habits due to the efforts of co-
operative and commercial banks.
 Traditional outlook: Rural customer values old customs and traditions.
CONTD…
 Low standard of living: Rural consumer have low standard of living because of low literacy,
low per capita income and social backwardness.
 Poor infrastructure facilities: Facilities like roads, warehouses, communication system, etc.
are inadequate in rural areas. Hence physical distribution becomes costly.
 Media reach: The reach of pint media is 10% followed by TV 31%, radio 31% and cinema
33%.
 Communication: As per Indian Express report about 6 lakhs villages are without telephone
facilities.
 Electrification: About 88% of villages have been electrified and rest will soon get electricity by
“Rural Electricity Corporation”.

Potential of Rural Market-

 With urban market showing signs of saturation, companies are excited about the potential of
rural India. Some major companies that have focused in the rural sector are Philips, Parle,
Proctor & Gamble, Colgate-Palmolive, Godrej Soap, Bajaj Auto, TVS, Atlas Cycle and HUL.
CONTD….

Following points indicate the potential of rural markets:

Scope / Attractiveness of Rural Market / Why Companies Go Rural -

Large Population: According to 2001 census rural population is 72% of total population and it is
scattered over a wide range of geographical area
Rising Rural Prosperity: Average income level has improved due to modern farming practices,

contract farming, industrialization, migration to urban areas and remittance of money by family
members settled abroad.
Growth in Consumption: There is a growth in purchasing power of or rural consumers. The average
per capita household expenditure is Rs. 382.
Changing Lifestyle: Lifestyle of rural consumer changed considerably.
Life Cycle Advantage: The products, which have attained the maturity stage in urban market, is still in
growth stage in rural market. E.g. popular soaps, skin cream, talcum powder, etc.
Market Growth Rate Higher than Urban: As per the survey made by NCAER the growth rate of
FMCG market and durables market is higher in rural areas. The rural market share is more than 50%
for products like body talcum powder, toilet soaps cooking oil, hair oil etc.
Rural Marketing is not Expensive: To promote consumer durables inside a state costs Rs one crore

while in urban areas it will costs in millions.

Vastness and Uneven Growth: India has about 5 lakhs villages, which are scattered over a wide range
of geographical area, and also they are not uniform in size.
PROBLEMS OF RURAL MARKET…..(CONSTRAINTS)
 *Transport Problem: Transportation infrastructure is very poor in rural India. Though India
has the fourth largest railway system in the world, many villages remain outside the railway
network. Many villages have only kaccha roads while many of rural interiors are totally
unconnected by roads. Because of this the physical distribution is difficult in rural areas.
 Communication Problems: Communication infrastructure consisting of posts, telegraphs
and telephones is inadequate.
 Warehousing Problems: Central Warehousing Corporation and State Warehousing
Corporation do not extend their services to the rural parts. The warehouses at mandi level
are managed by co-operative societies who provide services to members only.
 Many Languages and Dialects: The number of language and dialects vary widely from
state to state, region to region and even from district to district. Though the recognized
languages are only 16 the number of dialects is around 850.
 Market Organization & Staff: Rural marketing needs large marketing organization and
staff to have an effective control, which requires huge investment.
 Non-Availability of Dealers: It is not possible to have direct outlets in each rural market;
firms have to have service of dealers, which is not easily available.
 Hierarchy of Market: Rural consumers have identified market places for different items of
their requirements. Thus depending upon the purchase habit of rural people, the distribution
network of different commodities has to be different.
FACTORS CONTRIBUTING TO GROWTH OF RURAL MARKETS……

 Employment Opportunities: The income from new employment and rural

development efforts has increased the purchasing power of rural people.
 Green Revolution: Due to green revolution a technological breakthrough has
taken place in rural India, which results into substantial wealth generation in
these areas.
 Favorable Government Policies: Tax exemption in backward areas, subsidy,
concession, incentives and heavy investment in rural development programmes in
has brought rapid growth of rural markets.
 Literacy Growth: Literacy rate is increasing in rural areas, nearly 45% of rural
Indians are literate. This brings social and cultural changes in buying behavior of
the rural customers.
 Rising Disposable Income: Good monsoons, green revolution and Administered
Pricing Mechanism (PAM) have raised disposable income in rural areas.
 Attraction of Higher Standard of Living: Rural people have been motivated to
change their lifestyles and have higher standard of living.
 Spread of Cable Television: The growth of satellite TV channels has made a major
impact on villages. This has led to a change in lifestyle and consumption pattern.
CONTD….

 Market Segmentation in Rural Market

 1. Geographic Segmentation: Segmentation on the basis of geography is
done depending on various factors such as Region: North, South, East and
West.
 Village Size: < 500 people, 501 – 2000 people, 2001 – 5000 people, > 5000
people Proximity to the feeder town:Density:  The number of people per sq.
km
 Climate: Moderate, rain fed or dry with scanty rainfall. Level of Irrigation:
Weather good, moderate, scanty or none at all.
 2. Demographic Segmentation: It is based on the population, age group,
literacy level and income of the rural consumer.
 3. Psychographics / Behavioral Segmentation: Such segmentation is done
using variables such as Lifestyle of the people, (whether rigid, traditional or
changing), Occasion, (whether on a regular day or a special occasion),
Benefits sought from the product (such as Quality, Price and Service), and
Loyalty to brands, (whether Low, Medium or High.)
CHANGING PATTERN

 The position in the rural market was totally different twenty years ago. At present
there is a demand for products like TV, fans, oil engines, readymade garments,
medicine, etc. New products like toiletries, baby care products and consumer
durables are now getting good demand. Demand pattern of rural markets are
changing due to the following reasons:
 production of food grains has increased. This enhanced the rural purchasing
power.
 Due to 2000 Exim policy, export of Indian agricultural products increased.

 Credit facilities extended by public sector banks by kisan credit cards helps
farmers to buy agricultural and consumer goods on installments.
 Co-operative and public sector banks are extending loans to the rural people and
creating job opportunities for them.
 Cable TV has played important role in bringing change in lifestyle and
consumption habits of rural people.
 Liberalisation facilitated contract farming thus the farmer has ready market for
their produce.
THE CONSUMER
 Profile of the rural consumer
 Location pattern of rural consumer

 Low literacy level of rural consumer

 Occupation of rural consumer

 Income of rural consumer

 Savings of rural consumer

 Reference groups: Primary health workers, doctors, teachers, and panchayat

members.
 Conscious customer: Though not educated, very conscious about value for money.

 Brand loyalist

 High degree of involvement: He checks and rechecks particularly for purchasing

expensive and durable products.
 Interpersonal communication: Its accounts 80% of the communication process in
village. Hence word of mouth recommendation by users has great influence.
 Media habits:
CONTD….
 Classification of Rural Consumer
 Affluent Group: This group is very small and almost negligible. This group
can afford luxury products. E.g. chilly merchants in Guntur (AP) and wheat
farmers in Punjab.
 Middle Class: This class is about 300 million in size and continues goes on
expanding. It forms the base for demand of manufactured goods in the
country. E.g. jute farmers in West Bengal and sugarcane farmers in UP.
 Poor: This class is about 250 million in size. Their purchasing power is very
low. E.g. poorest farmers of jawar and bajra of Bihar and Orissa.
 Methods for Motivating Rural Consumers
 Mass Communication
 Education
 Sales Force
 Physical Distribution
 Live Demonstration
FACTORS INFLUENCING BUYING BEHAVIOR-

 The various factors that effect buying behavior of in rural India are:
 1.Environmental of the consumer - The environment or the surroundings, within which the
consumer lives, has a very strong influence on the buyer behavior, egs. Electrification, water
supply affects demand for durables.

 2.Geographic influences - The geographic location in which the rural consumer is located also
speaks about the thought process of the consumer. For instance, villages in South India accept
technology quicker than in other parts of India. Thus, HMT sells more winding watches in the
north while they sell more quartz watches down south.

 3.Influence of occupation – The land owners and service clan buy more of Category II and
Category III durables than agricultural laborers/farmers.

 4.Place of purchase (60% prefer HAATS due to better quality, variety & price) Companies need to
assess the influence of retailers on both consumers at village shops and at haats.

 5.Creative use of product ex Godrej hair dye being used as a paint to colour horns of oxen,
Washing machine being used for churning lassi.
CULTURAL FACTORS INFLUENCE OF BUYING BEHAVIOR

 Cultural factors exert the broadest and deepest influence on consumer behaviour. The marketer
needs to understand the role played by the buyer's culture. Culture is the most basic element
that shapes a person’s wants and behavior.

In India, there are so many different cultures, which only goes on to make the marketer's
job tougher. Some of the few cultural factors that influence buyer behavior are:

 1.Product (colour, size, design, shape): There are many examples

 that support this point.

 For example, the Tata Sumo, which was launched in rural India in a white colour, was not well
accepted. But however, when the same Sumo was re-launched as Spacio (a different name)
and in a bright yellow colour, with a larger seating capacity and ability to transport good, the
acceptance was higher.
Another good example would be Philips audio systems. Urban India looks at technology
with the viewpoint of ‘the smaller the better’. However, in rural India, the viewpoint is totally
opposite. That is the main reason for the large acceptance of big audio systems. Thus Philips
makes audio systems, which are big in size and get accepted in rural India by their sheer size.
2.Social practices : There are so many different cultures, and each
culture exhibits different social practices.
For example, in a few villages they have common bath areas.
Villagers used to buy one Lifebuoy cake and cut it into smaller
bars. This helped lifebuoy to introduce smaller 75-gram soap
bars, which could be used individually.

 3.Decision-making by male head : The male in Indian culture

has always been given the designation of key decision maker.
 For example, the Mukhiya’s opinion (Head of the village), in
most cases, is shared with the rest of the village. Even in a house
the male head is the final decision maker. In rural areas, this
trend is very prominent.