Chapter – III

RURAL MARKETING STRATEGIES OF CONSUMER DURABLES IN

INDIA

3.1 RURAL MARKETING

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, the rural areas have started consuming a large quantity of industrial
and urban manufactured products. In this context, a special marketing strategy has emerged
which is called rural marketing. The concept of rural marketing in India economy has always
played an influential role in the lives of people.
Globalization, liberalization and privatization have transformed the Indian economy into a
vibrant, rapidly growing consumer market. As a result the markets are flooded with different
kinds of goods and services, substantially effecting and changing the purchasing pattern of the
consumers. The rural markets, which were earlier ignored by most of the big international market
players, are now being seen as a land of great business opportunity. As the disposable income of
the masses is growing, more and more corporate houses are entering into the rural markets with
their new goods and products. Due to this reason, the marketing for rural consumers is becoming
more complex. The rural market in India brings in bigger revenues in the country, as the rural
regions comprise of the maximum consumers in this country.
India‘s vast rural market offers a huge potential for a marketer facing stiff competition in the
urban markets. The rural market environment is very different from the familiar surroundings of
the urban market. Rural consumers have customs and behaviors that the marketers may find
difficult to contend with. The rural markets in India have grown size, range and sophistication in
recent times. 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 green pastures for companies today, as they are growing faster as compared to the
urban markets. With their huge size and demand base, they offer great opportunities to the
marketers. More than three-fourths of country‘s consumers reside in rural areas and more than

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half of the national income is generated by them. Due to the global economic downturn, the
companies are few facing slower urban sales, prompting them to make a rush towards rural
India.

3.2 RURAL MARKETING – DEFINITION

The term ‗rural marketing‘ has been used widely in both academic and corporate worlds.
Business organizations have incorporated the word into their marketing rhetoric. Academics
have produced a plethora of textbooks and offered elective courses on rural marketing in various
business schools, which bears testimony to the growing importance of the subject in management
schools in India. An analysis of the content of a number of textbooks written on the subject
reveals that the meaning of rural marketing has changed over the past few decades.

According to Thompson: ‗ The study of rural marketing comprises all the operations & the
agencies conducting them, involved in the movement of farm produced food, raw materials
& their derivatives, such as textiles, form the farm to the final consumers & the effects of
such operations on producers, middlemen and consumers.‘

According to Ramkishen.Y : ‗ Rural marketing is the process of developing, pricing,

promoting, distributing rural-specific goods and services, leading to exchange between
urban and rural markets which satisfies consumer demand and also achieves organizational
objectives. Thus, rural marketing is a two way marketing process that includes the flow of
goods and services from rural to urban areas & the flow of goods & services from urban to
rural areas, as well as the flow of goods & services within rural areas.

Jha (1988) has proposed a domain of rural marketing, which has found wider acceptance in the
current literature. He visualized the domain of rural marketing as the flow of goods between rural
and urban areas. As per Jha‘s framework, rural marketing broadly represent the domain of rural
marketing—the flow of goods from rural to rural, rural to urban, and urban to rural areas.

Kashyap and Raut (2006) have listed three distinct phases in the evolution of rural marketing
during which the term changed its meaning and connotation. During the first phase, pre-1960s,

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rural marketing was synonymous with agriculture marketing. In the second phase, from 1960s to
1990, the marketing of agricultural inputs and marketing of non-farm rural produce was
considered as rural marketing. In the post-liberalization period, rural marketing refers to
predominantly refers to the marketing of fast moving consumer goods (FMCG) and consumer
durables in rural areas.

Pratik Modi (2009) proposed rural marketing as any marketing activity whose net developmental
impact on rural people is positive. His definition of rural marketing provides a criteria for
identifying a rural marketing activity from amongst various marketing activities that take place
in rural areas.

3.3 CHARACTERISTICS OF RURAL MARKETING

Some of the important features or characteristics of rural marketing are being listed below:

Large and scattered market

The rural market is very large in size and mostly scattered. As these markets are of diverse
nature, the people living in those rural areas are from diverse cultural, linguistic and religious
background. No two markets are alike and it is dispersed across India. Here in India, the rural
market consists of over 63 crore consumers from 6, 20,000 villages spread throughout the
country. Therefore a large population gives an opportunity for marketing a variety of goods and
services. However income and purchasing power play a major role in determining the demand in
rural areas.

Occupation Pattern
Agriculture and related activities continue to be the main occupation for majority of the rural
population. Land is the major source of income for about 77% of the population. Others are
engaged in business (10%), non-agriculture labour (9%), and salary earners (2%) and not
gainfully employed (2%). It is evident that rural prosperity depends upon growth and
development of agriculture.

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Low standard of living
The consumer in the village area do have a low standard of living because of low literacy levels,
low per capita income, social backwardness, low savings, economic backwardness, lack of
exposure to the media, etc. In general a rural consumer spends less on non-food items.

Traditional outlook
The rural consumer values old customs and tradition. They do not prefer changes. In other
words, the adaptability to change is lethargic and hence the problem of marketing of goods is
much prevalent.

Diverse socio-economic backwardness

Rural consumers have diverse socio-economic backwardness. This is different in different parts
of the country. There exists tremendous variation in culture, life style, tastes, preferences,
culture, etc of the rural consumers.

Infrastructure facilities
The infrastructure facilities like roads, warehouses, communication systems, and financial
systems are inadequate in rural areas. Most of rural markets are not connected by roads. Most of
the roads are kuchha and become unusable during rainy season. Many farmers use bullock cart
for transporting their produce from village to the market. This means of transport is time
consuming. And same is the problem with transporting the goods from urban markets to rural
areas. Hence physical distribution is hampered.

Prevalence of spurious brands

Most rural markets are inundated with local brands or spurious brands, which are quite cheaper
and therefore affordable to the people.

Seasonal demand
The rural markets are characterized by seasonal demand for products, especially costly products.
This is due to the fact that agriculture is their main source of income and once it is harvested,
then and only they would be able to buy products.

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Media Reach
The media reach in rural household is low. Statistics indicates that the reach of Print media is
10%, followed by TV 31%, Radio 32% and Cinema 36%. Therefore the marketer has to consider
rural specific promotion media and methods to reach the villagers.

3.4 RURAL MARKETING ENVIRONMENT

An environment is that which surrounds an organization. It is sum total of external factors and
made up of tangible and intangible factors, both controllable and uncontrollable. Rural marketing
is basically focused marketing activity of an organization. The environment includes threats and
opportunities in the rural market. The Rural marketing environment is complex and is changing
continuously. The marketing organization should foresee and adopt strategies to change in
requirements in the market. One which doesn‘t change perishes. An adaptive organization can
stand competition or have a modest growth. An organization which makes its effective marketing
plans and its own strategies or a creative one will prosper and creates opportunities in the change
in environment. Rural marketing environment changes will be in the area of
a) Social changes
b) Economic changes
c) Ethical changes
d) Political changes
e) Physical changes
f) Technological changes

1. SOCIAL CHANGES:- The social factor consists of three sub-factors,

1) Sociological factor:-
Consumer society or the community is an important consideration while devising rural marketing
strategy. The rural consumer life style is largely influenced by the social setup. The sociological
changes influence rural customer habits, taste, and lifestyles.

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2) Anthropological factors:-
The cultures, subcultures and living patterns influence advertising, sales promotion, selling and
packing strategies of the marketing organizations. The rural consumers living in east India have
different taste whereas those living in western India have totally different.
3) Psychological factors:-
Consumer behavior, attitudes, personality and mental make ups are unique. The study of rural
consumer behavior is vital to evolve marketing mix.

2. ECONOMIC FACTORS:-

1) Competition:-

A good and healthy competition brings in good and overall improvement in economic activities.
It also brings good quality, good quantity and price. Considering rural marketing, there exist less
or minimal competition. The presence of local brands in the rural markets has great impact on
competition.

2) Consumers:-
Rural lifestyles and behavioral trends are increasingly coming to resemble urban patterns, in both
form and variety. Like urban consumers, the rural middle class is buying more fairness creams,
whereas many of the rural poor are keen to invest in a mobile phone connection. The consumer
today is quite knowledgeable. The rural folks are even choosy than their urban counter parts
because they are ready to spend only when they are assured of getting value for their money.
Therefore their progress and well being should be the aim of any economic activity.

3) Price:-

Pricing is a delicate issue where it should be market friendly, not too high or too little. The
marketer has to keep in mind to get descent returns on investment and effects of producers and
marketers. But pricing becomes more important when the target segment is rural population.
Even the marketers have to introduce smaller packs for their products to these rural population
owing to their low purchasing power.

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4) ETHICAL FORCES:-

Business minus ethical values brings degeneration. In the long run it creates several problems.
Sub- standardization, exploitation and falsification are main ethical values in such organization.
The marketers have to take proper care while designing their products for rural segments as the
rural people are largely uneducated and are quite sensitive. A slight unethical practice may result
in huge boycott of their products.

5) POLITICAL FORCES:-

The government policy towards trade and commerce, internal taxation and preferential
treatments, have great influence on the rural marketing strategies. The marketing environment
has to meet the political frame work in which a government is made to work. Thanks to rural
supportive initiatives by Indian government, more and more companies are making their
presence felt in these rural areas. The government has increased spending in rural areas, from
US$9 billion for the financial year ending March 2007 to an anticipated US$16billion for the
financial year ending March 2010.

6) PHYSICAL FORCES:-

The infrastructure availability for movement and storage of goods play an important role in the
physical distribution of goods and reaching the rural consumers. Efficient and cheaper logistics
helps the market in a big way. But there is dearth of infrastructure facilities with respect to rural
areas of India. The marketer has to bear the brunt of this dearth and still have to promote their
products in those areas so as to increase their sales. This in turn is possible only when the remote
places become easily accessible.

7) TECHNOLOGICAL FORCES:-

The fast changing science and technology gives a cutting edge to the marketing of products. The
changes warrant changes in marketing inputs and strategies. Faster and efficient communication
and transport systems have speeded up marketer. The capital is made to work faster and harder.

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So the marketer has to use these new marketing tools and facilities in designing and
implementing his marketing strategies which are adaptive to the change in environment and
ensure success. Even the rural folks are eager to adopt the faster changing technology. They are
now ready to spend a handsome amount for purchasing the latest gadgets and durables.

3.5 CHALLENGES IN RURAL MARKETS

Rural marketing has already arrived in the world of business and is one of the single largest
segments of activity. Rural markets are most heterogeneous in nature. Unlike their urban
counterparts, where the demand of goods and services are highly concentrated in nature, rural
markets tend to be spread out across the country. It's the rural segment of market that contributes
more profit than its urban counterpart. Consequently, though many rural markets look good on
paper, in reality they are quite expensive to serve. Hence it is very difficult for the marketers to
provide service to each and every rural market in a better way.
While it is easier for an organization to market their products and services to urban markets and
the top of the pyramid, the challenge faced by them is tapping the rural market potential.
Marketing to the urban audience is easier due to their acceptance of media and its various forms
that are present in urban areas. Thus they are more susceptible to products that are marketed
there. The major challenges faced in rural markets are listed below: -

1) Heterogeneity in rural consumers – The vast rural population with heterogeneous markets
spread across in different states poses great difficulty for the marketers. Not only this, the
population density is greatly varied in rural regions. Therefore a densely populated country
provides ample opportunity for marketing a variety of latest goods and services on one hand
whereas on the other, it poses a great challenge as to what are the kinds of goods and services to
be served. On the top of it, the heterogeneity of the population creates problem of segmentation.
So it becomes very difficult for marketer to serve the same product with similar price and
promotion combination to different people. Unlike in urban markets where demand is highly
concentrated, rural markets tend to be spread out. This, of course, dramatically increases the

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sales efforts and costs. Consequently, though many rural markets look good on paper, in reality
they are quite costly to service.

2) Difficulty in distribution – Even though, there is a large chunk of consumers living in these
remote areas waiting to get served but still most of the times, the efforts to serve them in a proper
manner proves futile. An effective distribution system requires village-level shopkeeper, Mandal/
Taluka- level wholesaler or preferred dealer, distributor or stockiest at district level and
company-owned depot or consignment distribution at state level. The presence of too many tiers
in the distribution system increases the cost of distribution.

3) Inadequate infrastructure facilities (road, rail, etc) - Transportation is essential for

movement of products from urban production centers to remote villages. Hence, it becomes a
vital point for consideration in formulating strategies for rural marketing. The infrastructure is so
poor that many a times, even access to remote areas posses a great challenge. Almost half of the
total villages in India, for example, are not connected by road at all. Even though the initiative by
the government of India of building roads is well appreciated but then the task is quite. Most of
these villages are connected only by kuchha roads. And these roads create a huge problem during
monsoon season. Not only this, many rural areas are not connected by rail transport. So serving
the rural consumers located in these regions proves to be formidable task for the marketers.

4) Low literacy Level – One can easily ascertain the fact that most of the people living in rural
parts of India do not have proper access to education, so the literacy level in these regions is very
low. There are not enough opportunities for education in rural areas. The literacy level is as low
(36%) when compared to all- India average of 52%. Again, this is also one of the important areas
to be pondered upon by the marketers. To create awareness among the people of rural regions
regarding the development of new products by the marketers is quite a big problem. Not only
this, the villagers are unaware of the MNC‘s and the brands they are selling. On the top of it,
these marketers also have to consider the different languages spoken by the people living in
different parts.

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5) Seasonal Demand of products – Demand for goods in rural markets depends upon
agricultural situation, as agriculture is the main source of income in most of the rural areas.
Agriculture to a large extent depends upon monsoon and, therefore, the demand or buying
capacity is not stable or regular. This deters the companies from having one single strategy for
rural markets year round.

6) Inadequate Media Coverage – The reach of formal media is low in rural households. Media
have lots of problem in rural areas. Television is a good source to communicate the message to
rural people. But due to non availability of power as well as television sets, majority of rural
population cannot get the benefits of various media. So there is a possibility that the rural
customer remains ignorant of the new product being launched in the market. Moreover, the
places where the electricity is yet to reach, adds to the discomfort of the marketers. Therefore we
can say that the reach of media is very limited in rural areas.

7) Packaging and Pricing – The problem of pricing and packaging for rural customers has to be
taken into consideration. As we are well aware of the fact that there exist very large difference in
income levels between the rural customers and their urban counterparts, so the marketers have to
look for a possible price reduction in majority of the products. Moreover, the low purchasing
power of the rural customer makes it very difficult for them to purchase the products as they are
sold in urban markets. Most of the FMCG goods like cosmetics, toiletries, etc launched by
different MNCs have quite attractive and expensive packing and hence becomes unaffordable to
the rural customers. It is suggested that the marketers should use cheaper materials in packaging
for the rural markets.

8) Language Barrier – As the rural market is heterogeneous, so is the culture of these

customers. The languages spoken by them are different. Hence it becomes very difficult for the
marketers to advertise their products in one universally spoken language. If these marketers go
for advertising their products in the regional language, it adds to the cost of product, which may
prove detrimental for rural marketing.

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9) Inadequate purchasing power and lack of bank finance – As the income of rural customer
is very less as compare to their counterparts in the urban areas, there arise great difficulty in
purchasing expensive products like Television, Bikes, Refrigerator, DVD Players, etc for the
rural customers. Adding to their grievances, the banks do not support them by providing them
loans for purchasing these products. Moreover, the dealers located in the rural areas are also
reluctant to give them credit facility owing to their poor financial conditions.

10) Cultural Factors – Culture is a system of shared values, beliefs and perceptions that
influence the behavior of consumers. There are different groups based on religion, caste,
occupation, income, age, education and politics and each group exerts influence on the behavior
of people in villages.

11) Buying Decisions – Rural consumers are cautious in buying products and their decisions are
slow and delayed. They like to give a trial and only after being personally satisfied, do they buy
the product. Moreover, the rural people posses a traditional and conservative approach in buying
new products. Life in rural areas is still governed by customs and traditions and people do not
easily adapt new practices. For example, even rich and educated class of farmers does not wear
jeans or branded shoes.

12) Skilled local talent is hard to find in rural regions - Companies also find that their trained,
seasoned staff members are very reluctant to relocate to rural areas. This proves to be one of the
major challenges. Moreover hiring local staff does not prove to be futile as they are not having
relevant qualification and experience. If at all they are hired, the company has to spend a lot for
giving them proper training.

13) Warehousing - In the rural areas, there are no facilities for public as well as private
warehousing, unlike in urban areas. Therefore, marketers face a huge problem of storage of their
goods. Lack of proper distribution channel adds to their woes.

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3.6 OPPORTUNITIES IN RURAL MARKETS

Whilst on one hand, there are many challenges in rural marketing, but certainly there also exists
infinite opportunities. The rural market is fascinating and challenging at the same time. The
marketers have to find out new ways of dealing with the rural customers. As already mentioned,
the urban markets are fully saturated, so the easiest and the simplest option available with the
marketer is to look towards the rural prospects. These rural people are eagerly waiting to be
served. Here are some of the points which the marketers could utilize for marketing their
products in rural areas.

1) Huge untapped Potential – As more than 70% of the total India‘s population dwells in rural
areas, the huge population itself speaks of its potential. The rural market offers a great chance for
different branded goods as well as services for large number of customers. Penetration levels for
many products are low in rural areas. The market has been growing at 3-4% per annum adding
more than one million new consumers every year.

2) Impact of globalization - Globalization had a great impact on target groups like farmers,
youth and women. Farmers, today 'keep in touch' with the latest information and maximize both
ends. On youth its impact is on knowledge and information and while on women it still depends
on the socio-economic aspect. The marketers who understand the rural consumer and fine tune
their strategy are sure to reap benefits.

3) Effectiveness of communication - An important tool to reach out to the rural audience is

through effective communication. The rural audience has matured enough to understand the
communication developed for the urban markets, especially with reference to FMCG products.
Television has been a major effective communication system for rural mass and, as a result,
companies should identify themselves with their advertisements.

4) Rising rural prosperity and purchasing power - The agricultural development programs of
the government have helped to increase income in the agricultural sector. These in turn have
created greater purchasing power in rural markets. Moreover, today rural incomes generate not

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only from agricultural section but also from other sections. There is a sizeable salaried class in
rural areas. Rural demand in FMCG products, consumer durables, automobile and retail is
growing at a faster pace than anticipated due to rise in its consumption patterns.

Figure 3.1 Growing Non-farm Income (Source: MART Knowledge Centre)

2010 2020(E)

40%
Non Farm 30%
Non Farm
60% 70%
Farm Farm

5) Change in rural consumer behavior – With the economic development of rural areas,
disposable income of rural people has gone up. Moreover, with the presence of internet and
direct-to-home television connectivity in rural areas, these people have started gaining
knowledge about the different brands that are available in urban markets. They are slowly
realizing the importance of established brands and have started purchasing these brands. Rural
people are now purchasing branded soaps, toothpowder, paste, tobacco products, radio, TV,
bicycles, motorcycles, cooking utensils, wrist watch, razor blades, detergents and so on. The
rural consumers have become choosy and they have started weighing better options in
purchasing products, particularly branded ones. It is a boon to the companies that rural people
amidst deficiency spend so lavishly on weddings, ceremonies, rituals and festivals. Mainly
through more exposure to urban products and services due to media, literacy, migration, etc.,
demand for urban type products, aspiration for better quality of life as product become
affordable.

6) Improvement in infrastructure and rural connectivity - The governments too have realized
the importance of huge untapped potential and they are now on the path of making huge
investments in rural infrastructure. In India, the eleventh five year plan government has specific
focus on the inclusive growth of the country. Several schemes have been launched in last couple

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of years related to rural housing, roads, communication, drinking water, rural electrification, etc.
These have considerably improved the living conditions of rural population and have led to
increase in their demand and consumption for the automobile and consumer durable goods such
as mobile, television, etc. moreover, improvement of rural infrastructure and greater connectivity
with far flung rural areas can stop migration of rural youths. Not only this, agriculture related
activities will also get a fillip.

7) I.T. penetration in rural India - Today's rural children and youth grow up in an environment
where they have 'information access' to education opportunities, exam results, career counseling,
job opportunities, government schemes and services, health and legal services, worldwide news
and information, land records, mandi prices, weather forecasts, bank loans, livelihood options. If
television had change the language of brand communication in rural India, affordable internet
connectivity through various types of communication hubs had a great impact on the minds of
the rural youth. As the electronic ethos and IT culture moves into rural India, the possibilities of
change are becoming visible. Alternate use of rural labour especially the rural youths in service
sector and also in production related activities will help stop rural migration.

8) Favorable government policies – As a part of the process of planned economic development,

the government has been making concerted efforts towards rural development. The massive
investment in the rural India has generated new employment, new income and new purchasing
power. In the recent years, as a part of new farming policies, high support prices are offered for
agricultural products. Various measures like tax exemption in rural areas, subsidy, concessions,
incentives, assistances, literacy drive in rural areas has bought in rapid development of rural
markets. Government‘s initiative for vocationalization of education especially in rural areas
comes as a major boost in rural areas. XII th Plan has already initiated by the central government
but for Make in India to be successful, skilled labour force is needed. The labour in rural areas
(which remains idle for most of the time), can be effectively utilized with small scale industrial
units or with agro-based units, which are present near the rural areas.

9) Credit facilities through banks - With co-operative banks taking the lead in the rural areas,
every village has access to short, medium, long-term loans from these banks. The credit facilities

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extended by public sector banks through rural financing schemes like Kisaan Credit Cards help
the farmers to buy seeds, fertilizers and consumer durable goods on installments. The
introduction of the micro finance proved to be of great help to the people living in hinterlands.

10) Intense Competition in urban markets - Intensified competition in urban markets is

leading to increase in costs and thereby reducing market share. The rural markets are therefore
becoming increasingly attractive in comparison to urban markets. The automobile and FMCG
market brings this out clearly. Hero Honda motorcycles, Parle, Britannia, Brooke Bond, Maruti
Cars, HLL products or Wipro products find ready acceptance in rural markets as compared to
urban markets where there is a proliferation of brands.

11) Remittances from family members working in urban areas – Atleast one of the family
members from almost every rural family is works in city. They remit their salaries back home to their
family members residing in rural areas. These remittances are a sizeable contribution to growing
rural income & purchasing power of rural people.

3.7 RURAL MARKETING – INDIAN SCENARIO

Rural marketing is the single largest sector today in terms of population it impacts. It caters to
approximately 800 million people in India. The opportunity in the field is great and companies
across the world are beginning to understand it. While the urban market deals majorly with a
replacement policy, where old branded products are continuously replaced with new branded
products, the rural market is still untapped. There is no penetration of any sort of brands into
these markets. This offers great scope to companies.
When India got independence, the census survey on Indian Population claimed that 8o% of the
country‘s population was living in rural areas. In the 1991-2001 population census, the number
came down to 74% and the recent 2011 census marks it at 68%. Despite all the big talk about
urbanisation, 62% of the country‘s population will still be living in villages by 2021. It is also a
myth that the country is urbanising rapidly. In most metropolitan cities, population growth is
slowing down. While Delhi saw a population growth of 32% in the 2001 census, the growth

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came down to 20% in 2011. Most people who migrate prefer to shift to smaller cities since there
are more growth options there.

The McKinsey report (2007) on the rise on consumer market in India predicts that in twenty
years the rural Indian market will be larger than the total consumer markets in countries such as
South Korea or Canada today, and almost four times the size of today‘s urban Indian market. The
report estimated the size of the rural market at $577 Billion. India has perhaps the largest
potential rural market in the world. It has as many as 47,000 haats (congregation markets),
compared to 35,000 supermarkets in the US.

Haats or weekly markets

Weekly markets called haats are strategically located to cover a cluster of villages. They have
become the epicenter of economic and social exchange in rural India and in doing so, provide a
readymade solution to the problem mentioned above. In a report by RMAI, ‗Haats as marketing
hubs,‘ an editorial being published in Financial Express in 2011, revealed some interesting facts
about rural India‘s shopping patterns. India‘s 43,000 haats generate annual sales of Rs 50,000
crore. Almost 98% of villagers regularly visit haats, while 75% of them are estimated to frequent
a specific haat each week. Haats cater to anything between 21–57 villages and host footfall
ranging between 5,600 to 12,000 visitors a day, depending upon its size. Anywhere between 327
and 545 stalls may be found in a haat. Surprisingly, two-fifths of total attendees are women.
Haats perfectly sync with villagers‘ psyche of making a value-for-money purchase out of a
variety of offerings. They offer a touch-and-feel experience of products and drive sales by word
of mouth. The favorability of these factors for companies, along with brand awareness, low
selling overheads, majority cash sales and redistribution opportunity have prompted telecom
majors Nokia and Motorola to augment sales through village haats. Tata Shaktee, which offers
roof sheets, has witnessed a 25% rise in sales after they devised a pilot project in
100 haats which comprised setting up direct selling stalls. Similarly, Tata Agrico has
rural haats to thank for a significant expansion in their market share from 30–40%. The
eponymous Kumbh Mela has become a favored destination for MNC FMCG behemoths like
Colgate-Palmolive that distributes free tubes of herbal toothpaste or for Hindustan Lever that
markets its Lifebuoy soap. Similarly, Samsung‘s road-show for its ‗Dream Home‘ campaign

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constituted trips across 48 small towns in 100 days were aimed at augmenting brand awareness
for its electronic offerings.
Although global companies are not yet ready to reach out to Indian rural markets, local
companies have started various schemes to tap the market. For example, because electricity is
one of the major problems faced in rural India, local companies such as Jolly TV in Uttar
Pradesh are producing televisions which run on rechargeable battery systems. Such innovations
help rural consumers use products even during electricity cuts, thus expanding the scope of
marketing in rural areas.
India‘s vast market is one of the most complex in the world, with more than a billion consumers
spread out over more than 600,000 villages, 4000 towns, 400 cities and 35 urban agglomerations
(as of 2001). (Source: Indicus Analytics) Further, the population census, conducted by the
government of India in the year 2011, states that out of a total population of about 1.21 billion
people, more than 2/3rd people lives in rural areas of India (i.e, about 8.33 billion people). The
literacy rate of the people living in rural areas is about 68%, which is quite close to the average
national literacy level. (Source: Census of India 2011) This much huge rural population, coupled
with a very high number of literates, constitutes huge base for companies to market and sell their
products.
The McKinsey report (2007) on the rise on consumer market in India predicts that in twenty
years the rural Indian market will be larger than the total consumer markets in countries such as
South Korea or Canada today, and almost four times the size of today‘s urban Indian market.
Census of India defines rural as any habitation with a population density less than 400 per sq.
km., where at least 75 percent of the male working population is engaged in agriculture and
where there exists no municipality or board, and the same definition being accepted for this
research here. Also, the number of villages or rural units in India has increased to 6,40,867 as per
the census 2011. A marketer trying to market his product or service in the rural areas is faced by
many challenges; the first is posed by the geographic spread and low population density in the
villages in the country. The second challenge is from the low purchasing capacity and limited
disposable incomes in these parts of the country. But this has been changing in the last few
decades with agricultural growth rate faster in the 1990‘s and 80‘s than the 1970‘s (CMIE 1996).
Green revolution through the introduction of hybrid seeds, fertilizers and systematic irrigation
had a major impact on agricultural productivity, and combined with it was a price policy which

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ensured minimum support price, and in turn insulated the farmers from market risk, cheap input
policy and a stable demand (Vyas 2002). These all lead to a quantum jump in the incomes of
farmers in the country. Initially the impact of green revolution could be seen only in the
prosperous agricultural states of the country but now slowly its influence has spread across the
country with the increase in irrigation (Bhalla & Singh 2001). Though the income levels overall
are still very low there are many pockets of prosperity which have come up in the rural areas in
the country.
The current rural marketing environment and economic scenario have brought the corporate
under contemporary roofs of modern India, which is challenging the current standards of
segmenting, targeting and reaching the customers of rural areas. India as a nation has come a
long way from the place where only urban population which constitutes 20 per cent of customer
base for companies are responsible for 80 per cent of their profits. Villages in India are no longer
an abstraction, but fashionable in marketing terms. The footfalls in the villages are getting louder
and louder as companies scramble to woo the rural consumers. This has made the rural
consumers so attractive to companies now, especially the MNC‘s. After all, the 122-million
village households were not created overnight. The companies are looking for new opportunities
and avenues, as they are witnessing a decline in their growth rates in urban markets due to
market saturation and they do have a huge, untouched and untapped rural Indian market. The
driving force for this is rural youth who are becoming more and more educated, have access to
latest technology with smart cell phones and have openness to change. Also rural markets have
acquired significance, as the overall growth of economy has resulted into substantial increase in
the purchasing power of the rural communities. A survey by India's premier economic research
entity, National Council for Applied Economic Research (NCAER) indicates that rise in rural
incomes is keeping pace with the rise in urban incomes. The rural middle class is growing at 12
percent, close to the urban middle class which is growing at 13 percent. Punjab, Kerala, Haryana,
Rajasthan, Gujarat, Andhra Pradesh and Maharashtra are considered highly prosperous states.
Since 1970‘s and more particularly from the mid 1980‘s, the rural economy of India has started
showing potentialities. During 90‘s, there has been a steady shift to as well as growth of
purchasing power of rural India. Thus in recent years the rural sector provides a unique
opportunity to expand their market since the urban segment is clearly showing signs of
saturation. It‘s high time that marketers evolved their notions regarding the emerging rural class

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in villages. From being aspirants of roti, kapda and makaan, to becoming brand and value
conscious buyers, the rural consumer market is seeing sea-change. By communicating with
consumers at the venues they frequent, marketers can hope to make their fortunes in markets
beyond metros.

3.8 FACTS ABOUT INDIAN RURAL MARKETS

The urban market is getting saturated while villagers are flush with ‗disposable income‘ thanks
to generous harvests in the recent years. The estimated potential in rural markets is about three
times that of the European market. This certainly defines the potential volume of business that
can be generated in rural Indian markets. Here are a few insights which may drift one‘s attention
to India‘s hinterlands:
 A total of 13,113 villages have population over 5,000. Of these 9,988 villages or 76% are
in seven states - Uttar Pradesh, Bihar, West Bengal, Maharashtra, Andhra Pradesh,
Kerala and Tamil Nadu.
 The number of middle and higher income families ( having Rs. 70,000 plus annual
income) in rural (21 million ) and urban (24.2 million) is nearly the same.
 With the sustained rise in agri product price and NREGA spending, there is being a
significant increase in the average disposable income of the rural consumers.
 There are a total of 3,697,527 shops (retail outlets) in the rural sector, leading to an
average of 5.85 shops per village. Number of shops per village is lowest, around 1.5 - in
Himachal Pradesh, Arunachal Pradesh and Meghalaya.
 On the other extreme, Kerala has the largest number of shops - 192 per village. In Punjab,
West Bengal, Goa, Gujarat, Andhra Pradesh, Tamil Nadu and Pondicherry there are 7 or
more shops per village. Data on rural consumer buying behaviour indicates that the rural
retailer influences 35% of purchase occasions.
 In India, there are 50,000 Haats catering to villages having population over 2000 people.
Haats operate once a week or more often in a total of 41,888 villages. 45% of the villages
with haats are in the east, 27% in north, 20% in west and 8% in south.
 India has perhaps the largest potential rural market in the world. It has as many as 47,000
haats, compared 35,000 super markets in the US.

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  At the national level, Uttar Pradesh and Bihar have the maximum number of haats, i.e.,
25% and 18% respectively. In Uttar Pradesh, Bihar, West Bengal and Maharashtra,
villages holding haats form 10% of total villages in the respective states.
 At an all India level, pucca roads connect 209,360 villages or 33% of total villages. This
proportion is maximum at 57% in south zone and minimum at 20% in east zone. Pucca
roads connect almost all villages in Punjab, Kerala and Pondicherry.
 There are only 7,271 villages with railway stations. This forms 1.2% of total villages.
Kerala is the best state in this regard with 8% of villages having a railway station.
 5% of the total villages have a bank within the village.
 In Rural India, there are a total of 79,448 doctors. This implies that there are 12.76
doctors per hundred thousand of rural population.
 There are a total of 15,039 hospitals in Rural India. This works out to 2.4 hospitals per
100 villages.
 In India there are 1,34,582 PACS (Primary Agricultural Credit Co-operative Society).

It‘s certain that rural markets in India have a lot to explore..Altough the market is promising,
there have been several challenges involved in understanding and delivering what the market
demands. It has been observed that companies who have taken the pain of understanding the
market have reaped maximum benefits out of it. One such classic example is of the e-commerce
industry which seems have received an outstanding response from the non-metros and villages of
India.

3.9 DEVELOPMENT OF INDIAN RURAL MARKETS

Marketing is the pivot of economic development in rural areas. It is a vital component in income
and employment generation in farm and non-farm sectors. Rural marketing in India is often
perceived as agricultural marketing and not more. However, rural marketing determines the
carrying out of business activities bringing in the flow of goods from urban sectors to the rural
regions of the country as well as the marketing of various products manufactured by the
agricultural non-agricultural workers from rural to urban areas.

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With over 1.2 billion people in India, a majority of who stay in the rural areas it just goes to
show the potential the rural market possesses and the need for marketing to rural folk. In the
rural areas, due to little or no western influence, way of life there is a very traditional. It is a
simple life that the ‗aam-aadmi‘ or the common man leads. They are very careful about where
they spend their money and use it wisely. They are generally very content and satisfied with
what they have.
The markets in India have been fully developed since ancient times. But our study is restricted
only to the study of development of rural markets that has taken place in the new millennium.
Still it would not be fair to mention a brief analysis of the developments of Indian markets.
The development in Indian markets can be broadly classified as –

Post independence period till 1960

In this phase, rural marketing was referred to the marketing of the rural products in rural areas
and in urban areas as well. Rural marketing was referred to as selling of rural products in rural
and urban areas and agricultural inputs in rural markets. It was treated as synonymous to
‗agricultural marketing‘. Agricultural produces like food grains and industrial inputs like cotton,
oil seeds, sugarcane etc. occupied the central place of discussion during this period. The supply-
chain activities of firms supplying agricultural inputs and of artisans in rural areas received
secondary attention. The local marketing of products like bamboo baskets, jute bags, ropes,
wooden products like window and door frames, earthen and metallic utensils, small size
agricultural tools like ploughs by their respective manufacturers like black smiths, carpenters,
cobblers, and pot makers were emphasized in general. This was totally an unorganized market
where all banias and mahajans (local business people) dominated this market. Considering that
the rural economy was at the very primitive stage, the scope of marketing then was very limited.

Period between 1960’s – 1990’s

In this era, green revolution ushered into scientific farming practices like irrigation facilities, use
of fertilizers, pesticides, high yield variety seeds, tractors, power tillers, pump sets, harvesters,
threshers, sprinklers. This had transformed many of the poor villages into prosperous business
centers. As a result, the demand for agricultural inputs started heading north, which in turn led to

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drastic change in rural scenario. The Green Revolution raised productivity levels on the one
hand, but was rather harshly criticized for widening income disparities between rich and poor
farmers on the other. In this context, marketing of agricultural inputs took the importance. The
late 1960s and early 1970s witnessed a modernized agriculture with new equipment and farm
technology. New fertilizers led to high yielding varieties, tractors replaced cattle and the
immediate result was that the production of crops such as wheat and rice increased remarkably.

Two separate areas of activities had emerged- during this period ‗marketing of agricultural
inputs‘ and the conventional ―agricultural marketing‖. During this period, the marketing of rural
products received considerable attention in the general marketing frame work. Village industries
flourished and products like handicrafts, handloom textiles, soaps, safety matches, crackers etc.
hit the urban market on a large scale from rural areas. The formation of agencies like Khadi and
Village Industries Commission, Girijan Cooperative Societies, Bunkar (Weaver) societies,
APCO Fabrics, IFFCO, KRIBHCO, etc. helped to boost the rural marketing activities. This
period also saw an emergence of private companies like Mahindra and Mahindra, Escorts,
Eicher, Sriram fertilizers, etc indulging in the field of manufacturing rural products. The special
attention government had paid to promote these products were responsible for this upsurge.
Village industries flourished and products like handicrafts, handloom textiles, soaps, safety
matches, crackers etc. hit the urban market on a large scale from rural areas. The period from
1980‘s to 1990‘s was characterized by a shift in focus to the consumer needs which in turn led to
an increase in the number of consumer products, players and competition. This provided the rural
customer with a variety in products and also different options to select from. Another factor that
led to the boom was the increased reach of the media and rising household incomes bringing
about a major change in lifestyle.

Period from 1990’s - 2000

During this phase, industrial sector gained significance and maturity thereby leading to an
emergence of a new sector. The products which were not given attention so far during the two
earlier phases were that of marketing of household consumables and durables to the rural
markets. Efforts were made by the companies to market FMCG and consumer durables to rural
areas. The economic conditions of the country during that period were as such that the rural

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people were not in a position to buy these kinds of products. Secondly, Indian market was in a
closed shape and no new allowed companies (foreign) were allowed to operate in Indian market.
But, then the policy of liberalization and globalization was announced by the Indian government
which saw the lifting of so called license- raj curbs for Indian players and opening up the doors
for the foreign players in the Indian markets. Consequently, companies started flourishing in
India. The small villages/hamlets were widely scattered making reach difficult and expensive
consequently. Rural markets were seen an adjunct to urban market and conveniently ignored.
However, since 1990s, India‘s industrial sector had gained in strength and maturity. Its
contribution to GNP increased substantially. Meanwhile, due to the development programmes of
the central and state governments, service organizations and socially responsible business groups
like Mafatlal, Tatas, Birlas, Ambanis, Goenkas and others, the rural area witnessed an all round
socio-economic progress. The economic reforms further accelerated the process by introducing
competition in the markets. Steadily, the rural market has grown for household consumables and
durables.

Rural marketing represented the emergent distinct activity of attracting and serving rural markets
to fulfill the needs and wants of persons, households and occupations of rural people. As a result
of the above analysis, the definition of rural marketing changed ―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 area to create satisfaction and a standard of living for them and
thereby achieves the goals of the organization‖.

Period from 2000 - 2010

India, in the last decade, had witnessed a remarkable shift in its economic, social and
technological environment. Since 1991, India is going through a slow but consistent transition
phase. It had opted for liberalisation and globalization and reaffirmed its commitment to new
economic policies. As India being the founder member of World Trade Organization (W.T.O), it
got the advantage and it was very effectively especially since 1 st January, 1995(when W.T.O
came into existence). This had bought about a marked change in rural markets too, as these are
now flooded with a variety of foreign products. Firms operating in industries such as FMCG,

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telecommunication, insurance, financial services, consumer durable and automobiles started
employing innovative marketing practices for their survival as well as to increase their market
share in the first decade of new millennium. These companies have shifted their focus away from
the saturated metros and tier-I cities to the rural and semi urban towns, to increase their revenues
and market base. Rural consumer now no longer is ignorant and resigned to his fate. In the last
decade, rural buyer not only have a high purchasing power but also is better informed, price
conscious and demands more value for the money spent. They have started looking for better
quality, durability and utility of the products and services offered in the market. There have been
significant improvements in the rural sector in respect of agricultural production, spread of
education, electrification, banking facilities, transportation, communication, etc. All these
changes have led to the creation of general awareness for achieving a new and better style of
living. Thus, the future in rural marketing became very promising after 2000 for those marketers
who have understood the dynamics rural market and explored it.

Scenario 2010 onwards

In recent years, rural markets have acquired significance in countries like China and India, as the
overall growth of the economy has resulted into substantial increase in the purchasing power of
rural communities. Broadly rural marketing now incorporates not only the marketing of
agricultural products, but it also takes into consideration the rural industries products and
services provided to the rural people of several kinds. The trade channels for different types of
commodities available in rural areas private, cooperatives, processors, regulated markets and
state agencies. In no sense, a social cluster or village economy as at whole can be developed
without effective and efficient rural marketing.
There is large inflow of investment for rural development programs from government and other
sources. There is an increase in contact of rural people with their urban counterparts due to
development of transport and wide communication network in rural areas. The literary education
levels have increased among rural folks, an as a result there is an inclination to lead sophisticated
lives. Changes in land tenure system have also resulted in structural changes in the ownership
pattern and consequent changes in the buying behaviour of rural population. Thus a large

99
population, rising farm incomes and inspiring infrastructure has translated great opportunities
with a sizeable rural presence.
To this end, many corporate have taken initiatives to reach rural areas. Like Hariyali Kisaan
Bazaar , was set up by DCM Shriram Consolidated Ltd. to facilitate sale of agri-inputs such as
fertilizers, pesticides, farming equipment, seeds, animal feed, etc; ITC 's internet-enabled rural
interface to help sale of agri outputs, e-Choupal, is presently operational in 6 states and there are
more than 5200 kiosks; HUL's Project SHAKTHI - Through the state governments and NGOs
involved in microfinance, women entrepreneurs in villages are identified to act as local
distribution and sales point for HUL products; TRIVENI KUSHALI Bazaar, a rural agri-inputs
store run by Thriven Engineering Industries Ltd. in the sugarcane belt of U.P., is also used to sell
cement and FMCG products; Godrej Agrovet Ltd., is another company, which has initiated its
rural retail business through ―Godrej Aadhar‖. These outlets offer rural households, the basic
food, grocery, apparel, footwear, furniture, kitchen ware, and home appliances, value added
services and pharmacy and so on.
Not only this, various examples of products could be cited, which were at one time unaffordable
by the rural people, now had become integral part of their life. These are as –
Chik shampoo created the jasmine variant (in tune with the culture of women using jasmine
flowers to style their hair in a few parts of the country). TVS mopeds created functional value in
tune with the 'all purpose' vehicle culture existing in several parts of the non-metro areas. Philips
has moved forward with the creation of gas stoves and lanterns that are quite useful to such
markets. The Chik shampoo sachets sells for Rs. 1, the Parle G Tikki biscuit packs at Rs. 2 and
the Coca-Cola 200 ml glass bottle for Rs. 5. The needs are all the same, across rural and urban.
The solutions needed to be different.

3.10 PROFILE OF TYPICAL INDIAN RURAL CUSTOMER

Rural consumers are fundamentally different from their urban counterparts. The lower levels of
literacy and limited exposure to product and services are well-known, but there are also
differences in occupation options, with a direct impact on income levels and income flows, and a
high level of inter-dependency affecting the dynamics of rural community behavior. All
contribute to make rural consumer behavior starkly distinct from the urban.

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India is full of diverse and varied profile of customers, each being different in his buying habits
from another. Each of these diverse sections of rural India is embedded in its customs and
traditions, which in turn have a deep impact on the minds of the people. Every aspect of their
lives from birth, to education, to marriage, to livelihood is influenced by the deeply imbedded
traditions, especially in rural areas of India. Even the level of infrastructure provided in different
regions varies a lot. The diversity in terrain adds to the already varied lifestyle and livelihood of
people there. Therefore no marketer can follow a uniform marketing strategy throughout India.

Indian rural customer is marred largely by illiteracy and poverty. Illiteracy often leads to
minimal or negligible brand awareness. Poverty and dependency on monsoon result into a low
and unpredictable purchasing behavior. Moreover products sold are locally branded, generally
sold lose, giving tough competition to branded products. The rural customers are influenced by
local leaders like the panchayat members, caste and religious leaders etc. The rural consumer
also has a typical behavior of buying in small quantities, due to low income level.

Since rural population does not have the concept of storing goods and blocking too much capital
into it is important for rural marketers to provide products in small quantities as well as good
credit or EMI systems for larger products. It is also important to induce first time purchase and
trials so that customer is able to experience products he never has. Credit facility also needs to be
extended to the wholesalers. There is hardly any brand stickiness in rural consumption. Nirma is
simply referred to as the peela powder and surf as the neela powder. Because of illiteracy the
packaging of products plays an important role. It is also easy for spurious products to find a
foothold in rural markets. RC Cola packaged as Pepsi and Hello Chips a copy of Lays are widely
sold. Therefore it is important that companies give their products shorter names in the local
languages and educate the customer about the significance of their brands. Pictures and
endorsement by local stars will also help in increasing brand awareness. Over the past few years,
rural India has witnessed an increase in the buying power of consumers, accompanied by their
desire to upgrade their standard of living. Host of projects both from the government and the
private companies have changed the rules of the marketing game in rural India.

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Rural customers have upgraded their lifestyles and as a result are purchasing lifestyle products
like cosmetics, beverages, mobile phones, etc, which have become necessities for them.
According to a recent survey conducted by the National Council for Applied Economic Research
(NCAER), the purchasing power of the rural people has increased due to increase in productivity
and better price commanded by the agricultural products. Urbanization has become more of a life
style and is no longer bound to geographical areas.

Marketing and Research Team, (MART) an organization involved in rural marketing research,
has over the years built up a veritable trove of research on rural consumers and their
consumption patterns. Some of the findings were presented by the President, MART at the Rural
Marketing and Communication Conference organized by the Federation of Indian Chamber of
Commerce and Industry (FICCI) at Delhi held in 2003. The following are the findings of MART:

1. The rural consumer may not be very educated, but he is certainly astute, with a lot of common
sense and practical experience of handling the vagaries and uncertainties of life.

2. Though low on economic resources, he does not go in for only 'cheap‘ products but looks for
value for money. Perception of a premium product is not yet relevant in rural markets, with
consumers more concerned with functionality than unnecessary ‗frills‘ with a consumer durable.
Too many features with a product tend to confuse the rural consumer.
3. Rural consumers are generally mistrustful and wary of urbanities and turned off by their
patronizing attitudes. It is not easy for a rank outsider to get the rural consumer to spend money.

4. Brand adherence is high among village consumers. This may not necessarily be on account of
loyalties. Limited access to alternatives and lack of information about possible choices do make
them 'stick' to tried and tested brands.

5. Brand recognition is often on the basis of logos, symbols, colours rather than the exact brand
name. This tendency is partly responsible for the widespread menace of spurious products in
rural markets, as it is easy to deceive the rural consumer with look-alikes.

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6. A very high degree of involvement characterizes purchase of expensive products like
consumer durables. A lot of checking and counterchecking is done to seek reassurance on the
soundness of the buying decision.

7. Routine is important to a rural consumer's life as a lot of time consuming activities

characterize his everyday life. The routine is governed by nature and seasons, not by the calendar
or the clock. In buying processes, the consumer is not in a hurry and cannot be pushed into a
hasty purchase for products specially consumer durables.

8. Rural incomes show a great seasonality for the segment of large farmers. The segment of petty
farmers, farm labour, non farm workers and the salaried class show a greater regularity of
income patterns so the consumption cycles are also more regular and predictable.

9. On account of far higher degree of inter personal communication characterizing village life
and relatively low penetration of mass media, word of mouth is a very effective medium of
influence generation. Existing users, dealers, village influential, youth studying or working in
urban locations are all consulted before making purchases.

10. Among the households with TV ownership, TV viewing is the highest among women and
children who in contrast to the traditional, household head dominated decision scenario are fast
emerging as demand generators for the household goods. Decisions on durables like radio, TV
and two wheelers are still male dominated decisions, taken in consultation with other people in
the community.

3.11 STATE OF MAHARASHTRA

Maharashtra state occupies the western and central part of India and has a long coastline,
stretching nearly 720 kilometers along the Arabian Sea. Maharashtra is the second largest state in
India both in terms of population and geographical area (3.08 lakh sq. km.). The State has a
population of 11.24 crore (Census 2011) which is 9.3 per cent of the total population of India.
The State is highly urbanized with 45.2 percent people residing in urban areas and the rest 54.8
percent in rural parts.

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The State has 35 districts which are divided into six revenue division viz. Konkan, Pune, Nashik,
Aurangabad, Amravati and Nagpur for administrative purposes. The State has a long tradition of
having statutory bodies for planning at the district level. For local self-governance in rural areas,
there are 33 Zilla Parishads, 351 Panchayat Samitis and 27,906 Gram Panchayats. The urban
areas are governed through 26 Municipal Corporations, 219 Municipal Councils, 7 Nagar
Panchayats and 7 Cantonment Boards.

Table: 3.1 Number of districts, sub-districts, towns & villages in India and Maharashtra
Number of Districts, Sub-Districts, Towns
and Villages in Maharashtra
(As per 2011 Census)
No. of Towns
State Districts Sub Districts Village*
Statutory Towns Census Towns

Maharashtra 35 355 256 279 43663

India 640 5924 4041 3894 640867
* Includes un-inhabited village.
Source : Office of the Registrar General and Census Commissioner, India.

Mumbai, the capital of Maharashtra and the financial capital of India, houses the Head quarters
of most of the major corporate & financial institutions. India's main stock exchanges & capital
market and commodity exchanges are located in Mumbai.

The gross state domestic product (GSDP) at current prices for 2011-12 is estimated at 11, 99,548
crore and contributes about 14.4 per cent of the GDP. The GSDP has been growing at a rapid
pace over the last few years. Presently industrial and services sector both together contribute
about 87.1 per cent of the State‘s income. The agriculture & allied activities sector contributes
12.9 percent to the State‘s income. The State has 226.1 lakh hectares of land under cultivation
and area under forest is 52.1 lakh hectares.

Maharashtra is the most industrialized state and has maintained leading position in the industrial
sector in India. The State is pioneer in Small Scale industries. The State continues to attract
industrial investments from both, domestic as well as foreign institutions. It has become a
leading automobile production hub and a major IT growth centre. It boasts of the largest number
of special export promotion zones.

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 The State has given importance to primary education, which has resulted in consistent
improvement in literacy rate. The literacy rate of the State is 82.9 percent as against 74 percent at
national level, as per Census 2011. Progress on Human Development Index is often depicted as a
benchmark of a state‘s progress of key development indicators. As per India Human
Development Report, 2011 Human Development Index of India is 0.467 and State ranks 5th in
the country with Human Development Index of 0.572.

Table: 3.2 Table showing total workers & non-workers in Maharashtra and India
Total Workers Non Workers
State/ India
Person Male Female Person Male Female

Maharashtra

Total 49427878 32616875 16811003 62946455 25626181 37320274

Rural 30650871 17887071 12763800 30905203 13651963 17253240

Urban 18777007 14729804 4047203 32041252 11974218 20067034

India

Total 481743311 331865930 149877381 728826262 291255913 437570349

Rural 348597535 226763068 121834467 484865913 200869575 283996338

Urban 133145776 105102862 28042914 243960349 90386338 153574011

Source : Office of the Registrar General and Census Commissioner, India.

Table: 3.3 Table showing district-wise bifurcation of workers in Marathwada region

District-wise Total Workers in Maharashtra - Part I

(As per 2011 Census)

Total Population Total Workers Total Main Workers

District
Person Male Female Person Male Female Person Male Female

Nanded

Total 3361292 1730075 1631217 1493953 925232 568721 1317791 850493 467298

Rural 2447394 1258160 1189234 1200724 695134 505590 1062139 644223 417916

Urban 913898 471915 441983 293229 230098 63131 255652 206270 49382

Hingoli

Total 1177345 606294 571051 569182 330903 238279 514371 308332 206039

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Rural 998612 514430 484182 512590 285540 227050 463701 266999 196702

Urban 178733 91864 86869 56592 45363 11229 50670 41333 9337

Parbhani

Total 1836086 942870 893216 822797 501422 321375 756417 473246 283171

Rural 1266280 651886 614394 644137 361671 282466 598296 345944 252352

Urban 569806 290984 278822 178660 139751 38909 158121 127302 30819

Jalna

Total 1959046 1011473 947573 930886 545030 385856 844492 508298 336194

Rural 1581617 817279 764338 805304 447556 357748 735619 421019 314600

Urban 377429 194194 183235 125582 97474 28108 108873 87279 21594

Aurangabad

Total 3701282 1924469 1776813 1575079 1015864 559215 1446636 958515 488121

Rural 2081112 1081825 999287 1044684 593644 451040 962801 563255 399546

Urban 1620170 842644 777526 530395 422220 108175 483835 395260 88575

Beed

Total 2585049 1349106 1235943 1255548 727819 527729 1154708 684533 470175

Rural 2070751 1082978 987773 1086389 597389 489000 1004728 566122 438606

Urban 514298 266128 248170 169159 130430 38729 149980 118411 31569

Latur

Total 2454196 1273140 1181056 1046857 670018 376839 964177 633321 330856

Rural 1829216 949707 879509 857367 517448 339919 794557 494140 300417

Urban 624980 323433 301547 189490 152570 36920 169620 139181 30439

Osmanabad

Total 1657576 861535 796041 773916 473795 300121 701894 441657 260237

Rural 1376519 716237 660282 683388 404465 278923 623146 379763 243383

Urban 281057 145298 135759 90528 69330 21198 78748 61894 16854

Maharashtra

Total 112374333 58243056 54131277 49427878 32616875 16811003 43762890 29989314 13773576

Rural 61556074 31539034 30017040 30650871 17887071 12763800 26510066 16188697 10321369

Urban 50818259 26704022 24114237 18777007 14729804 4047203 17252824 13800617 3452207

Source : Office of the Registrar General and Census Commissioner, India.

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 Table: 3.4 Table showing year-wise employment status of people of Maharashtra
Employment – Status
Worker Population Non Working Population
Census Worker- Worker- Non Working- Non Working-
Year State Division Male Female Male Female
2011 Maharashtra Total 32616875 16811003 25626181 37320274
2011 Maharashtra Rural 17887071 12763800 13651963 17253240
2011 Maharashtra Urban 14729804 4047203 11974218 20067034
Source : Office of the Registrar General and Census Commissioner, India.

The State has well spread road network of 2.43 lakh kilometers. All weather roads and fair
weather roads connect more than 99 per cent villages. It has best surface transport facilities and
connectivity with sea ports and airports has resulted into good transport system. It has highest
installed capacity and generation of electricity in the country. All this has made this state the
most favored destination for investment.

3.12 SALIENT FEATURES OF MAHARASHTRA STATE

Area : 3.08 lakh sq. km.

Population (2011 Census)
- Rural : 5.57 crore (57.7 million)
- Urban : 4.11 crore (41 million)
- Total : 9.68 crore (96.8 million)
• Rural Households : 111 lakh (11.1 million)
• Rural Habitations : 98000
- Villages : 41095
- Gram Panchayats : 27920
Average population of village : 1357
- Up to 5000 : 39815
- More than 5000 : 1280
Rural Below Poverty Line population: 45 lakh families, 2.05 crore Villagers
(Source: - Maharashtra State Rural Livelihoods Mission Annual Action Plan 2012 – 13)

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Banking institutions are prime financial institutions in India. Other financial institutions like joint
stock companies, insurance companies, mutual funds, etc., are also playing significant role in
providing finances. Among scheduled commercial banks, nationalized banks (including State
Bank of India and its associates) are actively engaged in credit delivery in rural areas. Non
banking financial institutions are financial intermediaries that play an important role in
channelizing the scarce financial resources to capital formation. These institutions also
supplement the role of banking sector in meeting the increasing financial needs of the corporate
sector and delivering credit to unorganized sector.

Assets available to households of Maharashtra

The proportion of households in the State having TV was 56.8 per cent. The proportion of
households having computer/laptop with and without internet was 5.8 per cent and 7.5 per cent
respectively. Around 69.1 per cent households had telephone/mobile phone. In the State, the
proportion of households having two wheelers was 24.9 per cent, while the proportion of
households having four wheelers was 5.9 per cent. (Source: Economic Survey of Maharashtra
2012-13)

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Table: 3.5 Table showing house-holds of Maharashtra, having assets as per census of 2011

Source – Registrar General of India

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3.13 RURAL MARKETING – MAHARASHTRA SCENARIO

The state accounts for 23% of the gross value of Industrial output in the country. Maharashtra is
known for the development of sugar industry on co-operative lines in which the formers acquire
a share in the sugar mills, Pharmaceuticals, petrochemicals, heavy chemicals, electronics,
automobiles, engineering, food processing, and plastics are some of the major industries of the
state. Maharashtra is noted for the production of 3 wheels, jeeps, commercial vehicles and cars,
synthetic fibers, and cold rolled products and industrial alcohol. Small scale industries have also
come up in a big way in the state.

Although, it is a highly industrialized, state of India, agriculture continues to be the main

occupation of the people. Principal crops include rice, Jowar, Bajra, wheat, pulses, cotton,
sugarcane, several oil seeds including groundnut, sunflower and soybean, turmeric, onions and
other vegetables. The state has large areas, under fruit cultivation of which mangoes, bananas,
grapes, and oranges are the main ones.

Maharashtra alone, with a total population of 90 million, is one of the most populated states in
this country. Out of this 90 million, a whopping 55 million people reside in rural and semi rural
areas. A substantial number of the rural people of Maharashtra are living below the poverty line
and they have high level of unemployment and poor literacy level. These people are generally
unorganized. Under these circumstances, the sellers or the manufacturers, exploit the consumers.
Rural markets of Maharashtra are full of sub-standard goods and duplicity of branded goods is
another major problem in these rural areas. As there is no check on production and sale of such
products in the rural markets, many of these products have sometimes become health hazards.

Like any market that has seen a demand and awareness boom, rural India has also been
witnessing considerable rise in purchasing power. A change in consumption patterns and access
to communication media have made rural market a vital cog in the sales-growth wheel,
especially with demand for many categories of products and services plateau in the urban
markets. Understandably, this presents unique and limitless opportunities for brands trying to
make their presence felt in the semi rural and rural areas. Traditional media like print and TV

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reach out to only 45% and 40% of the entire population respectively. This means, that 46% of
the population can be considered as ‗media dark‘ or not being approached by any media.

A typical village in Maharashtra has clean identification of their places of requirement. The first
point of contact of rural consumer in the village shop from where he normally purchases daily
use items like tea, kerosene, cigarettes, provisions, rice, wheat, oil, etc. in most of the cases, they
maintain a credit account and very few cases of barter also. Next level in the hierarchy is
shandies, haats and jathras (melas). These markets functioning in a shandi is like a mini super
market. A wide range of goods and services are available in these places. They also provide an
opportunity to sell and purchase small quantities, local agricultural and poultry products like
vegetable grains, sheep or goat, cow or bullock, horse, chicken, etc. Jathras, on the other hand,
are markets held over a period of a week to one month. Normally, these are associated with some
important religious festivals. Haats or weekly markets also cater to the demand of rural
consumer. The weekly markets were important centres of trade in the past. The rural populace
used to purchase their day-to-day requirements of articles from the weekly markets. These
markets are generally distributing centres.

The articles sold in weekly bazaars are food-grains, pulses, oils, chillis, spices, gur,cloth, fruits,
vegetables, betel-leaves, dry fish, salt, earthen and metal pots, etc. Pedlars and hawkers set up
booths on the market-days. Even traders and shop-keepers from neighbouring villages go to
these markets and put up temporary stalls for consumer durable products like T.V sets, D.V.D
players, etc. Buyers are from neighbouring villages, within the distance of 6 to 8 kilometres.

The next market place in the hierarchy is the primary wholesale assembling markets which is
also sometimes called as secondary wholesale assembling markets or terminal markets. Normally
rural consumers will purchase the items like fertilizers, pesticides, seeds, etc and also consumer
durable items like T.V, refrigerator, fans, etc. These are the places where they sell their
commodities as soon as the harvest is over. Rural consumers in Maharashtra also make
occasional visits to cities or metros or head quarter for any legal related issues, if any.

The hierarchy of market places identified by rural consumers has an important implication to
marketers, with regard to distribution, management and arrangement. While rural consumers

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might purchase consumable items at the local village shop or shandies, they always prefer to
purchase consumer durable items from the towns or district headquarters, where agriculture
produce markets are located. The demand for consumer durable products is high during harvest
season and also during festivals. Some of the consumer durable products like almirah, T.V sets,
etc are also in great demand during the marriage season. The reason behind the high demand of
consumer durable product during the marriage season is that the villagers come together and
contribute together to purchase a consumer durable product for giving it as a gift during
marriage.

3.14 RURAL MARKETING STRATEGIES

The rural market in India is undergoing a silent revolution on the back of enhanced purchasing
power of rural consumers, the changing consumption patterns and increasing overall value of
consumption of goods and services. The sheer size of the rural market which has witnessed
tremendous growth in the recent years as large sections of rural population transformed into
discerning consumers has caught the imagination and incited business interest of the top
conglomerates in the country. Competition does not exist to that much extent in the rural areas as
it is in the urban market. Brands rarely compete amongst each other in the hinterlands. While the
rural markets certainly offer a big attraction to the marketers, it would be totally naïve to assume
that any firm can have easy access to these markets and can walk away with a sizable share of it.

A dramatic and considerable change is observed among the Indian villagers. This change is with
respect to the behavior and buying habits of the rural people. Villagers who used to crack open
peanut candies, eat the nut and throw away the shell are now demanding chocolate candies that
will melt in their mouths, not in their hands. Charcoal, Neem twigs and twigs of Babool tree to
cleaned teeth are replaced by toothpaste. Today, the ultra bright shine of Colgate or some other
international brand of toothpaste holds more appeal than the traditional methods of cleaning
teeth. Needless to say that consumerism and globalization is invading parts of India where time
seems to have ceased for centuries.

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While taking the buying decision, urban individual involves family, husband, wife, and children
whereas in rural areas it is the men who make the purchase decision primarily because of lack of
mobility amongst rural women and their awareness level about the market. Rural consumer is
also influenced by strong social interaction and community decision making is quite common.
Rural marketing cannot succeed if the strategies and action plan are merely extension to urban
marketing strategies and plans. In order to make the most of the untapped rural market in India,
companies need to understand the dynamics of rural consumer behaviour in order to design
strategies for rural consumers and to be successful (Kashyap Pradip, 2005).

The biggest challenge today in rural marketing is to develop a scalable model of influencing the
rural consumers‘ mind over a large period of time and keep it going. This needs to be achieved in
a limited or a reasonable budget. That‘s where the marketers who really understand rural markets
and advertising agencies can make a difference and develop a suitable communication model.

3.15 RURAL MARKETING MIX – 4 A’s

The rural market with its vast size and consumer base form an important part of the total Indian
market. The urban markets for large firms have become saturated enough to capture. Adding to
their woes, the market environment has become complex due to increased competition and it is
forcing marketers to go rural.

To minimize the urban and rural gap and reaching to the rural masses can be addressed by falling
back on the Bottom of the Pyramid marketing strategies as advocated by Prahlad (2004) and the
4 A‘s Availability, Affordability, Acceptability and Awareness (Anderson and Biliou, 2007,
Kashyap and Raut, 2005). The dimensions in rural marketing mix are availability, affordability,
acceptability and awareness as compared to the 4 P‘s of traditional marketing.
Marketing mix indicates an appropriate combination of 4 P‘s from the marketer‘s point of view.
Considering dynamics of rural market and the challenges in exploring the rural markets, a
practical approach would only be to use the model based on 4 A‘s.

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Table: 3.6 Traditional 4 P’s Vs 4 A’s of marketing

4 P’s (Traditional
4 A’s (Rural Marketing Mix)
Marketing Mix)
Place Availability
Price Affordability
Product Acceptability
Promotion Awareness

Availability

Availability is the first A is about making the product reach the consumers. This is to ensure
availability of the product or service. Rural people are more concerned with the utility of the
products rather than their appearance. This is why the firms have designed sturdy and utility
based products for the rural consumers. For example Philips free power radio, Nokia‘s mobile
phone with an in built torch, LG‘s Sampoorna television, Hero Honda motorcycles are still
popular in rural areas due to the aforesaid reasons.

It has been acknowledged by many that distribution systems are the most critical component and
a barrier which needs to be overcome for success in marketing in rural areas. The task of
distribution in these areas is considered to be more difficult than in urban areas, low density of
population and inaccessibility makes the problem of servicing villages individually difficult and
often uneconomical. Direct delivery of goods even to the top one percent of villages cost twice
as much as servicing urban markets .Villages are spread over hundreds of kilometres; where
majority of population dwells and finding and then segmenting them is not easy. However, given
the poor state of infrastructure in rural areas, it is an even greater challenge to regularly reach
products to the far‐flung villages. Marketers must trade off the distribution cost with incremental
market saturation. In the distribution the importance of small town markets cannot be ignored
and need to be given importance as besides being a point of distribution they can also be used for
promoting products as villagers tend to come to the town frequently for either purchase of
agricultural inputs or sale of their produce. Coca cola, which considers rural India as a future

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growth driver, has evolved a hub and spoke distribution model to reach the villages. LG
Electronics define all cities and towns other than the metro cities as rural and semi-urban
markets. To tap these unexplored markets, LG has set u 45 area offices and 59 rural area offices.

Affordability

The next challenge in rural marketing is to ensure affordability of the product or service. While
rural income level has gone up in recent years, the lower income group constitutes about 65% of
th rural population. The major source of income for the people of rural regions is still by and
large, agriculture and agriculture related activities. The cost component needs to be tailored
according to the needs of rural masses. The availability of disposable income in rural areas is
cyclical relate to agricultural cycles. Some companies have addressed the affordability problem
by introducing small unit packs. Most of the shampoos are available in smaller packs. It has been
shown through the success of single use small packs that the cost per-use is more important than
the cost of the overall product or service. Fair and lovely was launched in a smaller pack.
Colgate toothpaste launched its smaller packs to cater to the travelling segment and the rural
consumers. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50‐gm
packs, priced at Rs 4‐5 meant specifically for rural areas. Hindustan Lever, among the first
MNC‘s to realize the potential of India's rural market, has launched a variant of its largest selling
soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market.
Coca‐Cola has addressed the affordability issue by introducing the returnable 200‐ml glass bottle
priced at Rs 5. The initiative has paid off:

Eighty per cent of new drinkers now come from the rural markets. Coca‐Cola has also introduced
Sunfill, a powdered soft‐drink concentrate.

Acceptability

The third challenge is to gain acceptability for the product or service. Therefore, there is a need
to offer products that suit the rural market. Acceptability includes issues needed to be addressed
to improve the willingness to consume, distribute or sell a product. It also includes how the
product or service could be made more acceptable to the rural consumers by incorporating
features which would make it attractive to them. The rural population where illiteracy is very

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high needs to be taken into consideration before coming out with the product and the feature
which would be included in the product need to be rethought; the needs of rural consumer need
to be taken into consideration. One company which has reaped rich dividends by doing so is LG
Electronics. In 1998, it developed a customized TV for the rural market and christened it
Sampoorna. It was a runway hit selling 100,000 sets in the very first year. Because of the lack of
electricity and refrigerators in the rural areas, Coca‐Cola provides low‐cost ice boxes — a tin box
for new outlets and thermocol box for seasonal outlets. The insurance companies that have
tailor‐made products for the rural market have performed well.

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

Awareness

Brand awareness is another challenge. Fortunately, however, the rural consumer has the same
likes as the urban consumer — movies and music — and for both the urban and rural consumer,
the family is the key unit of identity. However, the rural consumer expressions differ from his
urban counterpart. Awareness is also linked to the issues of promotion in rural areas. The
promotion of the services also needs to be adapted to the village environment; the language and
means of communication used should be in the local language. The best places to promote the
services could be the local haats and melas which is frequented by the villagers, the local
festivals should also be included in the promotional plan, so should be the agricultural cycles.
Outing for the villagers is confined to local fairs and TV viewing was confined to the
state‐owned Doordarshan, in most of Indian rural regions. Consumption of branded products is
treated as a special treat or indulgence.

Hindustan Lever relies heavily on its own company‐organized media. These are promotional
events organized by stockiest. Godrej Consumer Products, which is trying to push its soap brands
into the interior areas, uses radio to reach the local people in their language. Coca‐Cola uses a
combination of TV, cinema and radio to reach 53.6 per cent of rural households. It has used
banners, posters and tapped all the local forms of entertainment. LG Electronics uses vans and

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road shows to reach rural customers. The company uses local language advertising. Philips India
uses wall writing and radio advertising to drive its growth in rural areas.
The key dilemma for MNC‘s ready to tap the large and fast‐growing rural market is whether they
can do so without hurting the company's profit margins.

3.16 STRATEGIES FOR RURAL MARKETING

1) Product strategy

In India, rural market is relatively special, which has the different consumer community, located
in the different physiographic region and the different consumer community, has the difference
consumer demand. Therefore, when a company launches product for the rural market, they
should pay great attention to meet the rural consumer's need, emphasizing difference research.
The company needs to take meet farmer's expense demand as the guidance, then adjusts product
structure, increasingly improves product quality, ameliorates product function and develops
practicable, solid which are suitable for the rural market. At the same time, product packing and
brand also should conform to farmer's consume psychology and the consumer custom. The most
important aspect that the company must focus is on the enhancement of product's basic function
and the reduction of unpractical accessional function, which can not only reduce the product cost
and price, but also can help the dissemination of company‘s brand effect.

Positioning: Product positioning plays a crucial role in marketing of rural products. Marketer
has to position their products after understanding the unique characteristics of the rural market
environment.
Positioning involves three tasks-
— Identifying the unique features of the company‘s offer with respect to the competitor‘s offers.
— Selecting the differences that have greater competitive advantage.
— Communicating such advantages effectively to the target audience.

Companies can reposition their existing products in rural markets. For example, refrigerator
manufacturing companies can launch a refrigerator of bigger size because most of the families in
rural areas are joint, big families and they require big refrigerators having bigger storage

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capacity. Secondly in India most of the villages are facing acute shortage of water; here
companies can reposition their washing machine, which require less water than any ordinary
washing machine.

Segmentation And Targeting - Right segmentation and targeting principles are key to achieve
faster success in rural market. Most firms assume that rural markets are homogeneous. It is
unwise on the part of these firms to assume that the rural market can be served with the same
product, price and promotion combination. Segmentation can be done based on one or more
variables like demographic, geographic, psychographic and behavioral aspects.

a) Geographic: As the rural market is spread over a large area, companies can divide the market
area into small sectors having some geographic similarity to consolidate their distribution
network.

b) Demographic: The market can be divided on the basis of demographic variables like income,
education, lifestyle, gender, marital status, family size, occupation and religion. Due to unequal
distribution of income, the Indian market for detergents is structurally shown like a pyramid.

c) Psychographic: Market is divided into different segments based on psychographic factors like
social class, life style and personality. E.g. in some parts of Gujarat, it is reported that farmers are
going in for big, 50 hp (horse power) tractors, when there need was for much smaller, typically
25 hp to 30 hp ones. The reason, when asked was the compulsion to ―keep up with the neighbors
and to replicate their lifestyle‖.

d) Behavioral: The following factors play important role to segment the market; occasions,
benefit sought, user status, usage rate, loyalty status, place and product possession category.

Branding: The brand is the surest means of conveying quality to rural consumers. Day by day,
though national brands are getting popular, local brands are also playing a significant role in
rural areas. This may be due to illiteracy, ignorance and low purchasing power of rural
consumers. It has been observed that there is greater dissatisfaction among the rural consumers

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with regard to selling of low quality duplicate brands, particularly soaps, creams, clothes, etc.
whose prices are often half of those of national brands, but sold at prices on par or slightly less
than the prices of national brands. Therefore, national and international brands should focus
more on satisfying the needs of the rural consumer by providing the same branded products,
which these rural folks lure for.

Packaging: As far as packaging is concerned, as a general rule, smaller packages are more
popular in the rural areas. At present, all essential products are not available in villages in smaller
packaging. The lower income group consumers are not able to purchase large and medium size
packaged goods. It is also found that the labeling on the package is not in the local language.
This is a major constraint to rural consumers understanding the product characteristics. Hence,
companies should take into consideration proper packaging and the size of the packs before
diffusing their products in rural areas. Many FMCG companies, selling products ranging from
biscuits to shampoos, have introduced smaller pack sizes to increase category penetration. For
example, the products like shampoos, soaps, hair-oil, toothpaste, spices, pickles, jams, ketchups,
tea, coffee sachets, confectionery products, medicated products like Vicks, pain-relieving
ointments, etc. are now being offered in sachets in rural markets. The rural market experts may
also practice value engineering, lowering the input costs by using alternative materials for raw
materials or as packaging alternatives. It is generally believed that markets are created, not
found. This is especially true in case of the rural market, where the demand is created by
promoting urban specific products to rural consumers.

Customized products: Rural consumers typically define value in terms of the functional focus
of a product or service—its durability, affordability, and fit for multiple uses. Rural lifestyles and
behavioral trends are increasingly coming to resemble urban patterns, in both form and variety.
Growing aspirations are as much a factor in rural markets as price sensitivity and an acute sense
of value for money. Success in those markets calls for knowing how to balance those factors.
Creation and development of markets in the hinterland involves building consumer
understanding, product customization, relevant pricing, value engineering, and innovative modes
of advertising and promotion—all designed to increase consumption and open up new markets.
A close observation of rural household items indicates the importance of redesigning or

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modifying the products. The manufacturing and marketing men can think in terms of new
product designs specially meant for rural areas keeping their lifestyles in view. People in rural
areas are more interested in bright flashy colors such as red, blue, green etc., and feel that
products with such colors are sturdy. The product meant for rural areas should be sturdy enough
to stand rough handling and storage. The following strategies could be in line with product
customization strategy –

i) Straight extension strategy

In straight extension strategy, the same product could be marketed to the rural customers with
minimum or least modifications; i.e. the contents remain the same but say, the packs may differ.
E.g. the products like FMCG could be marketed in small packs or sachets like hair oil,
toothpaste, washing powder, shampoo, etc.

ii) Product adoption strategy

The product adoption strategy states that the products are modified to suit the specific need of the
corresponding segment. E.g. a torch provided in the mobile phone marketed among rural
customers, promoting detergent powder in urban markets whereas promoting detergent cakes in
rural markets.

iii) Backward invention strategy

This strategy involves selling less complex and simple products. E.g. electric sewing machines
are introduced in urban markets and manually operating machines in rural markets.

iv) Forward invention strategy

This strategy includes developing entirely new products for the rural customers. E.g. Introducing
a tractor as a product for rural customers.

Creating new product categories

Businesses may need to develop new products tailored to the unique needs and circumstances of
rural consumers. For example: BP Energy India saw an opportunity to offer a cleaner fuel
alternative for the traditional charcoal- and wood-fired stoves used in the countryside—a move

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that the company believed could convert 3.6 billion potential consumers to more environment-
friendly energy solutions. The company bought patented technology from the Indian Institute
of Science (IISc) that used fuel pellets made from agri-waste to run smokeless stoves; it had
successfully sold the pellets to nearly 200,000 households by early 2008.

2) Price strategy

Pricing strategies are very much linked to product strategies. With low disposable incomes,
products need to be affordable to the rural consumer, most of which are on daily wages. Some
companies have addressed the affordability problem by introducing small unit packs. Some of
these pricing strategies are mentioned below –

Income variability:
India‘s wide income distribution implies that there exist multiple segments with very different
levels of purchasing power. The challenge for consumer goods companies is to develop more
rural specific products that are able to capture bigger share of the rural markets.

Focusing on volume not margins:

The companies must concentrate on the lower segment which is quite sizeable in number. A
significant portion of the rural population is paid daily wages. Daily wage earners tend to have
little stock of money, and, therefore, tend to make purchases only to meet their daily needs.
Therefore, the marketing strategies in rural India must be to concentrate on large volumes over
low margins and thus the overall profitability can be maintained.

Lower prices:
Many companies tend to bring their existing products at a much higher price and follow
marketing strategies that are not in sync with what is required to sell to the consumer in rural
areas. Hence, they end up serving the high-end niche players. In reality, consumers in the rural
areas are highly price conscious. They tend to purchase only those products, which are
inexpensive in nature, may it be local brands. This gives the local or regional companies an edge

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over the MNCs in the rural areas. Moreover, companies have adopted an unwritten policy to
dump second grade quality products to sell them at lower prices in the rural market.

Credit facility:
This holds true for marketing of consumer durable and automobiles. As the purchasing power of
the rural customer is quite low, they tend to purchase high ended products on credit. The
companies should make use of this opportunity to sell products. They have started collaborating
with banks and other financial institutions to sell their expensive products on credit. Even, some
of the least expensive products could be sold on daily credit basis such as mixers, iron, DVD
players, DTH players, etc. For selling these products on daily installment basis, even the rural
dealers could be encouraged by the companies apart from banks so as to avoid cumbersome
paper work. But a point of caution exists here. The rural credit facility may become useless if the
connectivity (both infrastructure and communication) is not developed because the person will
not be able to utilize finance and repay back. Hence all the exercise of providing finance will
become futile.

3) Distribution Strategy

Studies reveal that the bigger villages of above 5000 population are fairly covered by the
marketing people of various companies manufacturing consumable and durable products. The
smaller villages are not fully touched due to various reasons like accessibility, small markets and
far distances from towns and villages. Strategies for distribution to various rural segments are
discussed as under:

Small Villages:
In order to reach smaller villages, two types of strategies have to be adopted i.e., reach all
villages above 2000 population and reach all those within 50 km radius of big towns and cities.
This will help cover about 50% of the rural population and even this extent of coverage means
approximately 350 million populations and this is a massive coverage. Very small villages below
500 populations can be ignored at this stage as the output will not compensate the input. There
should be distribution vans to cover villages on fixed period (at least once a week) so that the

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shopkeepers us well as the public are sure of supplies from the feeder centre, which will be
nearby a town or city. The village shop keeper of 2000 population in towns should be used as a
distribution channel for shop keepers of very small villages around it. This is essential as some of
the smaller villages are not having motorable roads.

Agro Input Dealers:

Agricultural input dealers have know how and scope to deal with rural public as they are
already in touch with them for essential inputs like fertilizers, seeds and chemicals. In their
transactions, they are managing credit arrangements and hence are in a better position to take
care of consumer goods also. This method needs to be tried seriously. Some of the farmers from
agriculturally well off states like Punjab, Haryana, Western UP have improved their per capita
income to the level of urban people and can afford to buy more and more consumer goods. With
affluence, their awareness of modern goods and facilities also has increased. In addition to this,
the areas where cooperatives of sugar and dairy are stronger, the farmers have better income
level and cash flow is steady. It is in such places that the efforts to sell consumer goods give
results. These farmers will set a trend for other farm communities.

Activating Co-operative Societies :

Though cooperatives have been started mainly for input and output of rural produce, there is
scope and possibility to use these premises and offices for marketing of consumer goods to rural
people throughout India, there are more than three lakh cooperative offices working under
different names like ‗marketing cooperatives‘, ‗credit cooperative society‘, ‗farmers‘ service
cooperative societies and various local level cooperatives. There are organizations, some active
and some not so active. The premises and manpower can be better utilized by introducing the
consumer, durables and consumables required by the rural population. The approach has an
institution backing the marketing executives can feel safe 10 keep goods and give credit on
institution and hence basis than on the individual basis. The premises of cooperatives is also a
good place to keep hoardings and display of items kept for sale.

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Utilizing P.D.S Stores and Petrol Pumps:
These are two unexplored areas to develop market. Public Distribution Systems (PDS) are
available throughout the country and even in villages. Similarly petrol pumps are available on all
highways, state highways and link roads to towns and big villages. These are two places which
are not fully utilized. In cities, the petrol pumps are very busy and cannot do anything other than
giving petrol and diesel to hundreds of vehicles coming to them day and night. In urban and rural
areas and less busy roads the petrol pumps have adequate spare time to attend additional
functions. Similarly PDS stores which are in private hands have ample time three weeks in a
month. PDS stores have now-a-days become least active due to decreasing importance of this
scheme and very little gap between market price and PDS prices. This naturally gives scope to
make better utilization of these outlets.

Towns as Feeder Centers:

Towns are frequently visited by rural people for education, cinema, dramas, purchases, medical
treatment and various functions. It will be convenient if the town market is used as a distribution
channel for various villages surrounding towns. One or two traders in town need to be used as
feeders to village stores and also to sell directly to villagers coming to towns. This method is
already working in many places and can be further strengthened. The distribution strategy can be
changed based on the changing life style, communication and conveyance facilities. The
strategies discussed thus far are the possibilities for the current situation.

4) Promotion Strategy
Various types of promotion methods work as integrative systems between producers and
consumers. In case of consumer goods, this is done on large scale whereas for rural products, it is
on small scale or specific target wise done. The producers and processors think in terms of ―How
to reach our customers‖ and ―How our customer can reach us‖. Due to technological innovations
people can now communicate through both traditional and newer methods of media. Both mass
communication and / or target communications can be used as per requirements. Very commonly
used media of communication are newspapers; magazines, radio, TV, telephone, computers, fax,
pagers and mobile phones. These usage proportions differ from product to product.

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For five marketing related functions like (1) Advertising (2) Sales promotion (3) Public
Relations (4) Personal selling and (5) Direct marketing, there is a different way of approach
in urban and rural markets.

The product package, shape, color, pricing and sales persons get up and general impression are
no more monopoly of consumer goods, dealers. Now even for rural related commodities like
dairy products, flour, pickles, high quality grains and fruits and foods are neatly packed, branded,
weight, contents, price are written. Slowly and steadily, the marketing of rural produce in towns
and cities and marketing of consumer goods in rural sectors is taking a professionalized
approach. The basic difference is in organizational strength, permanent address and executive to
attend any type of call for consumer goods. Such facility is a far cry for rural products. Since the
literary level of rural population is low, it pays to do promotions through mass media like TV,
cinema and radio advertisements. In print media, mostly hoardings and wall paintings will help
more. These promotional strategies are covered as under:

Cinema:
For the last 60 years, cinema continues to be influencing factors in style, tastes, dress materials
and total Indian culture. The effect of cinema is much more in Southern India than elsewhere. In
the South, 76 % rural people view cinema regularly whereas elsewhere it is around 25 %. This
justifies why Tamil Nadu and Andhra Pradesh had cinema actors as Chief Ministers for a long
time. Despite TV being parallel popular, the hold of cinema on rural sector and urban middle
class and labour class continues. Product advertisements before a movie and during intervals get
good publicity. All the theaters do this with the help of slides and 1 or 2 minutes movie type
advertisements to highlight the product performance and utility. This method will continue to be
popular as many villagers like to see movies in theatres than on TV.

Television :
Since the last two decades, TV viewing has been a regular pastimefor all Indian public. The
TV serials like ‗Mahabharat‘, ‗Ramayan‘, ‗Humlog‘ and cricket matches have made TV very
popular. Infact, Doordarshan covers 85 % of India and private channels have started operating at
continental, national and regional levels. The advertisers have choice of segment to be touched.

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For all India coverage, important and popular serial intervals are best to advertise on TV.
Further, DD has special programmes on specific days and time for farmers. Advertising before
and in between this programme also gets good effect. The only constraint is that such prime time
advertisements cost more. Only products which can absorb such high costs can afford this.

Radio
Listening to Radio for a longtime has been for news, commentary (sports) and category songs. It
has been a recent trend since two-three various last decades to use radio programmes for
advertisements. The first and most famous commercial on Radio was ‗Binaca Geethmala‘ on
Radio Ceylon. Subsequently, many programmes have come on ―Vividha Bharati‘ and local
languages. Film songs are popular and playing advertisements in between to attract attention by
the listeners. Coverage of radio stations is wide and serves the purpose. Rural people have the
habit of carrying transistor radio sets and hence they play the radio wherever they go. About 75
% of the rural population listens occasionally. Both local language stations and ‗Vividh Bharti‘
stations are popular and hence advertising through these channels serves the purpose.

Print Media
Due to low literacy rate and poor reading habits, this is not a popular promotion strategy.
However, some advertisements are made through the local language low priced dailies. Rural
people normally read newspapers on Fridays and Sundays when there is more coverage about the
movies being shown and the forth coming movies. So the promotion of cinema viewing is best
done by the newspapers as far as rural people are concerned.

Hoardings
Hoardings on village entry junctions, writing and painting on walls of public buildings in
villages, compound walls of private people will be more appealing and readable. The rural inputs
like fertilizers and pesticides are advertised like this. The picture of product and catchy slogans
are considered to be the best promoters.

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Village Congregations/ Gatherings
Certain places have specific market days which can be used for mass communication to speed
awareness of products. Similarly particular places have local deities and Jathra or fairs along the
festival type celebrations. These occasions help to promote sales, explanation or product
awareness. If some promotional schemes are kept in those occasions, it will be a more appealing
effort. On these occasions, audio visual shows can be made for better explanations.

The implication is that pack size and price points are critical to sales, and importantly, that rural
consumers view the purchase-tradeoff dilemma across a much wider range of product categories.
As a result, the nature of competition is much greater; a beverage manufacture is not only
competing with other manufacture in its category, but also with other products that consumers
may consider one-off luxury purchases such as shampoo.

Hindustan Lever, a subsidiary of Unilever coined the term sachet. In tiny pillow-like plastic
packets that contain about 20 millimeters of product, Unilever sells shaving gel, dishwashing
liquid and toothpaste, to name just a few items. The sachets answer the needs of rural consumers
who cannot, or are not used to, buying larger sizes and enables them to buy on a more frequent
basis. This strategy provides a viable entry-level price for many rural consumers who want to try
new products, and allows companies to drive volume sales. Today, Hindustan Lever‘s estimates-
its shampoo sachets are sold in around 400,000 of India‘s 600,000 villages.

The success of Nirma is an example. In the late 1980s, Nirma started offering detergent products
and later toilet soaps for poor consumers mostly in the rural areas. Today, the brand Nirma has
become so popular among the tire 4 segments that it has captured a market share of nearly 35%
by value in the detergent segment and 20% market share in the toilet soap segment. In cassettes,
the T-series brand was extremely successful with its low pricing and at the same time providing
value with its more songs per cassette

Ratan Tata, Chairman of Tata Group, had announced that Tata was planning to manufacture a
car made from different low cost components like cycle parts, which would be priced at
Rs.1,00,000. At such a price, it might be able to expand the car market by attracting new

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customers with lower disposable income and also by luring away some of the existent two
wheeler users. Creating buying power: For any product to sell, consumers need to have
disposable income. The consumers in tier 4 segment have desire to buy products, but they do not
have the purchasing capacity, as majority of the products are priced higher. To meet their desires,
companies need to take steps so that these customers could have access to credit and have higher
earning capacity. Many companies, however, might argue that it is not their responsibility to
increase the earning capacity of the consumers to get access to credit. A few companies,
however, proved it wrong. Way back in 1920s, Henry ford increased the wages of his employees
to increase the sales of his Ford cars and he was successful.

Hindustan Lever Ltd. (HLL) the Indian subsidiary of unilever has started a programme targeting
villages with a population of less than 2000. Under the program, the company provides self
employment opportunities to villagers through Self-Help groups (SHGs). SHGs operate like
direct to home distributors wherein groups of 15-20 villagers who are below the poverty line (Rs.
750) are provided with an opportunity to take micro-credit from banks. With the help of this
money, villagers are able to buy HLL‘s products and sell them to other villagers, thereby
generating employment and income for themselves and also increasing the reach of HLL‘s
products.

Generally, the poor have difficulty in getting access to commercial credit, as the traditional
banking system does not normally lend money without collateral security. However, some
institutions, like the Grameen Bank in Bangladesh, are helping the poor to access money through
innovative solutions such as micro lending. In the Grameen Bank model, one group of rural
women took out a loan for as little as $ 25 to start a business. Only when she repaid could the
next woman in the group borrow.

The success of Grameen Bank(initiated by Nobel laureate Mohd. Yunus) has helped to spread
the idea of micro-lending throughout the world. In Bangladesh alone, there are now around 10
million people who have taken the help of micro-finance to start business. It is now planning to
replicate the success in rural India. The above banking model can fit well in the already existing
cooperative banking models with some changes, to initiate the concept of micro lending.

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Not only this, the success of Grameen Bank had also led to its offshoot, Grameen Phone, a
provider of village phone service. As mentioned in the article serving the World‘s Poor,
Profitably by Prahalad C. K. and Hammond Allen, under the Grameen Phone, a single
entrepreneur in a village borrows money from Grameen Bank to buy a mobile phone (GSM
standard), which is being used by the entire village generating an average monthly revenue of
around $90 for the entrepreneur.

3.17. INNOVATIVE MARKETING STRATEGIC DECISION

Product
Product plays an important role in strategic marketing decisions. Product innovation is in fact
key to success in rural market, developing indigenous products that cater to the needs of rural
consumers who demand quality products at an affordable cost. This requires substantial R & D
and marketing research to better understand consumer behaviour and preference. The case of
marketing of shampoo in rural areas. Hair products were introduced to rural India in an attempt
to capitalize on a culture where women take hair grooming extremely seriously. While rural
women may wear faded saris and little jewelry, few step out without ensuring that their hair is in
place. Consumer goods companies introduced a transplanted product from developed markets,
the 2-in-1 shampoo/conditioner. Companies thought that women would be attracted to this
product because it was cost-effective; however, initial sales were dismal. What companies failed
to recognize is that most rural consumers had previously never used shampoo and did not value
or understand the full benefits of conditioner.

Several years back, Hindustan Lever focused on product development strategies for rural
consumers who still did not use shampoo in India. Their research indicated that a prevailing
consumer habit in rural India was to use soap for hair and body care. Rather than try to change
instilled consumer behaviour, product developer focused on creating an opportunity consumers
wanted; a product that was convenient and low-cost. The result was a new 2-in-1 soap, a product
that cleans the hair and body, and is targeted towards consumers in rural areas.

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Offering a variety of pack sizes at different prices has been one solution. However, unlike
developed markets, consumer goods companies have to be particularly careful in developing
their pricing strategy in developing countries such as India. While daily sachets of products are
affordable to the rural consumer, if quantity discounts (common in developed markets) are large
enough, street entrepreneurs will purchase the ‗family pack‘ and retail it in loose form. The result
is a lack of control over the quality of the product, brand presentation, and pricing.

Most of global products that multinational companies manufacture are primarily for the tier one
consumers of the global markets. Those global products are then also sold to the tier 4
consumers, with least thought given whether those products are suitable for the tire 4 consumers.
Inevitably, most of such global products fail to fulfill the needs of tier 4 consumers. ―Other than
medication, most branded items marketed on a global basis can best be described as luxuries.
They ease or provide additional comforts and conveniences, or establish a person as belonging to
a specific milieu‖. To be successful, companies need to nurture local markets and provide local
solutions depending on the culture and consumer habits of a particular market.

For example, FMCG companies to sell more in the rural India, they have to be innovative in the
delivery format. In India, the tier 4 consumers, because of higher price, earlier did not often
purchase the shampoos sold by MNCs. Buying in small quantities is also practiced by the
laborers in the urban areas of India who are being paid on a weekly or daily basis. Many of them
stay in single rooms or huts with little space. Lack of cash and space makes these people to shop
every day in small quantities and hence single served sachets have become popular.

Once the multinational companies started selling shampoos in single served sachets priced at 50
paise/Re. 1, the sales of shampoos have increased to the extent that 30% of the personal care
products are now sold in single-served packages. Sachets are no longer restricted to shampoos
only; they have penetrated to other products such as edible oil, tea, jam etc. also. The sachets
give these buyers an option of choosing different brands without locking too much cash.

Lack of formal sales and distribution network: Developing the distribution network in the
rural market is not an easy task, due to low per capita income compounded by the need to

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maintain low operating costs. In a rural market formal sales and distribution networks are largely
non-existent and difficult to obtain without substantial capital or local guidance unlike developed
market where large retail distribution chains are commonplace. This poses a tremendous
challenge to consumer goods companies, which have traditionally used large retailers as their
primary channel of distribution. Retail chains have not flourished in rural areas of India because
economies of scale do not exist. Rural consumers live in small homes with little storage space,
lack refrigeration and do not own vehicles. As a result, daily purchases at the neighborhood store
are frequently preferred by consumers and may be the only avenue to buy goods in smaller rural
towns.

To compete successfully with incumbents, new consumer goods companies are forced to build
an extensive distribution network to reach India‘s rural population. This distribution network
relies first, on gaining shelf space in the small independently owned stores that drive the majority
of retail sales and then on establishing a relationship with wholesalers and distributors to further
expand the distribution network. Notwithstanding the direct sales force and working capital
costs, some companies have succeeded in building a distribution network, and in doing so,
created a substantial barrier to entry. Hindustan Lever boasts a network that reaches 800,000
stores directly and relies on wholesalers and distributors to reach another 3.5 million.

Other foreign companies have overcome the sales and distribution obstacles by entering into
joint ventures with local partners. This was an important motivation behind Procter & Gamble‘s
decision to collaborate with the Godrej group in the early 1990s. Procter & Gamble was able to
immediately tap a well established sales and distribution network rather than spending time and
money to go it alone.

Retailer Power: While independent retailers are a fragmented group, they have a substantial
amount of power in driving consumer purchases, particularly in rural areas. Most rural stores are
cramped, providing little opportunity for consumers to browse. The consumer interacts directly
with the retail salesperson (usually the owner) and services often include informal lines of credit
and home delivery in addition to personal opinions on goods. In rural areas, retailers tend to
carry only a single brand in a product category. In such a retailing environment, being first on the

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shelf and developing a privileged relationship with the retailer is extremely important and a
competitive advantage to consumer goods companies.

Relatively low cost of labour: The low cost of labour in rural areas has implications on the
consumer goods industry. Unlike developed markets where it has been cost-efficient to replace
human labour with machines, labour intensive manufacturing and distribution remains
economical in rural areas. A soft drink vending machine, which is used extensively in urban
market, may not be much effective in rural area as the cost of supplying and maintaining an
ending machine probably outweigh the cost of employing the salespeople. Secondly it also
generates the much needed employment for rural population and results into increase in
purchasing power of the community as a whole. The low cost of labour also explains the
difficulty large chain retailers have had in implementing their developed market strategy of
replacing human labour with capital in India. Scale economies are difficult to achieve with the
higher capital cost and often result in higher priced goods than the local owner-operated shops.
For consumer goods companies, independently owned stores in towns and villages will be the
primary form of distribution, at least for the near future.

Improving access: Many consumers in Tier 4 are in locations that make distribution extremely
difficult. To make sure that the consumers in the tire 4 segment have access to the products, the
distribution system followed by the companies should be different from that of their existing
systems. Lack of tar roads in India makes the distribution costs high and reach low. HLL has
realized that, for improving access of its products in rural areas, the traditional distribution
channels would increase costs, which would ultimately increase the price of the products. The
company has experimented with innovative methods to reach the rural consumer.
Under its ―indirect coverage (IDC)‖ method, company vans replaced vans belonging to
redistribution stockiest, which serviced a select group of neighbouring market. HLL also uses the
services of ‗Mobile traders‘. These mobile traders travel either on foot or on cycles, thus more
effective on cost and high on reach than the conventional wholesale distribution channel.
Besides, these traders target smaller villages, those with a population of less than 2000, which
conventional distribution channel often cannot reach. There is also the crucial issue of buying
behaviour.

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Most rural women are reluctant to visit retail outlets on their own. Instead, the village women
rely on the mobile traders for purchasing their needs. Another company, Perfetti India, uses
‗candy boys‘ to service small retailers in rural India.

The success of Legend computers in China is also attributed to its efficient distribution system.
Legend sells its low-priced PCs to smaller cities and towns where the US and European PC
companies, have not yet been able to penetrate. Legend computers, which was once only a
wholesale distributor of the US and European PC companies, has now become the number one
PC manufacturer in China with a market share of 30% in 2002 and is also one of the world‘s
fastest growing computer technology company. ―A company can either wait for income to grow
on a much broader basis, or get in there now, like Hyundai, and start seeding the market‖, says
Michael Fernandes, a principal at McKinsey and Co. in Mumbai who focuses on the consumer
sector. Companies are applying the lessons they are learning in India to other emerging markets
such as China. The Indian unit of south Korea‘s Hyundai Motor Co., for example, plans to
replicate the rural road show strategy it honed in India in China and other emerging markets,
says Lee Bong Guo, executive director for marketing and sales of Hyundai Motor India. Hyundai
has grabbed a 20% share of the booming Indian auto market since it came here in 1997, largely
through its low-priced Santro compact car, which sells for as little as $ 7,000.

Promotion
According to one source, only ten percent of Indian villages are connected by Cable and satellite
(C & S)- the rest watch only Doordarshan. Also, in India, the retailers are highly fragmented,
highly dispersed. Companies have to think for innovative ways of reaching the rural consumer
(haats, melas etc.), because media as we perceive it is not covering as much as 43% of rural
India.

When it comes to the rural market, two out of five Indians are unreached by any media- TV,
Press, Radio and Cinema put together. So haats, mandis and melas are opportunities. Innovative
advertising programs: Consumer goods companies cannot rely on conventional advertising
techniques; particularly in India‘s rural areas where only one in every three households owns a

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television set and more than half of all villagers are illiterate. Instead, companies need to turn to
more innovative methods of advertising to reach their potential customer base.

In this kind of a scenario some companies are using consumer video vans, which carry
infomercials to rural villages. A marketer invites people to the van to view the infomercial,
which incorporates the new product into an aspect of daily life. These potential customers are
subsequently given a demonstration of the product, for example, toothpaste and toothbrush, and
then provided free samples. The van returns the following month to reinforce the sales pitch and
to make sales.

Another strategy consumer goods companies have used to reach the rural mass-market is to
market at large festivals. Few years ago, many companies congregated at the Ganges River for
the Kumbh Mela festival where approximately 30 million people were expected to attend over
the span of a month. Companies provided ―touch and fell‖ demonstrations and free sample for
consumers, the majority of which were from rural areas. Colgate-Palmolive distributed free tubes
of herbal toothpaste at the festival to villagers who traditionally used a neem tree branch to clean
their teeth. Hindustan Lever marketed its Lifebuoy soap and handed out glasses of Brooke Bond
tea. This marketing strategy proved to be extremely effective in advertising to the mass rural
market.

In many villages, people might not see ads that appear in newspapers or on TV. So dealers drive
vans filled with products from village to village, and set up stands at weekly town markets.
Others equip their cars with loudspeakers and cruise through larger towns, touting their products
and stores. Philips also looked for new ways to extend its reach into every nook and corner of
India, driving its distributors to locate a slew of new retailers to carry their products, including
scores of one-stop shops in tiny hamlets like Jabli, a village of terraced fruit and vegetable farms
cut into the mountain along the Shimla highway in Himachal Pradesh, set in the foot hills of the
Himalayas.

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Role of a leader (Mukhiya)

The local or a group leader plays a crucial role in the promotion of a product because these
leaders act as an opinion builder or act as a role model for them. Here we want to quote an
interesting example: A team of Hyundai car salesmen takes his van into a tiny town‘s dusty
primary school, and turns it into a temporary car dealership. While a group of village men
dressed in turbans and loose kurta pajamas gathers around a big television set in the back of the
van to watch Hyundai advertisements, the chief sales rep talks with village headman, the
Hyundai folks were here the previous night, giving a local community head an exclusive test
drive and arranging this village visit.

A village headman is an opinion leader, whose advice is sought on everything from marriages to
crops. In the past few years, villagers have started to ask what TV set or car to buy, too. Four
years ago, there were just 15 TV sets in this village; now, there are 150, he says. Four people
even have mobile phones. ―If I tell them I like a particular brand, they‘ll go out and get it‖. 5.

Role of People (Youth)

It is a fact that unlike a few years ago, the rural youth today are playing a far more significant
role in influencing the purchases of radios, television (black and white as well as color).
Penetration levels of consumer durables in the rural sector have risen dramatically in the last
decade or so. It is observed that rural women are out of the closet completely…but unlike ten
years ago (when she had probably an insignificant or no role to play) today, she is exercising her
choice in select categories- the choice of brands may still be with the males of the household. But
yes, in this context the youth have certainly begun to play a role in selecting a brand in certain
product categories.

Here it is often observed that there is a tendency to follow the trends of nearest metro. Just like
so many youth in Mumbai aspire to be in U.S.A., the rural youth aspire to be in Mumbai,
Chennai or Calcutta and so on. This is like a yardstick- the city plays the yardstick in terms of
the development in the village. Studies suggest that the rural youth are playing an increasingly

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important role in purchase decisions. They are ones who actually travel out in the village
frequently. So they are the real drivers of the rural market. They may not be the final customers
(those who pay money) but often they are the people who influence the purchase of high value
products and they decide which brands to choose.

The motivators for purchase of a rural consumer are different from those in the urban consumer.
Therefore we are talking about rural youth. But when we talk about youth, we refer to the age
group of 15 to 25. In rural India; it is the age group between 8 and 15 that influence most
purchases-more than any other group. This is largely because they tend to retain messages and
often play back these messages to others too.

Just to give an example: Recently fair and Lovely soap in a village in Bihar. Its TV commercial
(chaand ka tukda) had debuted on prime time TV. The village kids played back the whole
commercial word by word with the product benefits, the product promise and so on. The
company team was quite surprised as they were targeting the rural women and they observed
kids who played back the commercial. So it‘s the 8 to 15 age group that has assumed importance.
Even HLL and Colgate have begun targeting this age group in their commercials.

Also, another typical rural phenomenon is that kids are sent by their mothers to purchase
something without specifying a brand. So kids tend to ask for products they have seen or heard
on radio or TV. So to a large extent, kids are driving this change as much as youth.

The Role of Technology

From times immemorial, technology has played a very important role in serving mankind. Be it
the telephone to communicate or the cars to transport goods cheaply between places. With the
help of technology, it is possible to spur micro-enterprise and economic developments and
empower consumers in the Tier 4 segment. Technology for renewable energy such as solar
power has helped to expand the market for various products. The advent of internet and
advancement of information and communication technologies has not only reduced the problems
but also became a powerful source of economic leverage for the consumers in tier 4. For
companies, the technological advances have become an inexpensive way to establish marketing

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and distribution channels in the tier 4 segment. ITC‘s success with e-choupal demonstrates the
importance of technology in serving the poor farmers in remote Indian villages.

India‘s second-largest consumer bank, ICICI Ltd., is selling life insurance to farmers through
internet kiosks set up in villages by the agricultural-trading farm of conglomerate ITC Ltd.
Philips has revamped its line of home electronics for folks in the countryside, offering a windup
radio that doesn‘t need hard-to-get batteries and a back-to-basics inexpensive television set.
Sales of all these products are up. A digital rural market covering 6000 villages.

ITC, the diversified Indian corporate is growing a digitally networked rural market, titled ‗e-
Choupal‘. Choupal is a village‘s traditional central meeting place where villagers exchange
notes. E-Choupal is however an intranet connecting villages. To overcome issues of literacy and
computer skills, there‘s a trained interpreter-technician called a ‗sanchalak‘ at each eChoupal.
Beyond the splash page echoupal.com is Hindi-only.

Originally a tobacco giant, ITC has over the last two decades diversified into consumer goods
and commodities among other things. With tobacco industry on the back foot, ITC probably
wants to develop newer interests. But the urban consumer market is a pretty crowded scene.
Hence ITC‘s rural initiative. It began with 6 e-choupals in June 2000 to prove the idea. ITC says
it now has 1200 such kiosks covering 6000 villages mainly in UP, MP, AP and Karnataka.
Thrusts into Kerala, Bengal, Maharashtra and Rajasthan are planned. Each e-Choupal- which is a
desktop with Internet access, really—costs between Rs. 1-3 lakhs to set up. Through the network
ITC buys from villages as well as sell to them. It also claims to offer the best ‗gate prices‘ for all
products bought for re-marketing. From Kerala it expects to buy spices, from Maharashtra
horticultural produce, from Bengal aquaculture products and Rajasthan wheat and oil-seed. In
turn, e-Choupals sell branded oil, salt, flour- and insurance products.

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