Rural Marketing

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@ Conceptual clarity about fundamental Rural Marketing
concepts: Rural and Rural Marketing.
@ Learn about evolution of Rural Marketing in India
@ Comprehend the Rural Marketing process as Rural

Marketing Model
@ Comparative analysis of Rural vs. Urban Marketing

m
@ Census of India (2001), defines rural as, that what is not
urban.
@ Urban is: All locations with a municipality/ corporation,

cantonment board or a notified town area committee.
All other locations satisfying all the following Criteria:
a) Minimum population of 5,000.
b) At least 75 percent of male workforce
engaged in non-agricultural activities and
c) Population density of over 400 persons per sq km
á

@ Most FMCG and Agri-input companies define rural as a
place with the population up to 20,000.
@ Consumer Durable companies consider any town with

population below 50,000 as a rural.
@ Some MNCs define rural/semi urban area as all cities

other than seven metros.
@ Rural in marketing parlance is also defined as an area,

which begins where the controllable distribution and
media reach ends.

@ Customers in India have also been divided into three broad
groups in terms of geography and sociological
characteristics (Jha, 2003):
a) Urban
b) Rural
c) Rurban
@ Rurban being the overlap between the two, with

pretensions to being closer to urban in physical features
and proximity to large urban centers, but with deep rural
sociological moorings.

@ Planning and implementation of marketing function
for the rural areas.
@ It is a two way marketing process, which encompasses

the performance of business activities that direct the
flow of goods from urban to rural areas (for
manufactured goods) and vice-versa (for agriculture
produce) and also within the rural areas
(Gopalaswamy, 2005).

It is a distinct specialization of marketing discipline,
which encompasses customized application of
marketing tools and strategies to understand the
psyche of rural consumer in terms of needs, tailoring
the products to meet such needs and effectively
delivering them to enable profitable exchange of goods
and services to and from the rural market.

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@ Úo understand demographic profile of rural India
@ Be aware of different poverty alleviation and developmental
programmes of government in the rural areas
@ Analyze the rural consumption and spending patterns

M
'
@ Draw an interrelationship between agriculture, rural income
and consumption patterns
@ Understand the electricity infrastructure availability across
rural India
@ Comprehend the nature and characteristic of rural market

()
@ 75% of Indiaǯs and 12.2% of worldǯs population lives in 6, 38,365
villages of India spread over 32 lakh square km.
@ 90% of rural population is concentrated in the villages with

population less than 2000.
@ Comprises of 13.5 crore households, constituting 72% of total

households in India with 48 crore adult individuals.

()
@ Rural is not homogeneous across the country. Variations in
exposure to urban centers and extent of development in a
region have resulted in tremendous heterogeneity.
@ Úhe consumerǯs willingness to accept innovation varies

significantly from one rural market segment to another.

á
@ Rural India is generating more than half of national
income.
@ 41% of Indian middle class homes and 58% of disposable

income exist in rural India.
@ Income contribution of 55.6% to the national income by

rural population of 74.6 crore is higher than urban Indiaǯs
with 25.4 crore people contributing 44.6%.

á
@ Per capita income turns out to be significantly lower in rural areas
because of the large population base. Study by NCAER revealed that
annual household income for rural areas in 2002 was Rs.56,630 as
compared to Rs.1, 02,963 in urban areas.
@ Rural accounts for 92 lakh middle-income households, having

annual income in range of Rs.30,001 to Rs.1,25,000 and urban like
consumption.
@ If there are 1.0 crore high and upper-middle income households in

urban India then there are 76 lakh in rural India.

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@ As per NCAER, in 2002 per capita annual income in rural areas
was Rs.9, 481 whereas in urban areas it was Rs.19, 407 and the
national average was Rs.12, 128.
@ Rural incomeǯs Compounded Annual Growth Rate (CAGR)

between 1970-71 and 1993-94 was 10.95% compared to 10.74% in
urban areas. (EÚIG 2002-03)

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(

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@ Rural and urban incomes were more evenly distributed in 1994-95
compared to 1975-76, but all India inequality has marginally

increased. Úhe share of rural income in 1975-76 was 66.8%.
According to the MIMAP survey of 1975-76, the urban household
earned an income on an average 1.82 times the rural households,
while the MIMAP survey in 1996 indicated the gap has widened and
increased to 2.1 times. (Pradhan, 2000)

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@ Úhe Gini Index, which is a standard measure of income
distribution among individuals or households in a country,

shows that inequality had risen from 30 in 1991 to 38 in
1997, owing to the wide disparity in economic growth and
distribution between rural and urban India.

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@ nly 3.8% of the rural households, with 2.8% of rural population
reported an income of more than Rs.1200 per capita per month while
28.5% of households with 24% of population reported similar
income in the urban areas.
@ Per capita income in rural India is only about half of urban Indiaǯs,
the status of disposable income is a roughly the same with the rural
consumer paying virtually nothing for health, education, housing
and food.
á
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@ Rural is not as poor as it is widely perceived to be. If there are
large number of poor people in villages than good number of
rich are also present.
@ Between 1982 and 1999 per capita village incomes increased by

70%, population increased by 47% and the share of non-farm
income in total village income rose to almost 50%.
@ In 1971, 82% of men in the 25 to 44 age group in rural areas

reported their primary activity was either farming or
agricultural labour, this figure dropped to 73% in 1982 and to
53% in 1999.
á
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@ Between 1971 and 1982 the proportion of prime working age men earning
income outside the agricultural sector rose from 10% to 16%, by 1999 this
figure had more than doubled to 36%. As this ratio increases, the cyclical
and unpredictable nature of Indian agriculture may have lesser impact on
rural incomes and consumption than before.
@ Comparison of findings of MIMAP survey in 1994-95 with similar survey

conducted by NCAER in 1975-76 revealed a significant decrease in share of
income from farm sector from 37.8% to 20.5%, increase in share of income
from salaries from 22.7% to 33.6% and other incomes from 7.2% to 12.4%
during the two decades (1975-76 to 1994-95).

@ 32.5 crore people lived below poverty line (BPL) in India,
which is around one third of the population.
@ Incidence of poverty in rural areas at 39.4% is much higher

than 28.4% in urban areas.
@ About 80% of poor lived in rural areas in 1995, but that does
not mean rural is only poor. More than 60% of rural
population is above poverty line and in actual terms it comes
out to be large number.

@ Percentage of BPL families declined from 46% to 27%. But,
actual numbers remain almost same.
@ Figure of population BPL varies significantly from one state to

another. rissa having 48% population below poverty line is
different from Punjab where it is just 6% (Planning
Commission, Govt. of India).
@ Úherefore, far ranging generalities cannot be developed on the

basis of nationwide figure and regional variations need to be
taken into account while developing any strategies for rural
market.
(

á
@ Land reforms
@ Gram Sadak Yojna
@ Providing Urban Amenities in Rural Areas (PURA)
@ National Rural Employment Guarantee Act
@ Integrated Rural Development Programme (IRDP)
@ Jawahar Rozgar Yojna: largest rural poverty alleviation
programme through public works. It was launched in 1989 by
merging National Rural Employment Programme (NREP) and
Rural Landless Guarantee Programme (RLEGP).

@ As per Francis Kanoi Marketing Planning Services, rural market
for FMCG was Rs.65,000 crore, for durables Rs.5,000 crores, for
tractors and Agri-inputs Rs.45,000 crore and for two and four
wheelers Rs.8000 crore a total of Rs.1,23,000 crores.
@ Not competing in rural market removes a company from about

half of necessity products market 1/3 of emerging products and
a 15% of lifestyle products in value terms.

@ Per capita expenditure on education of the urban households
was 4.5 times that of rural, twice on health, five times more on
rent.
@ Rural households hardly change their house or go for vacation.
@ Úhey save only fraction of money and spend the rest. And when
there is growth in income, the money goes straight into
consumption.
@ Úhus, the actual disposable income in a rural household comes

nearly to be the same of urban ones.

@ Úhere was three-fold increase in consumption of packaged goods in rural
areas (1984-89) and percentage of rural market in all Indian market
increased from 28 to 37%.
@ Rural FMCG market was worth Rs.44,000 crore in 1998 amounting to over
half of total Indian market and grew at an annual average rate of over 12%
between 1993-98.
@ Úhe share of expenditure on food item is going down in rural areas. In 1993-
94, food accounted for 65% of average rural per capita natural expenditure.
By 1999-2000, it had come down to 62%. It is not because of any fall in the
real expenditure on food. In fact there has been a sharp rise in the per capita
real spending on non-food items.

@ Rural household spends Rs.3, 203 per year for FMCGs that is
Rs.267, per month and this figure excludes cereals, pulses,
vegetables and milk. Úhis amount could vary between Rs.365
and Rs.175 depending in the socio-economic status of the
household (IRS 1999). Úhis seems to be a small number but in
the context of huge market size of rural India it leads to huge
numbers.
@ Rural telephone density has gone up by 300% in the last 10

years; every 1000 plus population is connected by SÚD. During
1981 - 2001 number of pucca houses doubled from 22% to 41%
and kuccha houses halved (41% to 23%).
M

@ Rural literacy has improved from 36% to 59%, but a long way
to go.
@ Úhere is increasing trend of public school education even in
rural areas, especially in progressive and developed states like
Punjab.
@ Úhere are more literate people in rural India (16.5 crore) then
in urban India (16 crore) but, head of household reported no
formal education in 51% of rural households and same was
only in 16% of urban households, while the all India level is
41%. Úhe share of income of these 41% of households was only
27.9%.
M

@ More than 55% of head of households reported at least

secondary education in urban areas whereas figure was 15% in
rural areas.
@ In about 26% households, head was a graduate or a technical

degree/diploma holder in urban areas, had 38.5% of income,
while 2.3% of such households have 4% of income in rural
areas.
& (

@ 56% of the households in the country had an electricity

connection in 2005. Úhe majority of households not having
electricity are in the rural India.
@ verall electricity connections, duration of power availability,

and power fluctuation in rural parts, needs to be considered
while designing the products for the rural market.
& (

@ Úhere is a great deal of variation amongst states. About 90%

of houses in Punjab and Goa are electrified, in Jharkhand it
is 25%, whereas in Bihar, at the bottom it is 10.3%. In states
like Haryana, Jammu & Kashmir, Gujarat, Karnataka, Úamil
Nadu, Maharashtra, Kerala and Madhya Pradesh more than
70% households are electrified.
á

@ India was ranked 138th as per Human Development Report

(HDR) 1997.
@ Indiaǯs infant mortality rate of 75 per thousand live births is

one of the highest in the world.
@ Access to potable water, health care, sanitation and shelter

are a far cry, particularly in the rural sector.
á

@ Kerala has highest HDI, 80% higher than national average,

although its per capita income is less then 17states.
@ India is at 103rd rank in 123 countries in Gender Disparity

Index (GDI) with a value of 0.41. But, Keralaǯs GDI value of
0.597 is at par with Mauritius, which is 80th in the world and
UPǯs GDI value of 0.31 match the tail end countries.

@ Large and Scattered market
@ Heterogeneous market
@ Significant %age of Income from agriculture
@ Lack of Infrastructure Facilities

M
'

@ utline the challenges in the Rural Marketing
@ Learn how to overcome those challenges
@ Understand the opportunities offered by rural market
@ Comprehend the factors that are leading to increasing

opportunities in the rural markets
@ Know how to make the best use of opportunities offered by the

rural markets

@ High Distribution Cost
@ Understanding Psyche of Rural Consumer
@ Limited knowledge of Rural Market
@ Communication
@ High Cost per Contact
@ Sale of Fakes and Spurious Products
@ Low Budgetary Allocations
@ Urban orientation and bias
@ Lack of right competence and commitment at frontline
level

'

@ Low literacy levels of rural population
@ Úraditional lifestyle
@ Low per capita income and poor standards of living, average size of
farm is 1.5 hectare and 60% of farming is rain fed.
@ Backwardness of the rural masses
@ Low exposure to different product categories and brands
@ Vastness of spread: highly dispersed and thinly populated markets,

42% of villages have population less than 500
@ Variation in languages & dialects.

'

@ Seasonality of demand
@ Modification of Marketing Mix for rural market
@ High initial market development expenditure
@ Inability of small retailer to carry stock without credit facility
@ Communication problems; Mass media not enough for promotion
@ Banking and credit problems
@ Management and sales force managing problems
@ Inadequate infrastructure facilities (lack of physical distribution,
roads, warehouses, poor connectivity, transportation)

@ Rising Rural Prosperity

@ Lesser Dependence on Agriculture & Monsoon
@ Increasing Rural Consumption
@ Increasing Rural Marketing Efforts
@ Increasing Sale of Branded Products
@ Large Population

*
Rural market has following arrived and the following
facts substantiate this.
@ 742 million people
@ Estimated annual size of the rural market
Ȉ FMCG Rs 65,000 Crore
Ȉ Durables Rs 5,000 Crore
Ȉ Agri-inputs (incl. tractors) Rs 45,000 Crore
Ȉ 2 / 4 wheelers Rs 8,000 Crore

*
@ In 2001-02, LIC sold 55 % of its policies in rural India.
@ f two million BSNL mobile connections, 50% in
small towns/villages.
@ f the six lakh villages, 5.22 lakh have a Village Public
Úelephone (VPÚ)
@ 41 million Kisan Credit Cards issued (against 22
million credit-plus-debit cards in urban) with
@ cumulative credit of Rs 977 billion resulting in
tremendous liquidity.

*
@ f 20 million Rediffmail signups, 60 % are from small
towns. 50% transactions from these towns on Rediff
online shopping site
@ 42 million rural HHs availing banking services in
comparison to 27 million urban HHs.
@ Investment in formal savings instruments: 6.6 million
HHs in rural and 6.7 million in urban

@ Infrastructure is improving rapidly.
Ȉ In 50 years only 40% villages connected by road, in next 10
years another 30%.
Ȉ More than 90 % villages electrified, though only 44% rural
homes have electric connections.
@ Ȉ Rural telephone density has gone up by 300% in the last 10
years; every 1000+ pop is connected by SÚD.
Social Indicators have improved a lot between 1981 and 2001
Ȉ Number of ǲpuccaǳ houses doubled from 22% to 41% and
ǲkucchaǳ houses halved (41%to 23%)
Ȉ Percentage of BPL families declined from 46% to 27%
Ȉ Rural Literacy level improved from 36% to 59%

@ Low penetration rates in rural so there are many
marketing opportunities.
Durable Urban Rural
CÚV 30.4 4.8
Refrigerator 33.5 3.5
Shampoo 66.3 35.2
Úoothpaste 82.2 44.9

A Marketers can make effective use of the large available
infrastructure
Post offices 1,38,000
Haats (periodic markets) 42,000
Melas (exhibitions) 25,000
Mandis (agri markets) 7,000
Public distribution shops 3,80,000
Bank branches 32,000

@ Proliferation of large format rural retail stores which
have been successful also.
DSCL Haryali stores
Ȉ M & M Shubh Labh stores
Ȉ ÚAÚA/Rallis Kisan Kendras
Ȉ Escorts rural stores
Ȉ Warnabazaar, Maharashtra (annual sale Rs 40 crore)

)

M
'
@ Comprehend rural consumerǯs buying behaviour
@ Know the factors that affect rural consumerǯs purchase
decision
@ Examine the rural consumerǯs lifestyle
@ Develop a generic profile of rural consumer
@ Know the rural consumerǯs shopping habits
@ Analyse the rural consumerǯs increasing trend towards
consumption
m" #$
@ Rural India buys.

A Products more often (mostly weekly).
A Buys small packs, low unit price more important
than economy.
A In rural India, brands rarely fight with each other;
they just have to be present at the right place.
A Many brands are building strong rural base without
much advertising support.
A Chik shampoo, second largest shampoo brand.
A Ghadi detergent, third largest brand.
A Fewer brand choices in rural: number of FMCG
brand in rural is half that of urban.
A Buy value for money, not cheap products
?
m"

#$
@ 1.
Rural Market Is a Homogeneous Mass
@ m Itǯs a heterogeneous population. Various tiers are

present depending on the incomes like Big
landlords; Úraders, small farmers; marginal farmers: labors,
artisans. State wise variations in rural demographics are
present viz. Literacy (Kerala 90%, Bihar 44%) and Population
below poverty line
(rissa 48%, Punjab 6%)
m" #$
3
3
@ m : 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.
m" #$
3.

m : Decision making process is collective. Purchase

process- influencer, decider, 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).

@ Socio-cultural factors
@ Group
@ Family
@ Role and status
@ Sociability
@ Economic Factors
@ Political factors

a. Influence of Social Custom
A Customs are socially accepted norms that have been
in practice over a long period of time.
A Rural India, isolated from new practices and
customs, tend to follow the customs of its traditional
societies
A E.g In many part of India touching another person
body with one`s feet is considered taboo.

b. Úradition
A Úraditions are long-standing belief that are believed
to be true in nature and often practiced in a
ritualistic manner, without knowing the origin, or
questioning the need to do so.

Impact of Úradition on communication
A A tradition that after washing the hair, it should not
be left open is based on the believe that this gives an
opportunity for `evil spirits` to enter.
A In some areas, leaving hair loose reflect loose
character of women

c. Úhe influence of Caste
A In Rural India, the upper and lower caste differences
still continue and are considered an important facet
of everyday life
A In Urban classification of houses are LIG,MIG and
HIG. While in rural its harijan basti, dompara,
brahman tola etc.

d. Sub-Culture
A E.g.- Model Incompatibility- A prominent tractor

company based in north decided to expand its
operation to the south. Armed with the knowledge
that the Sikhs farmer representing the agriculture
success, the company featured Sikh riding a tractor
in field.
A Úhe communication was found irrelevant in the
south because here Sikh farmer was unknown as a
symbol of success

Social Class
R1- landlord farmers, educated, exposed to urban

environment, with tractor, bike, ÚV., LPG ,
refrigerator.
R2- Rich farmers with 5 acre of land, may not be
educated, but want children get educated
own tractor, bike, ÚV., LPG , refrigerator.

R3- Average land holding 2-5 acre, manage small savings,
children sent to village school, low risk take, own
product like ÚV, tractor.
R4- has little or no land, agriculture labor, BPL, a major
purchaser from public distribution system

Product offering by ICICI to each segment
R1- Farm equipment loans and insurance, saving accounts,

high value policies and IP
R2- Working capital loans, farmer saving accounts,
Personal accident and health insurance, weather insurance.

R3- Crop Loans, commodity financing , farmer saving
accounts, Personal accident and health insurance, weather
insurance.
R4- Micro finance, jewel loan etc.

A Emergence of new institutions in rural India, which
have become part of social fabric have brought forward
new reference point and influence in the form of
professional workers such as 6

Family
A Individual are branching off, to form nuclear
families they continue to live in the traditional
family compound(under one roof)
A Úhese hybrid family is termed as `individualized
joint family(IJF).
A IJF take decisions independently for FMCG and
Consumer durables

Roles and Status
A In rural sector, caste plays a very important role in
defining social status, where as in urban status is
linked to the work done by the person, his
occupation and profession.
A Individuals such as leader, medical
practitioners, retired military personnel and priests
enjoy a high status in village.
A Úhey constitutes the upper level of society
regardless of their economic status and represent
role models of success.

Product and status symbol
A Úractors have become symbol of status in rural life.
A In parts of India like Punjab, the Horse Power(HP)
of the tractor and company name determine the
status.
A A farmer owning 50 HP tractor from Ford, is
considered a person with power and money
M

@ Rural consumer is very religious
@ Rural consumers prefer to work hard
@ Strong family ties and respect for family values
@ Likes to play cards and hangs out at choupal

@

Úraditional utlook
@ Different Perception and its influence from urban consumer
@ Less Exposure to Marketing Stimuli
@ Conscious for Value for Money
@ Realistic Aspirations
@ Different Concept of Quality
@ Attitude towards prestige products
@ Suspects hype and fear of being cheated

+

@ Preference for small or medium package
@ Significant role of retailer
@ Influential role of pinion Leaders for purchase of

durables

M
'
@ Understand the importance and necessity of segmenting the
rural market
@ Being aware of different parameters to segment the rural

market
@ Know about different IÚ based tools that can help in

segmenting the rural market by calculating the relative and
actual market potential value of different segments of the
rural market
(

@ Based on Size of Population of Village

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@ Class-I villages: population over 5,000
@ Class-II villages: population between

1,000-5,000
@ Class-III villages: population less than 1,000

)
M

@ Villages - near the Urban Centers
@ Villages - in Developing Districts Villages:

)
-

@ Marginal farmers holding up to 1.0 hectare
@ Small farmers holding 1.0-2.0 hectares
@ Semi-medium farmers holding 2.0-4.0 hectares
@ Medium farmers holding 4.0-10.0 hectares
@ Large farmers holding 10.0 hectares +

)

Gaikward, suggested following segmentation on
sociological basis :
@ Proprietors of large land tracts

@ Rich farmers
@ Small peasants or marginal farmers
@ Úenant farmers
@ Agricultural labourers
@ Artisans and others
)

@ Rural rich consumer
a) Concentrated rich consumers
b) Scattered rich consumers
@ Rural consumers around urban area
@ Rural consumer above poverty line
@ Rural consumer below poverty line

NCAER, has classified the Indian consumers into five classes:
@ Destitutes: Have income less than Rs.16,000 per annum

(market for basic, economical and essential commodities)
@ Aspirants: Have annual income in the range of Rs.16,000-

Rs.22,000 (market for basic durables)
@ Climbers: Income is between Rs.22,000-Rs.45,000 per annum

(market for consumables and consumer durables)

NCAER, has classified the Indian consumers into five
classes:
@ Consumers: Income is between Rs.45,000-Rs.2,15,000 per

annum (market for consumables and consumer durables)
@ Very Rich: Úhose having income greater than Rs.2,15,000

per annum (market for international brands)

Market
@ Úhompson Rural
.
Index
@ Mica Rural Market Rating
@ Linquest
@ Indian Market Demographics
@ Business Intelligence Unit
@ Lincompass
@ ARCVIEW
á
.

@ Step I: Define relevant market

@ Step II: Analysis of characteristics and wants of
potential customers
@ Step III: Identify basis for segmenting the market
@ Step IV: Define and describe market segments
@ Step V: Analyse competitorǯs position
@ Step VI: Evaluate market segments
@ Step VII: Select market segment(s)
@ Step VIII: Finalise marketing mix (es)

.

(

@ Socio-cultural, economic development and Infrastructural
Environment of different districts.
@ Density of population of different villages
@ Heterogeneity and homogeneity of population
@ Mobility, Media availability, cost of access to an area
@ System of interaction

/

/

0 0 !"
Product Acceptability
Price Affordability
Place Availability
Promotion Awareness

/

1. Availability
A Úhe first challenge is to ensure the
availability of the product or service.
A India`s 6,38,000 villages are spread over 3.3
million sq. km; 742 millions Indian may
live in rural India but finding them is not
so easy.
A Given the poor state of roads, it is an even
greater challenge to send products to far-
flung villages on a regular basis
A Marketers must trade off the distribution
cost with incremental market penetration

/

2. Affordability
A With low disposable income, products need to be
affordable to rural consumers, most of whom are
daily wage earners.
A Some companies have addressed the affordability
problems by introducing small unit packs.
A Cinthol, Fair Glow and Godrej in 50 gm priced at
Rs 4 to 5. Lifebuoy at Rs. 2 for 50g.
A Videocon`s Washer, without a dryer priced at Rs.-
3000

/

3. Acceptability
A Úo gain acceptability for the product or service,
there is a need to offer products that suit to rural
market.
A E.g. from LG .
A Because of the lack of electricity and absence of
refrigerators in rural areas provides low-cost ice
boxes,i.e. tin box for new outlets and thermocole
boxes for seasonal outlet
A HDFC standard life tied up with NGs and
offered reasonably priced policies in the nature
of group insurance cover

/

4. Awareness
A With large part of rural India inaccessible to
conventional advertising media- only 41% of
rural households have access to ÚV- building
awareness is a great challenge.
A HUL relies heavily on its own company-
organized media. Úhese are promotional events
organized by stockist.
A Godrej Consumer Products, which is trying to
push its soap brands into the interior areas, uses
radio to reach the local people in their own
language.

A Úhe rural consumer judges the offering on the basis of
product features and quality, services mix and the
appropriateness of the offering`s price.
A Most companies treat rural markets as a dumping
ground for low-end products designed for urban
customer.
A Marketers can penetrate rural by innovating their
products.

A Before launching products in the rural segments, it is
essential to understand and appreciate the cultural
dynamics of rural areas, as well as the specific needs of
rural people.
A E.g. Cadbury launched ChocoBix, a chocolate-
flavored biscuits, based on the consumer insight that
rural mothers opts for more affordable biscuits rather
the more expensive chocolate bars for their children

A Moreover, the acceptance of a product in a rural
markets is not only determined by consumer needs
and wants but also by physical and social
environment like the status of infrastructure
facilities.
A Úhe product has to satisfy rural needs and should be
value for money.
A Úhe product that rural consumer intends to buy also
depends on his attitude towards it as well as on the
cost-benefit analysis done by him before buying it.

Customized offer for rural market
A Philips found that rural consumer are willing to pay
higher price for large models because of their belief
that a bigger item must be costlier to produce.
A Company makes its rural models one and half times
larger and louder than ones sold in urban market.
A Smokeless chulha or a wood-burning stove in
Karnataka.

Five levels of Products
ABased on value proposition, marketers need to
think five levels of product offering namely,
core benefits, basic products, expected
product, augmented product and potential
product.
AÚhe core benefits and basic benefits remain the
same both in rural and urban. However,
differences may start appearing from the third
level onwards.

A At the third level, marketer prepares an expected product
and defines a set of attributes and conditions that buyer
normally expects when he purchases a product.
A A rural ÚV buyer expects good picture quality, clear sound
and easy to operate set, where as an urban consumer looks
for a digital sound, flat screen, child lock picture in picture
etc
A A motorcycle buyer in rural expects good shock absorbers,
fuel efficiency and low maintenance cost, where as an
urban buyer expects good appearance, power and style.

A At fourth level, the marketers prepares an
augmented product that meets the customer`s
desire beyond expectations.
A E.g. ÚV that run on batteries and provide better
picture quality in weak signal conditions and on-
screen display in local language for easy
operation.
A Philips launched free power radio, which
requires neither batteries nor electricity for
operation. A one Ȃminute winding of the spring
with a lever allows the user 30 minutes if listening
time.

A At fifth level potential product comes, which
encompasses all the augmentations and
transformations that the product might ultimately
undergoes in the future.
A Here marketers search for new ways to satisfy their
customers.
A E.g. by offering bulbs that can sustain high voltage
fluctuations or home appliances that can run on
alternate source of power.
Ê
M
'
@ Comprehend the different objectives behind new product
development
@ Understand the conceptual background of new product

development process
@ Learn the differences between the products that are meant for
rural and urban markets
@ Understand the necessity of having exclusive product

development process for the rural markets
Ê (
@ A new product does not necessarily mean an
invention. It can mean anything from a path breaking
invention in a field to a minor modification or
addition to an already existing product.
@ Úhere exists a spectrum of newness about the new

product.
Ê (
@ An organisation might launch:
a) a totally new product line

b) a new type of product that it was already
manufacturing
c) a new model of the existing product
d) just another variant of the same model by
making some cosmetic or technical alterations.
' Ê M

@ Úo satisfy the change in consumer demand
@ Úo counter the moves of competitors
@ As per strategic decision of organisation to expand product

range or product line.
@ Úo remain aligned with changes in technological environment,

which enable launch of new products
@ Úo increase sales and profit of the organisation

' Ê M

@ Single product businesses are likely to be more vulnerable
in the globalised environment
@ As per the policy of planned product obsolescence
@ Úo have different products at different stages of product

life cycle (PLC) to prevent serious fluctuations in profit
levels.
@ As products have to eventually enter the decline stage of

PLC it is rational to have new products coming up timely.
Ê á
@ Exploration Stage
@ Screening Stage
Nature of Demand
i. What will be the target market?
ii. How large can the demand be?
iii. What will the consistency of demand over a period of time?
iv. What are the growth prospects?
Compatibility:
i Whether new idea matches with corporate objectives?
ii. How is it likely to impact the existing product lines?
iii. How much easy or difficult it will be to incorporate
new idea with existing strategies and work processes?
Ê á
@ Resources: :
i. What amount of money, time and technological

capability will be required to develop new product
based on suggested idea?
ii. Whether company has the resource capacity to

pursue the idea and develop the product effectively?
iii. What will be the opportunity cost of pursuing a

particular idea or the cost of foregoing other ideas?
Ê á
@ Competition:
i. What are competing alternatives to product idea?
ii. What is the nature of the industry and competition for

the proposed product?
iii. What are the strengths, weaknesses, opportunities and

threats that are associated with the product idea in
line with competitive scenario?
á!%&&
Úo develop detailed product specifications about the new
product as per needs of rural consumers:
@ Product should be need satisfying solution: no frills
and psychological benefits.
@ It should be simple and easy to use.
@ Convenient to store
@ Appearing to be tough and solid
@ Product must be affordable
@ As per rural product usage environment
@ Urban imagery (feel and comfort)
á!%&&
@ Business Analysis Stage:
- What will be the cost?
- What will be potential demand over a period of time?
- When the costs are likely to be recovered?
- What will be the likely return on investment?
@ Product Development Stage
@ Development of Marketing Mix

Êá

A Úhe product development process remains the same
for rural and urban markets excepts in the case of
product specifically used in rural market.
A ne aspect that is often ignored in designing products
for rural markets is the product fit with rural lifestyle
and environment
A It is easier for marketers to relate the product to
themselves in the urban since they belongs to urban
area.
Êá

A So, it is important to conceive of a product idea and
build a product concept in the rural environment by
gaining a first hand understanding of consumer
lifestyle and behavior
A E.g. Max Gas, HPCL 5-Kg Cylinder
Êá

A Úhe test marketing of any new product is the most
important factor that decides the failure or success of
the product.
A It becomes critical in the rural context as the chances
of failure are often high.
A Úhe product needs to be tested in different
geographies as consumer responses could be different
in different regions due to socio-economic and
physical characteristics of a place.
A E.g Jalshodhak
M
M
'
@ Understand conceptual background of Product Life Cycle (PLC)
@ Comprehend the manifestation of PLC concept in the rural market

of India
@ Be aware of Rural Marketing strategies that need to applied in rural

markets for different stages of PLC
@ Have a critical assessment of the actual applications of the Product

Life Cycle concept
M M%
@ PLC represents sequence of stages through which a product
or product category passes through over a period of time
from the moment when it is introduced in the market for
the first time to a stage of a decline when it is withdrawn
from the market.
@ Conventionally, there are four stages of PLC:

Introduction
- Growth
- Maturity
- Decline
á
M
Duration of PLC is determined by following factors:
@ Market conditions
@ Growth of particular market segment
@ Úrends in buyer spending capacity
@ Úechnological developments in the industry
@ Company policy of planned product obsolescence.

á
M

/

@ Introduction Stage:
@ Growth is slow.
@ Sales volume is also low.
@ Product awareness is limited.
@ High marketing cost: launch and setting distribution network
@ Profits are unlikely at this stage.
@ Focus: Úhe focus at this stage is to:

@ Build awareness about benefits of product category
@ Establish distribution network

@Product Strategies:
@ Smaller Packages, if it is possible
@Place Strategies:
@ Creation of Distribution Networks
@Promotion Strategies:
@ Edutainment
@ Reaching the pinion-leaders
@ Úargeting the Innovators or Early Adopters
@ Category Growth
@Pricing Strategy:
@ Introductory Pricing
@ Penetration Pricing Strategy

@ Rapid growth in sales and profits
@ Economies of scales for the production
@ Even lower prices are possible on account of lower cost of
production, which lead to additional growth
@ Seeing the growth in a product category the competitors
move in the market
Focus:
@ Úo build brand preference
@ Úo increase market share

@ Product Strategies:
@ Brand Reinforcement
@ Modification or Value addition in the Product Design
@ Making Product more Relevant for the Customers
@ Launching Medium Packaging
@ Pricing Strategies:
@ Lowering the Price

@ Place Strategies:
@ Strengthening Relationship with Distributor
@ Deepening the Penetration
@ Promotion Strategies:
@ Increase in Promotional Budget
@ Highlighting Quality or Performance of the Product
@ Úargeting the Early Majority

@ a) Intense competition
@ b) Similarity or standardization of products and services
@ c) Weaker or non-serious players gradually start withdrawing.
@ d) Úhis is the dream stage for sales and marketing
professionals, as maximum sales and maximum profits comes
at this stage and most of the brands tend to stay in this stage
for a longer time than in other stages.
@ Focus:
@ Defending the market share
@ Maximising the profit

@ Elongate the Maturity Stage
@ Product Strategies:
@ i. Revitalise the Product
@ ii. Product Differentiation: Úo Avoid Brand
Commoditisation
@ iii. R&D to Enhance features
@ Promotion Strategies
@ i. Modification in Promotion-mix
@ ii. Brand Repositioning
@ iii. Promote Product Differentiation
@ iv. Úarget Late Majority and Laggards

@ Place Strategies:
@ i. Deepen the Distribution Network:
@ ii. Incentives to channel partners
@ Price Strategy:
@ i. Lowering Prices
@

á
Sales starts dropping

@ Demand diminishes
@ Market for product category shrinks
@ Inventories start piling up
@ verall profits start declining for entire industry.

á

@ Rejuvenate the Product
@ Harvest the Product
@ ffering the Product to Loyal Niche Segments
@ Find New Applications for the Product
@ Link the Product with other Products
@ Brand Harvesting
@ Maximum Efficiency in Marketing and Production
@ Liquidate the Product
M

@ Rural India is not single homogeneous market, which will be in same
PLC stage for a product category through. Rural market for purpose
of application of PLC is of three types: Developed, Developing and
Under-developed rural. Each of them may be at very different stage
of evolution for the same product category.
@ Segmentation of rural market is pre-condition for application of

PLC.
g
M

A In Most cases, the product is developed for urban market
and later pushed into the rural market.
A Now-a days companies started customizing their products
for rural markets
A E.g. LG
A PLC in rural market is often longer than it is in urban

market due to multiple challenges involved in the
distributions, Communication and adoption of the product.
M

A Úhe strategies during the different stages of PLC remain
similar in both urban and rural market, but the length of
each stage depends on consumer acceptance,
innovativeness, price proposition and trehe nature of the
product.
A Most companies that have introduced products in rural
markets are struggling to grow the market.
A Úhis is forcing company to re-engineer their product(Free
power radio) or introduce low priced packs
M

A Úhey are also trying to change consumption patterns
through consumer education(increasing soap usage
frequency from weekly to daily) and adopting alternate
channel to reach deeper(HLL`s Project Shakti, haats,
mandies)
A Úhe decline of product in rural is slow; it is hastened
sometimes because of technology advancement.(from
VCR to VCD players)

A Marketers have sufficient control over internal factors
and they are in position to use them in compatibility
with the external environment, in order to achieve
desired results
A Úhe internal factors affecting pricing includes cost and
the company`s pricing objectives

a) Cost
A Rural market required huge efforts and resources
devoted to all elements of marketing mix and in
many cases companies also need to invest in market
development
A In order to tap rural markets, marketers have to
allocate sufficient resources for packaging, no. of
SKU`s and promotion strategies suitable for these
markets. Credit based transaction in rural market
also increase the cost.

b) Pricing bjectives
A Pricing objectives need to be compatible with the
marketing strategy, including target market
selection and the desired product positioning.
A Úhere is usually trade-off between the quality on
offer and price, so price is an important variable in
positioning
A Hence the firm`s pricing objectives must be clearly
identified in order to determine optimal pricing.

1.Profit Maximization in the long run
A Company should not expect short-term profits when
entering to rural market.
A Initially they should develop the market by
introducing the product at low price with low profit
through penetration pricing of the products

2. Keeping up with competition
A Company that have an objective to meet the
competition set price to beat the leader`s price.
A Úo be able to compete effectively, marketers are
forced to become lowest cost producers and manage
with only a few channel intermediaries to minimize
distribution costs.
A E.g. fairever, Ghari, Ujala Etc.

3. Increasing sales volume and market share
A In sales maximization, management sets an
acceptable level of profitability and then tries to
maximize sales
A Úo accomplish this objective, the firms need not only
keep prices low but also make investments in R&D,
distribution and other element of marketing mix.
&/

a) Customer
A Marketers need to understand the price sensitivity of
customers who form the target segment of the
products that the are trying to sell.
A Úhe price sensitivity of customers is based on
various personal, social, economic, or geographical
factors and this presents a major challenge for
marketers while setting price.
&/

b) Suppliers
A Distribution is the most difficult task in rural
because of 6 lakh village locations compared to
the 5,000 odd towns in urban.
A Marketers have to consider the compatibility of
the companies target customers with a particular
retail format and their preferred mode of
payment for a particular product category.
A Úo extend distribution, a sub stockiest may be
required in the small town in addition to existing
channel. Úhis would entails an additional margin,
increasing the company`s channel cost.
&/

c) Competitors
A Earlier for large company competitions was
mainly from lower priced regional brands.
A But now, with arrival of multiple national and
international player in rural market, these players
defining competition in some product categories.

1. ptional-product pricing-
A It is pricing of optional or accessory products
along with the main product
A E.g. company selling tractors for a low price but
charging high prices for servicing and spare parts
2. Value Pricing
A due to increased competition forces company
provide `valueǯ Products to retain sells
A E.g. Godrej No.1 soap placed their offering
containing rose, sandal wood and neem
ingredients at a very economical price

3. Coinage Pricing
A It is mostly used in rural markets for FMCG
brands. For the convenience of retailer and
consumers, company adopt these kind of pricing
in order to avoid problem caused by shortage of
Change.
A Coinage price is directly proportionate to the
package size. Úhese packs are small in size and are
specially meant for one time, one day or one week
consumption.

4. Psychological Pricing
A Úhe price- quality relationship refers to the idea
that consumers tend to equate product quality
with price charged.
A E.g. in the colour ÚV Segment, LG at higher price
is considered a better buy than Úexla and Jolly
brands particularly in R1 house hold.

A Companies should not only price their products competitively,
but also offer their rural prospects maximum value for money
through aggressive cost structure.
A Re-designing of products for rural market should be done to

maintain a low cost for the products. Refill packs are a good
example in this case.
A Price decision should be influenced by income received, when

it is received and how it is allocated. As rural labourer either
get daily wages or the farmers get major income during the
harvest season.

A Companies must follow penetration pricing for
quality product. As two for one deal and coupons are
not very effective marketing tools, it is better to price
products as low as possible in the first place.
A FMCG companies can cut cost to maintain the price

points by reducing the net weight of the products or
doing away with freebies and promotions.
á

(

A Accessing rural markets presents challenges as these
markets are geographically spread out with a large no.
of retail outlets.
A So the task before the marketers are
a) Úo assure that the product reaches to rural outlets
b) Úo motivate the retailer in rural markets to stock a
product or a brand, because the no. of items stocked
by the rural retail store is lower than the urban retail
store.

,

A Úhere was a time when rural consumers purchased
most of their requirement nearby towns. Recently it
has been observed that there has been a greater shift
towards purchasing locally.
A Consumer loyalty can be to the brand or to the retailer.
Úhe influence of the retailer is perceived to be high in
rural market and more so for durable
A Úhe consumer loyalty pattern also suggests that
promotion by the retailer is more important in rural
market.

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á &

1. Profiling the target audience
2. Determining the communication objectives
3. Designing the message
4. ensuring the effectiveness of message
5. Selecting the communication channels
6. Designing the promotion strategy and integrating
the communication process
á &

1.Profiling the target audience
A Who uses the brand?
A Who buys the brand and why?
A Who decides which brand is to be bought?
á &

2. Determining Communication objectives
A Úo bring about awareness among a certain

percentage of target audience
A Úo improve knowledge to generate interest
A Úo strengthen the liking or preference of product.
A Úo persuade the consumer to buy the product
á &

3. Designing the Message
a) Rational Appeal
A Úhey appeal to the audience self interest
A E.g.- Ramco asbestos, Babool, Úata Shaktee GC
sheets.
á &

b) Emotional appeal
A Úhese attempt to stir up negative or positive
emotions that will motivate purchase.
A E.g. Kayam Churna, Birla White
c) Moral Appeals
A Úhese appeal to the audience`s sense of what is right
and proper
á &

4. Message Effectiveness
a) Language
b) Pictorial presentation
c) Form of message
d) Source of message
e) Context association
á &

5. Selecting the communication Channel
a) Personal- Advocate, expert and Social channel
b) Non personal
á &

6. Deciding the Promotion Mix

#
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ÚV Wall Painting Direct mailer
Radio Folk media Point of sale
Press Video Van Word of mouth
Cinema Haat and mela Interpersonal

communication

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1.Wall painting
A Wall paintings are important because it constantly
remind rural people about the brand name and logos
in addition to highlighting the key brand promise
A Úhey are economical as compared to the other
traditional media form, as manpower and
infrastructure requirements are low.

A Úhey can be easily customized in accordance with

regional language variations.
A Audience recall rates are high

Limitations
A Lack of availability of wall space at prominent
location
A Úhe quality of wall space available is not
satisfactory. Úhe base of rural wall structure is
generally not smooth and this impact the final
output.
A No exclusive wall rights are given to the company
A Wall paintings are generally an outsourced
operation. ften the job on paper appears to have
been completed but in reality this is not the case

Rural Marketers Rule

A Wall sites around public gathering like haats,
mandis and melas should be selected in order to
maximize the impact and reach of the advertised
message.
A It should be made at eye level, so that they are
easily visible; the height also ensures that villager
do not spoil them by urinating against the wall.
A Active monitoring is required

2. Direct Mail
A Direct mailing involves sending out single pieces
of mail-letters, flyers to a specific and targeted
audience
A Direct-mail marketers hope to sell a product or
service, collect of qualify leads for the sales force,
communicate interesting news, or reward loyal
customers with a gift.

Advantage
Ë Audience selectivity
Ë Personalization
Ë Allows early testing and measuring of results
Limitations
Ë Relatively high cost
Ë `junk mailǯ image

3. Folk media
A Folk media consist of folk songs, folk dances and
other theatrical forms including puppetry, street
theatre and magic shows, which are intrinsic part of
the culture and heritage of the land
A Úhey are capable of communicating messages about
contemporary issues, topics and concerns as per the
needs and demands of a changing society.
A Úhey are face to face and personal form of
communication
A Úhe essentials characteristics of folk media are that
they are interactive, repetitive and narrative.

Disadvantages
A Folk media involve high costs
A Úhe visible costs are due to intensive
preparations that go into the making of a
successful campaign
A Úhe invisible costs of handling contingencies
A Implementation costs are also high. Costs are
incurred during the campaign in attempts to
penetrate deep into the rural markets.
A Úhe availability of the right kind of troupe,
talent and skills can dramatically affect the
implementation of a campaign

Rural marketer`s Rule

A Folk media are a useful channel to promote/
propagate generic issues that can be woven easily
into the scripts
A A campaign is not likely to be very successful if its
focus is solely on brand promotion since people
are clever enough to understand that it is merely a
product promotion.

A Úhe timing of performance is very crucial. show

should be held during the time of the year when
farmers are relatively free.
A Úhe medium used should also gel with the
culture of region.e.g the î dance is popular
in Rajasthan, but it will not draw an audience in
West Bengal.

4. Video Van- use of AV vans to reach rural audiences

Advantages
A Úhe van can double up a mobile exhibition vehicle
to perform demonstrations and carry product
sample to induce trial. Úhe van promoters can do
retail merchandising and carry out door-to-door
campaigns
A Úhe van acts as a point of attraction of focus of
attention, around which people gather in large
no. Úhis is particularly useful in those areas where
it may not otherwise be possible to organize a
large gathering.

Disadvantage
A Úhe cost per person contact works out to be high.
A typical van campaign for 26 days cost around
Rs. 85,000. Úhe van covers 2 villages per day and
targets around 100 direct contact.
A Úhe number of children who gather for film
shows is generally much higher, than the number
of the actual targeted segment.

0
M
'
@ Comprehend the constituents and characteristics of FMCGs
@ Understand the characteristics of Indian FMCG industry in pre

and post liberalization scenario
@ Be aware of challenges for Indian FMCG industry
@ Understand phenomenal boom for FMCGs in rural market
@ Be aware of penetration level attained by different FMCG

categories
(
@ Fast Moving Consumer Goods, also called consumables or
consumer-packaged goods or Non-durable Goods
@ A tangible item that is quickly consumed, worn out or out

dated and consumed in single use or few uses.
@ Any product that is used very frequently, sometimes daily

and move relatively faster (consumption at least once in a
month) at the retailer end.
(
@ Essential, low price goods, which get repeat sales.
@ Consumer products used for personal, family or household

use are further classified as:
- Convenience
- Shopping
- Specialty categories.
(
@ Consumers tend to spend minimum of effort in
comparisons and buying them.
@ But, much of astute marketing activities have evolved from
these products, where consumers show low involvement,

get wider choice and are allured by a host of inducements.

@ FMCG is 4th largest sector of Indian economy with estimated market
size of Rs.85,000 crores in 2003, a significant direct and indirect
employer.
@ In 2004 total of Rs.89,161 crore was spent by households on four of non-

food categories: Personal care and effects (Rs.1, 959 crores), toilet
articles (Rs.21, 603 crores), sundry articles (Rs.17, 274 crores) and
miscellaneous consumer goods (Rs.48, 325 crores). (Sundry articles
miscellaneous goods exclude items of food, clothing, footwear,
durables, pan, tobacco and intoxicants, medical expenses and
educational expenses, entertainment and consumer services).

@ Rs.53,000 crore of Rs.89,000 crore was attributable to rural
areas.
@ Úhe proportion of non-food to total consumption expenditure

has risen steadily year after year from 36.2% in 1987-88 to
40.6% in 1999-2000 to 46% in 2003.
"$ &$!'"
!(!
) *+
@ Úhe FMCG sector got a huge facelift in the post-liberalization

era.
@ Economic reforms led to an overall increase in income levels in

the country, pushing up the demand for FMCG goods.
@ India has become one of the most tempting markets for

multinationals.
"$ &$!'"
!(!
) *+
@ Changes that were brought in industry structure by changes of
macro-economic regulatory environment in 1991 are:
@ It became relatively easier to set up business in the sector
@ rganisationsǯ increasingly reaching deeper into the mass rural
market
@ Increased penetration of media in rural areas enabling
promotional effort.
@ Increased activity and investments by MNCs in India
@ New categories within categories were created in products
(feminine hygiene products, men's toiletries, processed foods,
branded atta, etc.).
"$ &$!'"
!(!
) *+
@ Price war amongst players for greater share of the Indian FMCG
market.
@ Fierce competition led to consolidation in the industry. Many
companies left certain/all FMCG businesses (which were their

non-core businesses)
@ Increase in product offerings
@ Many local and regional players also got market savvy and
emerged as tough competitors for the national players.
@ Emergence of customer centricity.

# &$ $$!$'"

#)!,
@ Packaging innovations - particularly sachetization
@ Pricing innovations - providing different price points to

choose from
@ Product innovations - locally relevant products e.g.
ready-made chappatis
@ Delivery innovations - mobile retailers, e-tailing, direct
marketing
@ Supply chain innovations - real time delivery models
reducing erstwhile inventory
carrying costs and stock-out losses

@ Heavy launch costs
@ Presence of a large unorganized market
@ Úhe pace of competition
@ Criticality of distribution network
@ Price sensitivity and capacity to consume
@ Importance of brand building
@ Rise of Regional Brands
@ Large number of SKUs

@ Sustaining Growth in Mature Categories
@ Increasing Penetration for Emerging Categories
@ Innovation
@ More spending options with Consumers
@ Price Wars
@ Commoditization of Brands
@ Downgrading
@ Counterfeits
@ Providing Aspirational Value at an Affordable Price
@ Low rder Value per Rural Retailer per Visit

)
@ Post-reforms, industry's growth has been hinging around
burgeoning rural population, which has witnessed significant
rise in disposable incomes.
@ Successive good monsoon has led to dramatic boost in crop

yields. Food grain production was 20 crore tonnes during fiscal
1999 against 17.6 crores tonnes logged during fiscal 1991.
@ Not just improved crop yields; tax-exemption on rural income

too has been responsible for this enhanced rural purchasing
power.

)
@ As the urban markets are getting saturated in most of the
mature consumer non-durable goods categories, the industry
players are attempting greater rural penetration as a future
growth vehicle.
@ AC Nielsen 2004 rural report reveals that it may be marketerǯs

perception, and not the buyerǯs pocket, that is holding the
rural FMCG market back.
@ Úhe average monthly per capita rural spend on FMCG is

already at Rs.208, compared to Rs.1193 for urban areas.
'"
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@ Úoilet soap, washing cakes, washing powder, tea, hair oil
and cooking media products categories that contribute for
over 60% of the overall FMCG market (which was over
Rs.91,500 crore for basket of 22 products, in 1998-99 and
was over Rs.1,10,000 crore in 2003).
@ Hindustan Levers has a household penetration in rural

areas of 88%, Nirma has 56%, for Colgate Palmolive it is
33%, Parle Foods has 31% and for Malhotra Marketing it is
27% penetration.

m&
@ Brands with highest penetration in rural markets are Lifebuoy
for toilet soaps with 91%, Wheel in washing cake/bars with

88%, Lipton Úaaza in tea 77%, Nirma for detergent powder
70%, Úata salt in salt 64%, Parle G in biscuit category 61%. Úhis
clearly indicates significant penetration of branded products
in the rural market.
&/
+
( /

@ 44% is on food articles as tea, biscuit, salt and coffee.
@ 20% on toiletries
@ 13% on washing material
@ 10% on cosmetics
@ 4% on ÚC products
@ 9% on other consumable
"
@ Úhe rural market looks attractive for the FMCGs.
@ Úhe penetration levels are increasing year after year, because of
aggressive approach of corporate sector on one hand and the
rising disposable income in the rural areas on the other.
@ Úhe new consumers are entering the market every year and the
bottom of the pyramid is shrinking.

"
@ It is up to corporate world and acumen of marketer, to develop
innovative model for taking his goods to the rural heartland in
a cost effective manner.
@ Changes in lifestyle, rising incomes and a focus on value, are
pushing up growth for different product categories in the rural
areas.
"
@ Indications of larger disposable income and a perceptible shift
in consumption priority in the rural sector also appear to be

favoring the FMCG marketers.
@ Úo be successful, organisations need to develop business
models and marketing mix strategies that are as per changed

scenario in the rural markets of India.
"
@ It is the responsibility of the companies to supply a right
product to the right customer at right time at the right place at
the right price.
@ Úhe companies shall no longer decide the marketing mix for

rural market in accordance with the urban consumer alone;
but the rural customer shall decide it.

á

M
'
@ Comprehend the characteristics of Consumer Durables
@ Understand how and why the marketing of consumer durables

is different from FMCGs
@ Examine the issues with regard to rural marketing of consumer

durables
á
(
@ Durable goods are tangible goods that usually last over an
extended number of uses. Úhey need more personal selling and
service, command a higher margin and require more seller
guarantee.
@ Úhe consumers spend saving of few months or years on these

articles and want to be doubly sure on the long time
performance of these articles.
á
(
@ As most of the consumers especially the rural ones are
purchasing them for first time, they require lot of information

and reassurance and guarantee.
@ In most of cases live demonstration of the benefits prior to the
purchase is extremely important.

á
(
@ Rural market for GroupȂI consumer durables (priced less than Rs.1000 in
value: transistors, pressure cookers, wrist watches, bicycles) was bigger
than the urban markets in as early as 1999.
@ Rural market was likely to be bigger than the urban one by the year 2001-02
itself for GroupȂII durables (Rs.1001-Rs.6,000 in value : items like B&W
ÚVs, sewing machines, mixers, cassette recorders).
@ Even with the larger population base in the rural areas the growth rate for
the GroupȂI and GroupȂII durables is faster than the urban ones.
&" #á
*.*'"

@ Úhe amount of money that is spent, perceived risk that

is associated and the involvement of the consumer are
significantly higher for consumer durables than for
FMCGs.
@ Consumer durables are purchased once in few years

whereas FMCGs are purchased daily, weekly or monthly.
&" #á
*.*'"

@ Consumer behaviour in consumer durables is either

complex or dissonance reduction. Úhe consumer
behaviour for FMCGs is either habitual or variety seeking.
@ Úhe effort made by the customer in searching for the

information and discussion with the opinion leaders
might last for many months for consumer durables. But,
the purchase decision for FMCG can be made on the basis
of sudden impulse or the recommendation of retailer.

á

@ Lesser penetration
@ Lack of Infrastructure
@ Purchase priorities different in rural market
@ Purchases in towns and semi-urban centers
@ Importance of segmenting the market
@ Importance of studying the consumer behaviour

á

@ Majority of the sales of the consumer durables happen in
the urban centers but the consumers are from the villages
and even those living in the semi-urban centers have a
rural mindset. Úherefore, organisations need to study the
need profile and the buying behaviour of the rural
consumers and accordingly develop the marketing mix for
them.
@ Rural markets are evolving and there are no frameworks to

understand rural consumer behavior, marketer needs to
conduct thorough research to have consumer insight.

á

@ Instead of a marketing general, a developmental leader is
needed who can involve and integrate different stakeholder in
the marketing mix.
@ managers need to visit rural areas quite periodically to have the

direct feel of the market in which an organization is operating.

á

@ Úhe patchy once or twice a year promotional effort can only
bring results to a limited extent.
@ Úhere also must be shift in the marketing mindset of selling

products made for urban areas to rural population with urbane
promotional campaigns.

á

@ Úhe focus needs to be changed from high value to high volume
sales, from ǲone size fits allǳ to creative thinking.
@ A strategic, committed and integrated approach to rural

market can pay rich dividends. Úherefore, there must be
unwavering commitment from the CE and similar sentiment
in the frontline sales staff that has to actually implement the
vision.
á

M
'
@ Be acquainted with Indian retail market
@ Grasp the realities of Indian rural retail channel
@ Examine strategies for managing rural retail channel

(
@ Retailing is, ǮAll the activities involved in selling goods or
services directly to final consumers for their personal non-
business use.ǯ (Kotler, 1998).
@ Retail store, a place where the exchange of goods takes place

with the customer is defined by Philip Kotler as, Ǯany business
enterprise whose sales volume comes primarily from retailing.ǯ
(Kotler, 1998)
@ Retail mix is the mix of variables including price, location,

communications, merchandise, physical attributes, services and
personnel.

(
@ Retail is primarily classified into two sectors as: organised
and unorganised retail sector, depending on how it is
undertaken.
@ rganised retail sector has a single organisation having

large format retail stores providing wide varieties of goods
in good number of locations.
@ Unorganised sector has large number of organisations

having single, small retail outlets with limited variety at
single location.

@ Rs.8,10,000 crore Indian retail market is most fragmented
in world, with just 2% of entire retailing carried out by the
organized sector (CRISIL).
@ Úhere are more than 60 lakh retailers in India. India is the

only country with one retailer for every 200 people. More
than 1 crore 50 lakh people are engaged in this business.
Úotal turnover for retail business is likely to go up to
Rs.13,50,000 crore by the year 2010 (McKinsey-CII study).

@ Retail business in India is one of largest in world and a joint
CIIȂMcKinsey report has estimated it is growing at a rate of
11-12 per cent annually.
@ Retail is the not only the largest component of the service

sector but almost double the size of the next largest broad
economic activity in the service sector. With contribution
of 14% to GDP and employing 7% of the total workforce
that is 4.2 crores, it is only second after agriculture.

@ Rural markets are relatively virgin markets, which evolved on
their own with very little direct contact with them by the
corporate world, but their size is compelling and attractive.
@ f 33 lakh retail outlets in India in 1999, 21 lakh were in rural

areas.
@ 7 Indian states account for 76% of countryǯs total rural retail

outlets.
@ 184 districts accounted for 69% sales in 1999.

@ In interior villages retailing is part time chore in a part of
house. Úhe maintenance costs for retail outlets in interior
villages are also low with most of cost spent on traveling and
transportation.
@ In the 6,38,000 villages penetration into rural areas is

facilitated through the wholesaler, semi wholesaler, arhatia
and itinerant merchant network through 3000 odd towns,
5000 wholesale assembly markets (with lot of overlap) and
about 25,000 'haats/shandies'.

@ ne of main reason for explosion of retail and its fragmented
nature is that it is a form of disguised unemployment /
underemployment.
@ vercrowded agriculture sector, stagnating manufacturing

sector, hard nature of jobs and low wages in both, many
Indians are virtually forced into retail sector.

@ Given lack of opportunities, it is almost natural decision to
open a small shop depending on the available means and
capitals. Úhis explains the million of kirana shops and small
stores.

@ Number of product categories stocked by rural retailer is
almost the same for FMCG products as an urban retailer.
If, rural retailer was stocking 19 product categories then
the urban retailer stocks 27.

@ What varies is the number of companies they are dealing

with, 42 for rural and 92 for urban. So when we multiply
number of companies by their brands or variants and
Stock Keeping Units (SKUs), difference come in
thousands. If there are 30 categories, each has 30 brands
and for each there are 30 SKUs. It becomes 27,000 SKU.
&
mm"$#
@ Retailers are closest to point of purchase and have access to a
wealth of information on consumer shopping behaviour.
@ Retailers have unique advantages for managing brands:

continuous and actionable dialogue with consumers, control
over brand presentation at point-of-sale, control over shopping
environment, display location/ adjacencies, and signage. Úhey
use this advantage with success.
&
mm"$#
@ Retailerǯs recommendation carries weight for Rural consumers.
@ Retailerǯs relation with customer is based on the

understanding of their needs and buying habits and is
cemented by retailer credit.
@ Rural areas having different retail environment; require

separate marketing strategies in order to penetrate into rural
markets.
&
mm"$#
@ Mega Marketing: rganisations need to plan and

implement integrated effort for managing rural retail
channel. Stand-alone efforts are likely to provide limited
success.
@ Understanding Retailer Behaviour: Úo develop ability to

influence retailer to stock and promote products of an
organisation requires identifying the manner in which
he performs retailing.
&
mm"$#
@ Ensuring Availability: Availability is not a substitute for

creating purchasing power or driving preference, but is
a first step towards it. If marketer delivered their
product at retailer doorstep, they might prefer those
products or brands because; their time and
transportation cost is reduced.
&
mm"$#
@ Provision of Credit: By selecting financially strong

distributors and stockists, organisations can ensure
provision of credit to the rural retailers through these
channel partners.
@ Úhese channel partners can decide the quantum of

credit to be offered to which retailer on the basis of their
local knowledge.
&
mm"$#
@ Companies can have a tie-up with banks and

financial institution for the provision of credit to
their distributors so that they can buy the goods
from the companies in even larger quantity and can
then provide these goods to the creditworthy rural
retailers at a credit.
&
mm"$#
@ Provision of Quantity Based Discount for Distributors: By
offering quantity based discounts, organisations can
motivate distributors to lift stocks in good quantity and
then to make special efforts to take them to rural retailers.

&
mm"$#
@ Appointing Rural Sub-stockists: rganisations can appoint

the sub-stockists in the rural areas itself, in the larger
villages. Úhese sub-stockists on the basis of their in-depth
knowledge of adjoining villages can distribute the goods to
retailers in the smaller, interior and adjoining villages in a
cost effective manner and can serve retailers in the villages
on regular basis.
&
mm"$#
@ Provision of Van Subsidy for Rural Distribution:
rganisations can provide van subsidy to distributors who
use vans to distribute products in rural areas. Úhese
subsidies can be linked with sales volume or mileage
depending on the market scenario of the region.

&
mm"$#
@ Placement of Company Staff with the Distributors: Úo

monitor and motivate sales effort of distributors in rural
market. Úhese staff members can be selected locally to
have better knowledge of local terrain and will also be able
to talk with rural retailers in local dialect. Úhey can act as
eyes and ears of company and can conduct formal and
informal research at retailer and consumer end and
inform company on a periodic basis competitorǯs moves of
the in their territory.
&
mm"$#
@ Exclusive Distribution Network for Rural Sector: Úhis
focused approach has itsǯ own advantages as well as
challenges. If the rural markets can get better attention
and service and enable deeper penetration and more
revenues then there can be channel conflict because of
the consequent overlaps.
)
)

M
'
@ Comprehend concept of brand management
@ Analyze the prevalence and marketing approach of regional

brands especially in rural India
@ Understand competitive dynamics of regional and national

brands
@ Know the process of building brands in rural areas
@ Examine the response of rural consumers toward the

phenomenon of branding
)
(
@ A brand is a promise of seller to deliver a specific set of benefits
or attributes or services to the buyer.
@ Brand loyalty is ǲthe degree of consistency in buying particular

brand(s) as a function of cognition, emotion, satisfaction,
commitment, habit and positive attitude towards brand(s)ǳ.
m & $ &m !
@ Spread of cable & Satellite Úelevision
@ Understanding of the needs of Regional Consumers
@ Low verheads
@ Legacy
@ Large enough Regional Markets
@ ne-to one Relationship with Channel Partners
@ Entrepreneurial Spirit
)
)

@ Customization
@ Relevance
@ Below the line media
@ Slice of life message in local parlance
@ Enabling recognition
@ Word of mouth publicity

(

@ Comprehend the environment for marketing of agricultural
inputs: tractors, fertilisers and agro-chemicals industry
@ Understand policy environment of fertilisers and

agrochemicals
@ Have a brief overview with respect to agricultural inputs

industry: tractors, fertilisers and agro-chemicals industry

@ Learn the factors that affect the sales of different agriculture
inputs
@ Know the penetration levels in tractor industry
@ Be aware of classification of tractor, fertiliser and agrochemical

industries
@ Understand the trends with respect to consumption and

purchase of agricultural inputs over a period of time

@ Understand opportunities and challenges of marketing of
different segments of the agricultural input industry
@ Understand the factors that suggest good potential for

marketing of agricultural inputs in the future
@ Know different marketing strategies for different agricultural

input companies to effectively tap the rural market potential
! !
@ India is number one in the world in irrigated land area and 2nd in
arable land (17 lakh hectares), but lacks far behind in agricultural
productivity.
@ Indian agricultural output could become uncompetitive in the long

run if it fails to improve yield and quality of output.
@ ne way to improve productivity is to increase the level of

modernization of inputs and mechanization, which is abysmally low
in the current scenario.
@ Agriculture remains one of the least invested sectors and will require
a concerted effort in order to give a boost to the agricultural input
industry.
)!( !
@ Agricultural input industry can be broadly classified into:
Consumables agricultural inputs : seeds, fertilisers, agrochemicals, oil
and lubricants.
Durable agricultural inputs include: tractors, agricultural machinery
(thrasher, harvester, etc.) and agriculture implements and tools
(cultivators, levelers, harrow, etc.).
@ Marketing ecosystem for the key agricultural inputs, which varies

from one product category to another.
@ Marketing of consumables like fertilisers and agrochemicals different

from one another & different from marketing of durable inputs like
tractors.
& !(
@ Indian tractor industry was 2nd largest in world in volume
terms in 2002 up from 4th position in 1998.
@ Performance of tractor industry of India is closely linked with
the ups and downs in the agriculture output on account of
natural forces and intervention of government and corporate
sector.
@ Úo overcome volatility, Indian tractor industry has started
looking at the entire globe as its market by taking advantage of
low manufacturing cost in India.
@ Leading domestic brands and international giants are tapping
the global market by using India as a manufacturing base for
tractors and components.
! !( &,
@ From just about 50,000 units a year in early eighties the size
of tractor market in the country has grown up to over
200,000 units.
@ In terms of number of tractors sold, average volumes are

around 250,000 units per annum out of the world market of
about 8 lakh.
! !( &,
@ In terms of penetration per thousand hectares, the tractor
density of 10 tractors per 1000 hectares is significantly lower
when compared with the world average of 50-60 tractors per
1,000 hectares.
@ Úhere were more than 12 players in the sector, but five players:
Mahindra & Mahindra (including Gujarat Úractors), ÚAFE,
Escorts, Punjab Úractors, and HMÚ accounted of 98% of
industry sales in 2002.
"& & !(
@ Úractor industry on the basis of the horsepower of the engine
is broadly classified as:
Small : less than 30 Horse Power (HP)
Medium: between 31 and 40 HP
Large : more than 40 HP
@ Medium segment accounts for 51-55% of the total tractor sales

and has the greatest competition, with all manufacturers
having a product in this segment.
"& & !(
@ About 30% of all the 2.4 lakh tractors sold in 2004
were those above 40 HP, up from 27% in 2003 and
21% in 2002. Úhe gain of the high-powered tractors
was at the cost of the below 30 HP range, which
saw their share in the total tractor sales going
down from 23% in 2002 to 19% in 2004.
"& & !(
@ Because of smaller land holding and limited availability of
finance small and medium (20-40 HP range) tractors were
first to develop quickly.
@ Higher HP tractors have started finding favour with

farmers, because of:
@ Easier financing for the more expensive, higher HP
tractors
@ Increased use of high power tractors for the harder soil
of west and south India.
@ Prestige and status associated with higher horse power
tractors
"$& ! !(
@ Low levels of mechanization
@ Fragmented nature of land holdings in India
@ Lack of infrastructure
@ Lack of access to easy credit
@ Low productivity
@ Cautious and price sensitive buying behaviour
@ Lower literacy level
@ Good food stock position with government
' '- )
& !(
@ Increase in corporate farming
@ Increase in literacy level in last decade
@ Clearing of piled-up inventory
@ Low level of farm mechanization
@ Governmentǯ thrust on increasing irrigation
@ Emphasis on agriculture financing
@ Emphasis on Rural Infrastructure Development

& !(
@ Consolidation in domestic tractor industry
@ utsourcing of tractors and components for global markets
@ Manufacturing in alignment with market demand
@ Initiating measures to stop advance selling
@ Addition of new features
@ Setting up satellite plants
@ Improving capacity utilization
@ Improving working capital management
'+!( !
@ Fertiliser sector constitutes the backbone of Indian agriculture
industry.
@ Government has played a very active role in the evolution,

marketing and development of fertiliser industry in India.
@ Fertiliser is not only one of the most capital-intensive

industries but its marketing ecosystem is also one of the most
complex in the Indian context.
@ Fertiliser marketing in India is very much different from other

agricultural inputs are marketed.
'+!( !
@ Úo ensure equitable supply of fertilisers at a price which most
of the farmers can afford, government of India regulates the

various facets of this industry especially for nitrogenous
fertilisers.
@ For urea fertiliser majority of marketing mix is determined not
by organisations manufacturing and marketing it but by policy

makers in government.
'!(! !
@ It started with setting up of first Single Super Phosphate (SSP)
manufacturing unit in Ranipet near Chennai with a capacity of
6000 MÚ a year.
@ Fertilisers, especially nitrogenous fertiliser (Urea) remain one of

the few highly regulated industries in India. Prices (retention
pricing), subsidies, distribution restrictions, imports and even
choice of technology, feedstock are controlled/regulated by the
government.
'!(! !
@ India's green revolution in late sixties gave a boost to the sector

and presently India is the third largest fertilizer producer in the
world. Úhe total capacity of fertiliser industry as on 30th March
2003 reached 121.10 lakh metric tonne of nitrogen and 53.60 lakh
metric tonne of phosphatic nutrient13. Presently there are 57
large fertilizers plants in the country producing urea, DAP,
Complex fertilizer, Ammonium Sulphate and Calcium
Ammonium Nitrate.
'!(! !
@ Application of fertilisers have helped transform agriculture
sector in India from being dependent on food grain imports
before independence to a stage of self-sufficiency.
@ Úhere are signs that the fertiliser pricing mechanism is being

reviewed, imports liberalised, tariff rates revised
and measures being debated to lower fertiliser subsidies. But,
it is a very complex decision, as it will affect millions of
farmers and any change that might happen be will in the
gradual increment form in case of extreme compulsion.
'!(! !
@ Phosphatic and potassic fertilisers were decontrolled in

August 1992. Úhis policy measure has widened the ratio in
which urea (relatively cheaper fertiliser) is applied by the
farmers in comparison with phosphorous and potassic
fertiliser (which are costly because of their deregulation and
non-provision of subsidy support for them).
'!(! !
@ Úotal consumption of fertiliser has gone up by 38.37% in the
period of about ten years from 1990-91 to 2001-02 with the state
of Punjab having the largest consumption per hectare.
@ India is the third largest fertilizer user in the world, average
rate of fertiliser consumption is 90 kg/ha (65% as N, 25% as
P25, 10% as K2). Úhis figure is low even in comparison of the
average for the state of Punjab where average fertiliser
consumption per hectare in 2005-06 was 208 kg.
@ Indian fertiliser consumption per hectare is just 1/6 to 1/4 of
the developed countries.
'!(! !
@ Average figure for fertiliser consumption for entire India does
not present a true picture. Average fertiliser consumption in
western and eastern zones of India is far below national
average of 90 kg/ha; these states have potential of using more
fertilisers.
@ UP is largest market for all fertilisers combined. AP is at 2nd

position and Punjab has third position.
@ Fertiliser consumption in per hectare terms is highest in

Punjab. Andhra Pradesh has second position, Haryana third
and Úamil Nadu comes as close fourth. Uttar Pradesh, is at
fifth position.
'!(! !
@ Punjab, Andhra Pradesh and Haryana have consumption in the
range 208 kg, 193.5 kg and 178.6 kg per hectare respectively,
Madhya Pradesh, rissa and Rajasthan have figures as 49.4 kg,
47 kg and 42.4 kg per hectare respectively. Arunachal Pradesh,
Nagaland and Sikkim have been 2.5 kg, 3.4 kg and 6.7 kg per
hectare respectively.
@ UP is largest market for nitrogenous fertilisers, Andhra Pradesh

at 2nd position and Punjab has the third position.
'!(! !
@ For phosphorous fertilisers, Andhra Pradesh is the biggest

market, Karnataka at 2nd and Maharashtra at 3rd position.
Úamil Nadu comes at fourth position, Uttar Pradesh comes
at fifth position and Punjab at tenth position.
'!(! !
@ Úhere is significant variation in fertiliserǯs consumption per
hectare across 525 districts.
@ 19 districts consume more than 200 kg/ha
@ 35 districts consume between 150-200 kg/hectare
@ 75 districts consume between 100-150 kg/hectare
@ 132 districts between 50-100 kg/hectare
@ 84 districts account for 50 per cent of the total consumption of

all fertilisers.
'!(! !
Úhe fertilizer consumption in India ranges from:
@ 1.1-325 kg of Nitrogenous fertiliser/ha
@ 0.8-153.8 kg of phosphorous fertiliser/ha
@ 0.2-129 kg of phosphatic fertiliser/ha
@ Úhere is disparity in average consumption ratio of N:P:K

(6.8:2.8:1 in 2001-02), which is more pronounced in the
northern states (29.1:10.9:1) indicating highly imbalanced use
of fertilizers.
@ Úhis disparity of highly skewed consumption ratio is on
account of subsidy on urea fertiliser and its non-availability on
the other two.
- ( #& &'
@ Government is involved in almost all aspects of Fertilizer
industry through different policy initiatives and subsidy.
@ Úhis has been done to ensure wide spread use of fertiliser and
attain self-sufficiency in fertilisers.
@ Urea is highly subsidised with estimate for the subsidy on urea

in the budget of 2001 being Rs.8,456 crore.
- ( #& &'
@ If subsidy on urea is removed its prices will shoot up.
@ As urea is affordable for farmers therefore, it accounts for 83%

of the nitrogenous fertiliser consumption in India.
@ Department of Fertilisers finalises norms for capacity

utilisation and feedstock/energy consumption by urea units
for different pricing periods.
m -$#/m-0
@ Pricing of urea is regulated by retention-pricing scheme
@ Introduced in 1997 to reconcile two conflicting objectives - increasing
cost of fertilisers and need to keep prices low.
@ RPS is cost-plus subsidy paid to urea manufacturers to compensate for
higher cost vis-a-vis selling price.
@ RPS is manufacturing unit specific measure, which is calculated for
each unit. A fair ex price is assumed for each urea-manufacturing unit
based on prescribed efficiency norms, capacity utilisation, raw material,
feed stock, energy consumption, etc. It includes a 12% post tax return in
net worth.
m -$#/m-0
@ Some steps are being taken to changeover from a cost-plus
system of subsidy to a flat rate of subsidy for each group of units.
@ Subsidy on urea can only be phased out gradually over a period

of time, if it happens at all. Sudden, withdrawal of subsidy will
lead to large increase in prices and can be disastrous for
industry, farmers as well as society at large. Úhis will lead to a
decline in fertiliser consumption as a whole and eventually, will
affect food grain production of the country.
á - (
@ Urea is covered by Essential Commodities Act (ECA) 1955.
@ Úhe government determines allocation of urea in different states for
each manufacturing unit.
@ Up to 50% of a stateǯs allocation of urea is reserved for farmersǯ co-
operatives.
@ If any manufacturer produced more than the state quota, the excess
quantity does not qualify for price and transport subsidy.
@ Initially fertilisers were distributed through government agencies
and cooperative societies.
@ Private trade was allowed to sell fertiliser only in 1966.
á - (
@ Private trade accounts for nearly 70% of the total fertiliser

business. Úhere are 2,72,000 fertiliser sales points in India 25%
of them are institutional agencies, most of them cooperatives
and remaining 75% comprise of private trade.
@ If restrictions on distribution are removed it will certainly

affect the supplies in hilly regions because of higher landed
costs of fertilisers in those regions.

#-
@ Import Policy: Import of Urea is on a restricted list. It is canalised
through government-accredited agencies. Price and subsidies are
fixed in such a way that the prices for imported and domestic
fertilisers are more or less the same at the farmersǯ end.
@ Feedstock Policy: Manufacturers were given concession on prices of

feedstock for fertiliser plants. But in post liberalised environment
government of India restructured, pricing of naptha, fuel oil and
LSHS. Concessions in prices of these feedstocks, which were given
earlier, were withdrawn and price of feedstock was linked to import
parity price.
"$& &'!(
@ WÚ guidelines: Úhere is a considerable international
pressure to remove controls on urea.
@ Lack of irrigation: Farmers are not sure of the output of the
crop produce. Úaking risk on investing in fertiliser without

assured irrigation becomes a risky proposition for poor
farmers
"$& &'!(
@ Lack of Availability of Easy Credit: It remains one of

the major stumbling block in the way of maximising
consumption of fertilisers.
@ Limited Availability of Natural Gas: Restricted

availability of natural gas from indigenous sources
remains a major concern.
& '!(
@ Area-wise Constraint Analysis: Fertiliser companies need to
undertake area wise analysis to know consumption patterns in
different areas and identify what are the constraints for fertiliser
consumption in different areas. nce the companies are aware of
different constraints they can take measures to overcome those
challenges.
@ Úie-ups with Co-operative Agencies: Co-operative societies

based in every village can be effectively used to market the
fertiliser to consumers. Fertiliser companies can appoint the co-
operative agencies as franchisees for warehousing, transportation
and rake handling.
& '!(
@ Developmental Marketing: Liming of acid soil, reclamation of
sodic soil, wasteland development, rainwater harvesting,
adoption of sound water management and water shed
development practices can be key factors in promoting fertiliser
use.
@ Úhese efforts have to be implemented in a project mode as part

of area development programme with active participation of
farming community and other organisations.
& '!(
@ Úhese programmes will bring in more land under cultivation
and thus will lead to more consumption of fertilisers over a
period of time. It will also build a strong brand for an
organisation in a given market.
@ rganize Direct Contact Programs: Fertiliser companies can

organise farmerǯs meeting, farmersǯ trainings, crop seminars,
farmersǯ visit to research stations/institutes. Úhey can also
provide training to sales point personnel and launch
agricultural and social campaigns, etc.

@ Úhese programmes will not only educate farmers to enhance
crop productivity through balanced use of nutrients but at the
same time will build the brand of those companies amongst
farmer community.
Fertiliser companies can implement these programmes by:

@ Developing technical literature - crop folders, product
leaflets
@ Screening films on theme of improving crop productivity
@ Setting up farmersǯ school and service centres

& '!(
@ Introducing perational Efficiency Initiatives: Fertiliser
companies can implement plans to become even more
efficient. Úhose plants, which are using Naphtha can
switchover to Natural Gas. Companies can have a tight control
on costs in order to increase productivity through energy and
process efficiencies. Úhese initiatives would be of significant
value, as the fertiliser industry would gradually undergo
phased withdrawal of subsidies.
& '!(
@ Macro Environment Management: In the fertiliser industry it

is crucial to manage the macro environment in order to
influence the decision with regard to prices, subsidies and
imports that are fixed by the government. rganisations need
to lobby through industry associations, chambers of commerce
to get favourable decisions from the government.
& '!(
@ Developing ptimum Product Mix: Fertiliser companies need
to develop an product mix that is most productive to produce
and market.
@ Distribution Channel Management: Fertiliser is high volume

industry and is meant to serve the needs of highly widespread
consumer base. Úherefore, an extensive and well-managed
distribution network becomes extremely vital to serve the
market effectively.
& '!(
@ Demonstration: Farmers can be demonstrated the benefits of
the application of specific fertiliser product by organising live
programmes:
@ Úwo plot demonstrations
@ Block demonstrations
@ Cluster demonstrations
@ Promoting Balanced and Efficient use of Fertilisers: Efforts to

educate farmers on balanced fertiliser use, based on soil and
plant tissue testing can promote balanced and efficient use of
fertiliser leading to increase in the overall productivity of
farmers.
& '!(
@ An imbalanced application of fertiliser is not only
uneconomical but also unwarranted and is not in the interest
of all stakeholders including the fertiliser companies. Fertiliser
companies can organise variety of programmes to educate
farmers, fertiliser dealers on various aspect of fertiliser use. Úhe
appropriate NPK consumption ratio has to be adjudged on the
basis of soil test. Fertiliser companies can provide soil testing as
value added service this will create an emotional bond of
farmers with the brand.
& '!(
@ Promoting Fertiliser use through Education: Industry players
can educate farmers and promote their optimum use for
different crops.
@ Farmers can be educated that low level of fertiliser application

results in heavy depletion of plant nutrients from the soil after
the harvest of each crop. Úhis leads to depletion in soil fertility.
Companies can change the attitude to remove the customer
bias with respect to fertiliser use depending on the crops.
Pulses, oilseeds and millets are usually neglected and receive
lower than desired doses of fertiliser. Úhere is a need to evenly
spread the consumption all over the country.
& '!(
@ Below the Line Promotion Activities: Different
promotional campaigns that are interactive and involve
direct contact with the farmers can be organised:
@ By organising crop competitions
@ Arranging field days
@ Participating in Exhibition and fairs

& '!(
@ Úraining Programmes for Dealers: It might be difficult to train
farmers in large numbers but this objective can be achieved by
training the fertiliser dealers whose number is relatively less.
Úhey not only have a direct contact with farmers but also have
a considerable influence on them. Display materials like:
posters, samples, models can be developed and distributed to
dealers for educating them to eventually pass on the message
to the farming community.
& '!(
@ Provision of Value Added Service: Fertiliser sales points can
act as service centres. Provision of Value added services like:
soil amendments, soil and tissue testing, and also promote
precision and e-extension services can help in retaining
farmer-customers with them.
@ Use of Information Úechnology Networks: IÚ networks of

village-based kiosks that are being established by different
companies can be leveraged to take information to the
customer and to sell the fertilisers. Kissan
call centers can be used to develop an interactive relation
with farming community.
& '!(
@ Preparation for Decontrolled Scenario: Sooner or later the
nitrogenous fertiliser industry will be deregulated. Fertiliser
companies can start making preparation to be ready to meet
challenges of decontrolled scenario from now onwards. Úhis
can be done by developing market orientation and by
becoming efficient producer by process efficiencies.
& '!(
@ Marketing orientation and customer driven culture would be

required in the decontrolled scenario. Úhere will be markets
with very competitive situation and at the same time there will
be markets with poor availability. Different companies would
be selling fertilisers at different prices, so companies will have
to compete by product differentiation and brand building.
$#1
@ Agrochemical industry constitutes those chemical compounds
that prevent crops from the attack of pests, weeds, fungus,
insects and other related diseases.
@ From the physical form perspective they are classified as

powder chemicals and highly concentrated liquid chemicals.
@ Úhe main classification is on the basis of the purpose for which

they are used:
@ insecticides
@ herbicides or pesticides
@ fungicides
! $#
@ India is second largest producer of agrochemicals in Asia after Japan.
@ Úotal market size of the Indian agrochemical in 1998 was Rs.3,000
crores, a growth of about 16% over the 1997 consumption level.
@ Insecticides are largest product sector amongst agrochemicals in
India contributing 75% of market.
@ Herbicides account for about 12% of the Indian agrochemical
market. Úhe use of fungicides accounted only for 10% of the total
market.
@ Sulphur products, copper sulphate and copper oxychloride dominate
the fungicide market.
! $#
@ Insecticides are mainly used for cotton and rice crops, together
they account for 52% and 12% of the total sales value of
insecticide respectively. 8 percent of them are used for
vegetables whereas 5% of insecticides were used for pulses
crops.
@ Rice and wheat are two major crops where 63% of herbicides
are used, both crops having almost an equal share. If we add
tea crop to them then they constitute 75% of the market for
herbicides. ilseeds consume 8% of the herbicides whereas
6% of herbicide is used for sugarcane. Úhus these five crops
consume 90% of the herbicides in India.
! $#
@ Rice crop accounts for about 58% of fungicide sales in India
and another 20% of it is used for fruits and vegetables.
@ verall the highest consumption for agrochemicals in India is

for cotton crop, for which nearly 40% of all agrochemicals sold
in India are used. It is followed by rice crop with 31% share;
fruits & vegetables comprise another 15% share. nly 6% of all
the agrochemicals are used for cereals.
#& $#!
!)! & ,&
@ Cropping Patterns in India: nly 40% of the total cultivated
area in India is irrigated. Much of India's irrigation is
dependent on rainfall, which limits the possibility of high
investment in agrochemicals, as farmers are not sure about
good output even by applying this incase the rain is not
there.
@ Cotton: Cotton constitutes biggest market for insecticides.

Andhra Pradesh is the accounts for nearly 25% of the
agrochemicals market.
#& $#!
!)! & ,&
@ 12 to 15 sprays per season are common in central and

southern India whereas 6 to 10 sprays are accepted to be
normal in the state of Punjab.
@ Rice: Punjab and Haryana on an average consume 80% of

rice herbicides Hybrid varieties that provide improved
yields lead to increased pesticide use.
#& $#!
!)! & ,&
@ Wheat: A thriving herbicide market has developed in high
yielding wheat areas of Punjab, Haryana and western Uttar
Pradesh Future growth is likely to be in mixtures and a
number of new molecules are to enter the market.
@ Pulses: Productivity for pulses was less as they were grown

on poor soils but it has started to pick up. With increased
return the use of insecticides is growing. Because of lack of
minimum support price (MSP) farmers do not have assured
income to commit to a large pesticide spend on pulses crops.
#& $#!
!)! & ,&
@ Vegetables: Vegetables are becoming profitable because

farmers have started selling them directly in towns and
cities. Because of higher prices growers are prepared to
spend on pesticides. Involvement of corporate sector with
vegetable crops through contract farming is also
contributing to increased sales of agrochemicals.
- (2& & *$#
- * +
@ Reduction in Import Úariffs: Import tariffs were reduced from
115% to 50% and are expected to settle at: 35% for finished
product, 20Ȃ25% for intermediates and 10 Ȃ 15% for raw
materials.
@ Delicensing of Pesticide Industry: Úhe pesticide industry is now a

delicensed category. Úhis will enable larger companies to
improve productivity and quality. But new facilities have to meet
stringent new requirements on environmental contamination
and pollution control administered by the Pollution Control
Board.
- (2& & *$#
- * +
@ pportunity for Exports: Surplus production capacities will
mean that Indian companies will have to look at export
markets. With this, quality levels and compliance with
internationally accepted norms will also improve significantly.
Úhis will have indirect benefit for the domestic market.
@ Reforms in Agricultural Marketing Act: Practices with respect

to marketing of farm produce have been deregulated. With
this farm income is expected to rise and he will be in better
position to afford agricultural inputs in order to improve crop
yield and quality.
-!m
@ Agrochemicals can cause adverse effects on human health and
environment, so they are regulated by registration.
@ Úhe Insecticide Act, 1968 govern the registration and licensing

process for agrochemicals. Registration of agrochemicals is
handled at central government level whereas issues regarding
implementation of the Act and manufacturing license are done
at the state level.
-!m
@ It is executed by Central Insecticide Board (CIB), Registration
Committee (RC), Central Insecticide Laboratory (CIL) under
the Ministry of Agriculture (Registration & Scrutiny) along
with Ministry of Health.
@ Úhe Registration of Agrochemicals is of Úwo Úypes:

registration of technical grade material and registration of
formulations. If technical grade material refers to new
molecules and chemicals then the formulations refer to the
various combinations of technical grade material in different
percentages to create a distinct product, which are then sold to
the farmers for use.

@ Úhe registration process verifies the legal aspects, chemistry,
toxicology, bioefficacy and packaging, can take even up to four
to five years for new molecules. But, registrations are
becoming more difficult to obtain as the authorities try to
tighten up the system and remove registration loopholes.
@ In 1994, 31 pesticides were reviewed. number of active

ingredients have been banned. thers can only be used in
specific circumstances. DDÚ has already been phased out of
the pesticide industry from agricultural use and that
Iindane/BHC were phased out during 1997.
-!á !
@ Most of the agrochemicals have been manufactured
domestically but their importation is becoming easier because
of lowered down tariff and non-tariff barriers.
@ An extensive distribution network needs to be developed in

order to tap the large, diverse and seasonal nature of
agrochemical market.
-!á !
@ Major producers serve this market with large field forces.
@ Úhe retailer remains highly powerful part of this channel

because they are the main point of contact with the farmer and
are also active in providing credit to them. Because of their
considerable influence on farmer they are in a strong position
to dictate product choice to comparatively less informed
farmer who considerably depend on the retailers for product
choice decision.
$#
' &&
,$
@ Crop prices have firmed & farmer incomes are rising.
@ Aggressive marketing and promotional efforts is leading to

increased used of agrochemicals
@ Backward integration by companies has lead to lower cost of

product. Úhis is expanding the market.
@ Agrochemical use is increasing in profitable crops such as

vegetables, fruits, oil seeds (particularly sunflower and soya) and
pulses. Usage of agro-chemicals was very limited in past for these
crops.
$#
' &&

@ Number ,$
of new molecules from MNCs are reaching the
market, which is improving the effectiveness of agrochemicals
against the pests and insects.
@ An increasingly affluent middle-class can afford quality
produce at a slightly higher price. So, farmers can charge
higher price for higher cost.
@ Úhe growing economy is sucking labour into towns and
industry. Úhis encourages herbicide use as labour is either not
available or is costly.
@ Úotal irrigated area continues to rise, assured irrigation means
that farmers will be more willing to take risk with higher input
costs.
"$'!(! $#
!(
@ Low Capacity Utilization: Úhe 12,400 crore tonnes of installed
capacity is much more than the domestic consumption of 8,500
crore tonnes. Unreliable power and intermediate supply also
contribute to lower capacity utilization. Until export market is
taken seriously by manufacturers cost per unit will be relatively
higher because of high fixed overheads.
@ Seasonality of Demand: Because of smaller shelf life and shorter

period of applications manufacturers have to ensure that their
inventory move off the shelf of retailer during a particular
season.
"$&!(! $#
!(
@ Expensive Finance: Borrowed money is still expensive in
India. Cash tied up in debts or excessive stocks can cause
cash flow problems in overstretched companies. Some
smaller operators have gone out of business and number of
companies are in for consolidation.
@ High Inventory Cost: Seasonal demand and poor

management leads to high inventory costs.
@ Price-cutting: As season nears to an end dealersǯ rush to

clear stocks. Úhis leads to price-cutting and un-
remunerative pricing.
"$&!(!
$#!(
@ Huge Working Capital Requirement: Because of high inventory
and industry thriving on credit sales (range from 90-120 days), and
high interest rates for manufacturing sector. Retailers do not put
up their own money but buy on credit from companies. Farmers
also pay retailers, at the time of harvest, resulting in extended
credit period. Retailers use cash they generate from their
agrochemical businesses into other operations.
@ Number of Companies have become Financially verstretched:

large carryover stocks, outstanding credit and the high cost of
borrowing cause liquidity problems. n account of this not only
overall profitability is reducing but also lack the working capital of
almost all agrochemical companies is getting seriously affected.
"$&!(
! $#!(
@ Lack of Indigenous Research and Development: Local
companies have not developed new molecules on its own. At the
same time international companies became slow with new
introductions because of lack of patent protection and punitive
import duties.
@ Low Profit Margins: Margins are getting squeezed for the

manufacturers of agrochemicals because of over-capacity, large
working capital, high cost of capital, extensive credit periods and
high inventory costs.
"$&!(
! $#!(
@ Undisciplined Marketing: Many Indian manufacturers produce a
particular agrochemicals on basis of their capacity to produce it
without due consideration of its need and potential in the
market. Úhe end result is often high inventory, price-cutting and
market degradation. Retailers take the maximum advantage at
the cost of manufacturers and relatively less informed farming
community.
"$&!(
! $#!(
@ Crop Imbalance: Agrochemical consumption is concentrated in
select crops: cotton, wheat, rice, vegetables, tea and some fruits.
Úhere is lesser use in crops: oil seeds & pulses, thus optimum
potential for consumption of agrochemicals is not realized.
@ Regional Imbalance: Insecticides mainly get consumed in two

states of Andhra Pradesh and Karnataka while most of
herbicides are used in northern states of Punjab and Haryana.
Improved irrigation in other parts of India can create wide
spread use of agrochemicals.
"$&!(!
$#!(
@ Low Selling Price of Agriculture Produce: Low selling price of
agriculture produce reduces the income to be spent on
pesticides.
@ Natural Calamities: Cyclone and heavy rains in coastal states like
Andhra Pradesh a key market can affect sales of agrochemicals.
As cyclones and heavy rains reduce the pest levels considerably.
@ Environmental Pressures: Úhere has been some justifiable
criticism of pesticide pollution. It requires restricting or banning
certain products and reducing number of small, poorly qualified
formulators.
& $#
a. Product Strategy:
@ Backward Integration: Úo lower their overall costs, improve quality and to
have better margins.
@ Cost Effective Manufacturing Processes: Instituting manufacturing
processes that are efficient and cost effective, relative to the global
benchmarks.
@ Branding: Becoming capable of producing both technical and formulated
materials and develop ability to sell a large part of their production as
branded material. Úhen their profitability would be less affected, when
farmers decides to spend less during tough times.
@ Novel Products: By offering novel products and being active in less crowded
sectors companies will have relatively stronger position than those who are
competing in highly competitive markets.

(

b. Place Strategy:
@ Direct Dealing with Retailer: Úhis helps to save on the distributor margin &
sell at very competitive end user prices.
c. Price Strategy:
@ Higher MRP and Lower Selling Price: MRPs can be kept artificially high (to
make the discounts look better) to the farmer. Prices are also discounted
heavily for early selling and also to clear stocks at the end of the season.
@ Good Working Capital Management: By ensuring a limited supply of credit
to the channel partners, companies can ensure that their working capital is
not over leveraged. Úhis can be made possible through generating strong
pull from the customers for the particular brand.
& $#
d. Promotion strategy:
@ Changing Attitude: Úo change the attitude of the farmers
towards agrochemical consumption for the crops like oil
seeds and pulses for which there is lesser use of
agrochemicals.
@ Farmer Education: About pesticide need, use and safety.

With farmers not always understanding the logic of
product choice (he may mix two or three pyrethroids).
Úhis can help in brand building.
& $#
e. Export Strategy:
@ Úo safeguard against the unpredictability of Indian agricultural,
agrochemical industry should develop the export market as an
option. n the basis of low cost of production, Indian
agrochemical companies can have the entire world as their
market. Úhere can be good demand from Europe, South
America and other countries.
@ Pesticides Manufacturers & Formulators Association of India
(PMFAI) estimated export turnover to go up to Rs.3,200 crore
during 2004 up from Rs.2,800 crore in the previous year.
"
@ If there are immense opportunities for agricultural inputs
industry in domestic as well as global markets than they
face equally good number of challenges.
@ Úhe challenges can be managed in order to exploit the

opportunity through a well-coordinated marketing effort.
@ Marketing savvy players like Mahindra and Mahindra have

demonstrated this by outperforming over the prevailing
industry trend on a consistent basis.
"
@ Consumers & investors have significantly rewarded
companies that are responsive to needs of rural market.
@ verall the future appears to be bright for Agri-input

industry as Indian agriculture is on the developmental path
because of improved thrust of government and corporate
sector.
@ Export market is looking attractive & India is emerging as

low cost but high quality manufacturing hub for global
markets.

(

@ Be acquainted with development of Indian agriculture in post-
independence scenario
@ Understand marketing of agricultural produce in Indian

context
@ Comprehend the role of different stakeholders: government,

cooperatives, private sector in the development and marketing
of Indian agriculture
@ Be sensitized with challenges in marketing of agricultural

produce
@ Be aware of the strategies for promoting the marketing of

agricultural produce
á )# &!-
!)!
@ From a nation dependent on food imports, India today is not only
self-sufficient in grain production but also has a substantial reserve.
@ Indiaǯs agricultural production of $104 billion (Rs.4,68,000 crore) is

ranked 2nd in world.
@ Increase in agricultural production has been brought about by:

bringing additional area under cultivation, extension of irrigation
facilities, use of improved high-yielding variety of seeds, better
techniques evolved through agricultural research, water
management, plant protection, judicious use of fertilisers, pesticides
and cropping practices.
á )# &!-
!)!
@ Úhe 1970s saw a multi-fold increase in wheat

production that heralded the Green Revolution. In
next decade rice production rose significantly.
@ In 1995-96, rice production was 7.96 crore tonnes. Úhe

total grain production crossed 21.1 crore tonnes in 2001-
02, a big leap from 5.1 crore tonnes in 1950-51.
!- !
&- &
@ Úhere are primarily three types of players involved in marketing
of agricultural produce:
Government: Government has direct & indirect intervention:
@ Indirectly: by enacting policies and regulatory framework,
facilitating infrastructure development
@ Directly: through Boards, Commissions, Corporations, etc.
Co-operative Societies: Intervene through procurement,
processing and marketing of agriculture produce.
Private Sector: Involved as: itinerant merchants, traders,
processing firms and corporate based contract farming.
!- !
&- &
@ Agricultural produce marketing system in India

operates primarily according to market forces of supply
and demand.
@ Government intervention is to protect interests of

producers and consumers and promotion of organized
marketing.
m &
#
@ Govt. has played an active role to improve agricultural produce
marketing
@ Úhese steps include: establishing regulated markets,

constructing warehouses, grading and standardizing produce,
standardizing weights and measures, and providing
information on agricultural prices.
@ Agricultural Produce (Grading and Marketing) Act, 1937,

requires compulsorily grading for more than 40 primary
commodities for the purpose of exports and voluntarily grading
for internal consumption.
m &
#
@ Úhe Ministry of Agriculture's Directorate of Marketing and
Inspection is responsible for administering federal statutes and
conducting market research about marketing of agricultural
produce.
@ Regulation of commodity markets is a state function as per

constitution, but Directorate of Marketing and Inspection
provides marketing and inspection services and financial aid
down to village level to set up commodity grading centers.
m &
#
@ Various central government organizations are involved in
agricultural marketing: Commission for Agricultural Costs and
Prices (decides minimum support price (MSP) for certain
crops), Food Corporation of India (FCI), Cotton Corporation of
India (CCI) and Jute Corporation of India (JCI).
@ Úhere are specialized marketing boards for rubber, coffee, tea,

tobacco, spices, coconut, oilseeds, vegetable oil, and
horticulture, which overlook and coordinate the marketing of
the produce in their respective area. State governments have
also established different entities for similar purpose.
m &
#
@ Food Corporation of India (FCI) was established in 1965 as
public-sector marketing agency responsible for implementing
government price policy through procurement and public
distribution operations. It was intended to secure for
government a commanding position in the food-grain trade.
@ By 1979 FCI was operating in all states as the sole agency of

central government in food-grain procurement. FCI uses
services of state government agencies and cooperatives in its
operations.
m &
#
@ FCI is sole repository of food grains reserved for the Public
Distribution System (PDS). Food grains, primarily wheat
and rice, account for between 60 and 75 percent of the
corporation's total annual purchases.
@ Food-grain procurement was 89 lakh tonnes in 1971, 130

lakh tonnes in 1981, and 178 lakh tonnes in 1991. FCI has
functioned in providing price supports to farmers through
its procurement and in keeping a check on large price
increases by providing food grains through the PDS.
m &
#
@ PDS is a network of 350,000 fair-price shops that are monitored
by state governments. Punjab, Haryana, and western Uttar
Pradesh provide more than 80 percent of the supplies of grain to
the PDS. Food grains supplied through the PDS amounted to 78
lakh tonnes in 1971, 130 lakh tonnes in 1981, and 170 lakh tons in
1991.
@ Central governmentǯs Central Warehousing Corporation

operates warehouses at major points. By 1980s, warehouses for
storing agricultural produce and farm supplies started to play an
increasing role in government price control programs and in
distributing farm commodities and farm supplies.
m &
#
@ Úhe public warehouses issue a receipt to the owners of stored
goods on which loans can be raised, warehouses are also
becoming important in agricultural finance. Úheir growth has
resulted in a decline in weather damage to produce and in loss to
rodents and other pests.
@ In 1991 there were 6,640 regulated markets to which the central

government provided assistance in the establishment of
infrastructure and in setting up rural warehouses.
m &" * )
@ A network of cooperatives at the local, state, and national levels
assist in agricultural marketing.
@ Úhe major commodities handled are food grains, jute, cotton,

sugar, milk, grapes and areca nuts.
@ Established in 1958 as the apex of the state marketing

federations, the National Agricultural Cooperative Marketing
Federation of India handles much of domestic and most of
export marketing for its member organizations.
m &" * )
@ Large co-operative enterprises, such as cooperative sugar
factories, spinning mills, and solvent-extraction plants mostly
handle their own marketing operations independently.
@ Medium- and small-sized enterprises, such as rice mills, oil

mills, cotton ginning and pressing units, and jute baling units,
mostly are affiliated with cooperative marketing societies.
@ Cooperatives also operate warehouses in towns and villages.

m &" * )
@ In late 1980s, there were some 2,400 agro-processing units in the
cooperative sector. Cooperative sugar factories have achieved
notable success. Úhe number of licensed or registered
cooperative sugar units were 232, of which 211 had been installed
by March 1988.
@ During the ct 1987-Sept 1988 sugar season, 196 cooperative

sugar factories were in production. Úhey produced nearly 53 lakh
tonnes of sugar, accounting for about 57.5 percent of the
country's total production of 92 lakh tonnes.
m &" * )
@ In the early 1990s, cooperative marketing structure comprised
6,777 primary marketing societies: 2,759 general-purpose
societies at the (wholesale market) and 4,018 special
commodities societies.
@ Úhere were also 161 district or central societies covering nearly

all-important in the country and twenty-nine general-
purpose state cooperative marketing federations.
m &" * )
@ Úhe total value of agricultural produce marketed by
cooperatives amounted to about Rs.5,420 crores 1988,
compared with Rs.1,800 crores in 1979. Úhe total value of food
grains handled by marketing cooperatives increased from
Rs.500 crores in 1979 to about Rs.1,13,000 crore in 1986.
m &-
@ Farmers sell most of the agricultural produce in the private sector
to traders who are also moneylenders (to whom the farmer may
be indebted) or to itinerant merchants.
@ Agricultural produce is sold in many of the following ways:

@ At a weekly village market (haat) in the farmer's own village or
in a neighboring village.
@ At irregularly held markets in a nearby village or town
@ In the .
@ Úo traders who come to the work site.
@ Directly to the corporate sector for processing or exports
through Contract Farming.
"$ &- !
@ Numerous Intermediaries in the Distribution Channel: In

absence of marketing linkages, intermediaries were in
position to exploit the farmers and were making the most at
the cost of farmers.
@ Lack of Adequate Infrastructural Support: Significant %age of

fruits and vegetables rot in farms/ transportation and
markets before reaching the consumers homes.
"$ &- !
@ Absence of a Structured Network for Information Flow:
Indian farmers suffered heavily on account of lacking
information on where to buy cheap and where he could get
the best price for his produce.
@ Dependence on Environment: Úopography and climate

dictate, which crop can be grown in an area and for that
suitable markets may not be available. ver large areas of
India farmers are forced to rely on subsistence crops.
"$ &- !
@ Sharp Fluctuation in Prices: Returns to the farmer can vary
as prices fluctuate. At present guaranteed minimum prices
are only available for rice and wheat.
@ Lack of Pest Control: In India, annual losses due to pests is

greater than Rs.5000 crores. Pesticide industry remains
dependent on monsoon because large cultivated land does
not have assured irrigation and farmers find it difficult to
invest in pesticides in significantly large parts of rural India.
"$ &- !
@ Fragmented Landholdings: Indian farms are small, and getting
smaller as land is divided after every generation. Around 60% of
landholdings are less than 1 hectare. Farmer is not able to make
investment in mechanization, fertiliser, agrochemicals,
irrigation, etc. Úhus the overall productivity of the output goes
down. Another 20% of the holdings are between 1 and 2 hectares.
If we include the land holdings up to 4 hectares they constitute
for 91% of land holdings in India.
- # &
- !
@ Amendments in Agricultural Produce (Grading and
Marketing) Act, 1937: Úhis allows farmer to take his produce to
markets and buyers who are ready to give him the best price for
his produce. Úhe farmer will not be restricted to area where he
can market his produce. Úhis will involve relaxing physical
controls on trading of key crop such as edible oils and cotton.
Cotton is treated as a strategic crop and is purchased by the
government under the Monopoly Procurement Scheme.
- # &
- !
@ Úo built Distinctiveness in Specific Agricultural Product-
Markets: Different countries have developed distinct image for
themselves in a certain product segment.
@ Brazil in Poultry, New Zealand in niche markets for special, high

value apples in Europe, (produces less than 1% of world apples,
but has a share of 14% in world exports), Israelǯs export of citrus
fruits (developed in desert areas) account for 3.6% of total
exports of Israel (1.1% of world exports) and 2.5% of its GDP.
Mexico supplies tomatoes to US for about USD 500 million
- # &
- !
@ By focusing on specific crops/products and markets, these
countries have become important global players and provided
significant impetus to that industry in their countries. India can
do the same in case of select crops.
@ Increasing Úurnover for Agricultural Companies: Size is

important in food and agribusiness as it enables investment in
the supply chain and market development. Food processing
industry in India needs significant consolidation and have
international presence to successfully compete with MNCs.
- # &
- !
@ Better Supply Chain Management: Effectiveness in supply chain

management leads to improved quality, ability to be price
competitive and improved market development. Úhe
government should allow processors to purchase directly from
farmers and bypass the mandi. Input companies should be
permitted to sell their products directly to the farmers. Úhis
would enable the companies to interact directly with farmers,
without incurring unnecessary non-value adding costs.
- # &
- !
@ Crop Insurance Subsidy: Crop insurance business in India has been loss
making primarily because of poor economic viability. Experience in
other countries suggests that subsidy is required for crop insurance
business to be beneficial to a wide section of farmers. Central
government can reconsider its decision to end crop insurance subsidy.
@ Enabling ǮBulkingǯ: By enabling Ǯbulkingǯ in agri-commodities,

government can significantly bring down costs. For example, it is
estimated that about 3.5 per cent of the value of soyabean is lost due to
repeated bagging. Úhe investment required for creating bulking
infrastructure could be obtained from the private sector. Government
needs to remove the controls on agri-commodities to make these
projects commercially viable.
- # &
- !
@ Infrastructure Development: Roads, ports, railways, mandis,
needs to be improved to improve productivity, transportation,
storage and distributions of farm produce from fields to
consumers tables. Úhis can create better return for all the
stakeholders.
@ rganised Retailing: Efficient linkages directly with the

producer sans intermediaries can be effective in streamlining the
whole supply chain. It will reduce prices by making savings by
direct arrangement with producers and improvement in the
quality. Food retailers bring operational expertise, technology
and capital, which provide gain to all the stakeholders.
- # &
- !
@ Making use of agricultural waste: Agriculture generates enormous quantity
of by-products, which are usually not used economically. By making an
economic use of what is treated as waste can increase the income of farmers.
Paddy alone produces straw, leaves, stem, nodes, inter-nodes and husk as by-
product. Scientists have opened up new possibilities for the utilisation of
paddy straw. It can be used as industrial fuel, as feed for cattle and their
bedding, as compost, as mushroom culture and for making paper, chipboard
and panel products.
@ PAU has exploited maize cobs to produce citric acid. Pine needles going
waste in hill areas can be used as insulation material in cold stores.
Insulation With this material, a saving of about 30 per cent can be affected in
constructing a cold store.
- # &
- !
@ PAU has designed a biogas plant that uses wastes such as straw,
leaves and kitchen waste instead of cattle dung to produce biogas.
About 20 kg of straw waste fed to the plant daily produces about six
cubic meters gas. Úhe residue may be used as manure.
@ Large number of chemicals may be produced from agricultural

wastes. A process to produce polymers and convert them into plastic
foams also has been developed. Reinforced foam has been evaluated
as a suitable material to make roofs and panels.
@ With these innovations a new market for what was considered waste
will be developed and will lead to better income for farmers and
create employment opportunities.
"
@ Effective marketing of agricultural produce is critical not only for the
development of rural economy but it is also crucial if India aims to
achieve higher then the average rate of growth.
@ Úhere is need of appropriate marketing linkages to link the fields

with consumer homes within and outside India.
@ Already there have been initiatives on the part of government and

corporate sector to develop policies and business models, which can
provide effective platforms to bring prosperity to the farmers by
eliminating the non-value adding chain of intermediaries.
(
,

@ Be acquainted with origin and development of cooperative
movement in India
@ Learn about the types of cooperative societies
@ Know about nature and objectives of cooperative movement
@ Understand the benefits of cooperative movement
@ Be sensitized with challenges faced by cooperative sector
@ Comprehend the strategies to strengthen the primary

agricultural credit societies
!
@ In India with 75% of population living in villages, out of
which significant percentage comprising small or marginal or
even landless farmers; cooperative movement means more
than activities organized on co-operative lines.
@ Cooperatives perform the role of institutional agencies,

which strive for achieving social cohesion by providing
opportunity for sustainable development at Bottom of the
Pyramid, through the cooperation amongst the members.
!
@ Former Chairman of GCMMFL, Mr. Verghese Kurien said,
ǲCo-operation is first and foremost a philosophy. It is a faith
that human beings are capable of transcending narrow self-
interest to work together to achieve common and higher
goal. However the magic of co-operation is seen when this
philosophy is translated into business and economic
success.ǳ
&" ) #
@ Co-operative movement began in early 1900s.
Cooperation was first introduced as a form of organisation
under the Cooperative Credit Societies Act 1904.
@ At that time it was confined to organisation of cooperative

credit societies to relieve indebtedness and promote
thrift.
@ It aimed at pooling meager resources of small landholders

and entrepreneurs who found hard to sustain themselves
individually in free market by exorbitant interest rates.
&" ) #
@ Cooperative Societies Act 1912 permitted formation of
societies for promoting non-credit activities & federation of
primary societies into organisations at higher level.
@ Co-operative movement allows the rural economy to tackle

problems relating to credit, and provide an alternative for
procurement of inputs and marketing of the final products.
() &" * )
@ Agriculture Credit Cooperatives: Úhe primary agricultural credit
societies can be termed as sheet anchors of the entire co-operative
structure. Úhey provide short to medium-term and even long-term
credit and also undertake marketing of agricultural produce, supply
of agricultural inputs and distribution of consumer articles.
@ As, significant %age of farmers might be non-credit worthy

according to generally prescribed rules for advancing loans, credit
societies provide the loans on the basis of production programmes
and anticipated crops. A maximum credit limit is fixed for each
member and within this limit he is permitted to obtain loans
according to his requirements.
() &" * )
@ Úo ensure proper use of funds, loans are given as far as possible
in kind, in form of seed, fertilizer, etc. For cash loans, members
are persuaded to agree in advance to market their produce
through the primary marketing society.
@ As early as June 1954 there were 22 State Co-operative Banks,

499 Co-operative Central Banks and 126,954 agricultural credit
societies with 58 lakh members to whom they were providing
short to medium term loans.
,

@ Úhe proposals of Committee of Direction of the Rural Credit
Survey were accepted in principle by Central Government,
Reserve Bank of India and by representatives of the
cooperative movement. Úhus, following systemic and very
important changes were introduced in rural credit and
marketing societies:
@ State entered into partnership with cooperative institutions

at various levels to provide financial assistance and
guidance to the cooperatives. Úhe State partnership was
directly at the apex and the central bank level but in a more
flexible manner at the primary level.
,

@ For facilitation of partnership of the State in
cooperatives, the Reserve Bank of India established a

National Agricultural Credit (long-term operations)
Fund with an initial contribution of Rs.10 crores.
Contributions of Rs.5 crores per annum were made
during 2nd plan so that by 1960-61 the Fund has a
capital of Rs.35 crores. From this Fund loans were
advanced to States to enable them to subscribe to the
share capital of cooperative credit institutions.
(
@ Úhere were 16 State marketing societies, 2125 marketing unions and
federations and 9240 primary marketing societies with a total annual
turnover of about Rs.52 crores in the field of agricultural marketing in June
1954. Úhere were 937 irrigation societies, 65 milk supply unions, 1473 primary
milk supply societies and 601 cooperative farming at that time.
@ Cooperatives are the main institutional agency for procurement operations on

behalf of the Government and commodity Corporations. Úhey also
undertake commercial operations in important commodities, which are not
covered under the Price Support Programme. Some of them have effective
links with public sector commodity corporations such as the Food
Corporation of India FCI), Cotton Corporation of India (CCI) and Jute
Corporation of India (JCI).
(
@ Úhey undertake distribution of agricultural inputs: chemical
fertilizers, improved and hybrid varieties of seeds, pesticides and
agricultural implements.
@ Share of the co-operatives in total fertilizers distribution was 46

per cent in 1979-80 and it increased to 47 percent in 1984-85.
Presently about 25% of all fertilisers sold in India are through
co-operative societies.
@ Úhe value of agricultural produce marketed by co-operatives

which was Rs.1,750 crores on eve of 6th Plan increased to
Rs.2,700 crores by the end of 1984-85.
*
@ In the non-agricultural field significant success has been
achieved in the formation of 5,748 handloom weavers' societies
in 1953-54.
@ Úhe number of looms included in these societies has increased

during the first plan from 6,26,119 to about 10 lakh.
@ In the second five-year plan provision was made for developing

cooperative processing on a substantial scale, especially for
producing sugar, ginning cotton, crushing oil and balling jute.
&" ) #
@ Úo evolve a system of cooperative community organisation
which +vely impacts all facets of life with a developmental
approach.
@ It should lead to development of land, other resources and

social services in the common interest of village as a whole.
@ Cooperative movement should lead to re-organisation in the

rural economy.
&" ) #
@ Úo expand flow of credit and ensure supply of inputs
particularly to weaker sections on reasonable and non-
exploitative terms.
@ Úo enable co-operative movement to play a pivotal role in the

public distribution system in the rural areas.
@ Úo promote professional management and operational

efficiency of the tasks performed by rural producers and also
to benefit rural consumers.
&" )
@ Rural based cooperativeǯs organisation structure consists of
primary societies at villages level, central organisations at
district level and apex federation at the State level. Primary
marketing societies are federated together in an apex
marketing society at the state level.
@ Úhe areas, which are appropriate for the cooperative method of
organisation are: agricultural credit, marketing and processing
of different production in rural areas, consumers co-operative
stores, cooperatives of artisans, etc.
@ Cooperatives are established to become principal basis for the

organisation of economic activity.
&" )
@ Úhe development of agricultural cooperative societies varies
significantly across different States. Úhe agricultural produce
marketed through co-operatives in terms of per hectare ranged
from Rs.8 in Rajasthan to Rs.509 in Maharashtra.
@ Six States of Gujarat, Haryana, Karnataka, Maharashtra,

Punjab and Uttar Pradesh contributed 81% of the overall
achievement in 1984-85.
@ In spite of the assistance provided to the co-operatively weaker

states particularly in the North Eastern region, the co-
operative movement in these states has not developed that
effectively.
& &" ) #
@ Co-operatives offer certain benefits, which neither the private
enterprises nor the state owned public sector can deliver that
effectively.
@ It provides an approach and methodology of achieving results that

are valuable to community as a whole through social and individual
incentives.
@ If it succeeds, cooperation can bring larger and wide spread gains to

the community as a whole.
@ It avoids the exploitation of the interest of the lesser informed and

lesser-privileged unorganized individual from the exploitative
designs of the people and the organisations that are in position to
make the most of this opportunity.
"$& " * )
@ Under-utilisation of Capacity: In rice mills and fruit and
vegetable processing units, there is under-utilisation of
capacity.
@ Human Factor: Úhe involvement of human aspects, which

are very complex, makes it much more difficult for the co-
operative form of organisation to succeed than it is for a
completely socialized enterprise or an individual
entrepreneur.
"$& " * )
@ Deficiencies in Úechnical and Financial Management:
@ Úhe management of the most of co-operative units has not

been done on professional lines.
@ ne of the reason for this could be lack of individual incentive
and also at the same time political pressure on the entire
decision-making process does negatively influence the
performance of large number of co-operatives.
"$& " * )
@ Inadequate Availability of Co-operative Credit Due to High
ver Dues:
@ Úhe most serious challenge has been the continued existence
of high levels of over dues of large number of co-operative
societies in large number of States.
@ Úhis has eroded the overall viability of primary co-operatives
and has also adversely affected other fields of activity like
marketing of agricultural produce, supply of agricultural inputs
and distribution of consumer goods.
@ Úhe high interest rate on bank credit and inadequate margins
available to the co-operatives for fertilizer retailing also makes
it difficult for the co-operatives to serve the needs of rural
consumers.
"$& " * )
@ ver-dependence on Government: Úoo much dependence on
Government funds for different activities has been a major
constraint in their expansion.
@ Evaluation of the Úraining Programmes: Although the trainings

have been provided under the co-operative system and there
exists very good training infrastructure but evaluation of
trainings has not been given due attention.
$-#(
"!
@ Appointment of a Competent Staff: Most of the co-operatives
that are not performing successfully are the ones that are not
being managed by the adequate professional talent. Úhrough
appointment of professionally qualified staff that is selected
on merit, large number of co-operatives can start performing
profitably.
@ Provision of Physical Facilities: With the provision of state of

the art and efficient infrastructure, the performance of some
of the co-operatives can improve considerably.
$-#(
"!
@ Augmenting the Internal Resources of Cooperatives by Way
of Deposits: Úhe members and stakeholders can improve the
performance of some of the co-operatives with provision of
additional resources in the form of deposits.
@ Improving their Recovery Performance: With

implementation of effective policy measures their recovery
performance can be improved considerably.
$-#(
"!
@ Co-ordination with Panchayat: if both the entities work in

tandem they can achieve the objectives for which they are
constituted.
@ Sound Membership Base: Every family in a village should

preferably be a member of at least one co-operative society.
$-#(
"!
@ Size of Primary Cooperative Society: A primary co-operative group should
be reasonably small and homogeneous, for its members to know and trust
one another.
@ Úhan the number of small primary co-operatives may combine into a
larger organisations, but the strength of co-operation comes from the
base of relatively small and homogeneous primary groups, which function
actively.
@ Úhe area of jurisdiction for a cooperative should be large enough to make
it an efficient unit but at the same time it should not be so large that it
might become difficult to have sense of mutual obligation and concern for
rehabilitation of the weaker sections of the community.
@ Úhere should be intimate contact between management committee and
members.
@ If strong primary units exist at the base, effective organisations can be
built up at higher levels. Úhe structure as a whole can then undertake
activities and provide services, which require large resources and

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@ Learn about evolution of Rural Marketing in India

@ Comprehend the Rural Marketing process as Rural

@ Comparative analysis of Rural vs. Urban Marketing

@ Urban is: All locations with a municipality/ corporation,

@ Consumer Durable companies consider any town with

@ Some MNCs define rural/semi urban area as all cities

@ Rural in marketing parlance is also defined as an area,

@ Rurban being the overlap between the two, with

@ It is a two way marketing process, which encompasses

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@ Be aware of different poverty alleviation and developmental

programmes of government in the rural areas

@ Analyze the rural consumption and spending patterns

and consumption patterns

@ Understand the electricity infrastructure availability across

@ Comprehend the nature and characteristic of rural market

@ 90% of rural population is concentrated in the villages with

@ Comprises of 13.5 crore households, constituting 72% of total

@ Úhe consumerǯs willingness to accept innovation varies

@ 41% of Indian middle class homes and 58% of disposable

@ Income contribution of 55.6% to the national income by

@ Rural accounts for 92 lakh middle-income households, having

@ If there are 1.0 crore high and upper-middle income households in

@ Rural incomeǯs Compounded Annual Growth Rate (CAGR)

compared to 1975-76, but all India inequality has marginally

distribution among individuals or households in a country,

@ Between 1982 and 1999 per capita village incomes increased by

@ In 1971, 82% of men in the 25 to 44 age group in rural areas

@ Comparison of findings of MIMAP survey in 1994-95 with similar survey

@ Incidence of poverty in rural areas at 39.4% is much higher

@ Figure of population BPL varies significantly from one state to

@ Úherefore, far ranging generalities cannot be developed on the

@ Not competing in rural market removes a company from about

@ Rural households hardly change their house or go for vacation.

@ Úhus, the actual disposable income in a rural household comes

@ Rural telephone density has gone up by 300% in the last 10

@ More than 55% of head of households reported at least

@ In about 26% households, head was a graduate or a technical

@ 56% of the households in the country had an electricity

@ verall electricity connections, duration of power availability,

@ Úhere is a great deal of variation amongst states. About 90%

@ India was ranked 138th as per Human Development Report

@ Indiaǯs infant mortality rate of 75 per thousand live births is

@ Access to potable water, health care, sanitation and shelter

@ Kerala has highest HDI, 80% higher than national average,

@ India is at 103rd rank in 123 countries in Gender Disparity

@ Significant %age of Income from agriculture

@ Lack of Infrastructure Facilities

@ Learn how to overcome those challenges

@ Understand the opportunities offered by rural market

@ Comprehend the factors that are leading to increasing

@ Know how to make the best use of opportunities offered by the

@ Backwardness of the rural masses

@ Low exposure to different product categories and brands

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$'"!$ &!$,

@ verall electricity connections, duration of power availability,

@ m Itǯs a heterogeneous population. Various tiers are

@ m : Number of middle class HHs (annual income Rs

m : Decision making process is collective. Purchase

@ Influential role of pinion Leaders for purchase of

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