RM Module 2

8/7/2019 RM Module 2

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RURAL MARKETING ENVIRONMENT

The Rural Market is India is much larger than the urban market in terms of

population and number of households. The rural market consists of more than 10

million households with a total population of about 740 million. In spite of beinglarger in size rural areas are characterized by low per capita income, low literacy,

average agricultural productivity and low level of industrialization.

Given the impressive development that has taken place in rural areas under the

Five Year Plans and other special programmes, the rural market today offers vast

untapped potential. Development programs in the fields of agriculature and allied

activities, health, education, communications, rural electrification and others, haveimproved the levels of general awareness in the rural areas and considerably

changed the lifestyles of the rural populace. Some market research agencies forecast

that rural demand will outstrip urban demand in near future. This has probably

already happened in states like Haryana, Punjab and western parts of Uttar Pradesh.

To successfully exploit the potential offered by rural market, there is a need to

understand the market not just in terms of number of households and population,

but in terms of their occupation pattern, income generation, marketing arrangements

for agricultural produce, the process of rural and cottage industrialization,communication facilities, infrastructure development, rural buyer behaviour, attitude

and belief of rural people and their changing values and aspirations.

This chapter presents the rural marketing environment with a view to enable

marketers to understand the rural market and therefore to plan and developstrategies for penetrating it.

POPULATION

Rural population forms a major chunk of the Indian population from time

immemorial and this trend is expected to continue in future as well. This can be

seen in table below which not only presents the past and current statistics, but also

projections for the future.

Population in India - proportion of rural vs urban.

Year Ruralpopulation

Proportionto total

Urbanpopulation

Proportionto total

Totalpopulation

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in millions population

(%)

in million population

(%)

in millions

1951 295.0 82.6 62.0 17.4 357.0

2010* 822.0 69.8 355.0 30.2 1177.02015* 862.0 68.7 392.0 31.3 1254.0

2020* 897.0 67.6 430.0 32.4 1327.0

* Projections

Source : Census of India Reports 2001

About 70 per cent of Indians reside in rural areas. In other words, for everyconsumer in an urban area, there are three of them in rural areas. Though the

percentage of rural population to total population shows a slight decrease over the

years, in absolute numbers rural population continues to increase at a higher ratethan the urban population.

The situation does not seem to change very drastically, w hen population are

considered. The rural population might show a paltry decrease of a bout two tothree per cent during the year 2020 as observed presently, but the absolute numbers

of rural population will continue to increase.

It should be noted here that though a large population will require a wide variety

of consumables, durable goods, and services, but these needs do not automatically

guarantee a market, unless backed by a rising disposable income and the resultant

purchasing power.

Occupation Pattern

The main occupation for a vast majority of rural population is agriculture and

allied activities. It is pertinent to consider the workers among rural population to

study the occupation pattern. This excludes children and othese who are notgainfully employed. The table below gives the sex-wise distribution of rural

workers as per the broad occupation categories. Table below presents the proportion

of workers as per detailed occupation categories for both males and females,according to National Sample Survey reports.

Industrial Classification of workers (Proportion to total)

Sl.No. Industrial classification 1993-1994 1999-2000

Males Females Males Females

1 Agricultural hunting, forestry

and fishing

74.1 86.2 71.4 85.4

2 Mining and quarrying 0.7 0.4 0.6 0.3

3 Manufacturing 7.0 6.9 7.3 7.6

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4. Electricity, gas and water 0.3 0.1 0.2 0.0

5 Construction 3.2 0.9 4.5 1.1

6. Wholesale and retail trade andrestaurants and hotels

5.5 2.1 6.8 2.0

7 Transport, storage and

communication

2.2 0.1 3.2 0.1

8. Financing, insurance and real

estate business services

0.4 0.1 0.5 0.1

9. Community, social and

personal services

6.6 3.3 5.6 3.6

10. All 100 100 100 100

Source : NSS, 55th Round

About 40 per cent of the rural workers own or lease land and cultivate it for their

livelihood. Another 33 per cent are dependent on these cultivators for jobs as

agricultural labourers. Thus, a total of 73 per cent of rural workers and their familiessolely depend upon land for their living. This fact is amply supported by table also.More than 70 percent of males and 80 percent of females depend on agriculture and

related activities like hunting, forestry, and fishing. There are others, constituting a

small proportion, who is engaged in manufacturing, business and services. Theseare people engaged in running petty shops, itinerant merchants and a small minority

of salary earners like teachers, health workers, and village level officials. The

implication of this occupation pattern is that income generation in rural areasentirely depends upon how the basic resource, land, is distributed, how the land is

used, what crops are cultivated, how much is marketed, how much is consumed, and

what arrangements are available to market the agricultural produce. Rural areas

prosper if there is adequate rainfall, favourable weather conditions, and availabilityof appropriate technology. This has happened in states like Punjab, Haryana and

Western Uttar Pradesh. On the other hand if weather is unfavourable, rural income

suffers a great deal, as often happens in drought prone areas. In fact these days,farmers’ suicides have become a regular feature in such areas. So, disposable

income in the hands of rural people is very much dependent on the status of

agriculture and other allied activities.

Income Generation

The occupation pattern dictates the pattern of income generation also. The proportion

of income generated in rural areas, source wise, is present in the Table below.

Income generation in rural areas

Serial No. Sources of Income Proportion to rural income

(%)

1 Agriculture 59

2. Agricultural labour wages 16

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3 Household industry 9

4 Others 16

5 Total rural income 100

With agriculture being the major occupation, 75 per cent of income generated in

rural areas is from agriculture and agriculture related activities. It further confirmsthe earlier statement that the prosperity of rural areas and development of rural

market, depends upon the progress of agriculture and related activities to a large

extent.

Location of Rural Population

One o f the deterrents for the marketers to exploit the rural market potential has

been the vastness of area to be covered and the location of the population. It is

much easier to cater to the needs of urban population because of its concentration inrelatively smaller geographical areas. Besides, mobility and communication are

assured in urban areas. The urban population is concentrated in about 2,453 metros,cities and towns, while the rural population is spread over 5,93,643 villages. Eventhough rural population is nearly three times the urban population, their places of

location are still several times greater.

Table below gives the location and concentration of rural population.

Sl No. Population range(No. of persons) Number of villages Proportionto total (%) Populationin millions Proportionto total (%)

1. Lessthan 200 91555 15.4 12.61 1.7

2 200 to 499 127515 21.5 57.88 7.8

3. 500 to 999 145412 24.5 124.66 16.8

4 1000 to 1999 129979 21.9 190.69 25.7

5 2000 to 4999 80414 13.5 221.12 29.8

6 5000 to 9999 14806 2.5 83.10 11.2

7 10000 to above 3962 0.7 51.94 7.0

8 Total 593643 100.00 742.00 100.00

Source : Census 2001

It should be noted that these villages are not uniform in size. Nearly 37 per cent of the villages have a population of less than 500 persons or about 100 households, and

they are probably of no consequence for marketers since the proportion of

population present in these villages accounts for only 9.5 per cent of the total ruralpopulation. Yet it should be borne in mind that people in these villages too have

land which they cultivate to generate some income. Thus, the location and size of

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population in each phenomenon is not true for the whole country and there are wide

variations among the different states. In states with adequate irrigation facilities and

fertile lands, the concentration of population is more as compared to states with lowirrigation facilities and lack of arable land.

Expenditure Pattern

The expenditure pattern of rural and urban areas is presented in Table below. The

National Sample Survey Organization conducts consumer expenditure surveys in thecountry. The data available from the latest round conducted during July 2004- June

2005 is presented in the table. Usually, expenditure data is presented ‘expenditure

group-wise’ for different items under two major headings-food items and non-food

items. The figures are the value of consumption of different items per person per month.

The total expenditure per year on food items is of the order of Rs.27,38,781

million in rural areas as opposed to Rs.15,35,511 million in urban areas. Theexpenditure incurred by rural areas is nearly double than that of urban areas.

Similarly the expenditure on non-food items is slightly more than the expenditureon food Items in urban areas. For example consider footwear, rural people put

together spend Rs.52,177 million on footwear, which is about 1.3 times the urban

expenditure of Rs.38,988 million per year. It is possible that families in low expenditure

categories do not spend any amount on footwear, while those families in higher expenditure categories spend as much as their urban counterparts. In addition, rural

consumers may not go in for nationally branded footwear, but might opt instead

for locally made, low quality footwear like PVC shoes and ‘Hawaii chapples’

It is significant to note that the rural population as a whole incurs more

expenditure on medical requirements as compared to urban population. The medicalrequirements as compared to urban population. The medical expenses incurred by rural

population on both institutional and non-institutional medical treatment is about 1.6 times

than that of urban population. The rural population spent Rs.3,23,571 million as medicalexpenses, whereas the corresponding figure for urban population was only Rs.1,97,065

million. It is interesting to note that there was no difference between rural and urban

population regarding dependence on institutional and non – institutional medical

treatment.

Rural expenditure on durable goods per year is about Rs.1,93,572 million, whereas the

urban population spends only Rs.1,61,887 million. Here again, the difference will below per capita consumption in rural areas and high per capita consumption in urban

areas. Further, the demand for durable goods in urban areas may be for very

sophisticated and superior quality goods like automobiles, washing machines, quartzwatches, colour televisions etc., while in rural areas bicycles, mopeds, electrical

goods, and wound watches, black and white televisions etc., are in demand. The

demand in rural areas is for cheaper and long lasting products. From this above data it

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is clear that rural areas are not lagging far behind the urban areas in their demand

for food and non food items.

Literacy Level

Table below represents the literacy level of rural and urban areas for males andfemales respectively.

Literacy levels

Sl.No. Sex Literacy levels in percentage

1971 1981 1991 2001

R U R U R U R U

1 Males 34 61 41 66 58 81 71 87

2 Females 13 42 18 48 31 64 47 73

3 All 24 52 30 57 45 73 59 80

Source : Census of India reports.

Rural Marketing

Given the distribution of rural and urban population, it can be seen that the number of literates in rural areas are more than those in urban areas. For example in 2001, even

though the urban literacy level was high at 80 percent, the number of adult literates in

urban areas was around 200 million persons as opposed to about 367 million in ruralareas. Where, it is seen that rural population in 2001 is 742 million and urban population

is 285 million. The same can be observed in other years also.

A higher literate population implies that communication does not prove a hurdle withthe rural population, provided appropriate means are also chosen. Today, television has

proved to be effective mass medium for communication with the rural masses. The

television network in the country now covers almost 100 percent of the populationoffering greater reach when compared to any other medium. The introduction of

“Direct to Home (DTH)” by Doordarshan covers the entire country including the hilly

regions.

LAND DISTRIBUTION

It has been seen earlier that nearly 75 percent of rural income is generated byagriculture. The basic resource in agriculture is land and so land distribution is the

main factor in deciding the distribution of rural income. ………

The fact that sub-division and fragmentation is widely prevalent in rural areas,

especially when landed property is partitioned among the family members. With the

total land available for cultivation being constant – and likely to shrink in future due toother demands like land for Special Economic Zones (SEZ), industries, extension of

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urban areas-fragmentation is disadvantageous since the benefits of economies of scale

cannot be availed. Thus, rural areas consist of large number of small consumers

though the sum total of their consumption will exceed the urban consumption.Marketing efforts of a high magnitude are required to cater to approximately

100million farming families. So the rural market is characterized by very wide

disparities in consumption levels.

Land Use Pattern

The land use pattern also provides an interesting study. There appears to b e excessive

dependence on food crops rather than non-food commercial crops. Nearly 74 percent

of the area under cultivation is occupied by food crops and only 26 percent under

non-food crops. In other words, out of the gross cultivated area of around 190million hectares, 140 million hectares, ie., 74 percent are under food crops. The

preference for food crops is due to t he fact that the farmers prefer to have their

food secured and therefore retain sufficient quantities of the production for their own

consumption and only the balance goes to the market. It is estimated that nearly half the production of food crops is retained for home consumption whereas in the case of

non-food crops, the entire production is marketed. For example, in the case of cotton,sugarcane, groundnut etc., almost the entire production is marketed. This has an

implication in generation of disposable income. Small farmers particularly grow food

crops, most of which a re earmarked for their disposable income is small. Large

quantity is sold. Therefore, their disposable income is small. Large famers, on theotherhand, grow more commercial/non-food crops and are able to generate adequate

disposable incomes. The marketers are more interested in targeting this group.

However, this situation is solely changing with the introduction of high yielding

varieties, which are supposed to be scale neutral, even though they are capital intensive.

Nearly 60 to 90 percent of the area covered by food crops is under high yieldingvarieties now. The coverage by high yielding varieties varies from crop to crop. For

example, in wheat and rice nearly 86 percent and 74 percent of the area under the crop

is covered by high yielding varieties respectively. For other food crops likesorghum, maize and ragi it varies from 60 to 80 percent. The popularity of high

yeilding varieties has made even small holdings market a greater proportion of their

produce, since their production has increased. This means that even small holdings are

able to generate some amount of disposable income.

From experience, it has been observed that due to introduction of high yielding

varieties (which have ushered in the so called ‘green revolution’) many rural areas of states endowed with good natural resources like Punjab, Haryana, Western Uttar

Pradesh etc., have become prosperous.

Irrigation

Irrigation plays a major role in increasing the potential of rural market. In fact,

irrigation is the forerunner for adoption of new technology in agriculture and

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consequently for prosperity. Considerable investments have been made and are being

made to increase the irrigated area in the country through major, medium and minor

irrigation schemes. For example, the Sardar Sarovar Project across river Narmada isexpected to irrigate about 19 lakh hectares of land in states like Gujarat, Madhya

Pradesh and Maharastra. One can well imagine the prosperity of the farmers in these

beneficiary states.

It is seen that the major source of irrigation is wells followed by canals. The g ross

irrigated area is around 80 million hectares, which works out to about 40 percent of gross cropped area. So, it should be recognized that more than half of rural India is

still dependent on rainfall for agricultural operations. However, steps have been taken

to increase and improve the irrigation potential through programmes like Accelerated

Irrigation Benefit Programme (AIBP) in the year 1996-97 as well as through major andmedium irrigation projects. In addition to restoring and augmenting storage capacities

of water bodies, and recovering and extending their lost potential, a pilot scheme

namely ‘National Project for Repair, Renovation and Restoration of Water Bodies’

was launched in January 2005 by the Government of India. Adequate governmentalattention to irrigation has the potential to increase the prosperity of rural areas. The

government also encourages judicious use of water through ‘Drip Irrigation’programme so that more area can be covered under irrigation. Presently about three

lakh hectares are under drip irrigation in various states in the country. There is a

great scope to extend this method of irrigation in the context of shrinking ground

water supply.

In order to address the problems of rainfed areas for their sustainable and holistic

development, a ‘National Rainfed Area Authority’ was established in 206-07 with themain aim of achieving efficient water use. Wherever irrigation facilities are available,

the rate of technology adoption is also higher which results in increased productivity

and thereby increased income to the rural people.

DEVELOPMENTAL PROGRAMMES

The Five Year Plans have witnessed massive investments by the Central and State

Governments in rural areas through a number of development programmes. Some of

these programmes which contributed substantially to the income of rural people and

created considerable impact are listed below :

• Intensive Agricultural District Programme (IADP- Popularly known as package

programme)• Intensive Agricultural Area Progamme (IAAP)

• High Yielding Varieties Programme (HYVP-Popularly known as green

revolution)

• Drought Prone Areas Programme (DPAP)

• Small Farmers Development Agency (SFDA)

• Marginal farmers and Agricultural Labourers Development Programme(MFAL)

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• Integrated Tribal Development Programme (ITDP)

• Hill Areas Development Programme (HADP)

• Operation Flood I,II and III (White Revolution)

• Sericulture Development

• Inland and Marine Fisheries Development Programme (Blue Revolution)

• Intergrated Rural Development Programme (IRDP)• Sampoorna Grameen Rozgar Yojana(SGRY)

• Desert Development Programme (DDP)

• Intergrated Wastelands Development Programme (IWDP)

• National Rural Employment Guarantee Act (NREGA)

• Swarnjayanthi Gram Swarozgar Yojana(SGSY)

• Pradhan Mantri Gram Sadak Yojana (PHGSY)

• Accelerated Rural Water Supply Programme (ARWSP)

• Total Sanitation Programme (TSC) and others.

While some of these programmes focused mainly on agriculture and alliedactivities, there a re other programmes with massive investments which are devoted

to the development of rural people. These include programmes for improvement inhealth and sanitation, education, adult education recreation, skill development, women

development and so on. These have made a considerable impact on the lifestyles of

the masses by exposing them to modernization, reducing the drudgery of their work,and adding a modicum of dignity to their lives.

To cite a few examples, the high yielding varieties programme was expected to

generate an additional income of Rs.1000 to Rs.2000 crore during the initial years andwould then stabilize afterwards. Similarly, Operation Flood I, II and III have paved

the way to market nearly ten million litres of milk from rural areas everyday. One canv ery well imagine the cash inflow in the hands of farmers who own milch animals.Under SFDA Programme, small farmers are given a subsidy of 25 percent for

creating permanent assets on their farms like wells and pumpsets, bullocks, bullock

carts, milch animals etc. The subsidy is increased to 33.33 percent in the case of marginal farmers and agricultural labourers. The rest of the amount required for

acquiring a permanent asset is provided as bank loan either through cooperatives or

commercial banks. Programmes like these have not only increased the demand for

agricultural inputs but has also increased the demand for other related goods andservices. In addition, increased disposable incomes are available for s pending on

erstwhile ‘luxury’ goods like toilet and washing soaps, cosmetics, educational

supplies, pharmaceutical products etc., for the convenience of the rural family.

These development programmes have conferred enormous benefits to rural areas in

terms of increase in production and productivity, of agriculture and related items like,milk, eggs, meat, silk yarn, fish, horticultural products. Along with these, it has also

brought about increased employment opportunities, development of women etc. All

these programmes have empowered the rural people with greater purchasing power.

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INFRASTRUCTURE FACILITIES

Infrastructure facilities like roads and communications network, rural electrification,public distribution system, cinemas, television coverage and the like have also

received considerable attention in rural areas.

1. RURAL ELECTRIFICATION :

Rural electrification has been going on in a big way. Statistics indicate that 5,09,620villages, which is about 88 percent, now have an electricity connection. It is

estimated that only 80,000 villages are yet to get electricity, out which 18,000 are

remote villages. The main aim of this operation is to provide electricity required for

agricultural operations and for rural and cottage industries in addition to lighting.The Central Government created an organization called ‘Rural Electrification

Corporation’ with the sole idea of financing rural electrification projects. In addition

to this, one of the technology missions, Rural Electricity Supply Technology (REST)

and Pradhan Mantri Gramodaya Yojana (PMGY)are also very much involved in ruralelectrification. As a result of these efforts, it is hoped that all villages will have

electricity by 2010. It is also necessary to mention at this stage that considerableresearch efforts are being undertaken to develop biofuels. Ethanol has already been

identified to blend with diesel. In 2007, the planning Commission also recommended

setting up of National Mission on Biofuels with special focus on plantation of Jatrapha.

The raw materials for biofuels are agricultural products and by –products. Progressis also underway to t ap solar energy, small hydro power and wind energy. These

sources are considered to be ideal for remote villages, where it is not economical to

draw power lines from the main grid.

2. Rural Comunication

a) Road Network : The road network of over three million kilometers in

India is the largest in the world. The Golden Quadrilateral Project

connecting North-South and East – West corridors is near completion. Theproposed corridors have to necessarily run through rural areas. While this

will provide some amount of connectivity to such villages, there are special

efforts to connect throughout the year. A centrally sponsored scheme

called ‘Pradhan Mantri Gram Sadak Yojana’ (PMGSY) has been launchedwhich seeks to provide connectivity to all unconnected habitations in rural

areas, with a population of over 500 persons by the end of Tenth Plan

Period. With respect to hill states and desert areas, the objective is toconnect habitations with 250 persons and above. A requirement of

Rs.60,000 crore has been estimated to be the cost of achieving this

objective. Fifty per cent of t he cess collected on high speed diesel will bethe main source of funding for the scheme. In a couple of years, it can be

expected that all villages with at least a population of 500 people will be

accessible by all-weather roads, which will facilitate the distribution and

marketing of products across regional boundaries. Certain states like

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Tamil Nadu and Gujarat already have one daily public transport connecting

all villages.

b) Rail Network : The Railway network runs through rural areas

connecting at least a few thousands of villages. It is estimated that the total

rail length is 63,123 km. This means that there will about 19km rail lengthper 1000 sqkm area or about 6 km of rail length per lakh population. While

there are no definite statistics available regarding rural coverage by

railways, it can be assumed that not many railway lines pass through ruralareas. The increase in rail length has also not been very significant and

hence the possibility of all the villages being connected by rail is

currently remote. Further, considering the huge costs involved and the

traffic to be generated, the question of viability also arises.

c) Cinema Houses : Of late, the growth in cinema houses has been

somewhat stagnant or even diminishing in urban areas due to advent of

expansion of television network and cable television in urban areas. Thisnetwork has also penetrated in rural areas. Hence, the possibility of

coming up of new cinema houses appears to be very bleak. The tablebelow gives the number cinema houses in urban and rural areas from the

year 1999 to 2005.

Number of permanent and touring cinema houses

Sl.No. Year Number of cinema halls

Permanent Touring Total

1. 1999 9095 3453 12548

2 2000 NA NA 118363. 2004 8112 2446 10558

4. 2005 8008 1993 10001

Source : selected Socio-economic Indicators, 2002, Central Statisticalorganization, Ministry of Statistics and Programme Implementation,

Government of India.

It can be assumed that the touring cinema halls are mostly located in

rural areas. These cinema halls have thatched or zinc sheet roofs in rural

areas. This type of construction enables them to easily shift from one

village to another. These touring cinema halls function for a specifiedperiod and then shift elsewhere. In order to attract crowds, they frequently

change the movie being screened. These touring halls have good potential

as an inexpensive and effective means of communicating with the ruralpeople. But unfortunately, their growth shows a diminishing trend, both in

rural and urban areas. In future this medium for communication may lose

its importance.

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d) Television Network : Telecast by doordarshan covers the entire country

including the rural population. With the introduction of “Direct to

Home(DTH)” by Doordarshan, even the remote areas and hilly regions arealso covered. Statistics indicate that the television transmitters cover more

rural people than urban people. However, the question is whether the rural

people have access to a television set to view the programmes or nto. Theother limitation is the availability of electricity in rural areas. It has been

seen earlier that only 88 per cent of the villages have electricity. In addition

to Doordarshan, there are numerous satellite channels like Sun TV, Gemini,Jaihin, Kairali, ETV, PTC and many others which cater to regional interests

and reach all the villages. Like DTH, there are other caterers like Dish

TV, Tata Sky, etc., which cover the entire country. Probably over a

period of time, cable TV is likely to be replaced by DTH because itrequires a small initial investment and offers a bouquet of channels at a

nominal subscription. Doordarshan has special programmes for rural

audience like Krishi Darshan, Farm and Home Programme, Desh ki

Dharthi etc. These programmes concentrate on diffusing new technology inagriculture and provide socially useful information like that on polio

vaccine, family welfare, child and adult literacy to rural masses. The onlyindividual television sets. However, installation of community television

sets has resulted in enhancing viewership. While television undoubtedly

has its champions, it has its share of critics as well. Either way, the

potentially of this medium for promotion and communication with ruralmasses cannot be underestimated. It has become a boon for marketers as

advertisements can now reach out to a vast new (rural) audience hungry

for entertainment and information on lifestyle goods and services. In fact,rural consumers can now afford simple colour television sets as their prices

have declined considerably with the introduction of the expensive LCD

television sets.

e) Postal System : The country is well covered by the postal system. There

are more number of post offices in rural areas than in urban areas. Inaddition the population covered is much less as compare to urban areas.

It is interesting to note that the number of post offices in rural areas is

about eight times than t he number in urban areas. Consequently, thenumber of persons covered per post office in rural areas is only 25

percent as compared to the number in urban areas. However, it does not

mean that the letters are delivered more quickly in rural areas than inurban areas as there are constraints of transport and communication

facilities in rural areas and the heavy volume of traffic in urban areas. Yet

it is good augury that rural areas have more post offices than urban areas.Probably this is one of the reasons why the government is thinking of

expanding the scope of post office to include sale of insurance, mutual

funds and other activities.

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f) Telecommunication : A revolution has taken place in the field of

telecommunication in the country. There are two government controlled

organizations like Mahanagar Telephone Nigam Limited (MTNL) andBharat Sanchar Nigam Limited (BSNL). Traditionally these were typical

government departments and were later converted into companies with

business objectives. Under the liberalization and globalization regime, anumber of private telephone companies were permitted to operate in the

country. This gave rise to companies like, Tata Telecom, Reliance

Communication, Airtel, Vodafone etc. These companies provide bothfixed line phones and wireless mobile hand sets. This has increased the

number of fixed line phones and mobile hand sets.

The Teledensity is poor in rural areas as compared to urban areas. Thedensity doubled in rural areas over a period of five years, while it saw a

growth of about 3.4 times in urban areas. The current position of

telephones and teledensity is presented in the table below :

Number of telephones and teledensity as on 31st December 2006 (fixed and

mobile)

Sl. No. Area No. of telephonesin million

Teledensity (No. of telephonesper 100 persons)

1 Rural 14.85 1.86

2. Urban 175.07 53.34

3. Overall 189.92 16.89

Source : Department of Telecommunications, Ministry of communications

and information Technology, Government of India.

Between December 2005 AND 2006, there has been slight increase in rural

teledensity, while it was very pronounced in urban areas. However, there is

a silver lining to the dismal cloud. The rural telephone market has beenestimated to be worth Rs.40,000 crore by the year 2010. to exploit this

potential BSNL will set up 8000 towers in rural areas. Further the rural

mobile telephony will offer help lines concerning dairy, farming andmandies (agricultural produce markets). The handset manufacturing sector

will offer subsidized rugged handsets to the rural subscribers. In additionconcessional tariff has also been proposed for rural sector. Probably within adecade handsets in rural areas will be common in the same way as seen in

urban areas today. At this stage it should be mentioned that mobile

telephony offers excellent promotion and information opportunities. In fact

today in urban areas, the promotion activity through short message service(SMS) and calls has become a nuisance to many subscribers and now they

exercise their right to block such message and calls.

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RURAL CREDIT INSTITUTIONS

For a long time, cooperative societies were the only organized agency for disbursing

credit in rural areas, apart from a host of private sources like money lenders, traders,

commission agents and others. After the nationalization of banks in 1969, a number of branches in rural areas have been opened for providing credit to agricultural

operation. In addition, there are also around 196 Regional Rural Banks, which

function with one or two districts as their jurisdiction. These agencies have enabledfarmers to obtain credit for the purchase of all agricultural inputs at affordable

interest rates. In fact, nearly 90 percent of tractors purchased in rural areas are out

of loans provided by State Agricultural Rural Development Banks and nationalized

and non-nationalised commercial banks. More details about credit availability inrural areas and its impact on rural markets are presented in a separate chapter on

rural financial institutions. It is of interest to market men that the recently propsed

loan write off of Rs.71,000 crore will prove to be3 a boon for rural market in as

much as this amount will stay within the rural economy.

RURAL RETAIL OUTLETS

It is estimated that there are 20 lakh private retail outlets in rural areas. Apart from

these, there are r,84,175 fair price shops in rural areas as on July 31,2006.

Cooperative outlets are also present. The fair price shops are functioning under thepublic distribution system for supply of essential commodities like sugar, edible

oils, food grains etc. The above figures boil down to the f act that on t here is a

rural outlet for every 350 to 400 persons. Thus, there is place available for themarketers to store and exhibit their products. The shops may not be like the ones

as seen in urban areas,, but are small with meager stocks, lower range of products,

low inventory, observing convenient timings and offering short term credit to itscustomers.

PRINT MEDIA IN RURAL AREAS

The reach of print media in rural areas appears to be very poor except in certain

pockets of the country. It is estimated that hardly 5 to 10 percent of newspapers

reach rural areas. While the reach rural areas. While the reach of English dailies andperiodicals is dismal, it is quite encouraging in the case of certain vernacular dailies

and periodicals. For example, it is said that nearly 53 per cent of copies of the Tamil

daily ‘Dina Thanthi’ Published from several towns in Tamil Nadu are sold in ruralareas. Similarly ‘Malayala Manorama’ and Mathruboomi’ in Kerala, ‘Samyuktha

Karnataka’ in Karnataka and Lok Satha’ in Maharastra are real sellouts. The wide

circulation of vernacular dailies in rural areas has exposed the people tomodernization. Coupled with technology diffusion, the improvement in infrastructure

facilities has created a demand not just for agricultural inputs but also for other

products like mopeds, electrical goods, toilet soaps, washing soaps, and services like

banking, education, health etc., in rural areas. Today the requirement of rural areas

14



has considerably expanded both in width and depth and they also demand a number

of products which can be classified under various categories. In fact, the rural market

demand outstrips the urban demand in states like Punjab, Haryana, western Uttar Pradesh, Tamil Nadu, Andhra Pradesh and Maharastra. With the various

development programmes under implementation, rural demand is likely to be atleast

equal to urban demand, if not more.

RURAL AREA REQUIREMENTS

The requirements of rural areas can be calssified under the following heads :

1. Household Consumables

•

More and better food• More and better clothing

• Medicines

• Toiletries and cosmetics

• Educational supplies

• Wines and spirits

• Beverages

• Cigarettes, beedies etc.

2. Household Durables

• Furniture

• Cooking utensils

• Electrical appliances

• Radio and television sets

• Clocks and wrist watches

• Sewing machines

• Ornaments and jewellery

3. Construction materials

•For residences

• For infrastructure facilities

• For rural and cottage industries

• For business establishments

• For society/ community institutions

4. Consumables Agriculture Inputs

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• Manures and fertilizers

• Seeds

• Agro-chemicals

• Tools and implements

• Petrol, diesel, oils and lubricants,

• Electricity5. Capital Agricultural Inputs

• Tractors and implements

• Trailers

• Harvesters, winnowers, threshers

• Pump sets- oil engine and electrically operated, pipes and fittings for irrigation and drainage

• Drip irrigation equipment

6. Transportation Equipments

• Bullock carts

• Bicycles, motor cycles and mopeds

• Jeep / car

• Light commercial vehicles

7. Services

• Banking

• Health

• Education• Transportation and communication

• Electricity

It is up to the marketers to identify the needs of different areas and fulfill themaccordingly.

16



RURAL DEMAND AND

RURAL MARKET INDEX

As seen in the earlier chapter, the predominant occupation in rural areas is

agriculture and agriculture related activities. Since agriculture is a seasonal

occupation and source of income generation, the demand pattern also follows aseasonal pattern. In addition, t he rural population is highly spread as opposed to the

concentrated nature of urban population. Likewise, there are a number of

distinguishing features of rural and urban areas which are reflected in the demand

pattern.

A number of problems in marketing to rural areas emanate from these differences.

The agricultural input marketing firms have to depend solely upon the rural market

for t heir sales. They seem to have understood the rural market better and haveevolved appropriate strategies to realize the available potential, even though there

may be further scope for improving upon the adopted strategies. It may beworthwhile for the consumable and durable marketing firms to study and learn from

the experience of agricultural input marketing firms. Excepting a few companies

like ITC, HUL, and the erstwhile Lipton and Brooke-Bond, who have been

traditionally catering to rural markets, the others have a long way to go. However,understanding the distinguishing features of rural markets in comparison to urban

markets will help the marketing firms in evolving appropriate strategies, so that the

products or services can be delivered.

This apart, the rural people also recognize different market places for purchase of

different products and services. In short, this can be termed as hierarchy of marketsfor a rural consumer.

Rural consumers have identified places for specific items of purchase. Fig above

broadly indicates the hierarchy of rural markets for a rural consumer.

17



A typical rural consumer has clear identification of market places for different

requirements. The first point of contact is the ‘village shop’, which stocks very

essential manufactured goods like tea, biscuits, beedi, cigarettes, salt, kerosene, matches,edible oils etc., These are some of the items of daily requirement which are needed

in very small quantities and for such items the rural consumer always approaches a

nearby village shop. Quite often a running credit account is maintained. There maybe few cases of barter as well.

The next level of market in the hierarchy for rural consumer is the weekly shandyor heaty. These shandies or haats assemble in a particular spot, on a fixed day I n a

week. There are a number of such weekly markets in every state in the country. An

estimate puts the number of shandies operating in the country at around 47,000.

These shandies attract rural people from a radius of about 20 to 25 km. A shandy or haat is like a mini super bazaar for a rural consumer. The range of commodities and

services available in a shandy or a haat has to be seen to be believed. Agriculture

produce like food grains, pulses, groundut, jaggery (gur), vegetables, fruits, chillies,

betel leaves, betel nuts, some cheap brands of cosmetics, toiletry items like bathsoaps washing soaps, toys for children, clothing for men, women and children, toffees

and sweet-meats, locks, umbrellas, scented sticks, dried and fresh fish, live chicken,small agricultural tools and implements like pavadas, hand hoe, plough shares,

cooking utensils made of aluminium, earthenware, bamboo articles like baskets, and

several others things are available there. The services available are those of barber,

locksmith, umbrella repairer, blacksmith etc. Some of these poultry, sheep and goats.These shandies or haats provide an opportunity to sell and purchase small quantities

of local agricultural products like vegetables, grains, sheep or goat, poultry etc.

In addition to these shandies, jathras and melas are held over an extended period of

a week to about a month, in some prominent places. Twenty-five thousand such

jathras and melas are estimated to take place in the country. These are usuallyassociated with some important religious festivals. The merchants who operate in

shandies or haats also follow a rotation in their movement. Normally they operate in

five or six different shandies in a week and take one day off for replenishing their stocks from a nearby town or city.

The next market place in the hierarchy is the primary wholesale assembling

market. This is a market where a rural person goes to sell the agricultural producesoon after harvest. Sometimes these may also be called as secondary wholesale

assembling markets or terminal markets, depending upon the place of their location.

These are also popularly called mandi towns. In these places, there is a well-established market for selling and buying agricultural produce with a number of

market functionaries. A farmer not only sells his agricultural produce in these

markets but also purchases items like fertilizers, pesticides, seeds, and consumer durables like watches, radios, clocks, etc.

Market hierarchy has an important implication in marketing with regard to the level up

to which the distribution arrangement should extend. While rural consumers might

18



purchase consumable items at the village shop or in shandies, they will always prefer to

purchase consumer durable items from the towns or district headquarters where the

agricultural produce markets are located. This behaviour is due to the fact that therural consumers have a choice of visiting several shops to know about the quality and

price to decide on a brand. They are also offered a guarantee to get the product

replaced if anything goes wrong. Another important reason is that after selling theagricultural produce, t hey have ready cash to purchase durable goods. This implies

that the place where agricultural produce trading is done is the potential place up to

which the distribution network should extend in case of durable goods whereas for consumables the network can go right upto village level.

A rural consumer may also make an occasional visit to state headquarters or big

cities for any legal matter.

The important aspect to be kept in min is that the rural consumers have identified

market places for purchase of different requirements. So, while appointing dealers to

buy shelf space, the buying habits of rural consumers have to be borne in mind. Inother words, while it is prudent to arrange for distribution upto village level for

consumables, the durables require distribution arrangements only upto tehsil or mandi(agricultural produce market)level. Most of the factors listed aboe as distinguishing

features between rural and urban demand have definite implications in evolving

marketing strategies for rural marketing.

As seen in the earlier chapter, the villages do not have uniform sizes in terms of

population, area under cultivation, types of crops cultivated, economic prosperity, etc.

In other words, each village appears unique in the first glance and needs a tailor mademarketing strategy. Hence, it becomes important for marketers to know the potential

available in different villages, so that villages can be suitably indexed and

appropriate marketing strategies can be evolved for each category.

THOMPSON RURAL MARKET INDEX

A successful attempt in the direction of assessing the potential of rural markets has

been made by Hindustan Thompson Associates Limited. They have developed the‘Thompson Rural Market Index’ as a guide to the rural marketers. They made the first

attempt in 1972. Since most of the data are available at district level, they collected

these date for 334 districts. Then they identified 11 factors and assigned a weightageto e ach of these factors to assess the potential. However, this was not considered to

be a very satisfactory approach. Hence another attempt was made in the year 1986.

During the second attempt, they considered 26 factors for constructing the rural marketindex. This has been published under the name ‘Thompson Rural Market Index’ in

1986. Herein they considered 383 of the 412 districts in t he country, since data were

available for only these districts. Ultimately, rural market index was worked out for

355 districts. The districts not taken into account either did not constitute rural areas or

19



had very small rural population. The data on the following indicators was taken for

constructing the Rural Market Index.

Indicators Considered for Rural Market Index

1. Area of t he district in sq km

Demgraphics

2. Population : Rural Numbers

3. Males : Number

4. Females : Number

5. Density per square kilometer 6. percentage distribution of population – by- population strata

7. number of villages

8. percentage distribution of villages by population strata

9. literate - Rural Numbers10. percent of literacy

11. literate : Males12. Literate : Females

Occupation pattern

13. cultivators : number

14. Agriculture labourers

15. Non agricultural labourers

Agriculture Related Data :

16. Gross cropped area in hectages

17. Gross irrigated area in hectares

18. Area under non-food crops in hectares

19. average size of operational holdings in hectares

Agricultural inputs Data :

20. Pump sets and tube wells : Numer

21. Fertilizer consumption in metric tones

22. number of tractors

Rural Electrification Data :

23. Percentage of villages electrified

20



Commerical Banks Data :

24. Number of rural branches

25. Deposits in lakhs of rupees

26. Advances in lakhs of rupees

Since the major occupation in rural areas is agriculture, they also collected t he value

of agricultural output for each district, from the Centre for monitoring IndianEconomy. This value was to be the overall indicator of rural market potential. To

validate this assumption that value of agricultural output is a holistic indicator of

rural market potential, a statistical correlation analysis was conducted with 10 selected

variables related to agriculture with the value of agricultural production. The selectedten agriculture related variables were :

• Agricultural labourers•

Gross cropped area• Gross irrigated area

• Area under non-food crops• Pump sets

• Fertilizers consumption

• Tractors• Rural credit• Rural deposits and

• Electrified villages

It was found that these ten variables had a very high correlation with the value of

agricultural output ranging from 0.52 to 0.79. Thompson rural market index books

also presents the data for each district on t he chosen 26 variables. What is further needed is to update the chosen data to know the potential.

Based on the index number, the districts have been classified as A,B,C,D and E classmarkets. Table below summarizes the classification of the districts and the districts

and the proportion of rural market that they account for.

Classification of rural markets

Class of markets Index range No. of districts Percentage of

market

A 60.00 to 100.00 22 17.8

B 40.00 to 59.99 39 20.5

C 30.00to 39.99 54 20.4

D 20.00 to 29.99 86 23.0

E Below 20.00 154 18.3

Total 355 100.00

21



It is significant to note that the index relies on the ten factors related t o agriculture,

which have been chosen for t he correlation analysis. Any change in these variables like

increase in irrigated area or increase in area under commercial crops will have a positiveimpact on the potential. In other words, any change in these factors on the positive side

will increase the value of agricultural output, thereby increasing the income of rural

people.

As said earlier, the index can be easily updated with current data and c an b e used

for evolving marketing strategies. One can probably add other factors like road lengthper sq.km in the district, railway lines per sq. km., number of post offices, number of

television sets, number of two wheelers, etc. to have further validation of the potential

given by the index.

MICA RURAL MARKET INDEX

Recently an attempt has been made by Mudra Institute of communication,

Ahmedabad (MICA) to construct a rural market index as proprietary research. Due tothe nature of research, the results are not available, but the methodology is available.

They christened the indes as MICA Rural Market Ratings. The methodology adoptedby them is described below :

Rationale for the Study

Today, rural markets have already overtaken urban markets in many categories of mass consumption branded goods, both in terms of volume and growth. For many

companies, a strong presence in rural markets has now become crucial for achieving

corporate objectives. Prosperity in agriculture, widening retail network, and impact of television are expected to boost the importance of rural sector in near future.

The results of the study are for corporate bodies with a perspective on rural sceneand an understanding of the available opportunities. MICA rural market rating will

prove to be valuable and essential to all who have rural India in their scheme of

things.

Content Overview :

MICA Rural Market Ratings is supposed to be a comprehensive guide for suchcorporate bodies which are waiting to plunge into rural markets. Date were collected

based on the 1991 census reports and all the 459 districts in the country were covered.

A total of 42 socio-economic indicators have been included for the study. The ratingsarrived at denote the relative market potential of respective districts. The study is

presented in the form of an interactive CD-ROM which is divided into the following

three parts :

22



• Digital maps

• Rural socio-economic indicators, and• Names and population of all the 631,307 villages in India

Methodology

The objective of MICA is t o develop a single value for each district which will

reflect the market potential of that district as a close to reality as possible. The rating

developed is based on a linear combination of six variables.

As a first step, 19 demographic and economic variables were selected and the

variables selected were :

• Rural population

• Total literates

• Households with LPG•

Households having electricity• Number of shops

• Number of lodging places• Number of eating houses

• Number of business establishments

• Number of workshops and factories• Bank advances• Cropped area

• Irrigated area• Fertilizer consumption• Number of cultivators

• Number of agricultural labourers

• Number of non-agricultural workers• Food grain production

• Value of agricultural output

• Bank deposits

Pair wise correlation coefficients were calculated among these 19 variables. Then t he

average of these correlation coefficients for each variable with respect to other 18

variables was arrived at. This was used as the basis for selecting the six mostimportant variables. Thus, the six finally selected variables were :

• Bank advances• Cropped area

• Irrigated area

• Number of cultivators• Fertilizer consumption

• Value of agricultural output

23



It is claimed that these variables are highly relevant in understanding the market

size. A discriminant analysis was carried out for choosing one of the six variables as

criterion variable and t he other five as prediction variables. This exercise wasrepeated five times, each time considering one of the variables as criterion variable

and the rest as prediction variables. The coefficients for t he final linear combination

were arrived at by taking the average of the coefficients obtained for each variable inthe rotation exercise. These coefficients were used to arrive at a rating for each

district. Probably, one needs to study the report to understand the methodology adopted

in the study.

However, comparing MICA and Thompsons, one can see a number of common

variables in both. MICA study appears to have taken into account the trade aspects like

establishements, factories etc. A significant conclusion that can be arrived at is thefact that agriculture related factors play an important and vital role in indicating the

market potential concerning rural areas.

To summarize, the rural demand has peculiar characteristics in terms of its spread,

literacy rate, hierarchy of markets, per capita income, etc. which differentiate it fromurban demand. Since nearly 70 to 75 per cent of income generation in rural areas is

through agriculture and agriculture related activities, the variables related toagriculture can be safely assumed to indicate the potential of rural market. Both the

indices described above undoubtedly relied heavily on agriculture related factors.

This has to be kept in mind while dealing with rural markets.

24



PROBLEMS IN

RURAL MARKETING

While the rural market does offer a vast untapped potential, it should be recognized

that it is not that easy to operate in this market because of several attendant problems.

Rural marketing is not only time consuming but also requires considerable investmentsin terms of efforts in evolving appropriate strategies with a view to tackle the problems.

The major problems faced by manufacturers and marketers in rural areas are as

follows :

1. UNDERDEVELOPED PEOPLE AND UNDERDEVELOPED MARKET

Agricultural technoloty has tried to develop the people and market in rural areas.

Unfortunately, the impact of the technology has not been felt uniformly throughout thecountry. In a few pockets of some districts in Punjab, Haryana or western Uttar

Pradesh, a rural consumer may be comparable to his urban counterpart, but there are

still large areas and groups of people who have remained untouched by technologybreakthroughs. Even today, about 75 districts in the country are drought-prone. No new

technology worth the name has percolated to drought people there. In addition, t he

farmers w ith small agricultural land holdings have also not been able to takeadvantage of the new technology. The number of people below poverty line has not

decreased in any appreciable manner. Thus, the rural markets, by and large, are

characterized by underdeveloped people and consequently an underdeveloped market.

A vast majority of rural people is not financially stable and is tradition-bound,fatalistic, mired in age-old customs, traditions, habits, taboos and practices.

2. Lack of Proper Physical Communication Facilities

Nearly half of the villages in the country do not have all-weather roads. Therefore,

reaching these villages is very physically taxing. Even today, many villages ineastern part of the country are inaccessible during monsoons. Hence, the distribution

efforts put in by a manufacturer prove expensive and sometimes ineffective. To be

effective, the products have to be physically moved to places of consumption or places

of purchase. However, there seems to be a ray of hope. The Pradhan Mantri Gram

25



Sadak Yojana promises to connect all the villages with 500 persons and above in

plains and 250 persons and above in hill areas by all-weather roads in near future.

This would considerably ease the distribution logistics for the marketers.

3. Media for Rural Communication

Among the mass media, radio was considered to be good potential medium for

communication to t he rural people in t he late 50s or early 60s. A large number of rural

families in prosperous areas owned radios and community radio sets were also present.At present, radio programmes are being extensively used to diffuse agricultural

technology to rural areas.

The advent and expansion of telecast network, appears to be offering another potentialmedium for easy communication with rural masses. However, the question is that

how many rural people actually have access to television viewing? Therefore, there is

a need to examine the ownership pattern of television sets in rural areas to judge the

potential reach of this medium. Some surveys indicate t hat secondary viewing of television is widely prevalent in rural areas. In other words, though lots of rural

persons do not own a television, they view it in other’ homes.

Another mass media is cinema. It has also been abserved that wherever available, the

habit of viewing cinema is fairly satisfactory in rural areas. Again, statistics indicate

that the rural areas account for hardly 2000 mobile theatres which is far less than thenumber of villages. Under such circumstances, a company is forced to use its own

promotional vans. However, companies like Hindustan Unilever Limited, which use

such vans, have found it to be very expensive in as much as the per-viewer cost isabout 10 to 12 times higher in rural areas as compared to the per-viewer cost in urban

areas. In addition, the wear and tear on such promotion vans is also high due to the

bad roads in rural areas. Here again, a few companies like video-on-Wheels, Sampark Marketing and Advertising Solutions and Video Express specialize in rural van

promotion and this can be taken advantage of by marketers.

With all these disadvantages, it has to be recognized that communication is must to

motivate rural people. Today marketers can also take advantage of television network

and cable television specializing in regional languages. Though one is tempted to

totally rule out the print media because of low rural literacy and poor reach of newspapers and journals like weeklies and monthlies in rural areas, there are

always exceptions like the states of Kerala and Tamil Nadu, where high literacy is an

enabling factor.

4. Many languages and Dialects

Even on assuming that media are available for communication or the company

commissions its own media vans or hires them from professional operators, the next

26



roadblock is intelligibility of programmes across a broad spectrum of the rural

population. The number of languages and dialects varies widely from state to state,

region to region and probably from district to district. Messages have go to bedelivered in the local languages and dialects. Even though the number of recognized

languages in India is only 22, the number of dialects is estimated to be around 850.

Multi-dialect dubbing in a audio-visual presentations is a viable solution, but again,cost is crucial factor.

5. Vastness and uneven Spread

The number of villages in India is more than five lakh. Also, the villages are not

uniform in size. Nearly 60 per cent of the villages have a population of less than

1000 persons, which accounts for 26 per cent of the rural population. About half of the rural population, lives in ‘medium sized’ villages which have a population

ranging from 1000 to 5000 persons. Only 18 percent of the population lives in

villages with a population of 5000 persons and above. Hence, one can only think of

tackling about two lakh villages, which can be considered as medium and largevillages with adequate potential. This type of distribution of population warrants

appropriate distribution and promotion strategies to decide the extent of coverage of rural market.

6. Low Per Capital Incomes

Even though about 30 percent of the GDP is generated in rural areas, it is shared by

72 percent of the population. Hence, the per capita incomes are low as compared to

urban areas. Low per capita incomes are low purchasing power. This apart, thedistribution of income is highly skewed, since the landholding pattern, which is the

basic asset, it itself skewed. Thus, the rural population presents a highly

heterogeneous scene. Therefore a few questions arise in t his context. Given the lowpercapita incomes and the population spread in t he villages, what will be the off-

take of any product by rural consumers, say from a village shop? What inventory

levels should be maintained by a rural shopkeeper and how long will it take for himto liquidate his stocks ? If a company opts to distribute the products up to village shop

level, what should be the frequency of distribution ? These aspects require very

careful consideration while evolving distribution strategies for rural markets.

7. Logistics, Storage, Handling and Transport

Organizing a distribution set up poses a number of questions because of the

widespread nature and varying sizes of villages. Are there good storage facilities

available in rural areas? It has already been seen that the transport facility isgenerally poor in these ares. A leading company, which distributes its consumable

products in rural areas, had used bullock carts and camel backs for physical

transportation of goods to inaccessible areas. In some villages there may not be

even a shop from where the products can be made available to a rural consumer.

27



Several questions that come to one’s mind are : how do you motivate a rural person to

open a shop in the villages ? Whether he will have the requisite capital for the

same ? What will be the off-take from the shop in a day or in a week? How manytimes will he be able to turnover the capital invested ?

Thus, willingness to enter the rural market alone is not sufficient. Identification of potential shopkeepers, offering them credit, assuring periodic supplies and motivating

them also becomes very essential for effective rural marketing. Since rural consumers

have identified a hierarchy of markets, the extent to which t he distribution systemshould percolate, needs attention. This will obviously have an adverse impact on the

distribution costs. Again, whether a company can afford such costs should be

examined. For this a cost-benefit analysis needs to be performed.

8. Market Organization and Staff

The size of the market organization and staff strength is very important in order to

retain effective control. Relatively speaking catering to rural markets involves larger marketing organization and staff. How many manufacturers and marketers can afford

such huge investments in terms of personnel and also keep an effective control onthem, is a question that needs close examination.

9. Product Positioning

In a highly heterogeneous market, product positioning becomes very difficult.

Alternatively, the product range should be very large. However, a large product range

will give rise to distribution problems. A typical example is that of cigarettecompanies, which have numerous brands to suit the different income segments of

both rural and urban population. For a product like, say tractors, the positioning

becomes fairly easy since it is meant for progressive farmers with good irrigationfacilities and having at least 20-25 acres of land. However, a consumable input like

fertilizers is required by all farmers in varying quantities, irrespective of the area of

operation. This obviously leads to the question of size of packing. Here again, theexample of a consumable product like tea is interesting. Even the very large tea

companies like erstwhile Brooke Bond or Lipton had tea packets priced from 25/50

paise onwards so that all segments of population are taken care of. The very product

positioning limits the market only to such segment of farmers. While positioning ispossible in the case of durables, positioning of consumables poses problems. So, this

might warrant designing new products or modifying the existing products to suit the

rural expectations, conditions, habits, needs and purchasing power.

10. Hierarchy of Markets

As seen earlier, the rural consumers have identified market places for different

items of requirements. So, there cannot be a uniform distribution policy for all

products. It has been seen that 90 percent of the farmers visited the nearest town,

where an agricultural produce assembling market is situated, at least once in three

28



months, for either selling the produce or for purchasing their requirements. So

towns/ mandi centres with large hinterland villages become the focal point. Thus,

depending upon the purchasing habits of rural people, distribution network for different commodities needs to be different.

11. Low levels of Literacy

The literacy rate is low in rural areas as compared to urban areas and this leads to

the problem of communication for promotional purposes. With low literacy rates, printmedium becomes ineffective and to an extent irrelevant since its reach is poor.

Therefore, the dependence should be more on electronic media- cinema, radio and

television. While the access to cinema and radio appears to be fairly easy and

common, it is not so in the case of television. In addition, television advertising isvery expensive. With regard to mobile advertising, t he problems and advantages in

operating company owned media vans have already been discussed. As mentioned

earlier, it may be prudent to use professional promotion van operators, who specialize in

mobile rural advertising. Companies like HMT, Karnataka Soaps and Detergents Ltd.,and others have already adopted the concept of hired rural promotion vans. Most of

the fertilizer companies operate their own mobile promotion vans. Recently, ColgatePalmolive has also commissioned vans in collaboration with their distributors. Many

companies are resorting to the promotion of their product along with distribution by

vans.

12. Seasonal Demand

The distribution of any product in the rural areas; either agricultural inputs,consumables, or durables, should necessarily follow a seasonal pattern. Since 75 per

cent of rural income is generated through agricultural operations which a re seasonal,

the demand pattern is also seasonal. A typical example is that of fertilizers. Thedemand for fertilizer is always high during the start of Kharif and Rabi seasons. The

fertilizer manufacturers have evolved a distribution pattern, so that the seasonal demand

can be met. Likewise, the demand for consumables and durables is during the peak crop harvesting and marketing seasons. This is the time at which the rural people have

substantial cash inflows. Hence, the distribution should be fairly intensive during this

season. This arrangement would result in adequate sales realizations. During summer,

the demand will be minimal in places that lack irrigation facilities. Thus, thedistribution system has to be geared to meet the seasonal pattern of demand. In

addition, festival seasons like Sankaranthi or Pongal in Southern regions as opposed

to Baisakhi or Deepavali in North are also demand seasons. These festivals coincidewith the harvest seasons like Sankaranthi during Kharif harvest and Baisaki during

Rabi harvest. So the distribution for rural areas should be more and frequent during

these seasons as opposed to a fairly uniform demand pattern in urban areas.

It should be recognized that rural market is a highly heterogeneous, widely spead

and characterized by seasonal demand. It has poor transport and communication

29



facilities, both in terms of physical movement of products and also in communicating

with the target audience.

The innumerable problems mentioned above can be grouped under the following

major categories :

a) consumers motivation and buying habits

b) location and degree of concentration of demand

c) dealer availability, attitude and motivationd) mass communication media

e) logistics, storage, transport and handling; and

f) marketing organization and staff.

Any strategy for rural marketing should take the above problems into account, so

that the investments made are easily recovered.

RM Module 2

Documents

Transcript of RM Module 2