Table of Contents:-
- what is rural marketing?
- Definition of rural marketing
- Rural Marketing Mix
- 4A’s of Rural Marketing
- Emerging Trends of Rural Marketing in India
- RURAL MARKETS
- Features of Rural Markets
- Importance of Rural Markets
- Factors affecting Growth of Rural Market
- Challenges of Rural Markets
- Rural Consumers
what is rural marketing?
Rural marketing is often mistakenly equated with agricultural marketing, which involves selling agricultural products to industrial or urban consumers. In reality, rural marketing refers to selling processed goods and services to rural consumers, requiring a distinct marketing mix.
Initially, it was perceived as the selling of rural products in both rural and urban areas, along with the sale of agricultural inputs in rural markets. This perspective treated rural marketing as synonymous with farm marketing. It was significantly influenced by indigenous sellers such as baniyas and mahajans (local business people), resulting in a highly unorganized sector. The scenario began to change after the Green Revolution, leading to prosperous villages and an increased demand for agricultural inputs.
The government also played a crucial role by establishing agencies like Khadi and Village Industries Commission (KVIC), Indian Farmers Fertiliser Cooperative Limited (IFFCO), Krishak Bharti Cooperative Limited (KRIBHCO), Girijan Cooperative Societies, Andhra Pradesh State Handloom Weavers Cooperative Society Ltd (APCO Fabrics), etc., and promoting their products. This contributed to the growth of village industries, with products from rural artisans, such as handicrafts, handloom textiles, crackers, etc., gaining popularity in urban markets.
Furthermore, the opening up of the Indian economy and the implementation of LPG (Liberalization, Privatization, and Globalization) in 1990 significantly boosted rural marketing. Rural areas experienced comprehensive socio-economic progress, leading marketers to recognize rural markets as potential for household consumables and durables.
In contemporary times, no company aiming for growth and a larger market share can afford to overlook rural markets, and even major retail companies are trying to tap into these markets.
Definition of rural marketing
“Rural marketing encompasses all efforts made by companies to deliver their already marketed goods and services to rural consumers, ensuring their satisfaction, enhancing their standard of living, and thereby achieving organizational goals.”
It is “the process of assessing region-specific demands for goods and services in rural markets and making these demanded goods and services available to rural consumers, satisfying their needs, enhancing their standard of living, and achieving organizational objectives.”
Rural marketing is a two-way communication process. There is an inflow of products into rural markets for consumption or production and an outflow of products to urban areas. The urban-to-rural flow includes agricultural inputs and fast-moving consumer goods such as soaps, detergents, cosmetics, textiles, etc. The rural-to-urban flow includes agricultural produce such as rice, wheat, lentils, sugar, cotton, etc. Additionally, there is movement of rural products within rural areas for consumption. Thus, it is a two-way marketing process involving moving goods and services from rural to urban areas and vice versa. It also encompasses moving goods and services within rural areas for consumption.
Rural Marketing Mix
Companies need to carefully design their marketing mix to ensure the acceptance of their goods and services among rural consumers. Their products and services must align with the existing living conditions of rural consumers. Current models of electronic gadgets may not be as valuable to them, considering that the basic infrastructure required to use these products needs to be improved or more. Companies must consider this and develop a different model of the same products tailored to the needs of rural consumers. Similarly, they need to customize their product pricing, distribution, and promotion decisions (the 4Ps of the marketing mix) to suit rural consumers best. Let’s examine each of them.
Product and Service Decisions
Numerous households in rural areas may still lack essential consumer durables like washing machines, televisions, gas stoves, and refrigerators. This presents a significant market potential for companies dealing with consumer durables. Various studies indicate that rural markets must catch up in adopting new products compared to urban markets. Companies may perceive these markets as suitable for selling outdated products. For instance, urban markets’ demand for semi-automatic washing machines is decreasing. Still, it may have high potential in rural markets as it can be used without running water taps.
However, companies dealing with fast-moving consumer goods (FMCGs) cannot enter rural markets blindly or use the same approach as in urban markets. The consumption pattern of rural consumers differs from that of urban consumers. Villagers often use jaggery or gur instead of sugar and prefer mustard oil and pure ghee, which they can produce or make independently. Therefore, FMCG companies need to gradually and thoughtfully introduce their products to rural consumers, employing a different communication strategy.
Regarding services, rural markets show great promise. Traditional service providers, such as barbers, migrate to cities for better opportunities, creating a vacuum that other service providers can tap. Villages also offer a significant market for telecommunications, health, and education services. It is essential to note that there is a substantial demand for agricultural inputs in rural markets.”
Pricing Decisions
It is important to note that rural consumers typically prioritize liquidity and exhibit reluctance when it comes to parting with their money. They especially avoid spending money on products and services they can grow or make themselves. Additionally, they are highly price-sensitive, and their income sources may need to be more steady and regular. Many rely on income from selling their agricultural produce, with the eldest male member of the family typically controlling the money. The only medium of exchange for other family members is the grains available in the house. This circumstance has led some organized retailers to accept grains as an alternative to cash for their goods and services.
Alternatively, companies targeting rural markets should be willing to sell their products on credit, receiving payments only when the farmers sell their harvested crops.”
Distribution Decisions
Marketers must understand where, when and how rural consumers purchase goods and services. Rural consumers typically travel to the nearest cities to purchase items like tractors, televisions, and other consumer durables. They visit local markets near their villages for daily household needs such as tea, sugar, soaps, and detergent powder. However, their purchasing patterns are flexible like their urban counterparts. They buy goods as needed, only sometimes regularly.
Therefore, companies must decide whether to make their products available in local markets or establish a retailer in each village. A potential strategy is promoting a typical retailer in each town who can stock various goods in their shop.
Promotion Decisions
The purchasing behavior and patterns of rural consumers are significantly influenced by their communities. Therefore, word-of-mouth promotion can be effective and valuable. Companies must identify and convince influential people in the villages about their goods and services. Advertising through radio can also prove helpful, as people in villages use radios for news and other entertainment programs. TV is also gaining popularity and can be used for promotional purposes.
Researchers have suggested a few promotion strategies specific to rural marketing. These include:
- Promotion should be client and location-specific.
- Bundling several related items, selling them to rural consumers, and after-sales services.
- Granting credit facilities to rural consumers can also tap into significant market potential.
- A mix of traditional and modern media can be used for promotion.”
4A’s of Rural Marketing
Many companies from various sectors are drawn to rural markets as they present an enticing opportunity to sustain their growth momentum. These companies are actively seeking to penetrate this relatively untapped market. As you know, rural consumers differ from their urban counterparts in many ways. Hence, companies have to employ different marketing strategies, considering the characteristics of rural consumers.
These are termed the 4A’s of rural marketing, which refer to the challenges of rural markets and critical decision areas. The 4A’s are affordability, availability, awareness, and acceptability. These are explained below.”
Affordability
This refers to rural consumers’ purchasing power and financial capacity to pay for a particular service or product. Most rural consumers have low disposable income. Therefore, the marketer has to consider revising prices. It is only sometimes viable to reduce the price of the products. Therefore, many companies are developing different strategies to meet this challenge. They are offering their products in smaller quantities and smaller packs so that they can suit the pockets of rural consumers. Examples include small shampoo sachets, smaller packs of biscuits, soaps of smaller quantities, smaller bottles of aerated drinks, etc. Such initiatives have enlarged their customer base.”
Availability
The second key decision area in rural marketing is ensuring the availability of products and services in the rural market. To achieve this, companies must provide necessary transportation facilities. They are also adopting various creative approaches to ensure the delivery of their goods and services, such as direct selling using company delivery vans and setting up temporary stalls in village melas. To reach remote village areas, many companies are utilizing auto-rickshaws, bullock carts, and boats.”
Awareness
The next challenge in rural marketing is creating awareness among rural consumers about the goods and services companies offer. This involves providing necessary information to rural consumers. Mass media plays an essential role in this regard. Companies are also using unconventional media channels to promote their products. Events in rural areas, such as fairs, festivals, and haats, are utilized to communicate brand awareness. Many companies organize specific promotional events, vans, road shows, etc., for this purpose. Some companies are involving Gram Panchayats to aid in creating awareness.
Acceptability
The fourth “A” of rural marketing is the acceptability of products by rural customers. For products to be acceptable to rural customers, they must meet their requirements. Companies must tailor their offerings for rural consumers, providing value-add-ons and value for money to attract rural people and gain acceptance for their products. Examples include ‘Sampoorna TV’ by LG Electronics and ‘Chhotakool refrigerator’ by Godrej.
Emerging Trends of Rural Marketing in India
Rural markets hold significant potential but also present challenges such as a widely scattered market, poor infrastructure, uneconomical market size, and a diverse socio-economic profile of rural consumers. Marketers strive to design creative solutions for success in such a challenging environment. Product packaging is customized, with offerings in small quantities (biscuits, soaps, snacks, etc.) and sachets (shampoo, toothpaste, oil, etc.). Rural consumers are provided with an extended credit line, and local mediums such as folk media, haats, and melas are employed for communication.
Various government and non-government bodies are initiating efforts to address rural market challenges by providing rural people with education, health, and employment opportunities. The ICT revolution has also played an important role. For example, the well-known e-governance models of Andhra Pradesh, Gyandoot in Madhya Pradesh, and Jagriti e-Sewa have proven beneficial for rural India. Organized retail formats are also making their way into rural India. The synergistic combination of ICT and organized retailing has substantially overcome the challenges of rural markets. Some emerging trends in rural markets are outlined below.
1. Introduction of online services in rural markets
People in rural India increasingly utilize online services to access crop information, purchase agricultural inputs, acquire consumer durables, and sell rural produce at reasonable prices. Online transactions for selling and buying high-quality mangoes have recently gained popularity. Farmers cultivating superior-quality mangoes are now selling their produce online directly to consumers located in distant places. This practice is gradually being extended to other agricultural products as well.
2. Encouragement for need-based production
Farmers are urged to adopt need-based production practices to prevent oversupply. This initiative aims to reduce storage costs and bring about stability in prices.
3. Strengthening Financial Stability through Cost-Benefit Analysis
Farmers receive price information for agricultural products and inputs by leveraging information technology. This assists them in determining where to sell their products and where to purchase their agricultural inputs, ultimately enhancing their financial strength.
4. Modifying Operations and Strategies
Major companies are adjusting their operations and strategies to appeal to rural consumers. A few examples are provided below:
- Hindustan Unilever is working to empower rural women, training them as “Shakti Ammas” to facilitate the distribution of its products in rural markets.
- Godrej is conducting training programs for rural youth in channel sales and has established large-format retail stores named “Adhaar” in rural markets.
- ITC has introduced “e-Choupal,” an initiative focused on eliminating wasteful intermediation and multiple handling.
5. The Emergence of Organised Retailing in Rural Markets
The introduction of organised retailing has significantly transformed rural markets. Several prominent companies are venturing into rural markets with organised retail formats, including Choupal Sagar (ITC), Hariyali Kisan Bazaars (DCM Shriram), Tata Kisan Sagar (Tata Chemicals), Adhaar (The Godrej Group), and others. The government has also established rural networks like the Public Distribution System (PDS), Khadi and Village Industries Commission (KVIC), rural banks, and the Indian Farmers Fertilizers Cooperative Limited (IFFCO).
RURAL MARKETS
The Census of India defines a rural area as “any habitation with a population density of less than 400 per sq. km., where at least 75 percent of the male working population is engaged in agriculture and where a municipality or board does not exist.” India has nearly 6.4 lakh villages, of which only 20,000 have a population of more than 5000. Most companies in the fast-moving consumer goods (FMCG) sector define the rural market as any place with a population of up to 2,000.
Understanding and managing the rural market is challenging, as it is fraught with challenges. The Indian agrarian society is diverse, with different villages exhibiting variations in geographical, economic, cultural, moral, and other structures. The inhabitants’ behavior patterns, beliefs, ideas, and faiths vary significantly.
Challenges in rural markets include understanding rural consumers, ensuring product and service availability in remote rural locations, and effectively communicating with the vastly heterogeneous rural consumer base.
Features of Rural Markets
Certain specific features of the rural market must be considered before engaging in rural marketing. These are as follows:
1) Large and Scattered Population
In India, approximately 65 percent of the population resides in over six lakh villages in rural areas. While this challenges marketers due to dispersion, it also offers a vast and promising market.
2) Rising Purchasing Power
With the green revolution and the opening up of the economy post-1990, the income level of rural people has increased. Higher-income levels correspond to increased purchasing power and demand.
3) Steady Market Growth
The rural market has been growing steadily, witnessing consumption patterns and preferences changes. Branded products and traditional items like bicycles, mopeds, and agricultural inputs are now in demand. Increased awareness through IT and media has led to rising demand for cosmetics, FMCGs, consumer durables, etc.
4) Development of Infrastructure Facilities
Infrastructure facilities in rural areas have improved, reducing the distance between villages and cities. Investments in roads, transportation, communication networks, rural electrification, and government-run public service projects have enhanced connectivity, expanding the scope of rural marketing.
5) Low Standard of Living
Despite developments, the standard of living in rural areas remains relatively lower, particularly for individuals in the second and third consumer groups (refer to the section on rural consumers discussed above). Those with significant land holdings but not wealthy farmers (second group) and daily laborers (third group) often demand necessities in small quantities but more frequently.
6) Traditional Outlook
Rural consumers hold onto their old values, culture, customs, and traditions, influencing their demand patterns. However, there is a gradual shift, and demand for cosmetics and branded goods is entering rural markets.
7) Separate Marketing Mix Required
Given the distinct features of the rural market, companies must develop a separate marketing mix tailored to tap into its full potential.
Importance of Rural Markets
India is one of the largest markets globally, with the natural essence residing in its villages. Due to various factors like globalization, glocalization, economic liberalization, the IT revolution, and improving infrastructure, rural India has become a significant attraction for marketers. The size of the rural market in India is so extensive that companies aspiring for growth must pay attention to this market segment. Companies’ future success is highly dependent on understanding the dynamics of rural markets.
The increasing focus on the farm sector has boosted the income levels of rural consumers, presenting enormous opportunities for marketers. With infrastructure facilities improving, supply chain operations are set to benefit. The consumption patterns of rural consumers are also transforming.
Factors affecting Growth of Rural Market
The various factors that have contributed to the growth of the rural market in India can be summarized as follows:
a) Increased demand due to population growth;
b) Prosperity in the agriculture sector leading to higher rural income;
c) Improvement in the standard of living;
d) Active involvement of government and non-government organizations in rural development;
e) Higher literacy rates and educational levels;
f) Influx of foreign remittances and foreign-made goods into rural areas;
g) Enhanced rural infrastructure;
h) Increasing awareness among rural consumers about new products; and
i) Growing interaction between urban and rural areas.
Challenges of Rural Markets
The various challenges faced by firms in India regarding rural markets are as follows:
1) In many remote locations, the barter system still exists, posing a significant obstacle to the development of rural marketing in India.
2) The impact of information technology is not uniformly experienced across the nation. Farmers with extensive land holdings have primarily enjoyed the advantage, creating inequality and underdeveloped markets.
3) Physical communication facilities are not equally good across the nation. For example, villages in the eastern part of the country become inaccessible during monsoons due to a lack of all-weather roads, making physical communication expensive.
4) Demand in rural markets heavily depends on the agricultural situation, as agriculture is the primary source of livelihood. States like Uttar Pradesh, Bihar, and Madhya Pradesh, which rely heavily on monsoon, experience variations in purchasing power due to unpredictable monsoon patterns, making demand forecasting challenging for marketers.
5) The traditional outlook of rural consumers can lead to delayed buying decisions, posing a threat to marketers.
6) Differences in language and dialects from state to state and region to region make formulating marketing strategies and deciding market coverage complex for marketers.
7) Other factors such as natural calamities, pests and diseases, droughts, excess rainfall, lack of proper storage facilities, transportation, and insurance threaten rural marketers.
8) Challenges related to rural warehouses, supply chain operations, rural infrastructure, and fluctuation in the price of agricultural products add to the complexity for marketers.
As a marketer, overlooking these problems and challenges in handling rural markets is not an option. The key is to understand the dynamics of pastoral needs and efficiently connect with the nerves of rural consumers. Therefore, it is crucial to comprehend rural consumers and their buying behavior.
Rural Consumers
In marketing, it is always emphasized that the most important thing is understanding the target customers. Hence, a brief idea about rural consumers in India, who differ from urban customers in terms of taste, preference, education level, socio-economic status, etc., is crucial. In the record, most of them are illiterate and have low education levels, and their income levels are also standard. The principal occupation of most of them is farming, and some are artisans. Rural consumers differ from state to state and region to region. A consumer in rural areas of Rajasthan is considerably different from their counterparts in states like Uttar Pradesh and Jharkhand. Similarly, consumers in Kerala and Karnataka are more educated than their counterparts in other states. There is a difference in the prosperity of consumers in different regions and states.
Rural markets in India
Distinct segments exist in rural markets in India, grouped into three categories. In the first group, there are wealthy farmers with more significant pieces of land, substantial surplus income, and high purchasing power, leading luxurious and urban lifestyles. In the second group, farmers have enough land. While their economic status is less prosperous than the first group, they have a respectable lifestyle and are largely self-sufficient. Their purchasing power is good but less than that of the first category. The third group comprises farm laborers or daily wage earners with minimal purchasing power; buying required products frequently but in small quantities.
The buying process of rural consumers also varies. Unlike urban markets, their buying decision is influenced by the males of the family. It has also been noted that people make independent decisions in urban markets, whereas in rural areas, decisions may be influenced by family members and the community. However, the scenario in the rural market is also witnessing change, and marketers need to keep abreast of the changes taking place in rural markets, closely monitoring them. Despite such heterogeneity, there is some commonality, too. On average, rural consumers are reluctant, preferring liquidity and not wanting to part with their money easily. Selling costly products and services may take much work, as price sensitivity is much higher.