Rural marketing is the combination of two words – rural and marketing, where marketing is described as the process of defining, anticipating and knowing customer needs and organizing all the resources of company to satisfy them and Rural mean revenue villages with clear surveyed boundaries, where the density of population is not more than 400 people per sq. meter.
Rural marketing has become a buzz-word among marketing professionals and preachers. Delivering a better standard of living and quality of life will be the new role of rural marketing.
Rural marketing is a promotion of a company’s product in the rural market by using marketing strategies which differ from the urban market.
A marketer has to device a separate methodology for connecting with rural customers and redesign combinations of the components of the marketing mix relevant to rural areas.
So, rural marketing is the process of developing, pricing, promoting, distributing rural- specific goods and services leading to exchange between urban and rural markets, which satisfy consumer demand and also achieves organizational objectives.
1. History of Rural Marketing 2. Evolution of Rural Marketing 3. Meaning 4. Definitions 5. Concept 6. Features 7. Advantages to Indian Economy as well as to Companies 8. Importance.
9. Strategies Adopted by Big Companies 10. Agencies Involved 11. 4 A’s of Rural Marketing 12. Challenges and Opportunities 13. Factors Responsible for Continuous Growth 14. Problems 15. Recent Trends in India.
Rural Marketing in India: Evolution, Meaning, Concept, Role, Challenges, Opportunities, Problems and Other Details
Rural Marketing – History of Rural Markets in India
It is said that “Bharat mata gram vasini” which means that mother India lives in her villages. According to Census 2011, our country has 6,41,000 villages and total population of 1,210 million. Out of the total population, rural population is 833 million and constitute about 69% of the population.
The trust on rural development and the Green Revolution during the late 1960s and early 1970s that focused on the use of high yielding varieties of seeds, increased use of fertilisers and modern pest management practices have resulted in higher yields.
From a food deficit nation in the mid-60s, our country became self-sufficient in food production in 1971 and we are now exporting agricultural produce to other countries. The rise in income coupled with increased awareness and the need for possessing modern goods have influenced the rural marketing environment in our country. Expansion of TV network, rising aspirations of rural people and packaging revolution, have contributed to the growth of rural markets.
Further Government has adopted a planned programme for development of village industries and infrastructural facilities. There has been a shift from an agricultural economy to manufacturing and service economy and this development has resulted in increase in job opportunities, income and demand for goods and services in rural markets. However, the general impression among marketers is that the rural markets have potential only for agricultural inputs like seeds, fertilisers, pesticides, cattle feed and agricultural machinery.
Over 50 per cent of the national income is generated in rural India and there are opportunities to market modern goods and services in rural areas and also market agricultural products in urban areas, over 70 per cent of bicycles, mechanical watches and radios and about 60 per cent of batteries, sewing machines and table fans are sold in rural India.
At the same time, sales of colour television, washing machines, refrigerators, mobile phones, computers, shampoos, face cream, mosquito repellent and toothpaste are very low and there is tremendous potential for such products in rural markets.
Rural markets have undergone rapid transformation during the last ten years. Today, the rural consumer is exposed to a variety of products and services and specific brands. Rural markets account for about 50 per cent of the consumption of fast moving consumer goods and durables. Even usage of computers is growing in large villages and villages close to towns. While rural markets offer big attractions to the marketers, it is not easy to enter the market and take a sizeable share of the market within a short period.
This is due to low literacy, low income, seasonal demand and problems with regard to transportation, communication and distribution. Further, there are different groups based on religion, caste, education, income and age and there is a need to understand the rural markets in terms of buyer behaviour, attitudes, beliefs and aspirations of people.
Many of us think that increase in consumption of consumer goods such as mobile phone and television is an indication of the improvement in the quality of life of people in rural areas. But access to sanitation, electricity, education and health care is still lacking in villages and the people should have basic amenities of life such as Roti, Kapda, Makaan, Bijli, Sadak and Pani.
Rural marketing has become a buzz-word among marketing professionals and preachers. Delivering a better standard of living and quality of life will be the new role of rural marketing. The companies entering rural markets have a major role to play by carrying developmental messages to less informed rural population.
Late C.K. Prahalad, the Management Guru, in his famous book on, “The Fortune at the Bottom of the Pyramid”, has rightly said, “The real source of market promise is not the wealthy few in the developing world or even the emerging middle income consumers. It is the billions of aspiring poor who are joining the market economy for the first time.” Thus, rural markets offer opportunities and challenges for the marketers.
Rural Marketing – Evolution in India
The term ‘Rural Marketing’, which was earlier used as an umbrella term to refer to all commercial transactions of rural people, acquired a separate meaning of great significance in the year of 1990s.
Before 1960s there was no difference between rural marketing and agricultural marketing. At that time – ‘Rural Marketing’ merely referred to the marketing of rural products in rural and urban areas and agricultural inputs in rural markets. Therefore, it can be considered to be synonymous that was nothing but ‘Agricultural Marketing’.
The products which occupied the central place during this period were agricultural products like food grams and industrial inputs like-cotton, jute, sugar cane, oil seeds, etc. The scope for the agricultural inputs (seeds fertilizers, pesticides) and the agricultural implements (tractors, power tillers harvesters pump-sets, threshers, oil engines, electric motors) was very limited.
Instead the local marketing (this market was totally unorganized) for the products like wood and bamboo products (baskets, ropes, bullock carts, door and window frames, etc.,) and small agricultural tools like ploughs, household earthen and metallic utensils made by skilled workers in rural areas like blacksmiths, carpenters, cobblers, pot makers was an important activity.
Phase II (From 1960s to 1990s):
This is the phase for the ‘Green Revolution’ which took place in India and changed many of the poverty stricken villages into prosperous business centers through the advent of (many) agricultural inputs and implements. The ‘Green Revolution’ ushered in scientific farming practices in rural India and at this stage two separate areas of activities that gave the path for the emergence of two separate areas of activities – Marketing of agricultural inputs in rural markets and marketing of rural products in urban areas.
Usage of better irrigation facilities, fertilizers, pesticides, high-yield variety seeds coupled with the application of agri-implements such as – tractors, pump-sets, harvesters and sprinklers etc., resulted in increased agricultural inputs and also for changing the very content of rural markets.
Nowadays he emergence of giant companies like Mahindra & Mahindra, Eicher, Escorts, Shriram Fertilizers and IFFCO etc., were helped to step-in to the marketing of agricultural inputs apart from the conventional agricultural marketing.
The formation of agencies like KVIC (Khadi and Village Industries Commission), handicrafts emporiums, societies like—Girijan Co-operative societies, and Bunkar (weaver) societies, etc., received considerable attention for the marketing of rural products.
The promotion of village industries, supported by the government through exhibitions and different melas like Gram Shree Melas and Shilpa Melas resulted in the promotion of products like handloom, textiles, handicrafts, soaps, crackers, leather products, etc., on a large scale in the urban markets.
For example, during this period, marketing of rural products received considerable attention through the agencies like KVIC, handicrafts emporiums.
During the earlier two phases, marketing of household consumables and durables into the rural markets were not considered seriously.
Rural Marketing – Meaning
In recent years, rural markets have acquired significance, as the overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities. On account of green revolution, rural areas are consuming a large quantity of industrial and urban manufactured products. In this context, special marketing strategies namely, rural marketing has emerged.
Rural marketing is a promotion of a company’s product in the rural market by using marketing strategies which differ from the urban market. A marketer has to device a separate methodology for connecting with rural customers and redesign combinations of the components of the marketing mix relevant to rural areas.
Rural marketing is the combination of two words- Rural and marketing, where marketing is described as the process of defining, anticipating and knowing customer needs and organizing all the resources of company to satisfy them and Rural mean revenue villages with clear surveyed boundaries, where the density of population is not more than 400 people per sq. meter.
So, rural marketing is the process of developing, pricing, promoting, distributing rural- specific goods and services leading to exchange between urban and rural markets, which satisfy consumer demand and also achieves organizational objectives.
Rural marketing is basically dealing with various inputs, projects and services meant for the rural market. Sometimes rural marketing is confused with agriculture marketing but there is difference between the two. The later denotes marketing of produce of rural areas to the urban consumers or industrial consumers while rural marketing involves delivering manufactured or processed input or service to rural consumers and also include outflow of rural product into urban market. Agricultural marketing is the part of rural marketing.
Rural marketing is considered as a function concerned with the flow of goods and services that satisfy the needs and wants of households and occupational activities in rural areas. The advertising agencies and rural marketing consultancy organization have developed important databases on the rural market in the electronic form to map the needs of the rural consumers.
These index tools help companies to know market potentials and to select right media for rural markets. Rural markets are vast and widely spread so the marketers face a lots of problems in reaching out to end consumers. In India, the main occupation in rural areas is still agriculture and agriculture related activities.
As agriculture is a seasonal occupation and source of income is also seasonal, therefore, the demand pattern is also seasonal. When compared with urban population, the rural population is widely spread which brings the difference between the demand patterns of rural and urban areas.
Rural Marketing – Definitions
All activities involved in evaluating, encouraging and renovating the purchasing power of rural consumers into an effective demand for specific products and services and moving these products and services to the people in rural areas to create satisfaction and a better standard of living and thereby achieving organizational goals is defined as Rural Marketing.
According to the National Commission on Agriculture – “Rural Marketing is a process which starts with a decision to produce a saleable farm commodity and it involves all the aspects of market structure or system, both functional and institutional, based on technical and economic considerations and includes pre and post-harvest operations, assembling, grading, storage, transportation and distribution.”
According to Thomsen—”The study of Rural Marketing comprises of all the operations and the agencies conducting them, involved in the movement of farm produced food, raw materials and their derivatives, such as – textiles, from the farms to the final consumers, and the effects of such operations on producers, middlemen and consumers.”
The above two definitions reflects a very narrow vision about rural marketing. Rural marketing has two dimensions. One dimension is the movement of goods from rural to urban which is mainly concentrated in the above definitions. And the other dimension is movement of goods from urban to rural which is not concentrated here.
So, rural marketing includes transaction of goods from both sides and their functions are:
i. Marketing of agricultural products, such as – food grains, cotton, sugarcane, tobacco, vegetables, fruits, flowers etc., from rural to urban areas.
ii. Marketing of manufactured goods and services, such as – electric and electronic goods, agricultural machinery, FMCG etc., from urban to rural areas.
In real situation, if we compare the demand for agricultural inputs like, seeds, fertilizers, pesticides, cattle feed and so on among the two sectors; majority of the demand originates from rural sector only. It is because; the population in rural sector is majorly dependent on agricultural activities.
The demand for consumables (like soaps, shampoos, detergents, cosmetics, and food items etc.,) and durables (like phones, television, vehicles, cloths and other household articles, etc.,) also keeps on increasing among the rural people.
The need for services in rural areas, like education, health, transportation, communication and so on is also moving in the growth trend. These are all results in the movement of goods and services from urban to rural.
Beyond these two dimensions, one more kind of transaction is the flow of goods and services within the rural areas. The services rendered by Carpenters, Painters, Masons, Electricians, Pot Makers, Blacksmiths etc., are some of the examples for services rendered inside the rural area.
In India, previously marketer’s focus was mainly on urban market which is an easy route. Because the urban markets are already improved in many or all aspects and the people in urban sector also have sufficient knowledge about products. So, they had put no specific efforts to reach the rural markets.
But, due to the increased education and rural literacy level, social mobility, improved communication systems (like mobile phones, television, and various satellite channels etc.,) are all reflected in the change of rural life style and consumption pattern. Implementation of latest technologies in agriculture sector reduced the higher dependency on monsoons. These are all revealed in the increase of agriculture income, increased disposable surplus and improved purchasing power of rural people.
If we observe the report of Indian Census, 2011, rural population of India is 833.1 million which accounts for nearly 69% of total population. For measuring the size and potentiality of rural population, total number of livestock, the extent of land, forest and other natural resources are majorly considered.
So, the 69% of rural population and significantly noticeable percentage of untapped rural potential clearly exhibits the prosperity in the growth of rural markets. These are all the major factors which magnetized the marketers toward rural sector.
Rural Marketing – Concept
The marketing battle field has shifted from the cities to the villages. ‘Go Rural’ is the marketer’s new slogan which gives rise to the concept of rural marketing. The rural market has been growing steadily over the past few years and is now bigger than the urban market. The companies are now showing more and more interest in rural markets, because they see it as the biggest opportunity for making profits. Indian marketers as well as multinational companies are also placing emphasis on rural areas.
Companies such as Colgate, Godrej, Nirma, Dabur India and Hindustan Lever, have made inroads into countryside. Rural reach is on the rise and it is becoming the most important route to reach. Rural marketing is now a two way marketing process. There is inflow of products like FMCG products, bicycle, tractors, etc., from urban area to rural area and inflow of products like seeds, fruits, vegetables milk etc., from rural market to urban market.
Think of rural India and the images that come up are of bullock carts, cow-dung, miles and miles of paddy fields and kaccha roads and houses. It may not be true any longer. The rural markets have changed drastically in the past decade. A decade ago, the rural market was more unsaturated and was not a prioritized target markets. The introduction of currency, transport, communication and developments in infrastructure has increased the scope of the rural market.
Gradually, corporate realized that there was saturation, stiff competition and clutter in the urban market and demand was building in rural areas. Seeing the vast potential of 75 percent Indians living in rural areas and demand base offers great opportunities to marketers, they started focusing on their unexplored high potential areas. The companies are applying several modes and strategies to become winner in the rural markets.
The rural market is now an acknowledged viable market that has captured the attention of marketers. It is contributing in India’s total income at a large extent. Infrastructure is also developing fast, leading to better connectivity by road, by phone and access to mass media through television. Increased electrification of households has opened up the rural market for durables. All of these factors have increased purchasing power and the demand for and access to new goods and brands, as seen over the past decade. The future of the rural market looks even brighter.
Rural marketing in India is not much developed, there are many hindrances in the area of market, product design and positioning, pricing, distribution and promotion. Companies need to understand rural marketing in a broader manner not only to survive and growth in their business but also a means to the development of the rural economy. Companies should focus on creating awareness and excitement for their brands amongst the women, youth and children, rather than focusing on the older generation which remains more resistant to change, if they are to thrive in rural markets.
Rural marketing is a distinct specialized field of marketing discipline which encompasses a customized application of the marketing tools and strategies to understand the psyche of the rural consumer in terms of needs, tailoring the products to meet such needs and effectively delivering them to enable a profitable exchange of goods and services to and from the rural market.
1. Urban to Rural – A major part of rural marketing falls into this category. It includes the transactions of urban marketers, who sell their goods and services in rural areas like pesticides, fertilizers, seeds, FMCG products, consumer durables, tractors etc.
2. Rural to Urban – Transactions in this category basically fall under agricultural marketing where a rural producer seeks to sell his produce in an urban market like seeds, fruits, vegetables, milk and related products, forest produce, spices etc.
3. Rural to Rural – This includes the activity that take place between two villages in close proximity to each other, like agricultural tools, handicrafts and bullock carts, dress marketers etc.
Rural Marketing – Features
1. Huge Population – About 63 percent of India’s population lives in rural areas. And moreover, these rural areas are usually scattered across India. But this huge population promises a big market for companies.
2. Market Growth – Market growth of rural areas has been steadily increasing. From traditional products like bicycles, agricultural inputs to branded products like toothpaste, tea, soaps etc. Consumer durable products like television, refrigerators, etc., have also seen a rise in demand.
3. Purchasing Capacity – The high purchasing capacity of the rural people have attracted marketers to realize the potential of the rural market. As a result, companies are now moving from urban to rural areas to earn a greater profit.
4. Low Standard of Living – Low per capita income and low literacy level has contributed to low standard of living of rural people. They are socially and economically backward.
5. Infrastructure Facilities – There is rapid development of infrastructure facilities like proper roads, warehouses, communication networks, rural electrification etc. This type of development is supporting the growth of rural markets.
6. Traditional Outlook – It has been observed that rural consumers are highly attached with old customs and traditions, not preferring change. But lately, there has been a demand of branded products in rural areas as well, this shows that change is creeping into rural areas as well.
Rural Marketing – Advantages to Indian Economy as well as to Companies
Rural market is getting importance because of the saturation of urban market. So the marketers are looking for extending their product categories to an unexplored market i.e. the rural market. According to the Nielson’s survey the rural market for FMCG (Rs.65,000 crores), durables (Rs.5,000 crores) and clothing and footwear (Rs.35,000 crores) was as large as Rs.1,05,000 crores in 2008. Certainly the size is much bigger now.
According to Nielson by 2025, the rural FMCG sale is estimated to be $100 billion from the current $12 billion. This has also led to the CSR (Corporate Social Responsibilities) activities being done by the corporate to help the poor people attain some wealth to spend on their product categories.
Here, is the example of HLL initiatives in the rural India. One of such product is project Shakti, which is not only helping their company attain some revenue but also helping the poor women of the village to attain some wealth which is surely going to increase their purchasing power. Rural market is mystery for the companies. Due to lack of dipper insights into the psyche of the rural consumers, companies are hesitant to explore this territory. But local brand like Ghadi detergent in Kanpur have been able successfully tap the opportunities presented by rural market.
Rural India offers sustainable sales and profit for growth. Growth of rural market is possible due to green revolution and white revolution, which results into substantial wealth generation in rural area. In recent years, rural markets have acquired significance in the country like China and India as the overall growth of the economy has resulted into substantial increase purchasing power of rural communities. Due to green revolution in India, consumption pattern of rural people has changed.
So, in short rural marketing is providing following advantages to Indian economy as well as to companies:
i. Rural marketing help the companies to attain revenue but also helping the poor women of the village to attain some wealth which is surely going to increase their purchasing power.
ii. Rural India offers sustainable sales and profit for growth for the companies because of saturation of the urban markets.
iii. With the initiation of various rural development programmes there have been an upsurge of employment opportunities for the rural poor. One of the biggest cause behind the steady growth of rural market is that it is not exploited and also yet to be explored.
iv. The rural market in India is vast and scattered and offers a plenty of opportunities in comparison to the urban sector. It covers the maximum population and regions and thereby, the maximum number of consumers.
Rural Marketing – Importance
In general, a rural area is a geographic area that is located outside cities and town. Typical rural areas have a low population density and small settlements. Agricultural areas are commonly rural. Different countries have varying definitions of “rural” for statistical and administrative purpose.
“A habitation with a population density of less than 400 square km, where at least 75% of the male working population is engaged in agriculture and where there exist no municipality and board is defined as a rural habitation.” – ‘The Census of India’
“Rural marketing is the process of developing, pricing, promoting and distributing rural specific goods and services leading to exchange between urban and rural markets, which satisfies consumer demand and achieves the organizational objectives.”
Below are the few points why organizations are looking at rural marketing with a positive attitude:
According to 2011 census, rural population is 70% of total population and it is scattered over a wide range of geographic area. That is 12% of the world population, which is not yet fully utilized. The Indian rural areas have huge marketing potential of availability of number of potential customers in rural market.
(b) Rising Rural Prosperity:
Average income level of rural people has been improved due to modern farming practices, contract farming practices, better education awareness and migration to urban areas etc. There has been an overall activity in all economic activities in rural sector. Saving habits in rural people has also increased because of better education; this too contributes in higher purchasing power.
(c) Growth in Consumption:
There is a growth in spending power of rural consumers. But, the average per capita household expenditure is still low compared to urban spending. The potential market growth is more in rural segment as compared to urban sector because of so many factors for e.g., availability of number of potential customers, less competition, various subsidies offered by government in order to attract the business.
(d) Change in Lifestyle and Demands:
Lifestyle of rural consumers has been changed considerably because of access to worldwide net. People in rural area are now a days aware about and have access to almost each and every product available worldwide. There has been increase in demand for durables and non-durables like table fans, radio, mopeds, soaps, etc., by rural consumers. This provides ready market for the producers.
(e) Market Growth Rate Higher than Urban:
The growth rate of fast moving consumer goods (FMCG) market and durable market is high in rural areas. The rural market share is more than 50% for products like cooking oil, hair oil, etc.
(f) Life Cycle Advantage:
The products which have attained the maturity stage in urban market is still in growth stage in rural market. Thus, the product life cycle duration is more in rural areas as compared to urban sector because of less competition.
(g) Decision Making Units:
Women in rural areas are beginning to make fast decision for purchases. Studies reveal that 72.3% decisions are taken jointly in a family. With education and mass media, role of children in decision making is also changing.
The rural markets in India offer great opportunities to the marketers with their huge customer base, market potential and various subsidies offered by the government as well. Under the changing Socio-economic scenario, the rural markets have great potentialities in India and offer bright prospects and attraction to the companies. In fact, the rural markets are doing better than the urban, as they are growing faster.
Rural Marketing – Strategies Adopted by Big Companies for Rural Marketing
Big companies, which were reluctant to enter the rural markets and completely ignored this sector a few years ago, have started making a bee line for the villages now, each offering its brands of different consumer products.
The strategies adopted by them to sell their products to the villagers from the beginning of the 1990s are described below:
The colour television giant, Onida, decided to make a pitch for the rural market when it faced a recession in the industry that showed no sign of an upswing. Their initial foray was disastrous due to their high priced models, and wrong, urban-oriented, communication packages.
The black and white segment gave them an entry point, and they were able to make their presence felt in the rural markets. Onida’s rural foray has taken on the shape of a full- fledged war campaign christened Gramin Bharat. Its urban-oriented ad campaign, starring the devil, was drastically altered.
Though the devil was retained partially (only its eyes appeared in the print advertising), the punch line was changed to Onida ka black and white jadu. This was essential because its earlier urban aesthetics did not strike the right chord with rural consumers. It has also upgraded its distribution network.
2. HMT Ltd:
The premier watch manufacturing company in the public sector, the Hindustan Machines Tools Ltd. (HMT Ltd.) whose brands like Sona, Janata and Kanchan have a presence already in the rural market is increasing its promotional pitch. During 1991- 92, HMT spent Rs. 1,00 crore on advertising aimed at resident of semi-urban towns and rural areas.
Their focus, of course, is on distribution, and they have established a well-integrated distribution network of dealers and distributions and company-owned showrooms to co-ordinate the distribution.
3. Godfrey Philips India:
Godfrey Philip India (GPI), a cigarette manufacturing company, found that its brands were not reaching rural outlets. Non-availability of Mass Media like TV and radio made it all the more difficult for GPI to reach out to its target audience. To counter this GPI put five Toyota vans on the road, fitted out with TV sets.
Their routine stops in the villages were followed by an entertainment programme interspersed with ad messages. Their rural activity has increased, and the video vans help in creating awareness, encouraging sampling of brands, and monitoring the market.
One of the leading automobile companies with Japanese collaboration viz. Hero Honda, has introduced a new concept in motorbike marketing the extension counter. This came soon after it launched its CDSS 100 for the rural segment. There are small counters which are extensions to dealers in the bigger cities.
The company had identified by April, 1992, 40 such locations for extension counters all over the country. Mobile workshops too is another area on which the company is laying stress. It has gone in for special video films on servicing maintaining that are shown on video vans, when the mobile workshops make their stops. It is an exercise in building the confidence of their dealers and local mechanics.
The Hero Honda CDSS 100 Campaign has been exclusively targeted at rural audience through wall paintings, hoardings, local vernacular newspapers, and radio. The idea is to give the brand a rural orientation further, Hero Honda CDSS 100 is being plugged through Hindi, Marathi and Gujarati campaigns, but there is none of the gloss and slickness that is normally associated with Here Honda name.
5. Procter & Gamble:
The multi-product multinational company. Procter & Gamble, realised that packaging could make or break a brand in rural markets and therefore, adopted user-friendly sizes for the rural markets and made available. Their Vicks cough drops in single strips, instead of the regular cartons of 20.
Earlier available at Rs. 4 for a 15 ml. Sachet, its sales were, at best, stagnant. But, the company re-launched it in 10 ml. packs for Rs. 2, and the offtake increased manifold in smaller villages and towns.
6. Colgate-Palmolive (India) Ltd:
Realising that offering products at the lowest unit price was necessary to enter the rural market, Colgate Palmolive (India) Ltd. designed 10 gm. sachets of their toothpastes. Further, keeping in view the rural consumers, the company dispensed with the age-old Sing of confidence ad campaign, which had a distinct urban bias, and opted for a specially created 27 minute promotion film to woo the rural consumer.
In this way, the big marketers are fine-tuning their products, sprucing up their distribution channels, working out winning advertisement campaigns, and making a serious pitch for the rural sweepstakes.
Rural Marketing – Agencies Involved in Marketing of Rural Commodities
In the marketing of rural commodities, the following agencies are involved:
Most farmers or producers, perform one or more marketing functions. They sell the surplus either in the village or in the market. Some producers; especially the large ones, assemble the produce of small producers, transport it to the nearby market, sell it there and make a profit.
This activity helps these producers to supplement their incomes. Frequent visits to markets and constant touch with market functionaries, bring home to them a fair knowledge of market practices. They have, thus, an access to market information, and are able to perform the functions of market middlemen.
Middlemen are those individuals or business concerns which specialise in performing the various marketing functions and rendering such services as are involved in the marketing of goods. They do this at different stages in the marketing process.
The middlemen in food-grains marketing may, therefore, be classified as follows:
(i) Merchant Middlemen:
Merchant middlemen are those individuals who take title to the goods they handle. They buy and sell on their own and gain or lose, depending on the difference in the sale and purchase prices. They may, moreover, suffer loss with a fall in the price of the product.
Merchant middlemen are of two types:
Wholesalers are those merchant middlemen who buy and sell food-grains in large quantities. They may buy either directly from producers or from other wholesalers. They sell food-grains either in the same market or in other markets. They sell to retailers, other wholesalers and processors. They do not sell significant quantities to ultimate consumers. They own godowns for the storage of the farm produce.
The wholesalers perform the following functions in marketing:
1. They assemble the goods from various localities and areas to meet the demands of buyers;
2. They sort out the goods in different lots according to their quality and prepare them for the market;
3. They equalize the flow of goods by storing them in the peak arrival season and realizing them in the off-season;
4. They regulate the flow of goods by trading with buyers and sellers in the various markets;
5. They finance the producers so that the latter may meet their requirements of production inputs; and
6. They assess the demand of prospective buyers and processors from time to time, and plan the movement of the goods over space and time.
Retailers buy goods from wholesalers and sell them to the consumers in small quantities. They are producers’ personal representatives to consumers. Retailers are the closest to consumers in the marketing channel.
Itinerant traders and village merchants also come under this group. Itinerant traders are petty merchants who move from village to village, and directly purchase the produce from the cultivators. They transport it to the nearby primary or secondary market and sell it there. Village merchants have their small establishments in villages.
They purchase the produce of those producers who have either taken finance from them or those who are not able to influence the market. Village merchants also supply essential consumption goods to the producers.
They act as financiers of poor producers. They often visit nearby markets and keep in touch with the prevailing prices. They either sell the collected produce in the nearby market or retain it for sale at a later date in the village itself.
(ii) Speculative Middlemen:
Those middlemen who take title to the product with a view to making a profit on it are called speculative middlemen. They are not regular buyers or sellers of produce. They specialise in risk-taking. They buy at low prices when arrivals are substantial and sell in the off-season when prices are high. They do the minimum handling of goods. They make a profit from short run as well as long-run price fluctuations.
Processors carry on their business either on their own or on custom basis. Some processors employ agents to buy for them in the producing areas, store the produce and process it throughout the year on continuous basis.
They also engage in advertising activity to create a demand for their processed products.
(iii) Agent Middlemen:
Agent middlemen act as representative of their clients. They do not take title to the produce and, therefore, do not own it. They merely negotiate the purchase and/or sale. They sell services to their principals and not the goods or commodities. They receive income in the form of commission or brokerage. They serve as buyers or sellers in effective bargaining.
(iv) Facilitative Middlemen:
Some middlemen do not buy and sell directly but assist in the marketing process. Marketing can take place even if they are not active. But the efficiency of the system increases when they engage in business. These middlemen receive their income in the form of fees from those who use their services.
Rural Marketing – 4 A’s of Rural Marketing: Affordability, Availability, Awareness and Acceptability
The Indian rural market contributes 50% in -the total sales of durable and nondurable products. For Fast Moving Consumer Goods (FMCG) products, the Indian rural market is growing faster than the urban market. The four A’s of – rural marketing is similar to marketing mix.
The four A’s of rural marketing are as follows:
It refers to the ability of customers to pay for the product. The price of products should be set to match the income level of rural customers. Affordability does not mean that the marketer should provide cheaper products but the product should be brought into the range of ability to pay. The income of rural population is less than urban population so they cannot invest a large sum on a single product.
Therefore, rural population prefers to buy small quantity of products, which are affordable for them. For example, a shampoo bottle of 250 ml costing Rs. 200 becomes unaffordable for customers but a sachet of 5 ml costing Rs. 4 is affordable for them. Coca-Cola introduced 200ml bottle for Rs. 5 and Hindustan Unilever introduced 18gm Lifebuoy soap for Rs. 2.
It refers to the reach of a distribution channel in the rural market. Distribution is the biggest problem of the rural market due to lack of transportation facilities. In rural areas, retailers maintain good relationships with customers; therefore, it takes less time to sell a new product. An organization should adopt the best distribution channel to reach the rural market with minimum cost possible.
It refers to promotional activities to provide information to customers. The best media to reach the rural market are TV and radio. The other unconventional channels can be used to provide information, such as e- Choupal by ITC. The organization should conduct awareness programs in local languages to convey the message. Philips India used radio and wall writing to reach the Indian rural market.
It implies that a product should be readily acceptable by rural customers. Marketing mix should be properly designed to suit the rural customers.
Rural Marketing – Challenges and Opportunities in Rural Markets
Like every coin has two sides, rural markets also have two aspects – namely, challenges as well as opportunities.
Now we will analyze these in detail:
Challenges of Rural Marketing:
Corporate – Who want to penetrate into the rural marketing have to manage and overcome many kinds of challenges from various aspects.
i. Marketing (Mix) Challenges:
Even though the basic marketing mix tools – Product, Price, Place and Promotion, popularly known as 4Ps, remain same in both rural and urban markets, the so-called 4As – Acceptability, Affordability, Availability and Awareness, challenges the marketer and persuades him to re-schedule the marketing mix tools whenever he enters rural markets.
ii. Pricing Challenges:
The marketer has to consider many things before fixing price for a product like: nature of the product, utility of the product, level of competition, focused customers and their habits, size of the market, life of the product, income streams, spending capacity, lifestyle, age group etc.
He should take due care while deciding the pricing strategy which he is going to follow for the product in particular market such as:
a. It deals with the type of strategy should they follow for their new or innovative product to magnetize new and potential rural consumers.
b. If their product is already in the market, they should plan their pricing strategy, which helps not only for retaining their existing customers but also to turn the potential customers towards their product.
c. Price is the most dominant factor for increase or decrease of demand for a product, the marketer should be very careful while facing this kind of challenge.
Distribution challenges are the core reasons for the reach and unreliability of rural markets. This challenge occurs due to large number of small and underdeveloped markets which are scattered at wide range of rural remote areas.
Dispersed population makes the reach of marketers add to their difficulties in trade. Some more challenges appear from poor infrastructural facilities, communication facilities, inadequate bank and credit facilities for rural retailers, existence of poor storage and display system for product on rural shops. Highly credit-driven market and low investment capacity of retailers also creates a major push and pull in the rural trade.
Communication challenges arise due to the low literacy level and lack of knowledge in rural sector. Poor media reach, vast and diversely spread rural end users are some more causes which creates communication challenges for the marketers in rural sector. One more challenge that marketers explore is different kind of consumers with respect to their variations in language, culture and lifestyle.
Some Other Challenges in Front of the Rural Marketers:
Natural calamities and market conditions for product demand, supply and price, pests and diseases, drought or too much rains, primitive methods of cultivation, lack of proper storage facilities which exposes grain to rain and rats, grading, transport, long chain of middlemen, large number of intermediaries between cultivator and consumer, wholesalers and retailers and so on.
Opportunities in Rural Marketing:
i. Infrastructure is improving rapidly.
ii. In 50 years only 40% villages are connected by road, in next 10 years another 30%.
iii. More than 90% villages is electrified, though only 44% rural homes have electric connections.
iv. Rural telephone density has gone up by 300% in the last 10 years. Every 1000+ pop is connected by STD.
v. Social indicators have improved a lot between 1981 and 2001.
vi. Number of “pucca” houses doubled from 22% to 41% and “kuccha” houses halved (41% to 23%).
vii. Percentage of BPL families declined from 46% to 27%.
viii. Rural literacy level improved from 36% to 59%.
ix. Low penetration rates in rural so there are many marketing opportunities.
x. Manufacturing sector shirked and agriculture sector improved.
xi. Increase in rural purchase power – the increase in procurement prices (the Government’s Minimum Support Price [MSP] for farm products) contribute to a rise in rural demand.
xii. Farmers are released from their agricultural loans.
Rural Marketing – Factors Responsible for the Continuous Growth of Rural Market (With Challenges)
There are a number of factors, areas or activities which are responsible for the fast and continuous growth of the Rural Market.
Some of these are as:
1. Green Revolution:
The thrust on agriculture during the successive Five Year plans has helped improvement in agricultural productivity. Adoption of new agronomic practices, selective mechanisation, multiple cropping to include non-food crops and development of commercial activities like dairying have resulted in substantial increase in the disposable incomes of rural consumers.
Over 75 per cent of villages in India have been electrified. This has facilitated a shift from dependence on rain to irrigation. Cultivators have gone for high-risk, high-return cash/non-food crops. In the process, the seasonality of income receipts has been reduced and there disposable incomes have increased.
2. Improved Transport and Communication:
Over 40 per cent of villages today are connected by all-weather roads. Increase of road coverage has increased communication links- in turn, this has led to increased market access for companies going the rural way. Road networking, outsides enhancing the mobility of rural consumers, has increased their exposure to products and services. This also has an impact on better price realisation.
3. Rising Expectations Revolution:
The rural folk consciously or unconsciously are adopting modern ways of living, and this has led to a rise in the aspiration level. One can notice among the rural people being influenced by the marketing environment. The expectations revolution has brought about a powerful change in the environmental dynamics. It has kindled their hopes, and strengthened their motivation to work, earn and consume.
4. Varied Sources of Income:
As a part of planned economic development, the government has been making concerted efforts towards rural development. Plan after plan, it has been committing large outlays to sectors like agriculture, animal husbandry, irrigation, flood control and khadi and village industries. Various schemes like Jawahar Rozgar Yojana, Prime Minister’s Rozgar Yojana, IRDP, etc., are being implemented in rural areas.
Statutory increase in the minimum wages of agricultural labourers has also raised the incomes of the rural folk.
Thrust on minor and medium projects and village forestry collectively have helped create new job opportunities, increasing the purchasing power of rural people.
The share of rural purchases in selected products such as bicycles, razor blades, books and stationery, and cinema shows varies from 55 to 80 per cent. The Indian rural market has grown in size, range and sophistication. Even the rural market for packaged consumer products has grown nearly threefold, from Rs. 733 crore in 1984 to Rs. 2,083 crore in 1989.
The electrification of 60 per cent of the villages has further enhanced the upsurge in demand. The modernisation of agriculture has enlarged the rural market for agricultural inputs. Thus, the rural market of India offers big opportunities and attractions to marketers.
However, rural marketing is confronted with some challenges and they are given below:
(a) Widely Scattered Villages:
The distribution of the Indian consumer market, comprising a population of 84.5 crore is very peculiar. The rural sector, covering 75 per cent of the population, is widely spread in more than five lakh villages. Low density of population and inaccessibility make the problem of marketing not only difficult but also uneconomical.
(b) Proper Segmentation Difficult:
Demand for products varies for people living in different areas with different climatic conditions, occupations, their level of literacy, their outlook towards life, and their exposure to modern sophisticated goods and services. The income differences between the wealthy few and the common masses also create differences in the demand, customs, beliefs, etc. All these make proper segmentation difficult.
(c) Low Occurrence of Retail Outlets:
This is another important constraint in effective marketing by urban producers in rural areas. It is estimated that 42 families were served per retail outlet in rural areas, while in urban areas 14 households were served per outlet (1971 Census). The position now could well be the same.
(d) Problem of Marketing Communication:
The low level of literacy in rural areas poses a practically unsurmountable problem of communication. On account of this, many mass-media, which are utilised and are successful in urban areas for creating a primary demand, cannot be effectively used in rural areas.
(e) Inadequate Bank and Credit Facilities:
A large majority of the villages, especially those with 2,000 population or less do not enjoy banking facilities. Whatever RRBs are operating under the various nationalised commercial banks might be quantitatively satisfactory, but service-wise, their performance is not up to expectations.
In the process, the rural retailers experience several problems not only in financing their business operations, but also in making payments to the suppliers. For want of credit facilities, retailers are unable to carry enough stocks with them.
(f) Transport Still Erratic:
Though road transport facilities are improving, they are yet not adequate. Only 10 per cent of the total number of villages were connected by all- weather roads, while 60 per cent of the villages were connected by only fair-weather roads, or had no roads.
About 1.69 lakh villages were connected by all-weather roads, and 92,800 had fair-weather roads. Due to all these, retailers are put to many difficulties in procuring goods from the neighbouring towns.
(g) Towards Effective Rural Marketing:
Some Strategies. Rural literacy is expected to improve consequent upon the launching of the Total Literacy Campaigns (TLCs), and adult education programmes. Improvement in agricultural prosperity has been responsible for an increase in rural incomes and consequent increase in rural spending.
The rural share in many products is more, compared to the urban share. The rural market still remains untapped. A few strategies for tapping it in an effective manner are.
(h) Storage and Warehousing:
Rural outlets in many parts of India find it difficult to get suitable godowns. No public warehousing agencies exist in rural India. The Central Warehousing Corporation (CWC) and the state Warehousing Corporations (SWCs) do not extend their network of warehouses to the rural parts.
They go only upto the nodal points or major market centres. It is not possible to service the interior outlets effectively with the existing network of CWC/SWC warehouses.
(i) Promotional Strategy:
Television has an all-India exposure level of 27 per cent rural households. The exposure levels vary across the states between 15 and 38 per cent. Press exposure levels are less than 15 per cent Radio reaches relatively more people and its penetration level has grown significantly.
Keeping these and the regional variations in language, literacy, per capital income, and living, standards in mind, the communication strategy that can be followed is that of turning the content and pattern of the advertising to the regional requirement, instead of a national release.
During the postharvest period, farmers become cash rich, and are in the right frame of mind to go in for buying new products.
Local promotion activities should be given due emphasis which interalia may include:
1. Wall paintings and posters,
2. Publicity vans induce brand trial.
3. Stalls, hoardings and audio-visual publicity at local fairs.
4. Mobile retailing-cum-merchandising units to operate in individual villages.
5. Promotion sales supported by merchandising at baat markets.
Rural Marketing – Problems Faced by Marketers (With Causes of the Problems)
Marketers, who want to persuade into the rural market, should overcome many problems like – variation in demand, seasonal income, poor and inadequate infrastructural facilities, high illiteracy level, existence of many colloquial languages, absence of well-organized market structure, large and widely spread markets, difficulties of medias to reach the rural population and most of all, their customs, believes, culture, habits and lifestyle.
Since, these are the deciding factors for each and every product while outlining the rural demand, marketers are in a position to follow many techniques and take remedial measures in advance to root into the market.
They should frame and implement suitable strategies, policies and promotional schemes for their long and sustainable growth in that particular market.
We will focus on the major problems faced by the marketers and the causes for those problems in rural sector in detail:
1. Inadequate Physical Communication Facilities:
Maximum of all organized communication facilities are available in urban areas only. As per the research reports, nearly 70% of urban population gets these type of modern communication facilities and the remaining 30% rural population alone accounts for these facilities.
In availability of all-weather roads leads to inaccessibility of many rural villages. Inaccessibility or more difficulty to reach these rural remote villages, ultimately leads to heavy distribution cost to the marketer and sometimes it stands to be ineffective also. But the various development policies and programs framed by the government, promises big hope towards the resolution of these problems.
One of the examples – Pradhan Mantri Gram Sadak Yojana has implemented its policies towards the connection of all villages with 500 persons and above in plains and 250 persons and above in hill areas by all-weather roads in near future.
2. Underdevelopment of Markets – Rural and Urban:
The underdeveloped markets are populated by underdeveloped people, who are majorly below the poverty line. Agricultural based occupation and monsoon dependency creates many problems to rural people. Imbalances in monsoon or frequent changes in monsoon, results in drought, famine and flood etc., impacts the rural people life in a big way and finally leads to underdeveloped market in rural sector.
Some more factors which makes the rural market still underdeveloped are – lack of adequate credit facilities, banking financial assistance and other resources such as man power, equipments etc. Unlike the rural sector, availability of all these facilities makes the urban markets more developed one.
3. Inadequate Media Coverage for Rural Communication:
Mass media is used to give awareness about various products, demonstrate the applications and their functions as well as benefits. In the rural sectors, mass media coverage is low due to poor literacy rate and inadequate infrastructural facilities. This curtails down the impact of media coverage in rural sector.
4. Many Languages and Dialects:
One more problem in rural India is – the number of languages and dialects are in custom throughout India. Even though the recognized languages in India are only 22, dialects are more and that too vary from region to region, state to state and even district to district, results in huge number of vernacular languages in usage.
But, this sort of problem can be tackled by the marketers easily through conducting promotional campaigns through neighbouring language and giving advertisements in local or regional channels etc.
5. Market Organization and Staff:
Missing of well-organized market structure induced the rural marketing into many problems. The successful chain followed in urban area is, the manufacturer – who produces the product sells the goods to his stockiest in the regional level and the stockiest distributes the goods to different wholesale dealers who are in various states but, within their regional level.
Again, the wholesale dealer distributes the goods to various district retailers within their state. The retailer once again re-distributes the goods to the small shop owners who are in near-by village, town or city and finally the goods reaches to the end consumer who consumes the goods. Sometimes, the chain cuts at the retailer level itself and the consumer buys the goods directly from him instead of going to small shops.
These organized market structure helps the urban marketers as well as consumers for the continuous flow of goods and demand in both sides. So, the dependency on the small shop owners or retailers, reduced in a big way because, if any chain is stopped or dropped, they can immediately move one or two steps forward or backward as the case may be.
This facility is not available in rural sector. The consumer should rely upon only the shopkeeper and there is no other way to him. Staff management also creates more problems in rural sector. The things like – higher illiteracy level, appointing untrained labourers for lifting, handling, packaging and delivering goods etc., and lesser wages and salaries.
6. Problem Related to Marketing:
The main occupation for the people residing in rural sector is agriculture and allied activities, which is highly dependent on monsoon. This type of nature based, seasonal bound and unstable income stream ultimately reflects in varied and uneven consumption pattern for many products of rural sector.
To manage this kind of fluctuated demand, marketers have to structure unique, suitable marketing and distribution strategies for different types of products.
For example, demands for consumables and durables are more during the harvesting seasons. In the rural sector, crop harvesting season is the peak period for the marketers, to generate more demand for many products like consumables and durables because this is the time for the farmers to sell their produce and retain substantial liquid money with them.
To achieve rural sales target of the marketers, this is the right time for them to initiate efficient promotional policies in an effective manner. Thus, the marketing instruments should be arranged with the product demand. In this way, this kind of problem can be solved.
7. Different Way of Thinking:
Due to lack of reliable infrastructural facilities, improper communication mix and ignorance of rural people, the innovativeness and creativity is lagging behind in rural sector. Once these obstacles are reduced or completely eliminated, marketers can easily promote their products in the rural sector.
8. Distribution Problem:
If we see the village people’s buying behaviour, they have recognized different market places for their different product requirement and make purchases from those identified places only. Major popular market places in rural India are weekly haats or shandies, bazaars, melas, small shops, co-operative societies and Public Distribution System (PDS), etc.
For example – Village people go to weekly haats or shandies (organized weekly once or twice at the same place regularly) to buy fresh vegetables, rice, wheat, tamarind and small agricultural tools etc., and to purchase goods like – clothes, daily need items, soaps, some kind of agricultural tools implements etc., from bazaars. Often they buy necessity goods which have inelastic demand like – salt, sugar, matchbox, tea, edible oil, cigarettes, paan, shampoo sachet etc., from small village shops.
So, the marketers should plan different distribution strategies for different commodities depending upon the convenience and purchasing habits of rural people, instead of following tailor made and uniform distribution methods for all products.
9. Low Level Rural Literacy:
The literacy level in rural areas is very low in comparison to urban areas. Because of this companies find difficult to communicate and promote their products through print media. Hence, companies have to depend on television and radios to pass their message to rural consumers.
10. Seasonal Demand:
The rural population still depends on agriculture, the demand for their produce is also seasonal. If the harvest is good farmers receive good money and which leads to good demand for purchasing various products. But if the harvest is not good the demand level for purchase of various products falls down.
11. Traditional Life:
When compared with urban areas the rural people avoid changes and are not ready to adopt technical advancement as well as new practices. Due to their lack of knowledge they are much exploited by spurious products. Due to this rigid attitude the marketers find difficult to sell their products in the rural markets.
12. Uneven and Widely Scattered Population:
In India the villages are not equally populated, even the size of the villages also varies. There are large number of villages considered as medium sized villages whereas a very few are known as large villages with sufficient facilities and market potential. Due to uneven and imbalanced spread of population in these villages the marketers find it difficult to reach out to rural consumers for selling their products.
13. Low per Capita Income:
The Per Capita income level is higher in urban areas as compared to rural areas. It is difficult for the rural people to purchase or buy the things. It is also noticed that there is a wide disparity in income distribution in rural and urban India. The landholding pattern in the rural areas is highly distorted so the income is also highly distorted because of all these marketers have to plan very carefully the distribution strategies for rural markets.
14. Lack of Brand Awareness:
In rural areas the rural people hardly know about the branded products. They are exposed to a limited source of information regarding brands. Since, companies are not able to communicate about their product effectively due to lack of right media and convenient place to buy goods it results in low sales and at times purchasing of fake products by the rural consumers.
15. Difficulties in Positioning the Product:
In the markets dealing with heterogeneous products, the product positioning becomes very difficult because these heterogeneous products have wide range which leads to several distribution problems. When compared with durables the consumers face the problems in deciding the size and quantity of the products.
Hence, the marketing and positioning of consumer durable items like – TV, tractors becomes easy whereas marketing and positioning of FMCG products is highly challenging.
16. Less Retail Outlets:
The villages which are less populated there are hardly any retail shops visible. Since, there is a lack of finance the village shops are not able to stock wide variety of branded products to sell to rural people. These retail outlets concentrate basically on fast moving items which also include a large number of fake brands.
Rural Marketing – Recent Trends in India
‘Agriculture and Rural Development’ has been the key mantra for a sustained and long-term economic growth in India. The Government already initiated many large-scale rural development schemes mainly through the Ministry of Rural Development, National Bank for Agriculture and Rural Development (NABARD), and Khadi and Village Industries Commission (KVIC).
Some autonomous bodies like – District Rural Development Agency (DRDA), National Institute of Rural Development (NIRD), National Rural Roads Development Agency (NRRDA) and Council for Advancement of People’s Action and Rural Technology (CAPART), also joined hands with the Government for a better ‘Rural India’.
1. Online Rural Markets:
Online service can be used by the rural people as two-way communication for crop information, purchases of agri-inputs, consumer durables and sale of rural produce online at reasonable price. Improved telecommunication facilities all over India facilitate the easy access of farm information and online marketing in rural area. [Agricultural information can get through the internet if each village has small information office.]
2. Through Information Technology:
Private sector companies like ITC and Hindustan Unilever, have set up the IT enabled networks like, e-Choupal and project Shakti respectively, to technically improve the Indian fanners in rural sector. Their mission is to link the farmers with the remunerative markets and to manage risks through technologies etc.
3. Large Format Retail Stores:
In rural area, the consumers are forced by the shopkeeper, to buy the products offered by them alone. Even though the consumers are the end-users for the products, they are not allowed to go into the old kirana model stores and goods are out of reach of consumers. But, this situation is slowly changing due to the emergence of national chain stores.
(a) National chain stores – Large number of stores set up in different rural areas throughout the country by the same organization for marketing its products. Thus national chain stores can serve large number of customers in rural area.
(b) Increasing number of retail stores – Famous FMCG market players, show interest to continue and also to expand their rural potential market share because of the promising growth of rural market. For this purpose, they frame many customized promotional strategies for rural markets by using the rural people’s vernacular language. Some of them conduct training programs like, HUL’s Project Shakti, Tata Tea’s Gaon Chalo, Coca-Cola’s Parivartan and Dabur’s ASTRA (Advanced Sales Training for Retail Ascendance), etc. Through these programs, many retailers have trained to display and stock products.
(c) India post and private sector courier services – They have been already covered the urban market efficiently, are now looking for entering into the rural market.