Sunday, November 13, 2011

Rural marketing

Pinak Mukherjee, Siddharth P. Bijlani | mdi gurgaon

Rural marketing

In a diverse market like India, having second largest population in the world, the urban-rural divide is quite significant. According to various studies, around 12.2 per cent of the world’s population lives in rural India. Considering this as an untapped potential, a special marketing strategy, namely, rural marketing has emerged. It involves delivering manufactured or processed inputs or services to rural producers or consumers.

“The future lies with those companies who see the poor as their customers."
- C. K. Prahalad

Another reason that rural market is gaining importance is due to competition in the urban market, the market is reaching towards saturation level as higher capacity of the purchasers have been targeted by the marketers. So the marketers are looking for extending their product offerings to an unexplored market i.e. the rural market. This has also led to the CSR activities being done by the corporate to help the poor people attain some wealth to spend on their product categories. Here we can think of HUL initiatives in rural India. One of such project is the Project Shakti, which is not only helping their company earn revenues but also helping the poor women of the village to earn money which is increases their purchasing power. Also this will increase their brand loyalty as well as recognition in that area.

Rural market can be segmented using the concept of “urban orientation”. Urban orientation is defined as the degree to which a rural consumer would like to replicate the urban lifestyle. The higher the urban orientation, the higher will be the requirements for goods and services consumed in urban India and vice-versa. Broadly, the market can be segmented into three segments.

Also an interesting fact, most of the Indian villages have a population of less than 1,000, while there are only a few villages where more than 10,000 people live. With such a widespread market, marketers have been finding it difficult to penetrate this vast audience. For a rural marketer, it may not be commercially viable to reach out to villages that have a population of less than 2,000 people which constitutes 87% of the villages in India. Most of the rural audience in the smaller villages come to shop at a nearby ‘haat’ or travel to a nearby bigger village. Hence, if the marketer is focussing on those 13% (75000) villages, it is possible to cover almost all of the Indian rural audience.

In spite of attraction, it is not easy to enter the market and grab a sizeable share of the market, in the short time. Some of the reasons could be:

  • Low Literacy and Communication: There are not enough opportunities for education in rural areas. The literacy level is as low (36%) when compared to all- India average of 52%. Due to this, the consumers cannot understand themessage that has been communicated through advertisement of the products and services.
  • Seasonal Demand: Demand for goods in rural markets depends upon agricultural situation, as agriculture is the main source of income. Agriculture to a large extent depends upon monsoon and, therefore, the demand or buying capacity is not stable or regular.
  • Transportation: Many rural areas are not connected by rail transport. Kacha roads become unserviceable during monsoons and interior villages get isolated.
  • Distribution: An effective distribution system requires village-level shopkeeper, Mandal/ Taluka- level wholesaler or preferred dealer, distributor or stockiest at district level and company-owned depot or consignment distribution at state level. The presence of too many tiers in the distribution system increases the cost of distribution.

Keeping these difficulties in mind and to meet the objectives of Rural Marketing, the traditional four P's of marketing - Product, Price, Place and Promotion have been replaced by a different framework for analysis. A number of companies have worked on various elements of the marketing mix to improve the four A's - Affordability, Awareness, Availability and Acceptability for rural markets. FMCG companies innovated on package sizes to introduce low price points. They have customized promotional strategies for rural markets using local language and talent. Some FMCG players continue to expand rural penetration (Tata Tea's Gaon Chalo). Coca-Cola's Parivartan program has trained more than 6,000 retailers to display and stock products. Dabur has created a training module ASTRA (advanced sales training for retail ascendance) in several regional languages. A number of auto companies have launched rural-specific campaigns.

Definitely there is huge untapped potential in rural India. But there are hindrances at the same time. The greatest hindrance is that the rural market is still evolving and there is no set format to understand consumer behaviour. Lot of study is still to be conducted in order to understand the rural consumer. Only FMCGs with deeper pockets, unwavering rural commitment and staying power will be able to stay longer on this rural race and hence should venture into this territory.

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