Chapter 11

Marketing in Small Towns

Rural Marketing, 3/Ed Pradeep Kashyap

 Learning Objectives

• Define small towns, their potential and relevance

• Understand the behaviour of small-town customers

• Understand the strategic importance of small towns for rural

marketers

Rural Marketing, 3/Ed Pradeep Kashyap

2
 Small Towns and Their Potential

• Towns with population of less than one million

• Availability of adequate land, lower construction costs a great

advantage

Share of Total
Number Share Income
Disposable
of Cities of HHs per HH
Income
Tier I 8 29% 186,000 39%
Tier II 26 15% 129,000 14%
Tier III 33 9% 136,000 9%
Tier IV 5,094 47% 114,000 39%
TOTAL 5,160 100% 100%

Rural Marketing, 3/Ed Pradeep Kashyap

 The Potential of Small Towns

• Small towns constitute 59% of the urban

population

Town Population (in per cent)

Source: McKinsey Global Institute.

Rural Marketing, 3/Ed Pradeep Kashyap

 The Potential of Small Towns

• Income levels and buying power

Distribution of India’s Urban Population by City Tier

Rural Marketing, 3/Ed Pradeep Kashyap

 The Potential of Small Towns

• Income levels and buying power

Distribution of Households by Income and Size of Town (in per cent)

Rural Marketing, 3/Ed Pradeep Kashyap

 The Potential of Small Towns
• Bridge between urban and rural

Small Towns as Bridges Between Urban and Rural India

• Small towns cater to 200 nearby villages

• Infrastructure opportunities

Rural Marketing, 3/Ed Pradeep Kashyap

 The Potential of Small Towns

• Penetration
of
durables and
FMCG

Household Penetration of Durables and FMCG Products (in per cent)

Rural Marketing, 3/Ed Pradeep Kashyap
 The Potential of Small Towns
• Penetration of durables and FMCG
Household Penetration of High-end Durables in Towns with Less
than 100,000 Population

Rural Marketing, 3/Ed Pradeep Kashyap

 Small Town Consumer
Behaviour
• Expenditure pattern in small towns matches that
of bigger towns.
Distribution of Routine Expenditure by Size of Town (in per cent)

Rural Marketing, 3/Ed Pradeep Kashyap

 Small Town Consumer
Behaviour
• Growing affluence, leading to a better standard of living.

• Increase in awareness and education due to penetration of

DTH, C&S and Internet

• Changes in aspirations and lifestyle especially amongst youth

• Increasing brand awareness and preference for premium

products and services

• Consumer buying behaviour in small towns reflects both urban

and rural and is therefore a mix

Rural Marketing, 3/Ed Pradeep Kashyap

 Strategic Importance of Small
Towns for Rural Marketers
• As selling and redistribution centres
Products Purchased from Different Locations by Rural Consumers (in per cent)

Rural Marketing, 3/Ed Pradeep Kashyap

 Strategic Importance of Small
Towns for Rural Marketers

• As servicing centres

• As a hub for availing services in the area of health,

education and financial services

• As the agricultural linkage

• As a place for leisure and entertainment

Rural Marketing, 3/Ed Pradeep Kashyap

Products Purchased from Different
Locations by Rural Consumers
Larger
Nearby Larger
Nearest Town
Products Village Shandy/ Village City
Town Close
Mela Close by
by
Groceries 79 8 7 18 7 7

Food articles 82 12 8 18 8 6
Cosmetics
73 12 13 29 11 11
and Toiletries
Stationery 48 7 11 27 13 11

Agri-inputs 16 9 12 34 20 20
Clothes /
8 11 9 35 22 28
Footwear
Durables 6 7 7 37 25 35
All figures in percentages. For further details refer Table 11.6

Rural Marketing, 3/Ed Pradeep Kashyap

 Rural Marketing Case
Philips Lighting
Refer to video case and answer the following questions:

1. Give examples of two leading brands that have faced a

similar problem of commodification in small-town
markets. Explain how they responded to this challenge.
2. Why do you think this campaign achieved phenomenal
success?

Rural Marketing, 3/Ed Pradeep Kashyap

 Successful Mantra in Small
Towns

Observe the Linkages with Cities and Rural Areas

Rural Marketing, 3/Ed Pradeep Kashyap