Chapter - 4

Kyra! Demand and Rural Market Index,

 FOUR
Rural Demand and Rural Market Index

As seen in the earlier chapter, the predominant occupation in rural areas

is agriculture and agriculture-related activities. Since agriculture is a seasond

occupation and income generation source, the demand pattern also follows

a seasonal pattern. In addition, the rural population is widespread as opposed

to the concentrated nature of urban population. Likewise, there are numerous

other distinguishing features between rural and urban areas, which are very

much reflected in the demand pattern. Table 3.1 summarises the

distinguishing features of rural and urban demand.

A number of problems in marketing to rural areas emanate from these

differences. The agricultural input marketing firms depend upon the rural

market only for their sales. They seem to have understood the rural market

better and have evolved appropriate strategies to realise the available

potential even though there may be further scope for improving upon the

adopted strategies. It may be worthwhile for the consumable and durable

marketing firms to study and learn from the experience of agricultural input

marketing firms. Excepting a few companies like ITC, HLL, Lipton, Brooke-

Bond, etc. who have been traditionally catering to rural markets, the others

have a long way to go. However, understanding the distinctive features of

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rural markets in comparison to urban markets will help the marketing firms

to evolve appropriate strategies, so that the products or services can be

delivered.

Table - 4.1

Demand : Rural Vs Urban

SI.No. Features Rural Urban

1. Demand Pattern Seasonal Uniform

2. Spread Widely Spread Concentrated

3. Literacy Level Low High

4. Sources of Supply Inadequate Adequate

5. Physical Communication Poor Very Good

Facilities

6. Product Knowledge Not known

7. Awareness of Needs Not Known

8. Sources of Information Worth of Mouth Any Media

Mostley oral

9. Product Concept Not Known Known

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10. Timeliness of Supply Untimely Timely

11. After Sales Service Availability Inadequate Adequate

12. Expenditure Pattern Somewhat Productive

Unproudctive

13. Guidance of Usage Needed Not Needed

14. Per Capita Income Low High

15. Product as Status Symbol Mostly No Mostly Yes

16. Consumer Protection Rarely Available Easily Available

This apart, the rural people also recognise different market places

for purchase of different products and services. In short, this can be termed

as hierarchy of markets for a rural consumer. The rural consumers have

identified places for specific items of purchase. Chat 1 broadly indicates

the hierarchy of rural markets for a rural consumer.

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Chart - 1

Hierarchy of Markets for Rural Consumers

State Capitals, Cities and Metros Legal Matters and Casual Visits

Terminal Markets Fertilizers, Pesticides Seeds,

Durables like Cycles, Mopeds,

Secondaiy Wholesale Sewing Machines, Jewellery, Diy

Assembling Markets Batteiy Cells, Radios, Cosmetics,

Primary Wholesale Electrical Goods and

Assembling Markets Agricultural Finance etc.

Shandies, Hats and Jathras Cloth, Cosmetics, Soaps, Services,

Kitchen Equipments, Agricultural

Tools, Bamboo Baskets etc.

Village Shop Match Boxes, Cigarettes, Tea,

Kerosene, Edible Oils, Salt etc.

A typical rural consumer has clear cut identification of market places

for different requirements. The first point of contact is the 'village shop' which

stocks very essential manufactured goods like tea, beedi, cigarettes; salt,

kerosene, matches, edible oils, etc. These are some of the items, the rural

consumer always approaches a village shop. Many a times a running credit

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account is maintained. There may be a few cases of barter also.

The next level of market in the hierarchy of a rural consumer is the

weekly shandy. These shandies or hats assemble in a particular village at a

particular spot on a fixed day in a week. There are a number of such weekly

markets in every state in the country. These shandies stract rural people from

a radius of about 20 to 25 kms. For a rural consumer the shandy is like a mini

super bazaar. The range of commodities and services available in a shandy

has to be seen to be believed. The range of commodities available are

agricultural produce like food grains, pulses, groundnut, jaggery (gur),

vegetables, fruits, chillies, betal leaves and cheaper brands oil cosmetics,

and toiletry items like bath soaps, washing soaps, toys for children, clothing

for men, women and children, toffees and sweet-meats, locks, umbrellas,

scented sticks, dried and fresh fish, live chicken, small agricultural tools and

implements like pavadas, hand hoe, plough shares and several others. The

services available are like barber, locksmith, umbrella repairer, blancksmith

etc. Some of these shandies specialise in livestock like work bullocks, cows,

poultry and sheep and goats. These shandies provide an opportunity to sell

and purchase small quantities of local agricultural and poultry products like

vegetables, grains, sheep or goal, chicken etc. In additional to these shandies,

in some prominent place Jatras and Melas are held over and extended period

of a week to about a month. These are also associated with some important

religious festivals. The merchants who operate in shandies also follow a

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rotation in their movement. Normally they operate in five or six different

shandies in a week and take one day off for replenishing their stocks from a
nearby town or city.

The next market place in the hierarchy is the Primary Wholesale

Assembling markets. This is where a rural person goes to sell his agricultural

produce soon after harvest. Sometimes these may be termed as Secondary

Wholesale Assembly markets or Terminal markets, depending upon the place

-of their location. These are also popularly called Mandi centres or towns. In

these places, there is a well-established market functionaries. While the farmer

sells his agricultural produce in these markets, he also purchases items like

fertilizers, pesticides, seeds, etc. and consumer durable like watches, radios,

clocks etc.

This has an important implication in marketing with regards to the level

up to which the distribution arrangement should extend. While rural

consumers might purchase consumable items at the local village shop or in

shandies, they will always prefer to purchase consume durable items from

the town or district headquarters where the agricultural produce markets are

located. This behaviour is due to the fact that, the rural consumers have a

choice of visiting several shops to know about the comparative quality and

price to decide on a brand. Secondly, there is an assurity and guarantee, if

anything goes wrong. The third important reason is that after selling the
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agricultural produce, they have ready cash to purchase durables. This implies

that the places where agricultural produce trading is done is the potential

place up to which the distribution network should extend in the case of

durables, unlike consumable, which can go up to village level.

A rural consumer may also make occasional visits to states headquarters

or big cities for any legal matter.

The important aspect to be kept in mind is that the rural consumers

have identified market places for purchase of different requirements. So, while

appointing dealers, buying shelf space, the purchase habits of rural consumers

have to be borne in mind. In other words, while it is prudent to arrange for

distribution up to fairly large village levels for consumables, the durables

require distribution arrangements only up to taluk or mandi (agricultural

produce market) level. Most of the factors listed above as distinguishing

features between rural and urban demand have definite implications in

evolving marketing straegies for rural marketing.

As seen in the earlier chapter, the villages are not uniform in size in

terms of population, area under cultivation, types of crops cultivated,

economic prosperity etc. Hence, it becomes important for a marketer to know

the potential available in different villages, so that appropriate marketing

strategies can be evolved.

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Thompson Rural Market Index

A successful attempt in the direction of assessing the potential of rural

markets has been made by Hidustan Thompson Associates Limited. They

have developed the 'Thompson Rural Market Index' as a guide to the rural

marketing men. The first attempt was made by them in the year 1972. They

collected the data available at district level for 334 district. Then they had -

identified 11 factors and assigned a weightage to each of them to assess the

potential. This was not considered satisfactory and herice, another attempt

was made. Now they considered 26 factors for constructing the rural market

index. This has been published under the name Thompson Rural Market Index

in 19861. Herein they have covered 383 of the 412 district in the country,

since data was available for only these districts and the Rural Market Index

was ultimately worked out for 335 districts. The districts not taken into

account either do not constitute rural areas or have very small rural population.

The data on the following indicators was taken for constructing the Rural
Market Index.

Indicators Considered for Rural Market Index

1. Area of the district in sq. kms.

1. Thompson Rural Market Index, 1986, Hidustan Thompson Associates

Limited, Bombay.
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Demographics

2. Population : Rural No.

3. Males No.

4. Females No.

5. Density per sq. km,

6. Percentage districution of population by population strata.

7. Number of villages.

8. Percentage distribution of villages by population strata.

9. Literate - Rural No.

10. Per cent of literacy.

11. Loterate Males.

12. Literate Females.

Occupation Pattern

13. Cultivators No.

14. Agricultural labourers.

15. Non-agricultural labourers.

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Agriculture Related Data

16. Gross cropped area in hectares.

17. Gross irrigated area in hectares.

18. Area under non-food crops in hectares.

19. Average size of operational holdings in hectares.

Agricultural Inputs Data

20. Pumps sets and tube wells No.

21. Fertilizer consumption in metric tonnes.

22. No. of tractors.

Rural Electrification Data

23. Percentage of villages electrified.

Commercial Banks Data

24. No, of rural branches.

25. Deposits in Rs. lakh.

26. Advance in Rs. lakh.

In addition, they also collected the value of agricultural output for each
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district from the Centre for Monitoring Indian Economy, which was to be the

overall indicator of rural market potential, since the major occupation in rural
areas is agriculture. To validate this assumption that the value of agricultural

output is a holistic indicator of rural market potential, a statistical correlation

analysis was conducted with 10 selected variables related to agriculture with

the value of agricultural production. The selected ten agriculture-related

variables were

• Agricultural labourers,

• Gross cropped area,

• Gross irrigated era,

• Area under non-food crops,

• Pumps sets,

• Fertilizer consumption,

• Tractors,

• Rural credit,

• Rural deposits, and

• Villages electrified

It was found that these ten variables had a very high correlation with
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the value of agricultural output ranging 0.52 to 0.79. The book also presents

the data for each district on the 26 variables chosen. What is needed now is
to update the data chosen to know the potential.

Based on the index number, the districts have been classified as A, B,

C, D and E class markets. Table 4.2 summarises the classification of the

districts and the proportion of rural market they account for.

Table 4.2

Classification of markets

Class of Index Range No.of Districts Percentage

Markets of Market

A 60.00 to 100.00 22 17.8

B 40.00 to 59.99 39 20.5

C 30.00 to 39.99 54 20.4

D 20.00 to 29.99 86 23.0

E below to 29.99 154 18.3

Total 355 100.00

It is significant to note that the index relies on the ten factors related to
agriculture, which have been chosen for the correlation analysis. Any change
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in these variables like, increase in irrigated area or increase in area under

commercial crops will have a positive impact on the positive side will increase

the value of agricultural output, thus the income of the rural people.

One can probably add other factors like road length per sq. km. in the

district, railway lines per sq. km, number of post offices, number of Television

sets, number of two wheelers, etc. to have further validation of the potential

given by the index. To summarise, the rural demand has peculiar

characteristics in terms of its spread literacy rate, hierarchy of markets, per

capita income, etc. which differentiate it from urban demand. Since nearly

70 to 75 per cent of income generation in rural areas is through agriculture

and agriculture-related activities, the variables related to agriculture can be

safely assumed to be the indicator of the potential of rural market. Anyway,

the Rural Market Index prepared by Hindustan Thompson Associates, has

proved very useful in evaluating the potential of the rural markets.