The future lies with those companies who see the poor as their customers.” – C. K. Prahalad
India is a country of diverse cultures, languages and rituals. In these circumstances it has become a challenge for manufacturers to differentiate their offerings according to the Indian market. With about 70% of Indian population residing in rural areas the need of the hour for the marketers is penetrating this market.
Driven by green revolution, rural populations purchasing power has grown tremendously over the years. Accordingly rural demand for industrial and urban related products is also growing. In this context, a special marketing strategy, namely, rural marketing has emerged. But often, rural marketing is confused with agricultural marketing. While latter denotes marketing of produce of the rural areas to the urban consumers or industrial consumers, rural marketing involves delivering manufactured or processed inputs or services to rural producers or consumers.
What makes Rural Markets attractive?
Importance of rural market can be substantiated by following attributes:
Population 742 million
Estimated annual size of the rural market
Rs. crores
FMCGRs 65000
DurablesRs 5000
Agri-InputsRs 45000
2/4 WheelersRs 8000
$3.5bn worth FMCG products sold in rural India in 2009
of two million BSNL mobile connections, 50% are in small towns / villages.
MNCs like Coca-Cola have tried to customize their offering by introducing chota-coke costing 5 rupees. Ironically though purchasing power in rural India is growing but related infrastructure, like water & electricity has not kept pace with that. To overcome this phenomenon, washing machine manufacturers have introduced washing machines which will keep working even if there is no facility of running water though its another story that some of these machines were used to churn curd and prepare buttermilk.
Buying behavior of the rural consumer is subservient to varied factors and is different from urban consumers in many ways. Firstly majority of rural consumers stay in a joint family and most of the purchase decisions are taken by elders. Secondly lack of knowledge of product usage by semi literate population hinders market penetration, like Lux soap being used in rural areas for washing hair. Thirdly and the biggest challenge in rural markets, other than resources and economic condition, is the traditional mindset to buy things which are according to their cultural setup. Fourthly, being a closely knit community, opinion-leadership plays a very important role in purchase decisions in rural areas, making publicity through advertisement almost redundant. Sarpanch is one such opinion leader who can influence rural consumers purchase decision. Idea Telecom Company has used Abhishek Bacchan in one of the advertisements shown as a sarpanch just to have a positive appeal among the rural customers.
Strategies for Improving Rural Marketing
Considering the environment in which Indian rural market operates and other related problems, need of the hour is to evolve more effective strategies for rural marketing which would be in sync with rural physique. The strategies discussed here though not universally applicable depend upon product characteristics, the targeted segment of the rural market, the choice of the rural area and its economic condition.
Some of the typical characteristics which affect the rural market segmentation are land holding pattern, irrigation facilities, progressiveness of farmers, cropping pattern; mix of enterprise, education levels, proximity to cities/towns, sociological factors, occupation categories. Small and marginal farmers, agricultural labourers and artisans form the largest segment in rural market (about 2/3rd) where as rich farmers constitute about one third of rural market
1 New product designs
A close observation of rural household items indicates the importance of redesigning or modifying products consumed by rural population. The manufacturing and marketing companies can think in terms of new product designs like small packs (e.g. sachets) specially meant for rural areas keeping their lifestyles in view.
2. Sturdy products
Sturdiness of a product is an important factor for rural consumers. The product meant for rural areas should be sturdy enough to stand rough handling and storage. Nokia 1100 has positioned itself in the similar manner.
3. Brand name
The rural consumers being value for money customers are more concerned with the utility of the products. Being mostly semi literate, a brand name and/or logo which can be easily remembered is very essential for rural consumers
Pricing strategies
Pricing strategies are very much linked to product strategies. Some of these strategies are mentioned here.
1. Low cost/cheap products
Pricing strategy for rural market will largely depend upon scope for reducing price of the product to suit the rural incomes and at the same time not compromising with utility and sturdiness of the product.
This is a common strategy being adopted widely by many manufacturing and marketing companies. Price point can be kept low by small unit packing.
2. Avoid sophisticated packing
Adopting cheaper yet durable & aesthetic packaging can bring down the cost, as it is presently being done in the case of biscuits. Some innovation in packaging technology is very necessary for rural markets.
3. Refill packs/reusable packaging
Such measures have a significant impact on the rural market as it helps in reducing price. Packaging material used should preferably lend itself for reuse. An ideal example in this direction can be the packing of fertilizers. Now companies have started packing fertilizers in LDPE or HDPE sacks, which are not only tamper proof but also reusable for host of domestic chores.
4. Application of value engineering
This is a technique which can be tried to evolve cheaper products by substituting the costly raw material with the cheaper one, without sacrificing the quality or functional efficiency of the product, for example in food industry, ‘soya protein is being used instead of milk protein. Milk protein is expensive while soya protein is cheaper but the nutrition value is same. This technique yields itself for application in many engineering or product designed areas so that the price can be kept at an affordable level.
Distribution strategies
Most manufacturers and marketing companies have distribution arrangement for village with a population of at least 5000 people. While it is -essential to formulate specific strategies for distribution in rural areas, the characteristics of the product, its shelf life have to be kept in mind. Distribution strategies that are specifically designed for rural areas are: through co-operative societies, public distribution system, multi-purpose distribution centers, distribution up to feeder markets/mandi towns shanties/hat/jathras/melas, agricultural input dealers etc.
Promotion strategies
Mass media is a powerful medium of communication. It could be television, cinema, print media, and radio. Other means of mass media available are hoardings/wall paintings, shanties/hats/melas, non-price competition, special campaigns etc. Besides these, other mass media like hand bills and booklets, posters, stickers, banners of the schemes etc.
The Go Rural mantra is the need of the hour for most of the companies to survive for a longer time in the competitive market scenario. For decades, MNCs have sold modified products in India, a process widely recognized as globalization. This strategy worked reasonably well with the more affluent urban consumers whose behavior is somewhat similar to Western consumers. With growing rural purchasing power and the three times larger population than urban, companies will need to develop appropriate products for this market. The globalization or minor modification will not work as rural consumers are very different.
Rural marketing is an evolving concept, and as a part of any economy has huge tap able potential. Marketers have long realized this opportunity. Improvement in infrastructure and reach, promise a bright future for those intending to go rural.
With income levels rising rural consumers are keen on branded goods nowadays, so the market size for such products and services seems to have burgeoned. The rural population has shown a trend of wanting to move into a state of gradual urbanization in terms of exposure, habits, lifestyles and lastly, consumption patterns of goods and services.
By 2012 it is expected that every village will be connected by an all weather road, every village will have internet connectivity, and almost every home will have electricity and possess a mobile phone. This significant improvement in rural infrastructure coupled with agriculture reforms already under way we can expect rural markets to reach inflexion point. This will lead to an explosion in demand the way it happened in the urban markets in the mid 90s as a result of easy consumer finance, a boom in the IT sector and steep increase in corporate salaries. Companies are not anticipating this boom and many will be taken by surprise when it happens.