RURAL MARKETING NOTES UNIT-1

Rural Marketing: Introduction, Concept and Definitions

Rural marketing is a process of developing, pricing, promoting, and distributing rural
specific goods and services leading to desired exchange with rural customers to satisfy
their needs and wants, and also to achieve organizational objectives.
Introduction:
The emergence of rural markets as highly untapped potential emphasizes the need to explore
them. Marketers over the past few decades, with innovative approaches, have attempted to
understand and tap rural markets. Some of their efforts paid off and many markets still an
enigma. Rural marketing is an evolving concept, and as a part of any economy, has untapped
potential; marketers have realized the opportunity recently. Improvement in infrastructure and
reach, promise a bright future for those intending to go rural. Rural consumers are keen on
branded goods nowadays, so the market size for products and services seems to have
burgeoned.
The rural population has shown a trend of moving to a state of gradual urbanization in terms
of exposure, habits, lifestyles, and lastly, consumption patterns of goods and services. So,
there are dangers on concentrating more on the rural customers. Reducing the product
features in order to lower prices is a dangerous game to play. Rural buyers like to follow the
urban pattern of living. Astonishingly, as per the census report 2003-04, there are total
638365 villages in India in which nearly 70% of total population resides; out of them 35 %
villages have more than 1000 population.
Rural per capita consumption expenditure grew by 11.5 per cent while the urban expenditure
grew by 9.6 per cent. There is a tremendous potential for consumer durables like two-
wheelers, small cars, television sets, refrigerators, air-conditioners and household appliances
in rural India.
Lets have a glimpse on Rural Index 2005 figures:

Concept of Rural Marketing:

The concept of Rural Marketing in India Economy has always played an influential role in
the lives of people. In India, leaving out a few metropolitan cities, all the districts and
industrial townships are connected with rural markets. The rural market in India generates
bigger revenues in the country as the rural regions comprise of the maximum consumers in
this country. The rural market in Indian economy generates almost more than half of the
countrys income. Rural marketing in Indian economy can be classified under two broad
categories.
These are:
i. The market for consumer goods that comprise of both durable and non-durable goods
ii. The market for agricultural inputs that include fertilizers, pesticides, seeds, and so on
The concept of rural marketing in India is often been found to forms ambiguity in the mind of
people who think rural marketing is all about agricultural marketing. 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 non-agricultural workers from rural to urban areas.
To be precise, rural marketing in India Economy covers two broad sections, namely:
i. Selling of agricultural products in the urban areas
ii. Selling of manufactured products in the rural regions
The rural market in India is not a separate entity in itself and it is highly influenced by the
sociological and behavioural factors operating in the country. The rural population in India
accounts for around 627 million, which is exactly 74.3 percent of the total population.
Conceptually, rural marketing is not significantly different to urban marketing. Marketing
manager has to perform the same tasks, but differently in rural marketing. It can be said that
marketing is not different, but markets (buyers and users).
In rural marketing, a firm has to undergo marketing efforts to satisfy rural segments, which
notably differ from urban segments in some aspects. At the same time, we must note that
increasing literacy rate, improved sources of income, awareness due to improved and
increased means of communication and transportation, high rate of mobility within and
between countries due to liberalization and globalization, and many other such reasons, some
customers are likely to be identical.
Even, a few rural customers seem cosmopolitan! So, one can find customers of different
behaviour patterns within a village or a town. In the same way, most of products are
commonly used in both urban and rural areas. In some aspects, both rural and urban
customers behave in homogeneous pattern. Some Indian customers have become global and
cosmopolitan

Definitions:
Rural marketing is similar to simply marketing. Rural marketing differs only in terms of
buyers. Here, target market consists of customers living in rural areas. Thus, rural marketing
is an application of marketing fundamentals (concepts, principles, processes, theories, etc.) to
rural markets.
1. Let us define the term in simple way as: Rural marketing concerns with planning and
implementing marketing programmes (often referred as marketing strategies or simply 4Ps)
for rural markets to achieve marketing goals.
2. In more specific words: Rural marketing is a process of developing, pricing, promoting,
and distributing rural specific goods and services leading to desired exchange with rural
customers to satisfy their needs and wants, and also to achieve organizational objectives.
3. Marketing efforts remain same, only important aspect is type of buyers. So, the term can be
defined as: When marketing activities are undertaken for rural segments, it is turned as rural
marketing and the management is called rural marketing management.
4. Since marketing manager has to carry out similar tasks. So, definition of marketing stated
by American Marketing Association can be equally applicable in relation to rural segments.
We will add only specific word rural to define the term: Rural marketing is a process of
planning, and executing the conception, pricing, promotion, and distribution of ideas, goods,
and services to create exchange (for rural segments) that satisfy individual and organizational
objectives.
(Only the word rural has been added to the definition adopted by the AMA. The word
implies that marketing activities are undertaken in rural areas to satisfy rural segments.)
5. More specifically, it can be said: Rural Marketing means to produce products (goods and
services) for the rural customers and to make necessary arrangement to supply them.
6. At last, we can say: Rural marketing is the marketing for the customers residing in rural
areas. It involves designing marketing programme (4Ps) to arrive at desired exchange with
the rural customers that satisfies their needs and wants.
Scope for Rural Marketing in India
By relivingmbadays on December 21, 2012
Let us take at some of the points with respect to Rural India as per Census
1. Population density of less than 400 per sq.km.
2. At least 75% of the male working population is engaged in agriculture.
3. No municipality or board.
If we go by statistics, roughly around 70% of the Indian population lives in the rural areas.
That is almost 12 % of the world population. To expand the market by tapping the
countryside, more and more MNCs are foraying into Indias rural market.
Below are the few points why organizations are looking at rural marketing with a positive
attitude
1. Population
According to 2011 Census rural population is 72% of total population and it is scattered over
a wide range of geographic area. That is 12% of the world population which is not yet fully
utilized.
2. Rising Rural Prosperity
Average income level has unproved due to modern farming practices, contract farming
industrialization, migration to urban areas etc. There has been an overall increase in economic
activities because during the planned rural development heavy outlay of resources on
irrigation, fertilizers, agricultural equipments and agro processing industry has been made.
Saving habits in rural people also has increased. This too contributes in higher purchasing
power
3. Growth in consumption
There is a growth in purchasing power of rural consumers. But, the average per capita house
hold expenditure is still low compared to urban spending
4. Change in life style and Demands
Life style of rural consumer changed considerably. There has been increase in demand for
durables and non-durables like table fans, radios, mopeds, soaps, etc. by rural consumers.
This provides a ready market for the producers. Rural market is expanding day after day.
5. Market growth rate higher than urban:
The growth rate of fast moving consumer goods [FMCG] market and durable market is high
in rural areas. The rural market share is more than 50% for products like cooking oil, hair oil
etc.
6. Life cycle advantage
The products which have attained the maturity stage in urban market is still in growth stage in
rural market.
7. Decision-making Units
Women in rural areas are beginning to make fast decisions for purchases. Studies reveal that
72.3% decisions are taken jointly in a family. With education and mass media, role of
children in decision making is also changing

Top 8 Factors which Contributes to the Growth of Rural Markets

Eight factors which contributes to the growth of rural markets are as follows: 1. Government
initiatives 2. Rising literacy levels 3. Infrastructural facilities 4. New employment
opportunities 5. Rising mass media 6. Agricultural research 7. Marketing efforts 8. Urban
influence.
1. Government initiatives:
The initiatives taken by the Government of India to promote rural markets are as
follows:
a. Self sufficiency (Operation Flood, White Revolution, Blue Revolution)
b. Integrated Rural Development Program (IRDP), TRYSEM (Training Rural Youth for Self-
Employment), REP (Rural Electrification Program).

c. PSU and cooperative banks lend farmers (for example, Kisaan credit card by Canara and
Andhra Banks).
d. Contract farming: Companies give high-yielding variety seeds and tied up with farmers to
cultivate crops and sell them back to the company.
2. Rising literacy levels:
As per the 2001 census, about 50 per cent of the rural population is literate. This has
contributed to the increase in rural demand. This has changed the buying behaviour of rural
consumers and lifestyles. An increase in literacy levels has resulted in an increase in demand
for consumer goods.
3. Infrastructural facilities:
There is growth of infrastructure facilities and public service projects in rural India, which
includes construction of roads and transportation, communication network, rural
electrification and public distribution system. Because of these factors there is scope for rural
marketing.
4. New employment opportunities:
Various socio-economic policies of the government have resulted in the development of rural
India, which has resulted in new employment opportunities; for example, IRDP (Integrated
Rural Development Program).
5. Rising mass media:
Improved penetration of mass media has resulted in the creation of awareness among rural
consumers (Press, TV, hoardings, radio, etc.).
6. Agricultural research:
Research in the field of agriculture has resulted in increased scope for rural marketing. In
India, agricultural research is being conducted by Indian Council of Agricultural Research
(ICAR) and other institutions. Use of new scientific methods has increased the crop yields by
manifold. It has led to Green Revolution.
7. Marketing efforts:
A large number of MNCs have entered rural markets. MNCs such as Hindustan Lever, LG
Electronics, Godrej, Philips and Bajaj have made innovative marketing efforts in the area of
availability, affordability, acceptability and awareness.
8. Urban influence:
The people in rural areas are influenced by the urban people in their buying behaviour and
lifestyle. This may be because of the exposure to mass media and the villagers working in
towns and cities influence the lifestyles and habits of youth in villages.

Businesses in India are optimistic about growth of the country's rural consumer
markets, which is expected to be growing faster than urban consumer markets. These
days, there is better networking among rural consumers and their tendency to
proactively seek information via multiple sources to be better informed while making
purchase decisions.
Mainly, the wider reach of media and telecommunication services provides information
to Indias rural consumers and influencing their purchase decisions. According to
general trend, rural consumers are evolving towards a broader notion of value provided
by products and services. This involves aspects of price combined with utility, aesthetics
and features, and not just low prices.

The lands in India consist of about 650,000 villages. These villages are enclosed by about 850
million consumers making up for about 70 per cent of population of our country and
contributing around half of the country's Gross Domestic Product (GDP). Consumption
patterns in these rural areas are gradually changing to as equal as the consumption patterns of
urban areas.
Some of India's largest consumer companies serve one-third of their consumers from rural
India. Owing to a favorable changing consumption trend as well as the potential size of the
market, rural India provides a large and attractive investment opportunity for
private companies. Indias per capita GDP in rural areas has grown at a Compound Annual
Growth Rate (CAGR) of 6.2 percent since 2000.
Market Structure
The structure of the rural market can be defined by interlinking the Product and Consumer
flow processes as mentioned in the illustration below. We have taken the buyer and seller to
define different systems in rural markets.

Quadrant I It explains a situation in which both the buyer and seller are from rural area.
This is a constant economy system in which all rural produce is consumed within the system.
Quadrant II It explains that the majority of people concentrate on Quadrant II situation,
which unsustainably is tried by marketers to sell urban products in rural markets.
Quadrant III It is necessary to develop an urban-rural marketing linkage, so that both urban
and rural products can freely move across both the markets. Marketing should work as a
process of motivation to deliver and improve standards of living of rural people and
consumption rural products by urban people.
Quadrant IV It explains a situation in which both the buyer and seller are from urban area.
This is a constant economy system in which all urban produce is consumed within the
system.
Market Segmentation
Rural India accounts for a total of 55% of the manufacturing GDP. They were host to nearly
75% of the new factories built in the last decade. Rural consumption per person has increased
by 19% yearly between 2009 and 2014.
Rural marketing strategies include the following
 Segmentation This includes heterogeneity in rural market, prerequisites for effective
market segmentation, degrees of segmentation, basis of segmentation and approaches
to rural market segmentation.
Targeting This shows the evaluation and selection of segments, coverage of market
segments.
Positioning This identifies, selects, develops and communicates the positioning
concept in market.
The following are the degrees of segmentation
Mass Marketing In this, all the consumers are being treated the same. It allows the
company to target the maximum number of consumers. For example, HUL has
offered only one detergent that is Surf to all consumers but Norma entered the
market and grabbed a sizeable market share because of which HUL woke up and
introduced wheel.
Segment Marketing Marketers determines the potential of the market and its
consumers segments which are substantial enough to target and respond by offering
low-priced products and products that are designed appropriately.
Rural and Urban Market Analysis
Consumer behavior is a crucial area to be delved upon by the companies. The mindset of the
rural consumer is completely different from that of the urban consumer. In urban market, to
buy an electronic item, the customer thinks of brand and its updated feature, whereas in rural
market a buyer thinks of money, durability, buying capacity and so on. The bottom line is that
the mindset makes a lot of difference in both the markets.
Market is a place where buyers and sellers exchange goods/Service for some value in return
such as money. So, the market is same everywhere. But, the difference is in the behavior of
the consumer. There will be different buyers in each market. This is because of different
factors which Influence them, the same way there is a difference between rural and urban
market.
The factors are so many to differentiate in all the marketing variables. That is where most of
the companies approach with different marketing mix strategies to rural market. The
strategies differ from urban to rural market. The companies which have understood the
phenomena of rural market have succeeded in the market.
India has been acknowledged as one of the most promising and fastest growing economies of
the world. Besides urban and semi-urban areas, rural India has a huge potential. Many foreign
brands are dominating in consumer durables category. The purpose of the study is to
understand the comparative behavior of rural and urban Indian consumers towards the foreign
products against Indian products.
Rural consumers were found to be more interested than their urban counterparts in foreign
products in terms of maintenance, services, technical advancement, prestige, durability,
performance, and wide choice of size and variants. No significant differences were observed
between rural and urban consumers in terms of style and appearance. Indian producers in the
coming times are going to face very strong threat from foreign brands, particularly in
consumer durable category because of the consuming behavior.
 Unit 2
Understanding the Rural Consumer
Rural Community in India,
The ten essential characteristics of the rural community are as follows: a. Size of the
Community b. Density of Population c. Agriculture is the Main Occupation d. Close Contact
with Nature e. Homogeneity of Population f. Social Stratification g. Social Interaction h.
Social Mobility i. Social Solidarity j. Joint Family.
a. Size of the Community:
The village communities are smaller in area than the urban communities. As the village
communities are small, the population is also low.
b. Density of Population:
As the density of population is low, the people have intimate relationships and face-to-face
contacts with each other. In a village, everyone knows everyone.
c. Agriculture is the Main Occupation:
Agriculture is the fundamental occupation of the rural people and forms the basis of rural
economy. A farmer has to perform various agricultural activities for which he needs the
cooperation of other members. Usually, these members are from his family. Thus, the mem-
bers of the entire family share agricultural activities. That is the reason why Lowry Nelson
has mentioned that farming is a family enterprise.
d. Close Contact with Nature:
The rural people are in close contact with nature as most of their daily activities revolve
around the natural environment. This is the reason why a ruralite is more influenced by nature
than an urbanite. The villagers consider land as their real mother as they depend on it for their
food, clothing and shelter.
e. Homogeneity of Population:
The village communities are homogenous in nature. Most of their inhabitants are connected
with agriculture and its allied occupations, though there are people belonging to different
castes, religions and classes.
f. Social Stratification:
In rural society, social stratification is a traditional characteristic, based on caste. The rural
society is divided into various strata on the basis of caste.
g. Social Interaction:
The frequency of social interaction in rural areas is comparatively lower than in urban areas.
However, the interaction level possesses more stability and continuity. The relationships and
interactions in the primary groups are intimate. The family fulfills the needs of the members
and exercises control over them.

It is the family, which introduces the members to the customs, traditions and culture of the
society. Due to limited contacts, they do not develop individuality and their viewpoint
towards the outside world is very narrow, which makes them oppose any kind of violent
change.
h. Social Mobility:
In rural areas, mobility is rigid as all the occupations are based on caste. Shifting from one
occupation to another is difficult as caste is determined by birth. Thus, caste hierarchy
determines the social status of the rural people.
i. Social Solidarity:
The degree of social solidarity is greater in villages as compared to urban areas. Common
experience, purposes, customs and traditions form the basis of unity in the villages.

j. Joint Family:
Another characteristic feature of the rural society is the joint family system. The family
controls the behaviour of the individuals. Generally, the father is the head of the family and is
also responsible for maintaining the discipline among members. He manages the affairs of the
family.

Profile of Rural Marketing

1. Large and Scattered Market

In the 1st place, in terms of number of consumers, the rural market of India is a very large
market; it consists of more the 600 million consumers. It is also highly scattered market: the
consumers are scattered over 5,70,000 villages spread through the length and breadth of the
country. In terms of business generated too, it is a big market; 22000 crores rupees worth of
non-food consumer goods are being sold per year in the market at present.

2. Fast Changing Pattern and Demand

During the last decade the rural consumers were in need for low end products which would
meet their basic demands and necessities. But of lately due to change in technology rather
advancement in technology the demand for people have also changed and the buying pattern
which initially comprised of basic products have now shifted to luxurious products.
3. Heterogeneous Market
The relative status of the rural areas of different states differs. Parameters on which they
differ are Health and education facilities, nature of facilities, availability of public transport,
electricity, TV transmission, banks, post offices, water supply etc.
IMRB study reveals that an average village in India has 33 development index points,
Keralas average Is 88; Bihars average is just 22; while MP, Rajasthan and UP are close to
Bihar; and states like Maharashtra, Haryana, Karnataka range between 40 and so.

3. Demand, Seasonal and Agriculture dependent:

The basic occupation of people in Rural Indian is Agriculture and agriculture is seasonal.
Rural people have money only during the harvest period and most of the harvest periods are
celebrated as Festivals in India. Hence, Rural demand is not only harvest linked but also
festival linked.

4. Characterized by Great Diversity

The rural consumers of India are vastly diverse in terms of religious, social, cultural and
linguistic factors.

5. Steady growth despite inhibiting factors

The market has grown not only in quantitative terms, but qualitatively also. Many new
products have made entry into rural consumer basket. The upper segment in particular have
started buying and using a variety consumer products which were till recently unknown in the
rural.

Segmenting the Rural Market

Market Segmentation: 7 Bases for Market Segmentation | Marketing Management

Some of the major bases for market segmentation are as follows: 1. Geographic Segmentation
2. Demographic Segmentation 3. Psychographic Segmentation 4. Behavioristic Segmentation
5. Volume Segmentation 6. Product-space Segmentation 7. Benefit Segmentation.
A large number of variables are used to segment a consumer market.
The most common bases for segmenting markets are as follows:

Traditional:
Geographic, Demographic
Modern:
Psychographic, Behaviouristic
1. Geographic Segmentation:
Geographic location is one of the simplest methods of segmenting the market. People living
in one region of the country have purchasing and consuming habit which differs from those
living in other regions. For example, life style products sell very well in metro cities, e.g.,
Mumbai, Delhi, Kolkata and Chennai but do not sell in small towns. Banking needs of people
in rural areas differ from those of urban areas. Even within a city, a bank branch located in
the northern part of the city may attract more clients than a branch located in eastern part of
the city.
2. Demographic Segmentation:
Demographic variables such as age, occupation, education, sex and income are commonly
used for segmenting markets.
(a) Age:
Teenagers, adults, retired.
(b) Sex:
Male and female.
(c) Occupation:
Agriculture, industry, trade, students, service sector, house-holds, institutions.
ADVERTISEMENTS:
(i) Industrial sector:
Large, small, tiny.
(ii) Trade:
Wholesale, retail, exporters.
(iii) Services:
Professionals and non-professionals.
(iv) Institutions:
Educational, religions, clubs.
(v) Agriculture and cottage industries.
(d) Income Level:
Above Rs. 1 lakh per annum, Rs. 50,000 to Rs. 1 lakh, Rs. 25,000 to Rs. 50,000 per annum,
i.e., higher, middle and lower.
(e) Family Life-cycle:
Young single, young married no children, young married youngest child under six, young
married youngest child over six, older married with children, older married no children under
eighteen, older single, etc.
3. Psychographic Segmentation:
Under this method consumers are classified into market segments on the basis of their
psychological make-up, i.e., personality, attitude and lifestyle. According to attitude towards
life, people may be classified as traditionalists, achievers, etc.
Rogers has identified five groups of consumer personalities according to the way they
adopt new products:
() Innovators:
These are cosmopolitan people who are eager to try new ideas. They are highly venturesome
and willing to assume the risk of an occasional bad experience with a new product.
(b) Early Adopters:
These are influential people with whom the average person checks out an innovation.
(c) Early Majority:
This group tends to deliberate before adopting a new product. Its members are important in
legitimising an innovation but they are seldom leaders.
(d) Late Majority:
This group is cautious and adopts new ideas after an innovation has received public
confidence.
(e) Laggards:
These are past-oriented people. They are suspicious of change and innovations. By the time
they adopt a product, it may already have been replaced by a new one. Understanding of
psychographic of consumers enables marketers to better select potential markets and match
the product image with the type of consumer using it. For example, women making heavy use
of bank credit cards are said to lead an active lifestyle and are concerned with their
appearance. They tend to be liberated and are willing to try new things.
Psychographic classification may, however, be an oversimplification of consumer
personalities and purchase behaviour. So many factors influence consumers that an early
adopter of one product might well be a laggard for some other product and vice versa.
4. Behavioristic Segmentation:
In this method consumers are classified into market segments not the basis of their
knowledge, attitude and use of actual products or product attributes.
Any of the following variables might be used for this purpose:
() Purchase Occasion:
Buyers may be differentiated on the basis of when they use a product or service. For example,
air travellers might fly for business or vacation. Therefore, one airline might promote itself as
a business flyer while another might target the tourists.
(b) Benefits Sought:
The major benefit sought in a product is used as the basis of classify consumers. High quality,
low price, good taste, speed, sex appeal are examples of benefits. For example, some air
travellers prefer economy class (low price), while others seek executive class (status and
comfort).
(c) User Status:
Potential buyers may be classified as regular users, occasional users and non-users. Marketers
can develop new products or new uses of old products by targeting one or another of these
groups.
5. Volume Segmentation:
Consumers are classified light, medium and heavy users of a product. In some cases, 80 per
cent of the product may be sold to only 20 per cent of the group. Marketers can decide
product features and advertising strategies by finding common characteristics among heavy
users. For example, airlines having Frequent Flyer are using user rate as the basis of market
segmentation. Generally, marketers are interested in the heavy user group.
But marketers should pay attention to all the user groups because they represent different
opportunities. The non-users may consist of two types of people those who do not use the
product and those who might use it. Some may change over time from a non-user to a user.
Those who do not use due to ignorance may be provided extensive information. Repetitive
advertising may be used to overcome inertia or psychological resistance. In this way non-
users can gradually be converted into users.
6. Product-space Segmentation:
Here the buyers are asked to compare the existing brands according to their perceived
similarity and in relation to their ideal brands. First, the analyst infers the latent attributes that
consumers are using to perceive the brand. Then buyers are classified into groups each having
a distinct ideal brand in mind. The distinctive characteristics of each group are ascertained.
7. Benefit Segmentation:
Consumer behaviour depends more on the benefit sought in product/service than on
demographic factors. Each market segment is identified by the major benefits it is seeking.
Most buyers seek as many benefits as possible. However, the relative importance attached to
individual benefits differs from one group to another. For example, some consumers of
toothpaste give greater importance to freshness while other prefer taste or brightness of teeth.
Research studies on benefit segmentation reveal that it is easier to take advantage of existing
segment, then to create new segments. As no brand can appeal to all consumers, a marketer
who wants to cover the market fully must offer multiple brands.
The following benefit segments have been identified:
() The Status Seeker:
This group comprises buyers who are very much concerned with the prestige of the brand.
(b) The Swinger:
This group tries to be modern and up-to-date in all of its activities.
(c) The Conservative:
This group prefers popular brands and large successful companies.
(d) The Rational Man:
This group looks for benefits such as economy, value, durability and other logical factors.
(e) The Inner Directed Man:
This group is concerned with self-concept, e.g., sense of homour, independence, honesty, etc.
(f) The Hedonist:
This group is concerned mainly with sensory benefits.
Marketing experts suggest that benefit segmentation has the greatest number of practical
implications than any other method of segmentation.