Opportunities and Challenges

This concept note captures situations that reflect the growing interest and enthusiasm
of business towards rural markets. Opportunities in the rural market are examined in
the light of intense and growing competition in urban markets. The market
opportunities are clearly perceived through a comparison of consumption patterns for
durables as well as non-durables between the rural and urban markets. Identifying
opportunities and clarity in decision-making requires an unambiguous definition of rural
marketing. Rural marketing and rural markets are conceptualised to clearly distinguish
them from urban marketing and urban markets. Limitations in the approach used for
identifying the rural markets are also examined.

AREA OF OPERATION
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 behavior that
the marketer may find difficult to contend with.
The use of the existing network of channel members in rural markets is the key to
connecting with the rural heartland. Haats and melas, which are unique to rural
markets, supplement the retailer route to rural markets. The interaction between
consumers and these unique institutions provides information for use in marketing
decisions. The marketing strategy is examined in the context of the competitive
situations in the rural market.

Competition is categorised into

(a) Generic competition,

(b) Competition with the unorganised sector,
(c) New entrants, and
(d) Meeting the challenges created by imitations.

The challenges faced by the marketer in these competitive situations lead, at the same
time, to the opportunities available in rural markets.

BENCHMARK’S INTEREST IN RURAL MARKETS

When rural customers discover the new and exciting choice of brands available in urban
markets, a demand for these brands is created in rural areas. Marketers have entered
the rural markets by extending the distribution of their existing offering or developing a
separate marketing strategy for the rural markets. There is an increase in the launch of
new products and brands in rural areas. In many product categories like cigarettes,
biscuits, soaps, etc., specific brands are developed only for rural markets. The rural
market, in both durables and non-durables, can be developed through new products
and suitable positioning.

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Benchmark’s Reasons for Interests in Rural Market
There are quite a few reasons for the growing interest in rural markets. A very
straightforward reason is the growth of these markets. The vast untapped potential,
increasing income and purchasing power, improved accessibility and the increasing
competition in urban markets make rural markets an attractive destination for
marketers of products and services. Entry into rural markets reduces the risk of
depending only on the urban market.

Untapped Potential
Rural markets offer a great potential for marketing branded goods and services for two
reasons:
• The large number of consumers: A pointer to this is the larger volume sales
of certain products in rural areas as compared to sales of the same products in
urban areas.
• Largely untapped markets: The penetration levels for many products are low
in rural areas.

Market Size, Penetration and Potential

The estimated size of India’s rural market stated as a percentage of world population in
2007 is 12.4 per cent This means that 12.4 percent of the world’s consumers live in
rural India. In numbers, this works out to about 120 million households. In India, rural
households form about 72 per cent of total households. The rural market consists of
742,706,609 persons out of the total population of 1,028,830,774 in the country
(Central Statistical Organisation, 2003). This is a huge market by world standards.
The consumption expenditure is higher in rural areas compared to that in urban areas,
though slightly less in relation to population size. Rural India accounts for two thirds of
the country’s annual private consumption expenditure of over Rs 2,500 billion
(Businessworld, 1997).
The per capita expenditure is slightly less in rural market compared to the urban
market. Rural consumers own only 52 percent of available consumer durables, even
though they form 72 per cent of total households in India. On an average, a rural
household owns three consumer durables as compared to seven owned by an average
urban household (NCAER, 1998). The gap clearly indicates the untapped potential in
the large number of rural households.

Unmet Needs/Low Penetration

Increase in the consumption of various types of products in rural markets creates
opportunities for marketers. Moreover, products that were considered suitable only for
urban markets are now in demand in rural markets as well.

Non-durables
Consumption levels for certain products continue to be low for non-durables despite the
growth in rural markets. ORG-MARG figures indicate the pharmaceutical sales in rural
India to be Rs 28.71 billion compared to the total domestic sales of Rs 155.34 billion.
Rural sales, thereby, work out as 18.5 per cent of total sales in the country. While per
capita annual drug expenditure in India is Rs 151, in rural areas this figure is a meagre
Rs 39 per person. The demand for health care, if anything, is higher in rural markets
than in urban markets. According to a National Council for Applied Economic Research
(NCAER) survey, the prevalence rate of illness for men is higher in rural areas at 105.5

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per 1,000 population as against 98.2 in the urban areas. For women, it is at similar
levels in urban and rural areas—at 108.4 per 1,000 population (Gothivarekar, 2003).
The cellular phone industry has a large number of subscribers in rural areas. Out of its
consumer base of 540,000 subscribers, BPL has close to 200,000 subscribers in rural
areas of Maharashtra, Kerala and Tamil Nadu. In Andhra Pradesh and Karnataka, Bharti
has about 30 per cent of its total subscriber base in smaller towns and villages (Law,
2000). The share of 30 per cent is low compared to the potential for cellular phones in
rural market, and this is reflected in the high growth in the sales figures for the product
in the rural markets.

Current Consumption a Pointer to Potential

The purchase and use of certain durables and non-durables by consumers in rural areas
is more than that by consumers in urban areas. In the case of all fast moving consumer
goods (FMCGs) taken together, sales in rural markets contribute to 30 per cent of the
overall sales.
While for all FMCGs the percentage contribution to sales is more than 30 per cent, there
are at least five products where the rural market has a larger share than the urban
market (Table 1.1).

TABLE 1.1
Rural Market Share of Consumption
Non-Durable Product Share of Rural Market (%)
Washing cakes/bars 65
Batteries 64
Blues 57
Iodised salt 54
Safety razor blades 53
Washing powders 47
Toilet soaps 44
Tea 43
Biscuit 39
Shampoo 38
Toothpaste 31
Source: Dobhal, 2005.

WHY RURAL MARKET?

Increasing Income and Purchasing Power

India’s rural population of 74 per cent has 58 per cent of the country’s total disposable
income. The rural markets also indicate increasing incomes, with agricultural output
increasing from 176 million tonnes in 1991 to 215 million tonnes in 2004 (IBEF, 2004).
The agriculture development programmes of the government have helped to increase
income in the agriculture sector. This, in turn, has created greater purchasing power in
rural markets. Studies by NCAER provide evidence of the increased income of rural
households. Households in the lower income group have become less while there is a
strong growth in the number of upper middle and higher income households.

The road network has facilitated a systemised product distribution system to villages. In
the past, companies relied on a ‘trickle down’ of stocks to the buyer in interior villages,
which resulted from the active participation of channel members. In this system, the
village retailer made fortnightly visits to a bigger retailer

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in the nearest tehsil (sub-division of a district) level town to make purchases and the
large retailer in the tehsil town procured goods from the district headquarters. The
district headquarters were, therefore, the terminal point of the company distribution
channel. Today, an increasing number of companies are supplying
village markets directly. Increasing direct contact with villages helps product promotion
and availability of the product in the village shop. Marketers of durable goods use direct
contacts as a means to promote and attract consumers to dealer points in large feeder
villages or towns, locations from where a large number of interior villages get their
products. Delivery-cum-promotion vans traversing eight to 10 villages a day and
covering haats or mandis (markets) is a widely used method of direct contact in rural
areas. The subject of rural marketing has relevance because of the need for a different
marketing approach necessitated by variation in consumer behaviour and income
levels, as also by differences in the macro- and micro-environment of consumers
located in rural areas. The important aspects of the micro-environment are the type of
channels available in serving rural markets and also the type of media available to
promote products in rural markets. The type of infrastructure in rural areas has
implications for marketers. The geographically spread-out nature of markets also
requires different approaches to these markets. Rural marketing is, therefore, not
limited to behaviour and attitude of customers but also includes the influences on
marketing decision variables that result from the non-urban location.

MANPOWER
Benchmark envisions operating a Retail Chain in Rural India with the brand name of
‘SAUDAAGAR’. These stores will be operating on franchise model, and the manpower is
required to cater to this chain of retail stores. The product class will include, but not
limited to, FMCG, Medicine, Health Packages, and Developmental Programs etc. People
interested in the concept & having heartfelt desire to excel in the Rural Indian
Landscape should apply for the job vacancy. Benchmark promises a highly professional
work environment, matching the best in industry standards for the right candidate.

WHAT WE REQUIRE FROM YOU

As per the position applied for, we require a brief note on your opinion of the role you
assume will be helpful for the company on your appointment. How you will be adding
value to the company as a team member and as an individual? Also what is your vision
of the market potential of rural India.
On receipt of your note, we will analyize the same and call you for a personal interview
to evaluate your candidature. Also state your compensation expectations from the
company regarding your employment.

Wishing all the very best.

Alok Misra
CEO & MD
Benchmark Enterprises Private Limited
alok.benchmark@gmail.com

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