CHAPTER - III

RURAL, MARKETING
- AN OVERVIEW
 CHAPTER III

RURAL MARKETING - AN OVERVIEW

1. Introduction

The term “rural marketing” which was earlier used as an umbrella refers to all
commercial transition of rural people. It acquired a separate meaning of great
significance in 1990s and had evolved from agricultural marketing.

Today, rural marketing can be seen as a function which manages all those
activities involved in assessing, stimulating and converting the purchasing power into
an effective demand for specific products and services, and moving them to the
people in rural areas to create satisfaction and a standard of living to them and they
achieve the goals of the organization.

The census department defines the urban areas as follows.

a) All places with a municipality, corporation, cantonment board or notified town

area committee.

b) All other places which satisfy the following criteria.

(i) A minimum population of 5000 persons

(ii) At least 75 percent of the male working population engaged in non-

agricultural activities.

(iii) A population of at least 400 persons per sq km (or 1000 per sq mile)

Any place which does not fulfill the above criteria becomes a rural.

For most of the companies, rural market means markets that are not been
presently covered by them. A marketing manager of a consumer product company
refers to “Small towns” and “Mofussil Areas” having a population of less than 10,000
persons as rural markets.

23
2. Evolution of rural market

The basic difference between an industrial and an agrarian society plays a

significant role in shaping and differentiating the needs, wants and expectations of
the urban and the rural people. In India, ever since independence, because of some
obvious reasons, marketing acquired a largely urban bias. Hence, there was no
attempt on the part of marketers to know rural consumers and satisfy their needs.
The indifferent attitude was also due to the assumption that the rural people were
poor and had no purchasing power to buy expensive branded products. It was also
assumed that apart from the comparatively low level of consumption there was no
other difference in the nature of demand and consumption patterns of the rural and
urban buyers. This led to the belief that western marketing strategies and knowledge
could safely be applied to the semi-urban and rural markets in India. Besides such
fallacies, lack of transportation and communication links and limited reach of mass
media were also responsible for neglecf of the rural consumer by business firms.

The Green Revolution in the seventies provided a much-needed fillip to the

agriculture-based rural economy in the country. Not only this made India self-
sufficient in food production but also contributed towards overall economic growth of
the rural sector. Subsequently, other allied activities such as dairying, poultry and
horticulture gained momentum to supplement the landowners’ income from crop
farming. Infrastructural facilities in the form of road links, electricity and
communication networks also improved largely during the seventies and eighties.
These positive developments led many firms to take interest in the rural markets and
extend their penetration and reach to smaller towns and villages. However, a real
breakthrough in rural marketing was achieved only after the 1982 Asiad Games,
which inadvertently made the exponential growth of TV network possible. Television
was successful in breaking the literacy barrier, creating awareness and triggering off a
consumer boom in rural India.

The nineties saw widespread changes in the India business environment.

Urban markets for many consumer goods either got saturated or were badly hit by
recession. Also the fear of competition from multinationals was looming large,

24
therefore, the basic instinct of survival forced many a marketing strategist to abandon
the comforts of their skyscrapers and hit the muddy tracks leading to the rural
markets.

3. Rising rural prosperity

India was now seeing a dramatic shift towards prosperity in rural

households. The lowest income class will shrink from more than 60 per cent in
1994-95 to 20 per cent in 2006-07. The higher income classes might be more than
double.

Table No. 3.1 Income groups in rural households

Income groups (% of rural households)

Rs. 1,06,000 ------------------- ► 1.6 3.8 5.6
Rs. 77,001-1,06,000 ------------------- ► 2.7 4.7 5.8
Rs. 50,001-77,000 ------------------- ► 8.3 13.0 22.4
Rs. 25,001-50,000 ------------------- ► 61.4 37.4 20.2
Year 1994-95* 2001 - 2002* 2006-07*
* 2001-02 and 2006-07 were projections based on 7.2 per cent GDP growth.
Source: NCAER.

Table No. 3.2 - Rural FMCG market will boom

Rural FMCG Market Will Boom

Total size + % Growth** Rural
Category (Urban+Rural)
2001-02* 2006-07* Size
Toilet Soap 7,500 13.4 6,021 11,291
Body talcum powder 940 23.65 793 2.292
Tooth paste 2,080 23.50 1,441 4,140
Cooking medium(oil) 17,000 10.91 15,377 25,806
Cooking medium 3,900 7.63 2,844 4,108
Tea 6,500 10.97 49.55 8,337
Health beverages 908 28.54 601 2,110
Electric bulbs 750 9.40 354 555
Electric tubes 158 10.15 74 121
Cigarettes 7,662 13.09 6,422 11,879
Packaged biscuits 2,500 6.79 1,323 1,837
Hair oil/cream 175 30.85 179 689
* Projections + Figures in Rs. Crores for 1998-99. ** Annual growth rates compounded for
last five years.
Source: Business intelligence Unit and NCAER.

25
 Tabic No. 3.3 - Income groups

Income Group Average Annual Income (Rs)

High > 140,000
Upper-middle 1,05,001-1,40,000
Middle 70,001-1,05,000
Lower-middle 35,001-70,000
Lower < 35,000
Source: Beyond consumer marketing by J.S. Pamwar Response book publication P,98,2004

The Table 3.4 reveals that during 1989-90 and 1998-99, the proportion of
rural households in the top two income categories had grown about 2.6 folds. This
was an infallible evidence of rise in rural prosperity during the nineties.

Table No.3.4 - Income-wise distribution of rural households

(Percentage)
Income 1985-86 1989-90 1992-93 1995-96 1998-99
High 1.1 1.4 2.3 3.5 3.0
Upper-middle 0.7 1.2 2.3 3.1 3.9
Middle 4.0 7.1 8.2 8.6 10.4
Lower-middle 21.4 23.9 22.6 29.0 34.8
Lower 65.2 58.9 58.2 48.9 47.9
Source: NCAER, India Market Demographics Reports 1998 and 2002, pp. 7 and 10.

During the same period the proportion of households in the lowest strata had
come down by about 11 per cent. The percentage of households in the lower-
middle category had grown by about 10.9 per cent because as many households had
upgraded their incomes to quality for higher category. The study also predicts that
by the year AD 2006 the proportion of bottom level households could further be
reduced to just 27 per cent. Simultaneously the proportion of the upper-crust
households may, by then, expand by another 5.0 per cent. According to the NCAER
predictions the combined size of upper-middle and middle-class households is
expected to rise from 11.7 per cent in 1995-96 to 21 per cent by AD 2006, fueling
the rural demand further (India Market Demographics Report, 1998).

4. Data pertaining to Indian villages

According to the 2001 census, there were around 6,27,000 villages and more
than 72 percent population of the country lives in these villages. In terms of size, rural
market is a vast ocean of opportunities comprising of 741 million consumers.

26
 Tables 3.5 - Indian states: Number of villages
State/Union Territory No.
All India 580781
Andhra Pradesh 26586
Arunachala Pradesh 3649

Assam 24685
Bihar 67513
Goa 360

Gujarat 18028
Haryana 6759
Himachal Pradesh 16997

Karnataka 27066

Kerala 1384
Madhya Pradesh 71526
Maharastra 40412
Manipur 2182
Meghalaya 5484
Mizoram 698
Nagaland 1216
Orissa 46989
Punjab 12428
Rajasthan 37889
Sikkim 447
Tamilnadu 15822
Tirupura 855
Uttar Pradesh 112803
West Bengal 37910
Andaman & Nicobar 504
Chandigarh 25
Dadra & Nagar Haveli 71
Daman Diu 24
Delhi 199
Lakshwadeep 7
Pondicherry 263
Source: IRS 99

Another study done by Francis Kanoi Marketing Planning Services, a Chennai

-based consultancy, opines that the rural market for FMCG was Rs. 65,000 cr, for
durables Rs.5,000 cr, for tractors and agri-inputs Rs. 45,000 cr and two and four-
wheelers, Rs. 8,000 cr. In total, a whopping Rs. 1,23,000 cr. It predicts that volume

27
could be doubled if corporate understood rural buying behavior and got their
distribution and pricing right.

Table No. 3.6 - Rural data

Category Rs,
FMCG 65,000 cr,
Durable 5,000 cr.
Tractors and Agri inputs 45,000 cr.
Two wheelers 8,000 cr.
Total 1,23,000 cr.
Source: Francis Kanoi marketing planning services

5. Characteristics of Indian rural market

(a) Diverse nature

Fifty percent of the 6,27,000 Indian villages are very small with population of
less than 500 and limited purchasing power. Many of them don’t even have a single
shop. Villages in the next category (with population of 500-2,000) number around
2,50,000, have around five shops each and a market that does not yield favorable
distribution cost-benefit equations. In the last category are villages with populations
of 2,000 or more (and there are about 60,000 of them). Companies, therefore, need
to focus on the last two categories of villages, which had high potential. It was
necessary to understand that regional disparities heavily influencing economic
development, social interaction patterns, mobility patterns and awareness level. This
in turn influences purchasing power.

(b) Urban market saturation and rural house holds

According to a NCAER study, there were as many ‘middle income and above’
households in rural areas as there were in urban areas. There were almost twice as
many ‘lower middle income’ households in rural areas as in urban areas. At the
highest income level there were 2.3 million urban households as against 1.6 million
rural households.

28
(c) Rising purchasing power of rural consumers

New tax structures, good monsoons, the green revolution and the
administered pricing mechanism (APM) had raised disposable incomes in rural areas.
The rural buyer behaviour involves lot of contradictions and paradoxes in their
purchases which baffled most urban-born marketing people. It was ironic that rural
people spend so lavishly on weddings, ceremonies and festivals amidst deficiency.
But in day today purchases rural consumer shops for value.

(d) Spread of cable television

The growth of satellite TV channels had a major impact on villagers. It had

led to a change in lifestyles; consumption of non-food items had increased. Since the
accessibility of television was high compared to other media, its capacity to arouse
interest was also high. Rural consumers now aspire to buy brands rather than just
purchase commodities. Charcoal was no longer used to clean teeth; today, it’s
Colgate or some other international brand of toothpaste.

5.1 The tale of transformation in rural markets

(a) Rise in literacy level

The literacy level in rural India according to the 1991 Census was 41.2 per
cent. It had gone up to 59.4 per cent in 2001. Literacy among males was much
higher at 71.4 per cent as compared to 46.7 per cent literacy among females
(Economic Survey, 2001-02). There were many villages in Kerala, West Bengal,
Gujarat and Maharashtra where 100 per cent literacy had been achieved. It had
made villagers more receptive to new ideas, products and technologies. At the same
time education had also raised their expectations and desire for a better life, resulting
in more demand for better products and higher levels of consumption.

(b) Exposure of media

With the rise in literacy, newspapers and other print media had found their
way into the hinterlands. Media had facilitated commercial communication to target
the rural buyers. At the moment, transmission of radio and TV has also increased.

29
Radio transmission is available to almost cent percent villages while TV transmission
covers about 87 percent territory in the country. In 2003, TV transmission (including
cable TV) reached about 87 million homes. According to the National Readership
Survey (NRS) 2002 about 28.5 percent rural households in the country own TV sets,
and 34 percent of TV homes also have cable connections. The highest penetration of
cable (about 50 percent) was recorded in the larger villages having a population of
more than 5000 (The Economic Times, Dec 13, 2002). TV had really been successful
in breeding the literacy barrier and ushering in an era of consumption based life style
in rural India.

(c) Desire to urbanise

Television, feature films, and interaction with friends/relatives who had

prospered in cities influenced the rural people aspire for good city life. The ever
increasing cross flow of population between rural and urban areas had acted as
conduit for cross-flow of products and ideas, thus creating new demands for several
gadgets, comfort goods and hygiene products in the rural market. Many research
studies also indicate that rural consumption is gradually shifting from basic necessities
to the comfort and luxury goods.

(d) Changing norms and value system

Joint families were breaking up in the villages too and gone with them are the
old traditions and rigid social norms. The role of rural women is now not only
confined to home and hearts; but is also getting active in local politics and social
work. With this newfound glory the focuse is now more on the active role of domestic
purchase decisions, and matters like education of children, investments and travel.

(e) Improvement in transport and Infrastructure

Forever, growing road and railway network had reduced time and facilitated
travel. The merchandize can easily reach villages in good time and shape.

30
(f)Changlng lifestyles

Rural lifestyle had been changing. Almost every household had at least one
member living and working in a city. It provides an alternate source of income and
also more exposure leading to a cultural change in the family and in the village.
There was a reduced dependence on agriculture. Rural folk look forward to sending
their sons and daughters to cities to look for a better lifestyle. The cultural divide
between the village and city is narrowing.

Contrary to popular perception, the potential rural market was not confined to
a few million large farmer households. The boom in the rural market was not due to
sporadic indulgence by a privileged rural minority but reflects instead on the
changing priorities sweeping the entire hinterland. It was true that, the less privileged
had low purchasing power, but their raising aspirations should not be
underestimated. For certain products, usage is high even among agricultural
labourers, the bulk of them fall below the poverty line

Table No. 3.7 - Income vs usage of packed consumer goods

(% of Households using)
Monthly Household Income (Rs.)
Goods 751-
Upto 350 351-750 1501 +
1500
Washing cakes/bars 60 78 86 91
Toilet soaps 57 72 89 96
Tooth paste/ powder 22 36 65 85
Talcum powder 20 25 41 63
Tea (packaged) 22 30 48 64
Source: ORG Product Pro iles Narasimha Rao,Unfulfilled Promise, A&M, January 1991 p.47

Rural consumers were considered to prefer local, unbranded and low priced
products. One might as such expect that a large proportion of the purchase made in
rural India could be attributed to local unbranded players. However, this was true
only on certain product categories. Table 3.8 shows such product categories.

31
 Table No. 3.8 - Major product categories of
locals/ unbranded
Category % volume
Washing cakes/bars 55
Tea 61
Salt 59
Source: ORG-Marg TPanel, June 1999.

5.2 Hierachy of markets for rural consumers

State Capitals, Cities, and Metros Legal Matters and Casual Visits
Terminal Markets
Fertilizers, Pesticides Seeds, Durables
Secondary Wholesale Assembling Markets like Cycle, and Agricultural Finance,
etc.
Primary Wholesale Assembling Markets
Cloth, Cosmetics, Soaps, Services,
Shandies, Haats and Jathras Kitchen Equipment, Agricultural Tools,
Bamboo Baskets, etc.
Match Boxes, Cigarettes, Tea,
Village Shop
Kerosene, Edible Oils, Salt, etc

A typical rural consumer had clear cut identification of market place for
different requirements. The first point of contact was the ‘village shop’ which stocks
very essential manufactured goods like tea, beedi, cigarettes, salt, kerosene, matches,
edible oils, etc. These are some of the items of daily use required in very small
quantities and for such items, the rural consumer always approaches a village shop.

The next level of market in the hierarchy for a rural consumer was the weekly
shandy. These shandies or haats assemble in a particular village at a particular spot
on a fixed day in a week. There were a number of such weekly markets in every
state in the country. Those shandies attract rural people from a radius of about 20 to
25 kms. The range of commodities available were agricultural produce like food
grains, pulses, groundnut, jaggery (gur), vegetables, fruits, chillies, betel leaves and
cheaper brands of cosmetics, and toiletry items like bath soaps, washing soaps, toys
for children, clothing for men, women and children, toffees and sweets, meats, locks,
umbrellas, scented sticks, dried and fresh fish, live chicken, small agricultural tools
and implements etc. The services available were like barber, locksmith, umbrella
repairer, blacksmith, etc. Some of those shandies specialize in livestock like work

32
bullocks, cows, poultry and sheep and goats. Those shandies provide an opportunity
to sell and purchase small quantities of local agricultural and poultry products like
vegetables, grains, sheep or goat, chicken, etc. In addition to these shandies, in
some prominent places Jatras and Melas were held over an extended period of a
week to about a month. Those were also associated with some important religious
festivals.

Shandies had an important implication in marketing with regard to the level

up to which the distribution arrangement should extend. While rural consumers
might purchase consumable items at the local village shop or in shandies, they could
always prefer to purchase consumer durable items from the towns or district
headquarters where the agricultural produce markets were located. The behaviour
was due to the fact that, firstly, the rural consumers had a choice of visiting several
shops to know about the comparative quality and price to decide on a brand.
Secondly, there was an assurity and guarantee, if anything goes wrong and finally
the important reason was that after selling the agricultural produce, they will have
money in hand to purchase consumables. Rural consumer might make occasional
visits to state headquarters or big cities for any legal matter.

The important aspect to be kept in mind was that the rural consumers had
identified market places for purchase of different requirements. So, while appointing
dealers, buying shelf space, the purchase habits of rural consumers had to be borne
in mind.

5.3 Myths related to the rural markets in India

The rural market had the potential to bring much needed volumes of business
to the corporate sector, especially FMCGs. In value terms, NCAER estimated the
rural market for FMCG durables and vehicles to be worth a mind boggling Rs.
11,500 cr. The former Director General of NCAER, SL Rao stated, “The surge in
purchases of consumer products was not confined to the people with high levels of
income. Even those who appear to be poor and had the lowest level of income buy
and use FMCG products.”

33
 Many companies were reluctant to enter this domain and one of the main
reasons for the prevalence of a number of myths about the rural areas, were given
below accompanied by the facts:

Myth - 1. The rural market was an extension of the urban market and the use
of aggressive marketing and advertising campaigns akin to those in urban areas, it
embraces the brand and product preferences of the urban market.

The fact - Rural markets possess dynamics that were distinct from their urban
counterparts by virtue of their genesis, size and target audience. Brands and
products need to be presented and promoted in a manner that caters to the local
cultural and social sensitivities. It was also important to introduce features in the
product that holds significance for the rural consumer.

Myth - 2. The size of the market could be estimated based on the analysis of
current products penetration levels and sales volumes; and even limited acceptance
of the product translates into a potential market.

The fact - Limited acceptance in a rural area does not imply that the
commodity had market potential. Such an assumption might cause increased
product mortality as greater number of competing firms flood the market with their
products, while the actual demand was very low.

Myth - 3. The attitudes, values and purchasing behavior of a rural area in

one region was the same as that of another region and that the ‘one size fits all’
approach for promoting a product was well-suited for the market.

The fact - The rural markets in India were a complex phenomenon of

cultural and social mindsets, which greatly influence the local lifestyle. Often
purchase decisions were made collectively with people seeking advice from
influential members of the village. Despite education, employment and income levels
being major factors in product preferences, the socio-cultural mindset was the key to
purchase decisions and this mindset differs from one region to another. Hence, it
becomes imperative to use a multi-level approach for product promotion and to keep
the distinct regional dynamics in mind before planning out a marketing strategy.

34
 Myth - 4. Rural markets exhibit characteristics of price-inelasticity and the
best approach is to provide ‘value for money’ products rather than premium
offerings.

The fact - Despite sales being low, the rural consumers were exhibiting
increasing tendencies of premium product purchases, especially when the offering
had a popular and strong brand value and corresponds to their aspirations and
quality needs. The point in content was not the lack of demand for premium
offerings, but that manufacturers need to come up with premium products that fit the
specific context of the rural market.

35
5.4 Rural power configuration and marketing structure

Exhibit No. 3.1 - Rural power configuration and marketing structure

Upper class Suppressed class

Capitalists Backward linkages Small and marginal farmers

------------------------------------------- ►
Political elites Agricultural labourers

Landlords Wages Artisans

------------------------------------------- ►
Moneylenders Credit Village and cottage industry

Commission agents ----------------------------- *■ Women workers

Rich farmers Contract employment Commission workers

| ---------------------------------------------------------- ►

Local and forward marketing Production and retention

Marketable surplus

Financing local traders, Conflict in bargaining better

commission agents for price, alternative decision on

procurement in village trade channels

markets

Less price, profit Social power Distress sales

optimisation, establishing ^--------------------

onward linkages the upper Indebtedness

class ^

36
 In the given rural social structure, the upper class bargains over the
suppressed class to optimize their profit. It could be seen from the exhibit 3.1 how the
marketing system was controlled by the class comprising of capitalists, moneylenders,
rural political elites, big merchants and rich farmers. The group provides the
backward, linkages viz., credit and to some extent, technical and extension assistance
to the producers. In case of household industries, the types of backward linkages
were different from the agricultural sector. The former group provides to artisans the
credit, raw material and market for their products as backward linkages. But, the
conflict starts for better price when the surplus of farm products was brought into the
market for sales. It was also the case with the products of the rural industries. The
producers find themselves unable to strike trade agreement with alternative channels
other than the upper class in the village because of indebtedness and the social
power of the capitalist group. The farmers and artisans, therefore, sell their product
under economic compulsion.

It leads to the consequences of distress sales on their income, savings and

investment. The capitalist groups also provide credit to traders who in turn sell the
products procured from village markets to them for forward trading. The traders, on
the whole, act as commission agents and purchase the products from producers in
periodic markets locally known as shandy or haat. Those conditions form the cycle
of social power configuration which reflects on marketing in rural areas to a large
extent.

6. Comparison of rural and urban markets

6.1 Introduction

The rural market was an area of darkness to Indian entrepreneurs. An area

which was vast in size but amorphous in detail. An area where communications
were poor and the population poorer because their operations were small scale and
inadequate, therefore inefficient.

Yet, the rural market represents the largest potential market in the country. It
encompasses over 70 per cent of population. Its primary activities includes

37
 agriculture, animal husbandry, fisheries, forestry etc account from half of the national
income. Rural assets amount to more than 50 per cent of the country’s tangible
wealth. However, compared to the urban sector with 20 per cent of the population
and 50 per cent of the income, money must be spread thinly. Yet there were pockets
of wealth which an urban entrepreneur could tap.

Population of about 70 per cent of the Indian people reside in rural areas. In
other words, for every consumer in urban area, there were three of them in rural
areas. Though, the proportion of rural population to total population was showing a
slight decrease over the years, but in absolute numbers the rural population was
increasing at a higher rate than the urban population.

Table No. 3.9 - Rural population in India

Rural Population In India
Rural population in Urban population in Total
Year Percentage Percentage
(million) (million) (In million)
1951 295 82.2 62 17.4 357.0
1961 360 82.0 79 18.0 439.0
1971 439 80.1 109 19.9 548.0
1981 508 76.0 160 24.0 668.0
1991 621 74.3 215 25.7 836.0
2001 736 70.2 285 29.5 1021.0
Source: Census of India, 2001

When the rural market potential was determined, the marketer had to cover
the vastness of the rural market in terms of areas covered and the location of the
rural population.

Table No. 3.10 Shows the location and concentration of rural population.
Location and Concentration of Rural Population
Population range Number of Proportion to Population in Proportion
S. No
(No. of persons) Villages total % millions to total %
1 Less than 200 1,20,073 21.55 12.19 2.4
2 200 to 499 1,50,722 27.05 51.31 10.1
3 500 to 999 1,35,928 24.40 97.03 19.1
4 1000 to 1999 94,486 16.96 131.57 25.9
5 2000 to 4999 46,892 8.42 137.67 27.1
6 5000 to 9999 7,202 1.29 47.24 9.3
7 10000 and above 1,838 0.33 30.99 6.1
8 Total 5,57,141 100.00 508.00 100
Source: Census of India, 2001.

38
 Exhibit No. 3.2 : Urban and rural population in India

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1951 1961 1971 1981 1991 2001

Years 39
 Table No. 3.11 - Expenditure of patterns in rural areas

Value of Consumption Per Person Per Month

S. No Items Rural (in Rs.) Urban (in Rs.)
1 . Cereals 45.38 42.34
2. Gram 0.40 0.59
3. Cereal Substitutes 0.20 0.22
4. Pulses 8.31 10.04
5. Mild and Milk products 18.35 29.53
6. Edible oils 9.10 14.60
7. Meat, Eggs and Fish 6.84 11.42
8. Vegetables 0.25 14.65
9 Fruits and Nuts 3.23 6.87
10. Sugar 6.34 7.78
11. Salt 0.33 0.38
12. Spices 4.88 6.00
13. Beverage and Others 8.13 21.04
14. Total Food items 121.78 165.46
15. Pan, Tobacco and Intoxicants 6.69 7.57
16. Fuel and light 14.44 19.26
17. Clothing 12.15 19.86
18. Footwear 1.63 2.61
19. Miscellaneous Goods and Services 27.80 55.89
20. Durable Goods 4.33 15.38
21. Rents 0.57 11.40
22. Taxes and Cess 0.03 0.57
23 Total Non-food items 63.68 132.54
24. Total Consumer Expenditure 189.46 298.00
Source : Rural Marketing text and cases by S.L.Gupta, Wisdom publications pp. 3-4.

Table No. 3.12 - The literacy level in urban and rural areas

Literacy level n percentage

SI.
Sex 1971 1981 1991 2001
No
Rural Urban Rural Urban Rural Urban Rural Urban
1. Males 34 61 41 66 58 81 61 82
2. Females 13 42 18 48 31 64 32 67
3. All 24 52 30 57 45 73 50 75
Source : Rural Marketing text and cases by S.L.Gupta, Wisdom pub ications pp. 3-4.

40
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Table 3.13 Distribution households income-wise (projections)
(crore)
2001-02 2006-07
Income Groups Rural Rural
Total No % Total No. %
High 0.26 0.07 26.9 0.52 0.12 23.1
Middle 12.04 7.73 64.2 16.70 10.32 61.8
Low 5.74 5.09 88.7 3.68 3.52 95.7
Total 18.04 12.89 71.4 20.90 13.96 66.7
Source: The Future of the New Market place, NCAER Research Project,
Business Today, April 7-21, 1997.

Table 3.14 - Distribution of people income-wise (projections)

(crore)
2001-02 2006-07
Income Groups Rural Rural
Total No % Total No %
High 1.48 0.41 27.70 2.96 0.70 23.6
Middle 69.18 44.83 64.8 90.25 59.85 66.3
Low 32.29 29.52 91.42 20.41 95.8 95.7
Total 102.95 74.76 72.6 114.52 80.96 70.7
Source: The Future of the New Market place, NCAER Research Project,
Business Today, April 7-21, 1997.

The above table 3.13 and 3.14 shows that rural market constitutes 71.4
percent of households in 2001-02. It decreases to 66.7percent by 2006-07(similarly
there will be only 70.7 percent of the people in rural areas as against72.6 percent in
(2001-02 ). It was a result of growing urbanization.

Middle income segment constitutes the major chunk of the total market
population wise in 2001-02 and 2006-07 being 64.8 percent (69.18 crore out of
102.95 crore of people) and 66.3 per cent (90.25 crore out of 114.52 crore of
people) of the total market respectively.

In rural areas, about 70 percent of the people and households of the total
market were in the rural areas.

42
6.2 Share of national income

Table No. 3.15 - Share in national income (2000-01)

Sector Rural Urban

Agricultural (%) 94 6
Industrial (%) 43 57
Services (%) 54 46
Overall (%) 61 39
Per Capita Income (Rs) 12,700 29,100
Source: NCAER and CSO estimates in Economic Times, July 2, 2001, p.5.

Table No. 3.16 - Real growth in per capita

expenditure “99-00” over “93-94 “
(Percentage)
Products Rural Urban
Tea Leaf 37.0 27.4
Tea Cups 12.3 15.7
Biscuits 7.6 5.4
Salted Refreshment 27.9 38.4
Bidi 33.0 54.1
Cigarettes 29.0 15.7
Matches 5.1 14.2
Soaps 5.5 13.8
Hair Oil/Shampoo 26.9 38.5
Toothpaste 67.0 29.0
Powder/Cream 52.1 62.8
Shaving Blade 26.7 12.1
Washing Soap 36.3 34.1
Sources: Cases in rural marketing an integrated approach by C.S.G. Krishnamma charyalu
& Lalitha Ramakrishnan p. 68, 2002.

Between ’93-94 and ’99-00, the share of FMCG products in the per capita
consumption expenditure has dropped by 5.7 per cent in urban India (in a basket of
89 goods), and by 2 per cent in the rural areas (in a basket of 85 goods). Per capita
total expenditure on these baskets of goods has gone up by 15.34 per cent in urban
India and 5.2 per cent in rural areas, according to the National Sample Survey
Organization. The results of NSSO’s 55th and 50th rounds have been compared to
obtain these results. As per the analysis of the primary date of ’99-00 over ’93-94

43
 Exhibit No.3.4 : Share in national income 2000-01

100

:□ Rural
□ Urban

aBe)U33J3d
Agricultural (%) Industrial (%) Services (%) Overall (%)
Sector 44
 consumption patterns, the FMCG basket (comprising 14 items) did show
some laggards and fast runners

Table No. 3.17 Penetration rates-rural & urban

_______________________ (Percentage)
1985-86(%) 1995-96(%) Increase
Personal Products
Washing Cake 89.32 93.28 3.96
Washing Power 44.14 61.19 17.05
Toilet Soap 26.7 98.47 71.77
Toothpaste 26.7 43.8 17.1
Tooth Powder 34.59 38.52 3.93
Talcum Power 39.6 45.12 5.52
Face cream 9.25 20.22 10.97
Lipstick* 3.67 5.23 1.56
Nail Polish* 4.43 6.6 2.17
Flair oil/Cream 57.25 77.3 20.05
Shampoo* 10.3 15.39 5.09
Food & Beverages
Cooking Medium Oil 84.85 91.27 6.42
Cooking Medium 33.88 40.95 4.07
Vanaspati 18.37 31.67 13.3
Package Biscuits
75.65 85.99 10.34
Tea
Health Beverages 4.59 10.37 5.78
Cigarettes 16.49 21.47 4.98
The penetration rates of lipstick, shampoo and nail polish are available from 1992-93
onwards only. Therefore 85-86 numbers refer to penetration in 1992-93.
Source NCAER

Table No. 3.18 Composition of urban and rural outlets

Composition of Urban Composition of Rural

Outlets Outlets
Grocers 34.7% 55.6%
Chemist 6.3% 3.3%
General Stores 14.4% 13.5%
Others 17.0% 27.6%
Sources: Cases in rural marketing an integrated approach by C.S.G. Krishnammalcharyalu &
Lalitha Ramakrishnan p. 76, 2002.

45
Table No. 3.19 Income distribution in rural and urban areas

F lural Urban
Annual Income
Share in Share in
Group (Rs) Hhds Hhds
Income Income
Up to 12,000 16.21 5.28 2.33 0.37
12,000-18,000 25.71 14.20 7.74 2.12
18,000-24,000 17.92 13.67 9.61 3.50
24,000-48,000 29.91 36.47 35.83 22.20
48,000-72,000 5.86 12.58 19.80 20.07
72,000-96,000 2.10 6.33 11.32 16.30
Above 96,000 2.29 44.47 13.47 35.43
Total 100.00 100.00 100.00 100.00
Avg. Income per
Household (Rs.) 27411.00 57675.00
Sources: Cases in rural marketing an integrated approach by C.S.G. Krishnammalcharyalu &
Lalitha Ramakrishnan p. 101, 2002

7. Obstacles in Rural Marketing

(a) Lack of proper physical communication facilities.

Nearly 50 per cent of villages in the country do not have all weather roads.
Physical communication to these villages was highly expensive. Even today, most
villages in Eastern part of the country are inaccessible during monsoon season.
Hence, the distribution efforts put in by a manufacturer prove expensive and
sometimes of no consequence. To be effective the products had to be physically
moved to places of consumption or places of purchase.

(b) Media for rural communication

Among the mass media, radio was considered to be a potential medium for
communication to the rural people. A large number of rural families in prosperous
areas owned radios and there were also community radio sets. This has been
extensively used to diffuse agricultural technology to rural areas. The advent and
expansion of Telecast Network appears to be offering a potential medium for easy
communication with rural masses.

46
(c) Logistics, storage, handling and transport

It had been seen that the transport facility in general was poor in rural areas.
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 might not even be a shop from where the
products could be made available to a rural consumer. How to motivate a rural
person to open a shop in the village? 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 many
times will he be able to turnover the capital invested? Thus willingness to enter the
rural market alone was not sufficient, but identification of potential shopkeepers,
offering them credit, assuring periodic supplies and motivating them also become
very essential. Since rural consumers had identified a hierarchy of markets, the
extent to which the distribution system should percolate, needs attention.

(d) Low per capita income

Even though about 26 percent of GDP was generated in rural areas, it was
shared by 74 percent of the population. So per capita incomes were low. Moreover,
demand for goods in rural markets depends upon the agricultural situation, as
agriculture was the main source of income and it depends upon the monsoon to a
large extent. Therefore, demand is not stable or regular.

(e) Low level of literacy

Literacy rates were low in rural areas compared to urban areas. It leads to the
problem of communication. The print medium was ineffective in rural areas since its
reach was poor.

(f) Distribution strategies

What should be the inventory levels to be maintained by a rural shopkeeper

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

47
frequency of distribution? These aspects require very careful consideration while
evolving distribution strategies for rural markets.

(g) Market organisation and staff

The size of the market organisation and staff is very important, to have an
effective control. Comparatively, catering to rural market involved large marketing
organisation and staff. How many manufacturers and marketing men could afford
such huge investments in terms of personnel and also keep an effective control on it,
needs examination.

(h) Product positioning

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

While positioning was possible in the case of durables, positioning of consumables
does pose problems. So it might warrant designing new products or redesigning the
existing ones to suit the rural wants, habits and needs, based on the purchasing

power.

(i) Deprived people and deprived market

The number of people below the povertyline has not decreased in any
appreciable manner. Thus, by and large rural markets were characterised by poor
people and underdeveloped markets. A vast majority of rural people are
traditionbound and fatalistic. They believe in old customs, traditions, habits, taboos
and practices. They also face the frustrations of intermittent, inconsistent electrical
power, scarce and unreliable telephone systems, neo-feudal politicobusiness
associations that hinder developmental efforts, deeply ingrained ideologies of caste
hierarchy, gender inequality, and religious-communal difference, as well as significant
deprivation of basic human needs.

(j) Harsh terrain

Many rural areas are not connected by rail transport. Rural roads are poorly
surfaced, and many are totally destroyed or severely damaged by the monsoon and
remain unserviceable, leaving interior villages isolated. And the use of bullock carts

48
looks inevitable for many years into the future. Of the 15 million carts in the country,
12 million were estimated to be in rural areas, transporting about 6 billion tonnes of
freight per year. Camel carts operate in Rajasthan and Gujarat in both urban and
rural sectors. In Haryana, Punjab and Western UP, buffaloes also were used as carts.

Harsh terrain makes approaching these villages often not easy. The Indian
railway network connects only the towns, from where the sales personnel had to
travel on buses or bullock carts or auto rickshaws to reach the villages. Sometimes it ^
takes more than two days to reach some of the remotely connected villages. The
approach roads were not of good quality leading to the breakdown of vehicles. The
terrain often was unfriendly and unhygienic. It had meant that only a few companies
had a well established dealership network in rural India.

(k) 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. Messages have to be delivered in
local languages and dialects. Even though the number of recognised languages are
only 18, there are an estimated 1,652 dialects. It is difficult for marketers to design
promotional strategies in different languages and local dialects. Facilities such as
phone, telegram, and fax are less developed in villages, adding to the
communication problems faced by marketers in the distribution of goods.

(l) Dispersed markets

Rural population was scattered over a large land area and it was almost
impossible to ensure the availability of a brand all over the country. Seven Indian
states accounted for 76 percent of the country’s rural retail outlets, the total number
of which was placed at around 3.7 million. District fairs were periodic and occasional
in nature. Manufacturers and retailers prefered such occasions as they allowed
greater visibility and captured the attention of the target audience for large spans of
time. Advertising in a highly heterogeneous market, which was widely spread, was
very expensive.

49
(m)Prevalence of spurious brands and seasonal demand

For any branded product there were a multitude of ‘local variants’, which
were cheaper, and therefore, more desirable for villagers. Rural consumers were
cautious about buying and their decisions were slow. They like to give a product a
trial and buy it again only after getting personal satisfaction.

(n) Different way of thinking

There was a vast difference in the lifestyles of urban and rural people. An
urban customer had many more choices than his rural counterpart. The rural
consumer usually had two or three brands to choose from, whereas the urban one
had many more choices. There was also a difference in the way of thinking. The
rural consumer lives fairly simple compared to his urban counterpart. Life in rural
areas was still governed by customs and traditions people do not easily adopt new
practices.

(o) Distribution problem

Effective distribution requires a village-level shopkeeper, mandi/taluka-level

wholesaler or preferred dealer, a distributor or stockist at the distrit level and a
company-owned depot or consignment distribution at the state level. So many tiers
increase the cost of distribution. Rural markets typically pose complex logistical
challenges that translate into high distribution costs. Coupled with relatively slower
growth of incremental demand and the lack of an adequate institutional mechanism
for retail operations, margins were squeezed to the utmost. There were, of course,
more macro-level concerns about purchasing power partity, per capita household
expenditure and regional and cultural variances as well. Taken together, the great
hurdle that one can ill-afford to either ignore or take it for granted. Infrastructure
(bad roads, no adequate warehousing and lack of good distributors) also poses a
major problem when a marketer thinks of targeting rural markets.

50
 (p)Skeptical consumers

These consumers had a low risk profile. It takes a lot more to convince them
to buy new products unlike with their urban counterparts. They believe in the
opinion of leaders more than any well proven statistics or facts. The role of local
opinion leaders was undisputed.

(q) Regional politics

Local politics was becoming more powerful. They control not only the votes
but also the purses of the village folk. They decide on what will sell and what will not
sell in the local markets. Most of these decisions were driven by selfish motives of the
leader who wants a share in every item sold in his area. This reduces the margins for
companies who, any way, were working at low margins on rural products.

However, most of these problems could be overcome with increasing

awareness, education levels and income.

8. Market for non-durables

The study of various factors affecting and reflecting the purchase patterns and
income levels, the type of house, ownership of durables and education of the wage
earner were identified as the key discriminating variables and accordingly the rural
households were divided into six categories. The classification and percentage of
rural households falling in each category is shown in the Table 3.20.

Table No. 3.20 Rural socio-economic classification

Socio-economic Percentage Socio-economic Percentage

Class Households Class Households
SEC-I 2.0 SEC-IV 19.0
SEC-II 5.0 SEC-V 37.0
SEC-III 16.0 SEC-V1 21.0
Source: Business Standard, Mumbai edition, February 2, 1996, p.6

51
 About 7 per cent better-educated and well off households belonging to the
rural upper class (SEC-land2) had the highest purchasing power. Nearly 58 per cent
households belonging to the low-income strata (SEC-5and6) are less literate and
deprived. They have relatively low purchasing power and buy only the essential
things. The main drivers of rural demand are the SEC-3and4 category consumers,
constituting about 35 per cent rural population. However, the latest data-released by
the NCAER suggest that in rural India households with an annual income of less that
Rs 75,000 account for more that 75 per cent of the value consumption of consumer
non-durables (The Economic Times, Sept. 3, 2003). A household in the rural area
spends on an average Rs 327 per month on consumer non-durable goods (at 1998
prices.). The expenditure limits vary by SEC, ranging from Rs 781 to Rs 220 for the
top rung and lowest category households respectively (India Market Demographics
Report, 2002). Percentage of rural households buying different types of consumables
is shown in the Table 3.21.

Though the consumption data for a few products such as biscuits, hair oils
and talcum powders estimated by the two organizations (NCAER and ORG) do not
match, by and large there was an agreement regarding other FMCG products. Of
this total basket, necessary products such as toilet soaps, washing cakes and bars, tea,
edible oil, salt, etc., display highest penetration. Penetration of products like biscuits,
boiled sweets, blues, shampoo, toothpaste, tooth powders and dry cell batteries is
also high.

52
Table No. 3.21- Household penetration of consumable goods

Percentage Percentage
Percentage Percentage
Households Households
Product Households Product Households
(1998-99) (1998-99)
Category (1998) Category (1998)
NCAER NCAER
ORG Date ORG Date
Date Date
Toilet Soap 91.6 99.2 Talcum Power ' 16.4 43.3
Washing Bars 89.2 95.0 Hair Oil 16.0 78.7
Edible Oils 83.5 95.3 Skin Cream 15.5 18.4
Tea 75.6 75.8 Rubs & Balms 14.4 NA
Washing Power 71.0 57.5 Tooth Brush 9.9 NA
Iodised Salt 64.1 NA Digestive 7.2 NA
Biscuits 60.1 31.5 Coffee 0.7 NA
Coconut Oils 53.6 NA Mosquito Repel. 4.7 NA
Razor Blades 47.1 NA Antiseptic Cream 4.6 NA
Shampoo 39.8 35.3 Hair Wash power 3.0 NA
Blues 36.0 NA Antiseptic Creams 2.1 NA
Toothpaste 35.6 44.8 Shaving Creams 2.9 NA
Tooth Power 23.8 43.2 Home Insecticide 0.4 NA
Batteries 23.1 NA Vanaspati 17.4 41.5
Sources: ORG-Marg, R-panes report as quoted in The Economic Times, Ahmedabad edition,
December 7, 1998, p 5; and India Market Demographics Report 2002, p. 103.

The market Information Survey of Households (MISH) conduced by NCAER

collected information on 22 consumer non-durables in the Indian market. The
market size (urban and rural) for these products was estimated at Rs 915.5 billion at
1998 prices. It works out to an average household expenditure of around Rs 5,325
per annum. About 53 per cent of these sales were in rural India. In terms of average
household expenditure, the urban household expenditure at Rs 8,759 was more than
double of the rural household expenditure of Rs 3,921 (India Market Demographics
Report, 2002). Interestingly, in rural areas the two lowest income groups were found
to account for more that 70 per cent spending on consumer expendables.

Corraborating the findings of R-Panel the MISH study also revealed a high
rural-market share in the purchase of consumables such as cigarettes (58%), cooking
oils (66%), casual footwear(61%), tooth powders (78%), tea (60%), toilet soaps
(58%), washing cakes (67%), and washing powders(58%). The share of rural
markets in the so called ‘urban goods” such as face creams (28%), packaged biscuits
(43%), tooth pastes (46%), nail polish (44%), shampoos (32%) health beverages

53
(31%) and like was also found to be reasonably good. In face, for many consumable
goods the rural share was much higher now than what one would have imagined a
few years back.

8.1 Expenditure on consumer Non-durables

Rural buyers consume certain non-durable products regularly, and this buying
behavior reflects their lifestyles. The average expenditure among rural households in
the East was the lowest at Rs.2,837 and in the West was the highest at Rs. 3,622 per
annum for the 22 consumer non-durables. The rural household in the lowest income
group spent Rs. 2,464 a year and the highest income group spent Rs. 8,021 a year
(see Table 3.22)

Table No. 3.22 - Expenditure per household for 22 consumer

non-durables by income Group
Expenditure per Household (Rs.)
Income Group
Per annum
< 25,000 L 2,464
25,001-50,000 LM 3,474
50,001-77,000 M 4,875
77,001-1,06,000 UM 6,422
>1,06,000 H 8,021
Total 25,256
Source: Natarajan India Market Demographic Report 1998, NCAER 1988

54
 Table No. 3.23 - Penetration rates for 22 consumer non-durable Items
among rural households
(purchasing households per 1,000 households)
Consumer Non-durable No. of Households
Body talcum power 368.5
Cigaretts 186.8
Face cream 148.2
Cooking medium (oil) 898.2
Cooking medium (vanaspati) 365.5
Electric bulbs 475.9
Electric tubes 109.6
Footwear (casual) 639.7
Footwear (leather) 502.9
Footwear (sports) 241.7
Hair oil/Cream 731.4
Health beverages 51.6
Lipstick 11.8
Nail polish 31.4
Packaged biscuits 231.1
Shampoo 81.0
Tea 835.8
Toilet soap 979.2
Tooth paste 329.7
Tooth power 370.3
Washing cake 918.2
Washing power 553.7
Source: Natarajan India Market Demographic Report 1998, NCAER 1988

(i) Fast-moving consumer goods purchased by rural consumers include toilet soaps,
washing soap bars, edible oil, tea and washing powders. These indicate that rural
consumers buy basic products.

(ii) The acceptance of hair wash products like shampoos was less than compared
with products like soaps. This shows that personal hygiene is also considered
important by a number of rural consumers.

(iii) Toothpowders were considered to be the only sort of oral-care product rural
consumers would buy, yet toothpaste penetration had actually overtaken
toothpowder penetration (see Table 3.24).

55
 Table No. 3.24 - FMCG penetration

FMCG Penetration Total

Category Penetration
Analgesics/cold/ethical tablets 27.9%
Batteries 21.3%
Bulbs 29.9%
Edible oils 84.7%
Hair wash products 39.4%
Lodized salt 61.5%
Safety razor blades 45.4%
Tea 79.1%
Toilet soaps 88.3%
Toothpowders 22.8%
Toothpaste 33.1%
Washing cakes/bars 87.5%
Washing powders/liquids 70.3%
Source: Business World, April 1999.

9. Profile of the rural consumer

(a) Low literacy levels

It was estimated that the literacy level in rural India was 45 percent as
compared to 52 percent for the whole country. The literacy rates were much lower
in the villages of underdeveloped states like Bihar. The maximum education was
primary school or high school level. It might be an important point to be considered
in the rural profile.

(b) Low income levels

Though rural incomes have grown in the past decade, the money earned by
the average rural consumer is still much lower than that of his urban counterpart. A
part of the income was spent on basic necessities, leaving a smaller portion for other
consumer goods. Low purchasing power, standard of living, per capita income,
economic and special positions were the traits of rural consumers.

56
(c) Location pattern of rural consumers

India’s urban population is concentrated in 3,200 cities and towns, whereas

the rural population was scattered over 6,27,000 villages. Of those, only 7,202 had
a population of more than 5,000 persons. More than 2,70,795 villages were in the
category of 500 people or less. Rural consumers therefore are scattered over a large
area, unlike their urban counterparts, who were highly concentrated.

(d) Reference groups

Typically, in a rural area the reference groups were primary health workers,
doctors, teachers and panchayat members. The village trader or the grocer,
commonly called ‘Baniya’ or ‘mahajan’ might also be an important influence in the
decision-making of rural consumers. It was because of trader who extends credit to
the farmers. Today, another person who was considered a change agent was the
rural bank’s officer or manager. A marketer needs to be aware of those influences
who can effect changes in the rural consumers consumption patterns.

(e) Occupation

Typically, in a rural area the principal occupation was farming, trading, crafts,
and other odd jobs like plumbing, electric works etc. There were also primary health
workers and teachers. The different types of farming activities include growing crops,
cattle and poultry farming. The basis for differentiation was obviously the size and
ownership of land. Consumption patterns differ according to income levels.

(f) Media habits

Rural people were fond of music and folklore. In rural Maharashtra a popular
form of entertainment was the Tamasha. Rural folk listen to the brave deeds of their
hero Shivaji. Like wise, in Uttar Pradesh, Nautanki entertains the rural customer. And
then there were television, radio and video films.

57
(g) Other variables

Culture, language, religion, caste and social customs were some other
important variables for profiling a rural consumer. Rural consumer’s had a lot of
inhibitions and tend to be rigid in their behaviour. A company has to take intense
care while targeting them.

9.1 Classification of rural consumers based on economic status

Table No. 3.25 Number of rural consumer households in millions

Very rich 0.8 1.6

Consumer class 26.8 41.3
Climbers 54.7 63.3
Aspirants 25.0 14.7
Destitute 20.9 12.2
Years 2001-02 2006-07
Source: NCAER

(a) The affluent group

Numerically, the group forms a small part of the Indian population, with 150
million people. Though people in this group can afford conspicious consumption of
a high order, they do not form a demand base large enough for manufacturing and
marketing firms to depend upon exclusively, except for those who deal with real
luxury items. For example, cash-rich wheat farmers in Punjab and chilly merchants
in Andhra Pradesh (Guntur) fall in the group.

(b) The middle class

The evolution of the class and its all-out expansion was tremendous. There
were an estimated 300 million people in the class. It forms the base for demand for
manufactured goods in the country, where it constitutes the largest segment. For
example, sugarcane farmers in Uttar Pradesh and jute farmers in West Bengal fall in
these category.

58
(c) The poor

The third category, the poorer sections, stands out in striking contrast to the
first group. Their size was very large (there were an estimated 250 million in this
class) and their purchasing power was very low now. The group was getting the
benefits of social, educational and economic schemes, and over a period of time, a
good part might advance economically and merge into the middle class. For
example, the poorest farmers growing jowar, bajra etc., of Bihar and Orissa fall in the
class.
/

9.2 Rural consumer behaviour

Consumer behaviour was about how individuals make decisions to spread

their available resources (time, money, effort) on consumption-related products.
That includes what they buy, why they buy it , when they buy it, where they buy it,
how often they buy it, and how often they use it.

Not too long ago when marketing myopia was the prevalent feature of Indian
markets, companies developed products and services without ascertaining the needs
and wants of the target market. Today, though the consumer is treated as the king,
not enough effort is made to understand him. Without any special effort, penetrating
something as complex as a rural market is just not possible.

Simple model of rural consumer behaviour

/ .

Factors that influence rural consumer behaviour

I
/

(a) Stimuli

Stimuli were inputs to any of the sense. Stimuli (i.e. sensory inputs) include
products, packages, brand names, commercials etc. Marketing stimuli include an
enormous number of variables that affect consumer perceptions, such as the nature

59
of the products, their physical and commercial attributes (including the positioning of
the print ad or the timing of a commercial and editorial environment).

(b) Perception

Perception could be defined as “the process of selecting, organizing and

interpreting or attaching meaning to events happening in the environment”. It was
an integral part of consumer behaviour, whereby an individual selects data or
information from his environment, organizes it and then draws conclusions or
meaning from it. The factors that affect perception were exposure and interpretation.

(i) Exposure involves the extent to which we encounter a stimulus. In

rural areas.

(ii) Interpretation involves making sense of the stimulus. Since perception

was a subjective process, different people might interpret an event
differently.

(c) Attitudes

Attitudes were generally understood to be inner expressions or feelings that

reflect whether a person was favorably or unfavorably predisposed towards the
subject. Consumer attitudes were a composite of a consumer’s beliefs, feelings and
behavioral intentions towards some object within the context of marketing, usually a
brand or establishment.

(d) Needs and motives

Needs was a state of deprivation of some basic satisfaction, e.g., food,

clothing and shelter. To sell in rural markets, marketers had to adapt products to suit
rural needs, like the hugely successful sachet shampoos that were a boon to rural
workers, earning daily wages. The rural priority in outlays could also be non-
traditional, as shown by fishermen of Kerala who prefer to buy cell phones rather
than scooters or fridges so that they could obtain market information.

60
(e)Demographics

Demographics were important features of consumer behaviour. The following

were the demographic profiles such as family size, age, gender, income, occupation,
education, caste.

The problem of rural demographics was that there were often no good
correlation between the personal characteristics of consumers and what they wanted
to buy. Perhaps males wanted more favour and will be willing to settle for more
calories in a soft drink than women do, but there was a great deal of variation within
groups. Interestingly, it had been found that people who live in the same area-
talukas and zillas-tend to share many consumption characteristics.

(f) Culture

Culture was the complex of abstract and material elements created by a

society. It refers to values, ideas, attitudes and meaningful symbols, as well as
artifacts. These elements were transmitted from one generation to another and serve
to shape human behaviour, implying explicit or implicit patterns of behaviour.
Multiple cultural factors taken together characterize a particular society, such as
language, religion, technology, etc. In the context of consumer behaviour, one can
regard culture as the total of learned beliefs, values and customs, including material
elements that serve to regulate the consumption patterns of the member of a
particular society.

(g) Beliefs and values

The behavioral patterns of an individual depend on his or her beliefs and

values. Beliefs constitute a person’s particular knowledge and assessment of
something (another person, a store, a product, a place, etc.), and were often
expressed as mental or verbal statements (i.e., ‘I believe that...’). Values may have
the characteristics of beliefs but they were not directed towards a specific object: they
serve as standards for appropriate behaviour, and were widely accepted by members
of a social group. There were values specific to a social group, some standards of

61
behaviour were established and members were expected to conform to them. Those
were norms and they consist of concepts or generalizations that guide behaviour.

(h) Social class

Social class was a somewhat nebulous classification that involves stratifying

people into groups with various amounts of prestige, power and privilege. We
cannot, for example, associate social class with income, because someone in a
traditionally low-status job like a plumber may today earn as much as an individual
in a more prestigious job, like a school teacher. In certain other cultures, however,
the stratification was more clear-cut. Although the caste system in India was no
longer as powerful as it used to be, it still has a tremendous influence on rural society.

(i) Influence group

A useful framework of analysis of group influence on the individual was the so

called influence group- the group used by an individual as a standard of reference
against which he compares himself. The influence group involves reference groups,
opinion leadership, family and innovation.

(i) Reference groups : Reference groups come with various degrees of

influence. Primary reference group-members of the family, schoolteachers,
mukhiya of the village-have a great deal of influence.

(ii) Opinion leaders : Another big social influence was the opinion leader. An
opinion leader was a person who influences the actions or attitudes of others.
Individuals might be opinion leaders, opinion seekers or opinion recipients.
Anugrah Madison (rural advertising arm of ad agency Madison) discovered
that women and children were demand generators, but it was the man who
decided on the brand. The Old Order was made up of successful farmers,
village legislature members and elders. The New Order comprises youngsters
who go to the nearest town to study in a college or to work. Those were the

62
 people who come back to the village with news about the latest consumer
products, the most popular brands and the ‘in-things’.

(iii) Innovations : Usually, when new products or ideas come about, they were
only adopted by a small group of people initially; later, innovations spread to
other people.
<
9.3 Socio-cultural-psychological factors influencing rural consumers ;

(a) Cultural values :

Basic cultural values have not faded in rural India. Many rural purchases
require collective social sanction, unheard of in the urban areas. Buying decisions
were highly influenced by social customs, traditions and beliefs. Social norms
influencing individuals were more visible. Caste influences were direct and strong.
Rural consumers being conservative in their outlook, take longer time to be
influenced. They do not take quick decisions. They discuss the issue of purchase
with other villagers and the headmen. Decision-making was a collective and time-
consuming process.

(b) Occupational status :

Social classes in rural areas were difficult to define for two reasons.

(i) Occupation were not the same throughout the year.

(ii) Incomes were understated. Many farmers and artisans receive cash and kind as
their remuneration.

(c) Social groups :

(i) Primary Groups - in which there was a regular and informal interaction, for
example, family, friends and neighbours.

(ii) Secondary groups - in which the interaction was formal and less regular, for
example, offices, political groups and self-help groups. Reference groups were

63
 aspirational groups which serve as guide posts to shaping the attitudes and
behaviours of consumers.

(d) Family:

Family was an important consumer-buying organization in consumer markets.

Family size and roles played by family members exercise considerable influence on
purchase decisions. Industry observers were increasingly realizing that at times,
purchse of durables had nothing to do with income, but had more to do with the size
of the family. And that’s where rural India with its joint family structures becomes an
attractive proposition.

(e) Role and status :

Every person was a member of more than one group or organization. In each
one of them, the individual had a role and status. Role refers to the behaviours
expected of the individual as a member of the group. Status refers to the place given
to the individual because of his or her position or achievements. It reflects the
general esteem given to him/her by society. High-income group people reflect their
status by using premier products. Accordingly, they try to make sound purchase
decisions and provide rational advice to the people who seek their opinions.

(f) Sociability :

In the rural areas, individuals were known and identified better. Despite the
universality of personal identification and touch in rural areas, the sociability levels
were low. Rural folks had limited personal interactions. Their exposure to people
and information was very less. There were more frequent interactions with known
people.

(g) Lifestyle :

Lifestyle forms a person’s pattern of living. The pattern of living was

determined by the activities, interests and opinion of people.

64
 • Activities = work, hobbies, shopping, social events, etc

• Interests = food, fashion, family, recreation, etc

• Opinions = about self, society, government, business, etc

Different researchers had identified different life style patterns. One way of life
style classification is : trendsetters, traditionalists and chameleons.

(h) Personality and self concept:

Personality refers to the unique psychological characteristics that lead to

relatively consistent and lasting responses to one’s own environment. To relate
personality to products people purchase, there were two aspects to be considered,
situation and person. In a social gathering, youth prefer to buy cigarettes, pan
masala, tea, coffee or cold drinks, etc. while travelling people prefer to buy mineral
water bottles or sachets, food packets, etc. given the situation, the response pattern
vary from individual to individual.

(i) Psychological factors:

The three psychological factors, which help describe what goes on in the
minds of consumers, could influence on his decision-making process. They were:

• Perception • Cognition

• Beliefs and attitudes • Motivation

10. Buying behaviour patterns for non-durables

Assael distinguished four types of buying behaviour based on the two
parameters.

• Degree of buyer involvement (high and low)

• Degree of differences among brands(significant and not)

65
 Parameters
High involvement Low involvement
Differences
Significant differences Complex buying behaviour Variety seeking buying
among brands behaviour
Few differences among Dissonance reducing Habitual buying
brands behaviour behaviour

(a) Complex buying behaviour:

Complex behaviour is exhibited while purchasing products like computers,

refrigerators and automobiles. Marketer should initiate the following actions :

• Help consumer to learn about the product, its attributes, uses, and benefits
through detailed ads and exhibitions.

• Make comparative analysis of features and benefits of products in print media.

• Train and motivate sales personnel. They could effectively make prospects
aware of and interested in products.

• Generate word-of-mouth advertising and influence opinion leaders.

In the rural settings, demonstration, opinion leadership and trained retail sales
persons could be more effective as the literary levels of consumers were low.

(b) Dissonance reducing behaviour:

Products like carpets and furniture were expensive but had few differences.
Consumer was involved because they were more social products, their style,
appearance and performance will be talked about and might result in either delight
or dissonance. The buyer rationalizes the purchase by identifying certain attributes
and uses them as a defence to reduce the dissonance.

Marketers should be intelligent in knowing probable arguments in favour of

and against a product. On what grounds the product might be appreciated or
discounted? Using the knowledge, marketers should make their products and offer
them with the right amount of logical information.

66
(c) Habitual buying behaviour :

Products like salt, wheat, noodles, cigarettes, and paanmasala were low
involvement items with low cost. They were frequently purchased. Consumer was
not really bothered which brand it was. He could generally ask for the product and
not the brand. Some might ask for brand. When the preferred brand was not
available, they could ask for another brand. They do not postpone the purchase and
take the trouble of going to another shop. They bought whatever was available.
There was a lack of strong brand consciousness.

How to make low involvement products into high inolvement ones? How to
make consumers brand conscious? Differentiated marketing serves the purpose. The
attack could be on two fronts- rational and emotional.

(d) Variety seeking :

The products had significant differences. There exist a good number of

brands with different attributes and benefits. Purchasing was less expensive and
frequent. Consumer prefers to buy different items of the same brand or different
brands to experience a different sight, smell, sound, touch and taste. Brand
switching occurs to try a good variety of products and not because of dissatisfaction
arising out of the use of a product. Marketer had to take care of three things:

(i) Availability (ii) Attraction and (iii) Variety

11. Buying evaluation procedures

(a) Expectancy-value model : The procedure was as follows:

• Consumer identifies the attributes of the products/brands in which he/ she was
interested. For example, an educated farmer is interested in buying a moped.
He/ She identifies the attributes: resale value, fuel economy, speed load carrying
capacity and less maintenance costs and investment (price).

• He/ She assigns weightage to the attributes.

67
 He/ She then identifies his consideration to the set of brands.

• He/ She then states his expectations about the brands based on their attributes.

(b) Lexicographic model :

It describes the procedure of a consumer who was more interested in selecting

a brand if it excels in respect of one of the attributes arranged in order of priority.

• The buyer prepares a list of attributes.

• Prioritizes the attributes.

• Compares the brands on the first attribute. If there was a tie, he/ she goes on to
the next attribute.

• Compares the brands on the second attribute. If one brand was better than
others he/ she selects it.

• Otherwise, he will proceed to the next attribute till be finds a suitable one to
select.

(c) Conjunctive model :

A consumer may select a product that satisfies few attributes, which he/ she
considers important. The procedure involves:

• Identifying the important attributes.

• Determining the minimum attribute levels that the acceptable brand should

possess.

• Evaluating the available brands.

• Selecting the one that possesses the minimum attribute levels.

68
(d) Disjunctive model:

The consumer was keen on one variable. A brand having satisfying levels of
the attribute will be chosen.
*

12. Changing pattern of consumer behaviour

(a) Quality Consciousness

Increased income and improved awareness have made the villager more
quality conscious than ever before. The demand for various categories of durable
and non-durable goods such as motorcycles, fridge, pressure cookers, better quality
dress material, TV sets, premium soaps, biscuits, soft drink concentrates and like wise
now not confined to urban markets only. Rural consumers were fast learning to use
and consume such products (The Economic Times, Brand Equity, Oct 6-12, 1999).

(b) Attitude towards money and savings

The attitude of villagers towards use of money and savings had undergone a
sea change in the nineties. They were more willing to spend money on comfort and
consumption. The age-old practice of keeping the savings in the form of cash or gold
had given way to preference for bank accounts. Rural people today are also
investing in insurance policies, company shares and other securities. Taking loans to
buy durable product is no more a social taboo now.

(c) Willingness to experiment

The rural consumer was no longer suspicious of new urban products. He/ she
was trying to experiment with those products and take the limited risk. The attitude
might help marketers in securing higher trial rate for new products launched in the
rural markets. Moreover, marketers need to break the communication barrier to
convince the potential buyer.

69
(d)Brand consciousness

Awareness about various brands of consumable goods had increased in the

rural area. Commercials on radio and TV were consistently educating and
influencing them in this regard. The younger 18-35 year age group had a higher
awareness of brands due to media exposure. This had led village retailers to stock
larger number of products and brands today as compared to a few years before. The
ORG-MARG, rural retail store audit suggests that about 68 per cent retailers in the
rural area now stock multiple brands of popular consumable items.

(e) Fashion consciousness

The villager had become more conscious of how he/she looks and grooms,
thanks to the TV serials and feature films. As a result, sale of textile, cosmetics,
personal hygiene products, toiletries and readymade garments, branded shoes, etc.,
had picked up fast in rural areas. Nevertheless, firms need to strengthen their
distribution networks to reach the rural customer.

(f) Status symbols

Higher levels of income, expenditure and consumption have brought about

substantial change in the lifestyle of rural people. They were now more conscious
about their social status and the way they live. Earlier the land ownership, sliver and
gold jewellery, pucca house, number of cattle and buffaloes, etc., were considered as
status symbols in rural societies; now, tractor, tube-well, motorcycles and TV were the
new status symbols. As a result of change in outlook, lifestyle products, durables as
well as consumables, such as soft drinks, cigarettes, panparag, perfumes were finding
place in rural households.

(g) Shedding of inhibitions and taboos

Rural buyers had also shed many inhibitions and taboos related to the use or
consumption of certain products specially the packaged food and bakery products.
Most rural households had now allowed the use of plastic wares in their kitchens.

70
Getting flush toilets constructed in the homes is no more considered as ‘unclean’.
This was the indication of change in attitude and mindset of the rural consumer.

(h)Role of retailers

Retailers had a very strong influence on the rural buyers. No marketer worth
his Ps can ignore the fact. In the absence of any other source of reliable information
about the product, rural buyers often turn to the retailer for advice and counseling.
Role of the retailer becomes all the more important when some new brand was
introduced in the rural market.
t

12.1 What leads to a change in rural consumption pattern?

(a) Economical

The development of the rural sector and its marketing mainly depends on the
economic factors such as infrastructure facilities like roads, power, health education,
etc., and on the role played by the government to increase the per capita income and
standard of living.

The improved infrastructure, interaction with media, greater and diverse

influence of urban markets on the rural consumer, emphasis on education,
borrowing, buying process, saving and investment patterns have all brought about
significant changes in economic values, bringing individual behavior and action to
the center stage.

(b) Social factors

With faster economic growth the purchasing power of the rural consumers
had gone up tremendously. The influx of consumer products in villages had
highlighted the role of the rural housewife. She had now become a key influencer
and decision maker in all buying decisions, which was not the case a decade ago.
Villagers were now quicker in adopting a new product. The time gap in converting a
potential rural buyer into an actual buyer was gradually declining. The savings and
investment pattern of the rural consumer had changed in favor of consumer

71
durables, and their participation had become positive in banking and capital market
activities of the country.

(c) Political factors

Liberalization will not be able to move ahead without a base in the villages.
The prospects that development activities offer were big in rural markets. The
technological revolution, with the village as its target, presents newer ways of
expanding rural markets.

(d) Technological factors

Rapidly growing computerization of production in India, had brought about

massive expansion of the markets including the rural market. Commodities had
begun flowing from one region to another and from one village to another breaking
all barriers.
/

13. 4 P’s of rural market

(a) Product

Firms operating in the rural markets may exercise three major options
regarding their product offers:

i. Selling the same (urban) product in rural markets.

ii. Modify the product to make it more suitable for the needs/usage conditions of
rural consumer.

iii. Develop an entirely new product for rural markets.

So far, most Indian companies had chosen the more convenient and softer
option of extending the urban products/brands to rural markets without any
modifications. Because of increasing cross-flow of population between rural and
urban areas the firms believe that there was hardly any difference now in the choices
of rural and the urban buyers. The logic may, to some extent, be true for a few non­
durable mass consumption items such as toilet soaps, dry cell batteries, tea, shaving

72
blades and detergents but the same might not hold good for the semi-durable and
durable products.

For most firms the option of developing an entirely new product for rural
markets was an expensive and time-consuming proposition. Moreover, in the
absence of any hard data on rural needs, usage pattern, purchased intention and
buying behaviour, it was more like groping in the dark. Yet, despite all odds certain
firms have committed themselves to developing rural specific products.

(b) Packaging

In case of consumable items, a very important aspect is the pack size. A rural
woman is unlike to spend Rs 65 to buy a bottle of shampoo, which otherwise might
be more economic in regular use, but she would not mind in paying a rupee or two
to buy a sachet as and when needed by her.

• Type of packaging was also very important. Glossy packing was perceived as
expensive and not a good value for money. The packaging should therefore be
simple and functional. It should also be capable of protecting the product in
transportation and storage.

• Colour of the product/packaging was important because of its perceived linkage

with other elements of product-mix. Villagers, often associate colour with price
and quality. Blue detergents for example were perceived as expensive in
comparison to yellow powders. Any tea in a red coloured packaging is perceived
as better quality and toilet soaps of pink colour (Nirma, Breeze) were long lasting
as compared to white soaps. Hair oils of a dark green colour have a connotation
of luxury, hence were to be used only occasionally. For them, it was an easy way
of classification and categorization of numerous varieties of products.

(c) Pricing

Pricing was a critical aspect of rural marketing mix. Firms must therefore
rationalize and integrate pricing decisions with their overall strategies for achieving
success in rural markets. Most products purchased by villagers were utility products,

73
and they expect value for money from such purchases. Though, some affluent rural
consumers might pay a higher psychological price for brand image, perceived quality
or convenience, by and large most buyers were utility oriented, down to earth and
practical in their decisions. If the price of the product was more than the perceived
value, they might not be prefering to buy it.

Brand- based product differentiation does not make much sense for majority
of rural buyers because they were often unwilling to pay more for packaging or
imagery. This was why the demand for unbranded commodities and basic products
is more in rural markets. Often, there were different prices, one for the cash
purchases and the other for those who buy on credit. The margins of a rural retailer
may vary from 20 to 40 per cent depending upon the type of product and its
demand.

Products like toilet soaps, detergents, confectionery, biscuits, hair oil, dry cell
batteries, cigarettes, etc., normally sell at the same price in the urban and rural
markets. Even if a firm so desires, it was difficult for it to charge a lower price from
rural buyers because cost of distribution was much higher in rural areas. Marketing
firms may address this problem by offering a no-frills product in simple packaging
and small pack sizes at an affordable price to the rural consumers.

Sensible pricing had produced encouraging results for several homegrown as

well as multinational firms. Nirma’s success story, for example, hinges around its
penetrative pricing and easy availability of products in rural markets. Britannia
increased its share of Glucose biscuits from 7 percent to 18 percent in less than 2
years mostly on the basis of its sale in rural areas. Small pack sizes and low price had
helped firms like Colgate, HLL, Marico and Godrej Soaps to get a firm foothold in
rural markets.

(d) Promotion

Until the advent of TV, promotion of consumer products in rural markets was
a much daunting task. Illiteracy being a major barrier, constrained the impact of print
media severely. Radio too had its limitations in terms of effectiveness and impact on

74
the targeted audience. Television therefore provided the much-needed fillip to
media reach and impact and triggered a consumer boom in the sleepy backyards of
rural India. Though, television is not necessarily the best choice for all types of
communications with rural buyers, its importance lies in its ability to break the
literacy barrier.

For smaller firms operating at the local or regional levels TV was expensive. It
is not a right choice again for low-value products such as PVC footwear, kerosene
stoves, dress materials, transistor radios, boiled confectionery, electric bulbs and like
that were commonly used in rural areas. It had also been observed that the rural
audience watches TV for certain specific programmes only, such as Chitrahaar, Hindi
or regional language films, and some weekly serials. So TV was not an anytime
medium for the rural audience. The India readership Survey (IRS) 1998 suggests
that the rural audience cannot be reached through mass media alone; you need to
use some other channels as well (see Table 3.26).

Table No. 3.26 - Reach of mass media in rural markets

MHI
MHI MHI
Reach (%) Rs 3,001 - All
Rs. 5,001 + < Rs. 3,000
5,000
TV 59 63 30 33
TV + Radio 68 74 40 44
TV + Radio + Press 73 80 46 49
TV + Radio + Press + Cinema 74 80 48 51
*MHI- Monthly Households Income.
Source: IRS 1998, as quoted in Advertising and Marketing, May 1-15, 1998.
• The message should be simple and straightforward. Use of jargon and complex,
unfamiliar vocabulary does not help.

• Use of local dialect was most effective in any rural communication.

• The message should stress only the core benefits of products and not the frills and
fineries,

• Never say anything that might hurt village people’s sentiments or violate the
santity of their faith or social norms.

• Anything that requires a change in usage pattern or consumptions habits may not
be accepted readily.

75
14. Distribution in Rural Markets

In terms of value and geographic spread both, the rural market in India was a
large but scattered entity. The cost of distribution was therefore much higher as
compared to urban markets. Lack of transportation, storage, communication and
banking facilities compound the problem further. In the states like Punjab, Haryana,
Pondicherry and Kerala where almost 100 per cent villages are connected with pucca
-weather roads, distribution was as efficient and economic as in any urban market
but in other parts of the country the most difficult challenge for marketers was to
manage physical distribution in the countryside.

At the all India level 2,09,360 or 33 per cent of total villages were connected
by pucca roads. The proportion was the maximum at 57 per cent in the south and
minimum at 20 per cent in the eastern zone. There were only 7,271 villages with
railway stations. This forms 1.2 per cent of total villages. Kerala was the best state in
this regard with 8 per cent of villages having a railway station. Kerala was also
characterized by large villages; 1,259 out of the total of 1,384 have population over
5,000. While the average population in Kerala was 15,475 per village, for rest of the
country the figure was 954 only. There were approximately 3.7 million shops in the
rural sector, leading to an average of 5.85 shops per village. In Punjab, West Bengal,
Goa, Gujarat, Andhra Pradesh and Tamil Nadu there were seven or more shops per
village. The average number of shops per village was lowest, around 1.5 in
Himachal Pradesh, Arunachal and Meghalaya whereas Kerala has the highest
number of shops at 192 per village.

76
 Exhibit No.3.5 - Distribution network in the rural markets

Company Depot

_________ I__________
Redistribution Stockists, Semi-wholesalers and Retailers
at District Headquarters

i
Semi-wholesalers and Retailers at Taluka Head Quarters, Other
Smaller towns and industrial townships

1
Semi-wholesalers and Retailers in Large Villages
(With a Population of 5,000 or Above)

I
Retailers in Smaller Villages

Z' Itinerant Traders at

V Haat Markets

Haats operate once a week or so in a total of 41,888 villages. About 45 per

cent villages with haats were in the east, 27 per cent in north, 20 per cent in west and
8 per cent in south. At the national level, UP and Bihar had the maximum number
of haats, i.e., 25 per cent and 18 per cent respectively. In UP, Bihar, West Bengal
and Maharashtra, villages holding haats form 10 per cent of total villages in the
respective states. Majority of villages holding haats were typically small in size. The
Table 3.12 gives a region-wise distribution of retail outlets and haats in the rural area.

77
Tabic No. 3.27 - Region-wise distribution of rural retail outlets and haats

Region East West North South

Total
Distribution Zone Zone Zone Zone
Villages with
1,81,982 1,35,936 2,00,106 73,585 5,91,609
> 5,000 people
Villages with pucca
41,348 44,693 78,217 45,102 2,09,360
roads
Total retail outlets
10,89,603 6,51,285 9,75,911 9,80,728 36,97,527
Villages with
18,905 8,380 11,436 3,167 41,888
number of haats
Source: Business World, October 11, ' L999, pp. 30,32.

Table 3.27 shows zone-wise details of villages with sizeable proportion of

people, pucca roads, outlets and haats. In the industry circles, it was generally
agreed that companies would be better off if they focus on villages with populations
of 2000 and above, which typically have 5-15 shops each.

• Fifty per cent of the villages were very small having a population of less than 500
with limited purchasing power and many of them don’t have even a single shop.

• About 2.5 lakh villages with population of 501-2000, had around 5 shops each
but sales were not good enough.

• About 60,000 villages had population of 2001 and above.

• Seven Indian states account for 76 per cent off the country’s rural outlets.

• 184 districts account for as much as 69 per cent of sales.

FMCG companies can cover as many as 1 lakh villages by appointing 2000

stockists in towns with population of 20,000. Every stockists can conveniently
redistribute products to 50 locations around the towns. For durables, 90 per cent of
products are bought in the 2000 small town markets.

Haats and melas

The haats and melas were called as ‘weekly supermarkets’ of rural India,
around 47,000 haats and 25,000 melas were held annually in rural India. The

78
annual sales from these haats are around Rs 825 crore a year, and the melas account
for Rs 350 crore. NCAER estimates that around half the items sold in those melas
and haats were FMCG brands and consumer durables

Table No. 3.28 - Furnishes information about hatts and melas

Number of haats 47,000

Average per day sales in haats Rs. 2,23,000
Average out lets per haat 314
Average visitors to a haat 4,580(covers five villages)
Average sales per outlet in a haat Rs. 874
Purchase of manufactured goods in a haat 24.3 per cent
Number of commercial melas 5000
Sales per day in a mela Rs. 25 lakh
Source: Pradeep Kashyap, MART, quoted in A&M, Fe Druary, 1999

14.1 Distribution channels and its problems in rural markets

In the first place, the rural distribution chain requires a larger number of tiers,
compared to the urban one. The long distances to be covered from the product
points and the scattered locations of the consuming households cause this situation.
At the minimum, the rural distribution chain needs the village-level shopkeeper, the
mandi-level distributor and the wholesaler/stockist in the town. And on top of them
were manufacturers’ own warehouse/branch office operations at selected centers in
the marketing territory. Such multiple tiers and scattered outfits push up costs and
make channel management a major problem. The dependence of the firm on
intermediaries was much greater in rural areas as direct outlets were ruled out.

79
(a) Non-availability of dealers

Another problem was the availability of dealers. Many firms find that there
were limited number of suitable dealers. Even If the firm was willing to start from
scratch and try out newcomers, the choice of candidates was really limited

(b) Poor viability of retail outlets

Retail sales outlets in the rural market suffer from poor viability. A familiar
paradox in rural distribution was that the manufacturer incurs additional expenses on
distribution; still the retail outlets find that the business was unremunerative! The
scattered nature of the market and the multiplicity of tiers in the chain use up the
additional funds the manufacturer was prepared to part with. And no additional
money comes to any of the groups. Moreover, the business volume was not enough
to sustain the profitability of all the groups and the retail outlet suffers the most.

(c) Inadequate bank facilities

Distribution in rural markets was also handicapped due to lack of adequate

banking and credit facilities. Rural outlets need banking support for three important

purposes:

i. To facilitate remittances to principals and to get fast replenishment of stocks.

ii. To receive supplies ‘through bank’

iii. To facilitate credit from bank.

As banking facilities were inadequate in rural areas, rural dealers were

handicapped in all those aspects. It was estimated that there was only one bank
branch for every fifth village.

(d) Relying on private village shops

A major chunk of the 2.02 million sales outlets in rural India were private
shops. In fact, Indian private village shops were one of the cheapest distribution
channels in the world. This was striking, considering the mighty constraints that the

80
village shopkeeper in India had to operate under. He/She forced to deal in a large
number of products in order to make his/her operations viable.

(e) Satellite distribution

The concept of satellite distribution was strongly recommended to penetrate

the rural market. The system works like this:

Stockiest were appointed in major towns and feeder towns. They, by and
large, discharge the following functions;

a) Financing b) Warehousing c) Sub-distribution

Depending on the size of the stockiest and the product line, those functions
were performed with varying degrees of competence.

Retailers in and around the feeder town get attached to those stockiest. In
some cases they function as authorized retailers or franchised dealers of the
company and were recognized officially as forming part of the company’s marketing
network, operating through the stockists. In other cases, they were not franchised
dealers, but by custom form part of the stockist network.

81
Exhibit No.3.6 - Hubs & spokes system

82
15. Rural marketing strategies
(a) Opinion leaders

The opinion leaders had a significant role in motivating village buyers. They
break their inhibitions in trying new products and concepts. The primary and
secondary role models, both were effective. The marketer has to be careful in
choosing opinion leaders for the rural folk (Amitabh Bachchan and not John
Abraham works in rural India). Generating word of mouth publicity was also known
to reduce the risk perception.

(b) Penetration pricing

Low prices work well. They reduce the entry price and encourage trials, (eg)
Reliance India mobile’s “kar lo duniya mutthi mein” had been successful primarily
because of its good price.

(c) Small pack sizes to generate trials.

Smaller packs encourage experimentation and, thus, generate awareness and

interest. They come with low entry price and were convenient in smaller village
homes.

(d) Different means of communication

The nature of communication to villages was very different. The

communication had to be in the form of a narrative and had a high component of
dramatization. Television and radio were effective. However, the reach of television
was wider to higher income groups and homes with electric connection. Some
common tools used were puppet shows and video vans. Often hoardings and transit
communication like buses and autos had been used to paint advertisement.

(e) Use captive audience points like melas, haats and fairs

The village folk gather at local markets weekly. It was a good point to find a
captive audience. Most products were advertised and sold here. It was here that the
buyers evaluate and compare deals and then finally buy the product.

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(f) Understand the product needs

A good amount of consumer research was required to understand the latent

needs and provide suitable products. Rural brands need not be similar to their urban
cousins. A classic case was that of the heavy sales of washing machines in Punjab
villages. On further research, it was found that the washing machines were being
used as milk spinners in the homes of Punjab (milk rich state) to make butter out of
milk. It was an illustration of how village needs were different from those of city
dwellers.

(g) Provide incentive to communicate

Enhanced marketing in the villages had increased the bargaining power of the
villagers. Villagers no more come out to be just an audience to a communication.
They expect some gifts or freebies in return. Thus, a free cup of tea with every ad
viewing, or a movie show with ad inserts within the movie might work better.

(h) Distribute free samples to generate trials

Sampling worked well in all segments. Thus, a lot of marketing effort had to
be modified to suit the rural consumer. However, the basics of marketing remain the
same. Though the marketing strategies might differ, what remained unchanged was
that, a happy consumer could mean a strong brand.

16. Rural media

(I) Conventional media

(a) Television

Television was the prime medium for delivering a campaign’s advertising

message. The large size of the audience tends to result in relatively broad
demographics for most television programme.

As a result of its large audience, TV was an extremely cost-effective method of

delivering the advertising message. On a cost per point basis, TV was excellent for

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reaching an overall audience. Television (Doordarshan) has a reach of 97 percent in
rural areas.

Exihit No. 3.7 - Rural media

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(b) Radio

The major advantages of radio were that of airtime. It was relatively

inexpensive and it provides much tighter targeting than its possibility on television.
Radio stations employ formats, or types of programming, that were designed to
attract a narrower audience than is possible with television. Radio information tends
to reduce waste in the audience desired in a media buy. Radio had a reach of 99
percent of rural India. Radio stations sell time by appealing to the advertiser’s need
for concentrated, narrow demographics. Radio was effective in reaching defined
geographic targets.

(c) Word of mouth

Word of mouth was an important method of communication in rural areas.

Opinion leaders like schoolteachers, village headmasters, panchayat heads, primary
health center doctors, bank managers might play an important role in the decision­
making process. In today’s world, it was better known as rival marketing. Companies
were now concentrating on influencing these opinion leaders to have a better impact.

(d) Cinema theatres

In the rural parts of southern states like Tamil Nadu, Andhra Pradesh and
Karnataka, cinema had a wider reach and a great impact on the lives of people. In
those places, movie stars were almost like demi-gods. Cinema houses were an
important medium for advertising as there was a lot of scope for localizing the
advertisement and taking advantage of the big screen and a better picture.

(e) Print

Print has been gaining dominance as an advertising medium because of the

increasing literacy levels among rural folk. Newspapers like Dainik Bhaskar,
Navbharat Times, Eenadu and Malayala Manorama were very popular in Indian
villages. Print had an advantage so that messages can be localized and could be used
to advertise any particular sales offer. It could also be customized.

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(f) Cable television

In planning and buying advertising, cable TV was similar to radio. Both media
require high frequency levels to influence the voter, and feature specialized
programme designed to attract a defined segmented audience. Many towns and
cities were tied together by a cable interconnect, a group of cable systems were
linked together permitting a commercial to be aired simultaneously over several
different systems.

(g) Video on wheels

India’s leading ad agency for the promotion of video vans was Video On
Wheels located at Andheri. It was an innovative concept to advertise to the target
market. The van moves around villages, with side panels exhibiting the products.
The van plays videos with product information in every village.

II Traditional media

Villagers were more conservative buyers than their urban counterparts. Their desire
to experiment with new products was restricted. Traditional media could be used to
market new concepts in rural areas. Its effective reach, powerful input and
personalized communication system could help realize those goals. Besides, when
advertisements were presented as entertainment, it went down easily with villagers/
Traditional media comprises:

(a) Puppetry

It was the indigenous theatre of India, and the most popular form of
entertainment available to rural people since times immemorial. It was an
inexpensive activity. The manipulator uses the puppets as a medium to express and
communicate ideas, values and social messages. Those include string puppets or
kathputlis of Rajasthan, string puppets of Orissa, shadow puppets of Andhra, Kerala
and Karnataka etc.

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(b) Folk theatre

Those were mainly short and rhythmic in form. The simple tunes help in
informing and educating people in an informal and interesting manner. It had been
used as an effective medium for social protest against injustice, exploitation and
oppression.

Burrakatha, Veethi Natakah of Andhra, Bharai of Gujarat, Tamasha, Sondha,

Dashavatar of Maharashtra were some different types of folk theatre prevalent in
India.

(c) Demonstrations

Demonstrations play a significant role in raising the awareness of rural

customers. Due to the lack of awareness of product features, rural consumers need
product demonstrations. Audio-visual media could add value to the demonstrations.
Many consumer durable and FMCG companies were now using demonstrations.

(d) Wall paintings:

Wall paintings were an effective and economical medium for advertising in

rural areas. They were long-lasting, and remain as long as the weather permits.
Retailers normally welcome the painting or their shops, walls, name boards, etc. since
it makes the shop look cleaner and better. The message should be simple, direct and
clear. The best way of attracting attention was to use bright colours that do not fade.

(e) Video net

A new media has been emerging in rural areas, i.e., computers. Companies
like n-Logue Communications were providing Internet services for rural people in
vernacular languages. And ITC has launched e-choupal web sites, which provide
information to rural people on agricultural inputs. If tapped properly, the Internet
can be an excellent medium to advertise in rural areas.

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(f) Booklet/ calendars for rural areas

There were booklets in rural areas on folk heroes, folk songs, and religious
activities. There were also rural calendars (panchang), which could be effective
media for rural advertisers.

For eg: Lifebuoy a soap brand prints Lakshmi calendars with the soap
packaging. The advantage of the medium was that a calendar could be used for the
whole year.

17. Brand loyalty

Brand building and extensive distribution network was the key factor. A
successful brand could be a precious asset, which could fetch a price many times the
cost of assets required to make that product. A study conducted by ORG-MARG
reflects that the share of branded goods was high for a number of daily used
products. Branded goods comprise 65 per cent of sales in villages and the share of
non-branded products was shrinking dramatically. In the case of convenience goods,
sachets or low unit packs have generated a new sales wave for branded products.

Multi-brand strategies and entry for new brands in rural markets were
possible, though it was perceived to be a highly brand loyal market. The rural
consumer was willing to consider alternatives. The loyalty of rural consumers to a
brand varies according to product categories. Loyalty is low in toilet soaps,
toothpaste batteries and washing cakes but high in home insecticides Chyavanprash,
shaving preparations and skin creams. Brand loyalty was possibly lower in product
categories where there was more choice and not much brand building.

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Table No. 3.29 - Loyalty levels

Category % Loyalty * Category % Loyalty

Analgesics/cold/ ethical
tablets 21.8 Rubs & Balms 47.2

Batteries 17.7 Safety razor blades 26.5

Biscuits 22.8 Shaving preparations 67.3
Bulbs 32.8 Skin creams 62.5
Chyavanprash 77.3 Tea 25.3
Cocount oil 52.1 Toilet soaps 3.1
Hair wash preparations 28.9 Toothpowders 47.3
Home insecticides 85.8 Toothpastes 12.6
Iodized salt 24.2 Washing cakes/bars 18.0
Washing powders/
25.9
Liquids
*Loyalty is defined as buying only a single brand every time the category is purchased in the
last six months
Source: Business World, April 7-12,1999.

Table No. 3.30 - Multiple Brand usage in Rural Households

% Multiple % Multiple
Category User Category User
Households * Households *
Analgesics/
27.6 Safety razor blade 16.1
cold/ethical tablets
Batteries 8.2 Tea 26.0
Biscuits 28.8 Toilet soaps 42.9
Bulbs 12.0 Toothpowders 6.3
Digestives 11.6 Toothpaste 8.6
Edible oils 15.4 Washing cakes/ bars 30.7
Hair wash Washing powers/
22.8 21.9
preparations liquids
Rubs & Balms 10.1
* Multiple users are those who have bought more than one brand in a category in the last
month. Source: Business World, April 7-12, 1999.

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 Table No. 3.31 - Rural disloyalty for toilet soaps

Top Toilet Highest User 100% Loyal % of 100% Loyal

Soaps Households Households Households
Lifebuoy 34,995,691 2,541,981 7.01
Haman 6,503,391 338,878 5.21
Mysore sandal 1,586,935 68,780 4.33
Lux 30,192,762 1,117,049 3.70
Nirma 18,423,515 645,373 3.50
Rexona 8,471,697 2,25,614 2.66
Breeze 12,878,921 2,32,976 1.81
Santoor 4,998,281 85,550 1.71
Lifebuoy plus 3,905,598 51,173 1.31
Liril 4,281,039 44,823 1.05
Cinthol Fresh 2,275,942 21,248 0.93
Margo 1,559,770 14,316 0.92
Nirma Bath 3,431,068 24,610 0.72
Medimix 2,054,249 12,415 0.60
Nirma Lime Fres 6,046,797 30,211 0.50
Dettol 1,676,106 7515 0.45
Jai 7,291,207 30,905 0.42
Moti 554,820 2262 0.41
Nirma Premium 2,156,575 8328 0.39
Lifebuoy Gold 4,082,549 11,969 0.29
Lux International 2,438,296 5899 0.24
* Per user household Source: The Bt-Org-Marg Rural Market Watch

The above observation, confirms that the natural tendency of humans to

explore and experiment when there was an opportunity. It could be assumed that
the brand loyalty, found earliest, was mainly because of brand non-availability, and
other factors like lack of exposure, and lack of purchasing power. The lesson: it’s
tough to enter the market, but it’s definitely tougher to win over the rural customer
for a lifetime. j

17.1 Brand preference and loyalty

A marketer does not perceive the opportunity in the rural market when he or
she was aware that the rural consumer buys unbranded items. It would be useful to
have a good understanding of the purchase behaviour of the consumer in order to

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guide decisions in the rural markets. In as many as 18 product categories,
consumption of branded items account for 80 per cent of sales. Those were not
always national brands, regional or locally manufactured brands also have good
sales. It indicates the potential for national brands if they could find a way to package
their offering to compete effectively with regional brands.

Table No. 3.32 - Preference for brands

Percent
<20% 21-40% 41-60% 61-80% 81-100%
Branded
Iodized salt
Non- Tea Toilet soaps
Necessity Biscuits
refined oil Washing Washing power
cakes
Analgesics
Safety razor
Coconut
Popular Blues blades
oil
Toothpastes
Shampoos
Batteries
Vanaspati
Rubs&Balms
Premium Bulbs
Skin creams
Hair oils
Tooth powders
Toothbrushes
Antiseptic creams
Antiseptic liquids
Chayavanaprash
Home
Super­ Refined Digestives
insecticides
premium oil Mosquito
repellants
Shaving
preparations
Tube lights
Source: Business Word, April 7-12, 1999.

With the advent of satellite television, cable network all across the country the
rural populace has been exposed to the rich life style of the urban households. It had
created an awareness of the branded products and also induced an attraction for the
premium products like surf, Ariel, Pantene and Denim. Table 3.33 shows the brands
with highest penetration in rural areas.

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Table No. 3.33 - Population strata at which brands were available

Category
Category Brand with higher Penetration
Penetration (%)
Toilet soap 91 Lifebuoy
Washing cakes/bars 88 Wheel
Edible oil 84 Double Herian Mustard
Tea 77 Lipton Tata
Washing Power/liquid 70 Nirma
Salt 64 Tata Salt
Biscuits 61 Parle G
Source: ORG-Marg R-Panel June, 1999.

18. Challenges in rural marketing

Although the rural markets in India had a huge potential, marketers had to
have a clear understanding about the challenges that were involved in a foray into
the rural markets. Those challenges arise primarily because of the unique
characteristics of the market environment. One of the major factors to be considered
was the low per capita income of rural consumers, which was the single most
influential factor in determining consumer behavior and product preferences.
According to Euro monitor data, the per capita income of India was a mere $360 in
2002, which translates into a very low level of disposable income. This makes the
semi-urban and rural markets extremely price sensitive and requires that the
marketing strategies be focused on large volumes rather that a fat profit margin. One
of the best strategic initiatives for driving volume growth was that of Hindustan Lever
Limited, which introduced the concept of sachets for its range of shampoos, targeted
primarily at the rural consumer who lacks the steady income of salaried professionals
in the urban areas. This low volume and low price strategy turned out to be
immensely successful as revealed by an ORG-MARG study, which found that sachet
sales accounted for almost 95% of total shampoo sales in rural regions.

Another hurdle in the path to success in rural markets was the absence of a
formal distribution network. Typically villages do not have supermarkets or
departmental stores where manufacturers compete for shelf space. Rather, the
villages had one or two small Tirana’ or local provision stores from where the
villagers make daily purchases in small quantities. This makes it imperative for

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manufacturers to realize the importance of those small local retailers who interact
directly with the customer and play an important role in the decision process.

Another point in concern was that those local retailers often sell goods on
credit which, in turn, affects their income levels making it hard for them to hold large
stocks of products. Moreover, the rural population was spread over a large region
which makes reaching them a tough task for the marketer.

Not all villages in India had electricity and proper road networks connecting
them with the nearby towns or cities. This makes conventional media like TV, radio,
etc. ineffective thereby increasing the value of non-conventional mediums of
advertising like puppetry, stage shows, folk dramas, to spread awareness about the
brands. The dispersion of population was also a hindrance to market research,
making it difficult to establish market samples and to apply research results from one
region to another.

The more daring companies were meeting the consequent challenges of the
so-called 4 As in rural marketing, namely (a)Awareness about the product
(b) Acceptance of the product idea or concept by the targeted customer;
(c) Affordability in terms of price and easy; (d)Availability of the product with the local
retailer.

(a) Availability

The first ‘A’ was to ensure availability of the product or service. India's
627,000 villages were spread over 3.2 million sq km; 700 million Indians might live
in rural areas, finding them was not easy. However, given the poor state of roads, it
was an even greater challenge to regularly reach products to the far-flung villages.
Any serious marketer must strive to reach at least 13,113 villages with a population
of more than 5,000. Marketers must trade off the distribution cost with incremental
market penetration.

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(b) Affordability

The second ‘A’ was to ensure affordability of the product or service. With low
disposable incomes, products need to be affordable to the rural consumer, most of
whom were on daily wages. Some companies had addressed the affordability
problem by introducing small unit packs.

(c) Acceptability

The third ‘A’ was to gain acceptability for the product or service. Therefore,
there was a need to offer products that suit the rural market.

However, the rural consumer expressions differ from his urban counterpart.
Outing for the former was confined to local fairs and festivals and TV viewing was
confined to the state-owned Doordarshan. Consumption of branded products was
treated as a special treat or indulgence.

(d) Awareness

The final ‘A’ was to see whether all information reaches all geographic corners
at the same time. A house on the 21st floor of a plush Mumbai suburb gets the
information at the same time as a dusty, populous hut in a village in Bihar. Rising
literacy levels and the media boom had made the village folk conscious of their living
standard and they were willing to spend more on advanced and better products.

19. Structural Analysis of FMCG Industry

FMCG refers to consumer non-durable goods required for daily or frequent use.
Typically, a consumer buy those goods at least once a month. The sector covers a
wide gamut of products such as detergents, toilet soaps, toothpaste, shampoos,
creams, powders, food products, confectioneries, beverages etc. Typical
characteristics of FMCG products were :

• Individual items are of small value although all FMCG products put together
account for a significant part of the consumer's budget.

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• The consumer keeps limited inventory of those products and prefers to purchase
them frequently, as and when required.
• The consumer spends little time on the purchase decision. Rarely does he/she
look for technical specifications (in contrast to industrial goods). Brand loyalties or
recommendations of reliable retailer/ dealer drive purchase decisions.
• Trial of a new product i.e. brand switching was often induced by heavy
advertisement, recommendation of the retailer or neighbours/ friends.
• Those products cater to necessities, comforts as well as luxuries. They meet the
demands of the entire cross section of population. Price and income elasticity of
demand varies across products and consumers.

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