Marketing strategies for Organized retail to capture Rural Market

Dr.J.Gopu1
T.Girija2
ABSTRACT

The Indian retailing industry is becoming intensely competitive, as more and more
players are Vying for the same set of customers. Retailing is one of the biggest sectors
and it is witnessing revolution in India. The new entrant in retailing in India signifies the
beginning of retail revolution. India's retail market is expected to grow tremendously
and become more organized. Not only the Indian brands are entering organized retailing
even foreign players like Wal-Mart are entering organized retailing in India.

Over the past few years, the rural market has emerged as one of the most lucrative
markets for Indian companies. The rural market in India brings in bigger revenues, 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 country's income. Promotion of
brands in rural markets requires some special measures as the characteristics of rural
market differ from urban market.

Many products that are successful in the urban market are failing in the rural market.
There are many reasons behind it, but the main reason is usually the marketers make a
product for the urban market and drag it to the rural market. To be successful in the rural
market the unique characteristics of the rural market must be studied and all marketing
strategies need to concentrate towards that.

The great question here is does the organized retailers entering the rural market making
strategies customized for the rural market. This paper speaks about different strategies
followed by corporate to attract the rural market and suggest strategies for organized
retailer to capture the rural market.

Key words: Organized retailing, Rural market and Rural marketing strategies.
1

11
. Assistant Professor, Department of Management Studies, BSA Crescent Engineering College, Chennai.
2. Associate Professor, National Institute of Management Studies, Chennai
INTRODUCTION
The rural market in India is not a separate entity in itself and it is highly
influenced by the sociological and behavioral factors operating in the country. Until few
years back, the rural markets were mostly ignored and were not considered profitable
even though the rural population in India accounts for around 627 million, which is
exactly 74.3 percent of the total population.1 In fact the rural market in India brings in
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 country's income. Similarly out of the different industry in India retail industry is one
of the fastest growing industries. Though initially, the retail industry in India was mostly
unorganized, however with the change of tastes and preferences of the consumers, the
industry is getting more popular these days and getting organized as well. Understanding
the great market in Rural India many organized retail brands have started entering the
rural market. This article aims to highlight the significance of rural markets and
strategies for organized retail to overcome the obstacles and operate profitable in rural
market.
OBJECTIVES
Primary Objective
• Marketing strategies that can be applied by Organized retailer to capture Rural
market
Secondary Objective
• To study state of organized retailing in India
• To study the opportunities existing in rural market
• To study the marketing strategies followed by corporate to attract rural market
• To suggest ways and means for the organized retailers to attract rural market.
Statement of problem
According to a white paper prepared by CII-Tecnopak, the rural market grew at an
impressive 25% in the year 2008 and is expected to have approximately 720-790 million
customers with a size of US$425 bn in the year 2010- 11.2 On the other hand the retail
Industry in India is growing at a great pace and is expected to go up to US$ 833 billion
by year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at CAGR
of 10%3. The rural market is no longer a non-player in the retail game. India's large rural
population has also caught the eye of retailers looking for new areas of growth. A slew of
supermarket chains, including those of the Tata and ITC, are set to storm the rural areas
of the country as corporate realize the huge potential of the untapped market. The rural
market are accounting for over one-third of the market for most durable and non-durable
products. To capture further in the rural market the organized retailers need to understand
the psyche of the rural consumers and then act accordingly. Firms should refrain from
designing goods for the urban markets and subsequently pushing them in the rural areas.

Need for the study

Are our organized retailers making efforts to capture the rural market? To study the
unique characteristics of the rural market and also help design the organized retailers,
marketing strategies to penetrate the rural market.

LITERATURE REVIEW
1. Organized retailing in India
Retailing can be referred to all the activities involved in the marketing and distribution of
goods and services. Different formats of retailing are Mom and Pop stores, Convenient
stores, Chain of stores, Franchise, Speciality store, Departmental store, Super market ,
Hyper market, Shopping mall, Shopping plaza, Discount stores, E-trailers, Vending
machines and Category killer or Multi brand outlet. Retailing in its initial period was
witnessed at the weekly hats or gatherings in a market place where vendors put of display
their products. But nowadays the retailing had become more organized. The changes in
the organized retail industry are visible in the form of new retail formats.

India's retail market is expected to be worth about US$ 410 billion, with 5 per cent of
sales through organized retail, meaning that the opportunity in India remains immense.
Retail should continue to grow rapidly up to US$ 535 billion in 2013, with 10 per cent
coming from organized retail3. According to a McKinsey & Company report titled 'The
Great Indian Bazaar: Organised Retail Comes of Age in India', organized retail in India is
expected to increase from 5 per cent of the total market to 14 - 18 per cent of the total
retail market and reach US$ 450 billion by 20153. According to another report titled
'India Organised Retail Market 2010', published by Knight Frank India in May 2010
during 2010-12, around 55 million square feet (sq ft) of retail space will be ready in
Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and
Pune. Besides, between 2010 and 2012, the organized retail real estate stock will grow
from the existing 41 million sq ft to 95 million sq ft. All the predictions indicate the
massive growth of organized retailing in India.

Fig 1: The growth projection of retail industry in (US$ Billion)4

Major drivers that drive the growth of retail sector in India are raising income, the rapidly
growing middle class consumers, Growth in the number of double income house holds,
less time at the disposal of double income families, through media and other
communication net words exposure to the world class tastes and preference of products
and brands, rising work force with global travel, increasing usage of credit or debit card
and growing youth population with the ability to study and work simultaneously. The
organized retailing in India is not alone shared by the domestic corporate like Pantaloon,
Tata groups, Reliance, RPG group, AV Birla group, it is also being targeted by foreign
players like Wal-Mart.
2. Rural Marketing

In India, leaving out a few metropolitan cities, all the districts and industrial townships
are connected with rural markets. The rural population in India accounts for around 627
million, which is exactly 74.3 percent of the total population. The rural market in India
brings in 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 country's income. Rural Marketing in India Economy covers two broad
sections, namely:

• Selling of agricultural items in the urban areas

• Selling of manufactured products in the rural regions

On account of green revolution, the rural areas are consuming a large quantity of
industrial and urban manufactured products. In this context, a special marketing strategy,
namely, rural marketing has emerged. But often, rural marketing is confused with
agricultural marketing - the latter denotes marketing of produce of the rural areas to the
urban consumers or industrial consumers, whereas rural marketing involves delivering
manufactured or processed inputs or services to rural producers or consumers.

2. a. Opportunities of Rural Market

The rural market in India is vast and scattered and offers a plethora of opportunities in
comparison to the urban sector. It covers the maximum population and regions and
thereby, the maximum number of consumers. Rural consumption and expenditure is
exploding, a fact that is not being missed out by either the researchers or those who have
plans for organized retail. At the very basis level, All India sales of fast moving
consumer goods or FMCG are tipped to touch $100 billion by 20255

Attractive factors of rural market 6

• 742 million people

• In 2001-02, LIC sold 55% of its policies in rural India.
 • Of two million BSNL mobile connections, 50% are in small towns / villages.
• Of the 6.0 lakh villages, 5.22 lakh have a Village Public Telephone (VPT).
• 41 million Kisan Credit Cards have been issued (against 22 million credit-plus-
debit cards in urban), with cumulative credit of Rs. 977 billion resulting in
tremendous liquidity.
• Of the 20 million Rediffmail sign-ups, 60% are from small towns. 50% of
transactions from these towns are on Rediff online shopping site.
• 42 million rural households (HHs) are availing banking services in comparison to
27 million urban HHs.
• Investment in formal savings instruments is 6.6 million HHs in rural and 6.7
million HHs in urban.
• Rural literacy level improved from 36% to 59%.
• In 50 years only, 40% villages have been connected by road, in next 10 years
another 30% would be connected.
• Low penetration rates in rural areas, so there are many marketing opportunities.

So, the rural market is no longer a non-player in the retail game. It is now accounting for
over one-third of the market for most durable and non-durable products. Even
manufacturers are developing new products with the rural consumer in mind besides
using village-oriented marketing strategies for brand promotions. According to data from
Mumbai-based Centre for Monitoring Indian Economy, or CMIE, while urban India
spends half its income, the spending in the rural economy is 54%5. The rural market is no
longer of hypothetical empirical value but is well researched and reached by most
companies looking to tap India's vast and abundant bounty. Wal-Mart the well known
foreign retailer well known for his less price, estimates that there is a concentration of
population and wealth in villages about half of India’s population live in just one-sixth of
its 600,000 villages5. And more importantly, this section accounts for 60 percent of rural
wealth. Rural markets have become a more favorable destination for marketing
companies because of competition in Urban Markets, Changing consumption pattern in
Rural areas, Improved lifestyle, huge population and Rapidly growing market.
2. b. Myths Vs Reality of rural market
In spite of many favorable situations in the rural market there are certain myths about the
rural market but reality is difference and some of them are.

Myth 1: Rural Market is a Homogeneous Mass

Reality: It's a heterogeneous population. Various Tiers are present depending on the
incomes like Big Landlords, Traders, Small Farmers, Marginal Farmers, Labourers
Artisans. State wise variations in rural demographics are present viz. literacy (Kerala
90%, Bihar 44%) and population below poverty line (Orissa 48%, Punjab 6%).

Myth 2: Disposable Income is Low

Reality: Number of middle class HHs (annual income Rs. 45,000 - 2,15,000) for rural
sector is 27.4 million as compared to the figure of 29.5 million for urban sector. Rural
incomes CAGR was 10.95% compared to 10.74% in urban between 1970-71 and 1993-
94.

Myth3: Individuals Decide about Purchases

Reality: Decision making process is collective. Purchase process - influencer, decider,
and buyer, one who pays - can all be different. So marketers must address brand message
at several levels. Rural youth brings brand knowledge to Households (HH).

It is not an easy task to enter the rural market because of main problems with rural
marketing such as

• Understanding the Rural Consumer

• Poor Infrastructure
• Physical Distribution
• Channel Management
• Promotion and Marketing Communication
• Dynamics of rural markets differ from other market types, and similarly, rural
marketing strategies are also significantly different from the marketing strategies
aimed at an urban or industrial consumer.
2. c. Rural markets astonishing utility of products
Understanding the rural people and predicting their behavior can prove to be a daunting
task because of their diverse and varied characteristics. A lot of careful attention and
effort is required in this direction. Nothing can be taken for granted any kind of error can
lead to a significant set back. In the past several big companies have entered the rural
markets and have met with failure, either due to a communication gap between the
company and the customers, or because the rural people did not find their products useful
in the way they were intended to be used. There were several instances wherein rural
consumers found unique and unintended use for certain products
• Godrej, one of India’s well-known brands, faced an uncomfortable situation with
its black hair dye in Raichur (Karnataka), when it was found that the dye was being
used to polish buffalos, so that they looked better when presented for sale in the
village market.
• Good Knight Mosquito repellant mat was being used twice, once on each side.
As only one side of the mat comes in contact with the heater tray in the machine, it
was thought that the other side can be used again. Godrej Sara Lee(the maker of
Good Knight) had to attach a foil to one side of the mat so that it was only used once.
• In Punjab, the washing machine was being used to make lassi in large quantitities,
instead of washing clothes.
• In Bihar it was found that Horlicks, was being fed to cattle for fattening them.
• Iodex, a pain reliever, was being applied to relieve the muscular pain in animals
after a hard day’s work, so that they could be exploited to full advantage again the
next day. The rural markets are not easy to understand and explore. Even small
mistakes could lead to seemingly funny but serious consequences. The success of a
brand in the Indian rural market is as unpredictable as rain. Many brands, which
should have been successful, have failed miserably. This is because most firms try to
extend marketing plans that they use in urban areas to the rural markets.
METHODOLOGY
This study involves a descriptive approach. This study describes retailing in India, Rural
market, rural marketing and the unique marketing strategies followed by corporate to
obtain the rural market. Based on this marketing strategies are framed for organized
retailers to capture the rural market. The data used is mainly secondary data from journals
websites and published reports. Time constraint is mainly the limitation of this study.

ANALYSIS

The main problems of rural market are understand the rural Consumer, Poor
Infrastructure, Physical Distribution, Channel Management, Promotion and Marketing
Communication and Dynamics of rural markets differ from other market types, and
similarly, rural marketing strategies are also significantly different from the marketing
strategies aimed at an urban or industrial consumer. These unique characteristics of rural
market must be studied and the marketing strategies need to be designed accordingly to
capture the rural market.

FINDINGS

The study have brought out certain practices that has been uniquely practiced for the
rural market by some leading companies to promote and sell their product in rural
market.

Marketing Strategy for rural market

Marketers need to understand the psyche of the rural consumers and then act accordingly.
Rural marketing involves more intensive personal selling efforts compared to urban
marketing. Firms should refrain from designing goods for the urban markets and
subsequently pushing them in the rural areas. To effectively tap the rural market, a brand
must associate it with the same things the rural folks do. This can be done by utilizing the
various rural folk media to reach them in their own language and in large numbers so that
the brand can be associated with the myriad rituals, celebrations, festivals, "melas", and
other activities where they assemble.
Distribution Strategy for rural market

One of the ways could be using company delivery van which can serve two purposes - it
can take the products to the customers in every nook and corner of the market, and it also
enables the firm to establish direct contact with them, and thereby facilitate sales
promotion. This also acts as promotional media

Promotional Strategy for rural market

Firms must be very careful in choosing the vehicle to be used for communication. Only
16% of the rural population has access to a vernacular newspaper. So, the audio visuals
must be planned to convey a right message to the rural folk. The rich, traditional media
forms like folk dances, puppet shows, etc., with which the rural consumers are familiar
and comfortable, can be used for high impact product campaigns. Some of promotional
media that can effectively serve the purpose of contacting the rural market are

a) Farm-to-Farm/House-to-House visit:

Rural people prefer face-to-face communication and farm visits facilitate two-way
communication. The advantage is that the sales person can understand the needs and
wants of the rural customer by directly discussing with him and answer his queries on
products and services. Potential customers in the village are identified and the
company’s/distributor’s representative makes farm-to-farm visits and highlight the
benefits of the products. The person carries with him literature in local language and also
samples of products. The person does not sell the product but only promotes the use of
the product. Very often the local dealer also joins the representative in making farm-to-
farm visits. The dealer clarifies the terms and conditions of sale and also makes
independent follow up visits for securing orders.

Example: This approach has been found to be very effective for agricultural machinery,
animal health products and agricultural inputs. Many LIC agents and companies dealing
with high value consumer durables have tried this method with success in rich rural areas.
b) Group meeting:

Group meetings of rural customers as well as prospects are an important part of

interpersonal media. The company is able to pass on the message regarding benefits of
the products to a large number of customers through such meetings. Group meeting of
key customers are conducted by banks, agricultural inputs and machinery companies in
rural areas. The bankers visit an identified village, get the village people in a common
place and explain the various schemes to the villagers. Such meetings could be organized
in prosperous villages for promoting consumer durables and two wheelers also.

Fig : Cookerey classes targeting house wives

Example: MRF Tyres conduct tractor owners meet in villages to discuss repairs and
maintenance of tractors.

c)Opinion leaders:

Villagers place more emphasis on the experience of others who have used a
product/brand to make purchase decision. Opinion leader is a person who is considered to
be knowledgeable and is consulted by others and his advice is normally followed. Such
opinion leaders could be big landlords, bank official, panchayath-president, teachers,
extension workers etc.
Examples: a) Mahindra Tractors use bankers as opinion leaders for their product.

b) Asian Paints promoted its Utsav brand of paint by painting the village Sarpanch’s
house a few months prior to the launch if the branch to demonstrate that the paint does
not peel off.

d)The Melas /Fairs:

Melas are of different types i.e. commodity fairs, cattle fairs and religious fairs and may
be held only for a day or may extend over a week. Many companies have come out with
creative ideas for participating in such melas.

Examples: a) Britannia promotes Tiger Brand Biscuits through melas. b) The

mahakumbh at Allahabad is the biggest mela in India. HLL has put up 14 stalls in the
mela grounds for promoting Lifebuoy. Handcarts have been deployed for increasing
access.

Fig 2: LG promoting their product at Rajamundry fair

e)The Haats:

Traditionally on certain days of week, both the sellers and buyers meet in the village to
buy and sell goods and services. These are the haats that are being held regularly in all
rural areas. The sellers arrive in the morning in the haat and remain till late in the
evening. Next day they move to another haat. For the marketer, the haat can be an ideal
platform for advertising and selling of goods. By participating in haats and melas, the
company can not only promote and sell the products but also understand the shared
values, beliefs and perceptions of rural customers that influence his buying behaviour.

Fig 3: Aim toothpaste stall at a haat in rural area

f)Folk dances:

These are well-appreciated form of entertainment available to the village people. The folk
dance “Kuravan Kurathi” is popular in Tamil Nadu. The troupe consists of dancers,
drummers and musicians and they move in a well-decorated van from one village to
another village singing and dancing. In a day the troupe covers about 8-10 villages. As
soon as the van reaches a village, film songs are played to attract the attention of the
villages. This is followed by folk dances. Mike announcement is made about the
company’s products and leaflets are distributed. After the dance programme, queries, if
any, about the products are answered by the sales person. Folk dance programme costs
about Rs.5000 per day and therefore these programmes are conducted during the peak
season in selected villages.
Examples: Thumps Up has sponsored Lavnis, the folk dance programme of Maharashtra
and over 30 programmes have been arranged in selected rural markets.

g) Audio Visual Publicity Vans (AVP Vans):

Fig 4: Audio Visual Publicity Vans used to promote LG Products in rural

AV unit is one of the effective tools for rural communication. The van is a mobile
promotion station having facilities for screening films slides and mike publicity. The
sales person makes a brief talk about situation in the village, the products and the
benefits. The ad film is screened along with some popular film shots and this continues
for about 30 minutes. At the end of the film show, he distributes handbills and answers
queries of the customers. The whole operation takes about 1-2 hours depending upon the
products under promotion, number of participants in the meeting and time taken for
question and answers. The vans move to the next village for the second show. The cost of
running a fully equipped AVP unit is about Rs.4000 per day and AVP van operation has
to be considered as an investment for business development in rural areas.

Example: Companies such as HLL, Colgate, LG and Phillips have made effective use of
AVP vans for popularizing their products in rural areas.

h) Product display contests:

Package is an integral part of the product. Its main purpose is to protect the product
during transit, to preserve the quality and to avoid any loss in quality and quantity. The
main purpose of this contest is to remind the customer to buy the product as soon as he
enters the shop. Another objective is to influence the dealer to stock the product and
support the company in increasing the sales. The display contest has to be announced
well in advance and promotional materials to be distributed to all the selected dealers in a
geographical area. Prizes for best displays are announced to motivate the dealers; the
contest lasts for about a month. A well-planned product display contest not only increases
the involvement of dealers in the company’s products but also increases the sales during
the contest period. This is used for promoting consumer goods such as shampoos, soaps
and toothpaste.

i) Field demonstration:

This is based on the extension principle “seeing believes” and is one of the most effective
methods to show the superiority of the company’s products to the customers. A
progressive farmer who is an opinion leader is selected and the demonstration is
conducted in his field in the presence of a group of farmers in the village. The farmers
observe the results in the field and the local dealer calls on them in their farms and
persuades them to buy the particular brand of pesticide or fertilizer.

Examples: a) Hawkins pressure cooker has demonstration representatives who carry out
demos in rural households. The representative receives 1% commission for every
customer who approaches the dealer via demonstrations. b) Similarly effectiveness of
detergents, pressure cookers, vaccum cleaners and mosquito coils could be promoted by
demonstrations in selected markets.

SUGGESTIONS
• The unique consumption patterns, tastes and needs of the rural consumers should
be analyzed at the product planning stage so that they match the needs of the rural
people
 • As the decision making is collective the members of the family preference need to
be analyzed by organized retailer and promotional tools need to be framed in such a
way all the influencers of purchase are concentrated.
• Organized retailer need to analyze the market plans that are applied in urban
market on the basis of swot with respect to rural market and necessary modifications
need to be made and then presented to rural market.
• Organized retailer can use farm to farm, group meeting, opinion leaders, melas,
haats folk dances, audio visual publicity vans, field demonstrations to explain about
the benefits obtained from organized retail outlet and also to create awareness about
the organized retail outlet.
CONCLUSIONS
Rural market is like a gold mine in the hands of organized retailers in the hands of
organized retailers. The success of organized retailers in rural market purely depends
upon the efforts taken with regard to analysis of character of rural market and making
available of products in required quantity, creating awareness about the organized retail
outlet and providing the sales promotion to initiate them to make purchase in organized
retail outlet. Thus it is concluded that the success of organized retailing in rural market
depends upon the means by which the organized retailers tap the make like a potter does
to make a pot.

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