Unit 3

Definition and Scope of Rural Markets

Rural Vs Urban Markets
Rural Marketing Environment
Rural Consumer Profile
Consumer Behaviour
Rural Marketing Mix
Rural Market Segmentation
Targeting and Positioning
Marketing of Consumer Durables
Rural Sales Force Management
Unit 4
Agricultural Produce Marketing
Importance
Problems
Lines of Improvement
Regulated Markets
Quality Orientation
Indian Markets

4. Impact of Globalisation on

Standardisation and Grading E chaupals ,Commodity Markets

andimportance
Role of financial institutions in Agricultural marketing

 Innovative Marketing Techniques and Recent Trend in Rural

Markets

Chapter 4

Contd..

RTI, 2005
Intended to get access to information under control of public
authorities
Aims at containing corruption and holding government
accountable
The central govt has Central Information Commission & State
Govt has State Information Commission
Applicability
Extends to whole of India except J&K
Each public authority maintains all its records indexed &
computerised
Public Information Officers (PIO) are officers designated by
public authorities in all administrative units
All officials have to help PIO whenever demanded
Procedure
PIO deals with all requests made in writing
Where the request cannot be made in writing, assistance is
given to the person seeking information
If the needed information is connected to another public
authority, the PIO has to transfer the request to that public
authority within 5 days
He must also inform the applicant immediately

 The PIO has to provide with the information, or reject the

request within 30 days
If the information is concerning life or liberty of a person, the
information has to be provided within 48 hours
If the PIO doesnt give a decision on the request, his refusal is
assumed
In case of rejection, the PIO has to communicate the reason for
rejection
He must also specify the period within which an appeal against
such rejection can be made
Information Exempted from Disclosure
Information exempted under the Official Secrets Act, 1923 (can
be disclosed if public interest in disclosure overweighs the
harm to the protected interest)
Information disclosure of which would prejudicially affect the
sovereignty and integrity of India, the security, strategic,
scientific or economic interest of the State
Information the disclosure of which would cause a breach of
privilege (powers) of Parliament or State Legislature
Fee for Seeking Information
A person who desires to seek some information from a public
authority is required to send, along with the application, a
demand draft or a bankers cheque or an Indian Postal Order of
Rs. 10/ The applicant may also be required to pay further fee towards
the cost of providing the information
(a) Rs. 2/- for each page ( in A-4 or A-3 size paper) created or
copied
(b) actual charge or cost price of a copy in larger size paper
(c) actual cost or price for samples or models
(d) for information provided in diskette or floppy, Rs. 50/- per

 diskette or floppy
A citizen has a right to inspect the records of a public authority
For inspection of records, the public authority shall charge no
fee for the first hour
But a fee of Rs. 5 for each subsequent hour shall be charged
Penalties
Central Information Commission can impose a penalty of Rs.
250 for each day till information is given.
Maximum penalty is Rs. 25000
The Commission can take disciplinary action again PIO if :
He doesn't give reasonable cause of rejection
Doesn't furnish information in time
Knowingly gives incorrect/incomplete or misleading information
Destroys/obstructs information
Chapter 5
Rights & powers of managing committee of a Co-operative society
To scrutinise all applications for membership
Check account books & ensure timely recovery of money
Sanction working expenses
Ensure that cash book is updated daily
Deal with complaints
Deposit funds of society in bank account
Appoint suspend or remove any officer
Appoint, fix duties & remuneration for employees
Sanction emergency expenditure
Rights of a member

 To hold shares not exceeding 1/5th of total share capital or Rs.

20000.
To transfer shares after holding them for at least one year.
To be entered as a member in the register of members.
Right to vote at general body meeting
To contest elections
To know affairs of the society
To receive copies of documents on payment of fees
To refer disputes to co-operative court for decision.
To resign or withdraw membership
To receive dividends not exceeding 15%
To pay dues of the society regularly
To comply with provisions of the act & bye-laws of the society
Not to bring disrepute to the society
Rights of registrar of co-operatives
Deciding policies
Guidance
Registration of Co-op societies
Handle complaints regarding membership
Giving consent for amendment for bye-laws
Investing societys funds and advances
Audit and inspection of society

 Instruct societies to conduct regular meetings

Amalgamation & reconstruction of societies
Impose penalties
Give decisions in disputes
Assist land development bank to recover loans
Stoppage of business in society

Responsibilities of an auditor
He certifies the final accounts are true and correct
He assesses the atmosphere, unity and cooperation among
members
He inspects if the society works on prociples of cooperation
He checks if the society maintains accounts as per the Act
He observes loans taken by the society
He makes sure that board of directors are using their powers
and doing their duties well
Prepares audit report
Auditor does an audit from three dimensions:
Members dimension: If they get goods and services from the
society
Society dimension: If cooperative principles are followed to
make society economically viable
Ethical dimension: If the society is ethical in its business and
abides by the Act

Right of an auditor
Access to balance sheets & all books of accounts
Power to summon any member in charge of the books of
accounts
Right to receive information
Right to be informed of and to attend the general body meeting
Challenges for cooperatives
Slow pace of growth
Mismanagement and Manipulation (in case of large
membership)
Lack of awareness
Lack of funds
Inadequate supply of support material
Lack of trainers
Restricted coverage
Threat from liberalisation
Rural Markets (Chapter 1)
What is Rural?
Government agencies like IRDA (Insurance Regulatory And
Development Agency)and NCAER (National Council for applied
Economic Research) define Rural as villages with a population
<5000 with 75% male population engaged in agriculture .
According to NSSO - National Sample Survey Office ( Census) :
Population density < 400 / Sq Km

75 percent of the male working population is engaged in

agriculture

No Municipal corporation / board

According to Planning Commission :
Towns up to population of 15,000 are considered rural
According to NABARD/RBI:
All locations with a population up to 10, 000 are considered
rural
What is Rural Marketing?
Developing of the market in the area which is defined as Rural
Process of developing, pricing, promoting, distributing rural
specific goods and services leading to exchange between urban
and rural markets, which satisfies consumer demand and
achieves organisational objectives
Aspects covered by rural marketing
1. Marketing of agricultural products from rural to urban areas
2. Marketing of manufactured goods and services in rural areas
Hence rural marketing is, Marketing of1. Urban products in rural areas
2. Rural products in urban areas
3. Marketing within rural areas (rural to rural)

Urban

Why Rural Markets?

Growing urbanisation
Higher purchasing power
Infrastructural facilities
Role of women in decision making
Relevance of opinion leaders
Media exposure
Rise of alert buyers
Saturated urban markets
Reasons for growth in rural markets
Increase in population, Increase in income

 Increased productivity of agriculture- Use of scientific methods,

technology
Government investment in rural development (Jawahar Rojgar
Yojna, Small Industries Training, Rural Electrification,
Spending on Health and Sanitation, Primary Education),
initiatives like Green & White revolution (Dairy), tax exemption
in backward areas etc
Initiatives by banks for more branches and Kisan credit card to
buy seeds, fertilizers, consumer goods on installment basis
Changing lifestyles/attraction of higher standards of living by
firms like HUL, Britania ,Dabur, LG, Honda, Videocon, ITC etc.
Evolution of new cadre of entrepreneurs in rural areas
Higher rural literacy rate Almost 59%
Revenue generated by rural markets for HUL- 50%
Colgate- 50 %
LG- 50 %
Asian Paints- 60 %
Dabur- 40 %
Videocon- 40 %
Cadburys- 25 %
Hero Honda- 40 %
Distinguish
URBAN MARKET

RURAL MARKET

Mostly concentrated

Widely spread and scattered

High infrastructural level

Low infrastructural level

High density of population per sq km

Low density of population per sq km

Good physical connectivity and high mobility

Poor physical connectivity and low mo

Incomes are more stable and permanent

People work in less certain environmen

Occupations are government employment,

business, industry etc.

Mostly agricultural occupation

Income received at regular income

Acute seasonality in income receipts

Social norms are less visible

Social norms influencing individuals

Caste influence indirect and less visible

Caste influence direct and strong

High exposure to variety of products

Low exposure to variety of products

High brand awareness

Low brand awareness

High exposure to multiple sources of information Low exposure to and limited sources o
information
More convenient buying, more retail outlets

Less convenient buying, less retail out

Rural Marketing Environment

Who is the consumer?
Consumables & Lifestyle products: School going children &
young adults
20-35 yrs = 1/4th Indias consumption base

 48% of the rural Indias population is below 20

Improvement in literacy rates= mature decisions, more brand

awareness & hence brand consciousness
Characteristics of rural markets

Rural literacy levels: 36% in 1981; 45% in 1991; 59% in 2001

Large and scattered market: Rural population is 72% of total
population and it is scattered over a wide range of
geographical area
Diverse socio-economic background
Changing demand pattern: Demand pattern of rural customer
is fast changing due to increasing in income and credit facilities
offered by banks like Kisan credit card
Major income comes from agriculture: About 60% of the rural
income is from agriculture and hence the demand for consumer
goods is high during harvesting season
Saving habits: Rural consumer is now having saving habits due
to the efforts of co-operative and commercial banks
Traditional outlook: Rural customer values old customs and
traditions
Low standard of living compared to urban
Poor infrastructure facilities: Facilities like roads, warehouses,
communication system, etc. are inadequate in rural areas.
Hence physical distribution becomes costly
Media reach: The reach of print media is 10% followed by TV
31%, radio 31% and cinema 33%.
Communication: Around 6 lakhs villages are still without
telephone facilities.
Electrification: About 88% of villages have been electrified
Kisan Credit Card
A Kisan Credit Card is a credit card to provide affordable credit
for farmers in India

 It was started by the Government of India, Reserve Bank of

India (RBI), and National Bank for Agriculture and Rural
Development (NABARD) in 1998-99 to help farmers access
timely and adequate credit
The Kisan Credit Card allows farmers to have cash credit
facilities without going through time-consuming bank credit
screening processes repeatedly
Repayment can be rescheduled if there is a bad crop season,
and extensions are offered for up to four years
The card is valid for three years and subject to annual renewals
Withdrawals are made using slips, cards, and a passbook
Classification of Rural Consumer by Income
Affluent Group: This group is very small and can afford luxury
products. E.g. Chilly merchants in Gunthur, Andhra Pradesh and
wheat farmers in Punjab.
Middle Class: This class is about 30 crores in size and is
expanding. E.g. Jute farmers in West Bengal and sugarcane
farmers in UP.
Poor: This class is about 25 crores in size. Their purchasing
power is very low. E.g. Poor farmers of jawar and bajra of Bihar
and Orissa.
Profile of Rural Consumer
Educational profile
Occupation
Low income levels
Opinion leaders
Media habits

 Increase in brand consciousness

Value for money
Rural consumer behavior
What is Consumer Behaviour?
Human behaviour that go to make purchase decisions. Its
the reaction of individuals in obtaining and using goods and
services of a particular type
Definition:
Is the process whereby individuals decide whether, what,
when, how and from whom to purchase goods and services.
Characteristics of Rural Consumer that affect the buying
process
Age and life cycle stage
Occupation
Purchasing power (small packs & prices, installments &
discounts and free gifts)
Lifestyle ( Poor, Aspirants, climbers, consuming class, very rich)
Personality & self Concept
Psychological factor
Perception
Cognition (knowledge)
Beliefs & attitudes
Motivation
Rural consumers Buying behavior

 Socio-Cultural factors
Culture
Social class
Groups
Family
Role & status
Sociability (interactions between one another)
Technological factors
Economic factors
Political Factors
Chapter 3
PRODUCT STRATEGY
1) Small Unit Packaging
Small packs are preferred due to the following reasons:
Small packs help the rural consumer to pick the product at
affordable price
Individual use products like shampoo; toilet soaps, etc. are
bought in smaller size
Small packs are easy to display and they increase the visual
appeal
Small packs are convenient to retailer to do his business
Example:
Cavin Kare introduced shampoo in 4 ml sachets at 0.50 paise

 Rasna is now available in sachet at Re. 1

Ponds introduced 20 gm talcum powder
Tiger biscuit is available in four biscuits pack at Re. 1
2) New Product Design
The products are designed as per the rural lifestyle
Example:
PVC shoes and chappals are designed to work in adverse
conditions
LG electronics launched Sampoorna TV that can withstand
power fluctuations
Philips introduced small refrigerators especially for rural
consumers
3) Sturdy Products
Sturdiness of a product is an important factor for rural
consumers. The rural consumers believe that heavier the,
higher he power and durability
Example:
Bullet motorcycle is popular in village due to its ruggedness
Escorts has positioned their motorcycle Rajdoot as a tough
vehicle
Rural consumer prefer dry battery cell, which are heavy
4) Utility Oriented Products
Rural consumers are more concerned with the utility of the
product and its appearance

Example:
Philips introduced low cost radio Bahadur with only medium
wave receiver, which was failed and fund that rural consumer
purchase radio not only for news but also for entertainment
5) Brand Name
Rural consumers are more brand loyalists than urban
consumer. The brand name should instantly be understood by
the rural consumers
Rural consumers are unfamiliar with English and absurd names
More preferably rural brand is a symbol, logo or color
Example:
Everyday battery with a cat symbol rural consumers
remember it as billi wali battery
Lifebuoy soap rural consumers remember it as lal saboon
Mahindra tractors brand Bhumiputra
Slogan of Red Label Tea jiyo mere lal proved very effective to
promote sale
DUPLICATE AND COUNTERFEIT PRODUCTS IN RURAL MARKET
Counterfeiting is a kind of duplication where the fake products
bear the identical name of the original product, its packaging,
graphics, color pattern, design and even same name and
address as the genuine manufacturer
A pass-off product is one that comes with a few minor changes
from the original product. The slight changes are made to avoid
legal problems
Example:

 Head and Shower Head and Shoulder

Pantane Pantene, etc
PRICING STRATEGY
1. Low Cost Products
Rural customer is price conscious manly because of low
income. The price can be kept low, by low unit packaging
This is a common strategy adopted by many companies
marketing in rural areas. Example same as of small unit packs
2. Application of Value Engineering
The aim of value engineering is to reduce the value of the
product so that a larger segment of population can afford it to
buy
Eg: Soya protein can be used instead of milk protein, nutrition
content of both is same but the soya protein is cheaper then
milk protein
3. Refill / Reusable Packaging
Refill packs benefits the rural consumers in terms of price and
also the packaging material should be reusable in rural areas
Example Many farmers demand for fertilizers packed in
durable sacks. They feel that they get sacks free of cost by
purchasing fertilizers
4. Discounts
In order to motivate the rural retailer to sell more, a discount of
5-10% is given on the MRP particularly in case of FMC goods
5. Promotional Schemes

 Rural consumer normally buys household articles during

festivals like Eid, Diwali, and Pongal etc. special promotional
schemes could be introduced on such occasions like exchange
offers, special discounts, etc
RURAL PRICING OBJECTIVES
1. Deeper penetration of market: Basically rural markets are
adopted for deeper penetration and expansion because of its
size. Hence the pricing objectives are different for rural and
urban markets. E.g. VIM washing bar is Rs. 15 (400 gm) in the
urban market but it is offered for Rs. 4 (200 gm) in rural
markets
2. Long run profit maximisation: A company enters in rural market
should wait for success in long run. Hence penetration-pricing
strategy is the best option
3. Recover distribution cost: The pricing objective of a rural
marketer should recover the costs involved in distribution
alongwith production cost and dealer margin
4. Competing pricing: Rural marketer should study the pricing
strategy of its competitors and accordingly fix its prices
5. Increase sales and market share: The pricing objectives should
be such that it boosts the sales in rural markets. E.g. Anchor
white toothpaste launched with much lower price than the
leading brands and captured the market
CONSUMER CATEGORIES WITH RESPECT TO PRICING
1) Quality Conscious Consumers They are very rich and are
mainly concerned with quality of the products and services
Pricing Methods:
Discriminatory Pricing charging different customer groups
differently.

 Skimming pricing Charging high prices at initial level, E.g.

P&G launched Tide detergent at high price and then reduced it
lower than other brands
2) Value Conscious Customers They are of middle class and are
mainly concerned with functional benefits and value for money
Pricing Methods:
Penetration Pricing Charging low prices at initial level then
increasing gradually when brand name has been established.
E.g. Maggie noodles, Vicks
Value Pricing Setting the price reasonably lower than the
competitors price
3) Price Conscious Customers They are climbers, aspirants and
destitutes (poor). They watch for promotional offers and purchase
cheap or fake products
Pricing Methods:
Psychological Pricing Psychological pricing is one that ends in
an odd number e.g. Rs. 99.95. It conveys two notions to
consumer that there is a discount or bargain and it belongs to
lower price category
Promotional Pricing It includes mini packs, price-off, special
discounts, credit facilities etc
PROMOTIONAL STRATEGY -Qualities Required for a Rural Sales
Person
1. Knowledge of local language
2. Willingness to get located in villages
3. Cultural Congruence: Rural salesman must have proper
acquaintance with the cultural pattern of rural life

4. Patience
5. Capacity to handle number of products lines: Rural salesman
usually does not generate economic value of business if he
handles few products. He is required to handle much large
number of products lines as compared to urban salesman
6. Greater Creativity: Rural marketing involves greater creativity. If
the product is very new in the rural context, he has to introduce
it using consumption pioneers and opinion leaders
ALTERNATIVE MEDIA FOR RURAL COMMUNICATION
A] Formal Organised Media:
Newspapers and Magazines: E.g.
Dina Thanthi in Tamilnadu, Punjab Kesri in North and Loksatta in
Maharashtra
TV: Regional channel is very popular like SUN TV in Tamilnadu
and Asianet in Kerala.
Cinema: Short feature films with advertisement message, Adfilms and documentaries that combine knowledge and
advertisement are useful for rural communication
Radio: It is a well-established medium in rural areas. Radio
reaches large rural population at low cost
Point Of Purchase: Colors, symbols and pictures should be used
more than the written words
Outdoors: Hoardings, wall paintings, illuminations and other
displays are also now being used for rural communication
B] Rural Specific Media
Music Records: Inexpensive medium. A complete language
group can be reached on a low budget through cassettes that
can be played in the place where rural people gather

 Puppetry: The indigenous theatre of India; most popular form of

entertainment available to the village people. The performer
uses puppets as a medium to communicate, ideas, values and
social messages. Eg:
Sounds and drama division of the government of India
used puppets to promote various government projects
LIC used puppets to educate rural masses about jeevan
beema in Lucknow
Folk Theater: Folk theatre is mainly short and rhythmic in form.
It has been used as an effective medium for social protest
against injustice and exploitation
Interpersonal Media: In many cases, rural people prefer face-toface communication than mass communication. A firm can
contact audience through fairs & festivals, folk, etc
Group Meeting: It is a component of interpersonal media.
Salesman can effectively convey the product message at these
meetings. Demonstration of products can also be carried out
House-to-House Campaign: In these campaigns, promotional
staff makes house-to-house visits in rural areas. This is different
from door-to-door selling campaigns. Promotion staff does not
sell the products, they only propagate the products
Field Demonstrations:
AV Vans: AV van is a comprehensive mobile promotion station.
The van can be used for sales campaign in addition to
promotion campaigns. AV van exhibits films, audiovisual
presentations, slide shows etc. It is very popular with rural
marketing firms particularly agro business firms. AV van is very
effective tool in rural communication but its cost is very high as
the target population is very high

 Syndicated AV Vans: It is an AV van publicity service provided

by the independent agencies. Firms, which cannot afford to
have their own publicity van, can utilise the syndicate van
services
Stalls, Haats (a temporary & periodic market), Melas: These are
useful media of rural communication to spread the message
and to induce brand trials
Wall Paintings: The speech or the film comes to an end but the
paintings stay as long as whether allows it to stay. The retailer
usually paints its shops wall and name board which acts as a
status symbol
Use of Logos and Symbols: Illiterate villagers would remember
brands only by picture, symbols more than the name
Use of Information Technology: ITC developed a web portal in
regional languages to provide information to the farmers about
the products and services which they need in order to enhance
farm productivity, information on whether, scientific practices,
market prices etc
Focus on Reference Groups: They are the opinion leaders and
are the key persons of the village e.g. Sarpanch, Gram Sevak,
Teachers, Doctors etc. These people should be taken into
consideration while chalking the rural communication
Constraints in Rural Communication
Low Literacy Rate
Low Spending Capacity
Joint Families and Strong Kinship Ties: Difficult to reach female
consumers directly
Linguistic and Socio-cultural Differences

 Unique Media Habits: Newspapers are found mostly at

groceries shop, tea stall etc. Magazines are not read at all
Expensive Communication: Repeat exposure is a must
otherwise the message loss its effect during gap periods
Poor Infrastructure
Lack of Research Data: Decisions regarding messages and
media mix for rural communication depends only on sales force
and distributors, which is insufficient
DISTRIBUTION STRATEGY -METHODS OF DISTRIBUTION
Stockists Van / Company Owned Vehicles: In this system, a
salesman loads the van with stocks and from the company
stock point and distribute in the surrounding market. Then he
moves the next stock point and covers all surrounding markets.
In this way he moves from one stock point to another and
returns to companys stock point. It is the best but an
expensive method
Hired Vehicles: In this system, the salesman hire a public
carrier like a taxi or a truck. The disadvantage of this system is
that the salesman has to spend lot of time in organizing
transport
Working by Independent Stockist: In this system, inspite of
having salesman, company gives this job to the stockist. Each
stockist is asked to cover his surrounding market. It is useful
only to companies with high volume turnover
Selling Through Bullock Cart / Camel: This is used to market in
remote villages with no motorable roads. In this system the
number of outlets covered is limited because of slow
transportation

 Appointment of Primary Dealers: Here a big retailer in a village

is appointed as a primary dealer ad is asked to purchase the
goods from nearby stockist with a special discount
Using Urban Wholesalers: Company can ask the urban
wholesaler to recommend and sell its products through their
rural retailers. In return, company gives them 1% incentives on
actual sales made
PROBLEMS OF RURAL DISTRIBUTION
Transportation Problems
Warehousing Problems
Communication Problems
Non-Availability of Dealers
Greater Dependence on Dealers: Scope of manufacturers direct
outlets in rural market is limited; it is expensive as well as
unmanageable. Thus firms have to depend on large network of
intermediaries, controlling of which is a difficult task.
Higher Cost and Administrative Problems: Distribution chain in
the rural context requires large number of tiers including
village level shopkeeper, mandi level distributor and wholesaler
in town. Such multiple tiers and scattered outfits increase the
costs and make channel management difficult
Poor Viability of Retail Outlets: Retail outlets suffer from poor
viability because the business volume is not adequate enough
to sustain the profitability
RURAL RETAILER BEHAVIOUR
Seasonal Pattern: There is particular seasonal pattern in stock
holding of rural retailer. During the harvest he stocks variety of

consumer goods, because the main buying season in rural

areas is during harvest
Transfer of Capital: When the harvest is over and cash is
realized, the retailers invest in inventories for his shop
Credit Pattern: Credits offered to consumers by retailers is
different from area to area. Normally consumers have a running
credit with a part of outstanding is paid every month and the
balance is paid during the harvest
Purchasing Cycle: In high turnover feeder villages, the retailers
make purchases 3 to 4 times a week from urban wholesaler. In
other villages they buy once a week or fortnightly
Multiplier Effect of Rural Demand
Once a product gains acceptance in rural markets, the rural
retailer put this item on his shopping list when visiting the
wholesaler in the nearby town
This action by the rural retailer starts a chain reaction with
the urban wholesaler; once the urban wholesaler knows that
for such a product a rural demand is possible, he will start
stocking this product and will recommend and push this
product to other rural retailers
These rural retailers will in turn, sell to smaller retailers of
smaller villages. In this way a multiplier effect create in rural
demand
Chapter 3
Segmentation in Rural Market
1. Geographic Segmentation: Segmentation on the basis of
geography is done depending on various factors such as:
Region/Zone: North, South, East and West.

 Village Size: < 500 people, 501 2000 people, 2001 5000
people, > 5000 people
Proximity to the feeder town
Density: The number of people per sq. km
Climate: Moderate, rain fed or dry with scanty rainfall
Level of Irrigation: Whether good, moderate, scanty or none
at all
2. Demographic Segmentation: It is based on the population, age
group, literacy level and income of the rural consumer
3. Psychographics / Behavioral Segmentation: Such segmentation
is done using variables such as:
Social Class (Upper, Middle, Lower)
Lifestyle of the people, (whether rigid, traditional or
changing)
Occasion (whether purchases on a regular day or a special
occasion)
Benefits sought from the product (such as Quality, Price and
Service)
Usage rate, size of consumption
Loyalty to brands (whether Low, Medium or High)

Targeting
1. Evaluate the segments: Based on profitability of the segment,
attractiveness, growth rate, company objectives, limitations of
the segment

2. Select the segments: Rates the above parameters on high,

medium or low and comes with a score for each segment
3. Coverage of segments: Types: Differentiated, undifferentiated
and concentrated
Positioning
It is what you do to the mind of the prospect
Involves:
1. Identifying own USP via a vis competition
2. Select the differences that have greater competitive
advantage
3. Communicate such advantages to target audience
Marketer can differentiate using:
1. Product
2. Service
3. People/brand endorsers
4. Overall image using ads, signs, symbols, colors, logos etc
Marketing of Consumer Durables
Income level determines demand
Purchase priority- High to low: TV, Fridge, washing m/c, AC
Changes in demand pattern due to consumer finance
High growth witnessed in rural demand
Exchange schemes work well
Issues

 Low penetration compared to potential

Lack of infrastructure (Power, water)
No economies of scale for rural retailer
Spending tendency more on labor than machines
Chapter 4
Agricultural Produce Marketing
Agricultural marketing is a process which starts with a decision
to produce a farm commodity
It involves all aspects of market structure and includes pre and
post harvest operations like assembling, grading, storage and
distribution
Characteristics of Agricultural Produce
Uncertain quality/quantity of output
Bulky
Perishable
Seasonal in many cases
Need processing
Classification of Markets

1. On the Basis of Location

Village Markets: Located in small villages
Primary Wholesale Markets: Held weekly or bi-weekly at
different villages and locally called as Shandi or Haat

 Secondary Wholesale Markets: Located at taluka or district

headquarters and towns and known as Mandi or Gunj
Terminal Markets: Located in metro cities where buyers and
sellers come from different regions or nations
Seaboard Markets: Located near seashore for the purpose of
import and export
2. Time Span
Short Period Markets: Perishable products such as fish, milk
etc. are traded
Long Period Markets: Less perishable products such as
oilseed food grains are traded
3. Volume of Transaction
Wholesale Markets: Goods are bought and sold in large
quantities
Retail Markets: Goods are bought and sold according to the
consumers requirement
4. Nature of Transaction
Spot or Cash Market: Money is realized immediately after the
sale
Forward Market: Process of purchase and sale is done but
goods and money is exchanged at some specific date
5. Number of Commodities
General Market: All types of commodities are bought and
sold
Specialised Market: Only one or two commodities are sold,
e.g. cloth market

Marketing Functions
Primary Marketing Functions:
1. Assembling: It is the process of collecting agricultural produce
from small cultivators and marketing them in large quantities in
wholesale markets In assembling process number of agents
take part. They are:
Farmers who bring their produce to market
Cultivators who collect the produce of other farmers
Landlords who collect the produce of their tenants
Merchants or village banias
Arhatiya that is wholesale merchants and manufacturers
2. Processing: It is a process that adds utility to a commodity. It
improves the quality of produce like polishing of rice
3. Distribution: It is the process of storage and selling of
processed or unprocessed products
Secondary Marketing Functions:
1. Standardisation & Grading: Difficult to grade agricultural
products because of the wide variation from region to region
and even from farm to farm
2. Packaging
3. Transportation
4. Storing
5. Financing

Methods of Sale
Under Cover of a Cloth (Hatta) System: The price is fixed by the
Commission agent and the retailers (Purchaser) under the
cover of cloth by making signs on the palm (Hatta system). This
system has been banned by government because of the
possibility of cheating.
Open Auction System: In this system, the seller piles-up his
produce at one place. Dalal visits each piled-up stocks, pick
samples and shows it to the buyers. The agent then invites bids
and the produce is sold to the highest bidder
Random Bid System: Dalal invites only few buyers, everyone is
not informed
Roster Bid System: Bidding starts from a particular shop in the
market and the bidders after the auction of produce at one
shop move to the next in a clockwise or anticlockwise direction
till the auction at all shops is over
Closed Tender System: In this system the bidders are asked to
quote their offer price in a prescribed form and submit it to the
seller. All the bidders are invited on a fix date and time and
sealed tenders are opened in presence of all bidders. The name
and price of highest bidders is announced and goods are sold
to him
Mogum Sale: In this system, farmers take advance from the
buyer before the harvest without fixing the price, with an
understanding that the buyer will pay the prevailing rate after
the harvest
Private Negotiations: In this method, buyer comes to the shops
of agent, inspects the sample and offers his price. If price is
accepted the agent convey the decisions to the seller and the
produce is weighed and given

Market Charges and Deductions

Arhat Commission
Bardana Rent for supply of gunny bags
Borioto Charges for holding the gunny bags while filling
Hamali Handling charges
Tulai Weighing charges
Munimi Clerks allowance
Karda Trade allowance to buyer to compensate for loss in
weight on account of impurities etc
Direct Marketing for Agricultural Produce
Apni Mandi / Kisan Mandi
A direct contact between the farmer and consumer without the
involvement of middlemen
Minimises the marketing costs and zero middlemen margin
The Apni Mandi is fully covered from top but open on the sides
It accommodates raised platforms of 6'x8' size each
These platforms are allocated temporarily to the famers to
display their produce and sell it to the consumers directly
First Apni Mandi was started by Punjab Mandi Board at
Chandigarh in 1987
State government provides various facilities like space, water,
sheds, counters etc to the market committee of the area where
Apni Mandi is located

 Today, the country has 7,246 such mandis each of which caters
to an average area of nearly 450 sq km
Only 20 per cent of the over 242 million tonne of fruits and
vegetables produced in India is traded through regulated
markets
Hadapsar Vegetable Market: It is located at Pune and is a model
market for direct marketing of vegetables. It has no middlemen
or commission agents
Rythu Bazar: It is located in major cities of Andhra Pradesh
Uzhavar Shandies: Located at selected municipal panchayats of
Tamilnadu
Shetkari Bazar: Established in Maharashtra for marketing fruits
and vegetables
Krushak Bazar: Established in Orissa for marketing fruits and
vegetables
Mother Dairy Booth: After the notorious onion and potatoes
price crisis, Mother Dairy opened these booths in almost all
colonies of Delhi to sell vegetables in retail
Contract Farming: Agro processing companies enter into
contract with the farmers that they provide the farmers with
the inputs like fertilizers, seeds, pesticides and guidelines to
grow crops and buy back the products with a rate specified in
advance.
Problems in Marketing Agricultural Produce
Lack of organisation among producers
Superfluous middlemen
Forced sale due to poverty, debt, communication gap etc

 Market charges like commission, namoona, munimi etc

Multiple weights and measures
Adulteration by farmers
Malpractices like large samples taken are not paid for
Under developed infrastructure & transportation
Absence of grading and standardisation
Lack of easy finance
Information gap
Inadequate storage facilities

Chapter 5
Regulated markets
The regulated markets are established as per the provisions of
the `Marketing of Agricultural Produce Acts of the State
Government
The Commodities with which the market will deal, are also
declared
Regulated markets aim at the development of marketing
structures to ensure remunerative prices to the producers and
to narrow down the price spread between the producer and the
consumer. It also aims at reducing the non-functional margins
of the commission agents
For controlling the activities of the marketing, there is a
`Market Committee

 The Committee consists of representatives of the farmers,

commission agents and the Government nominees
The Committee issues licences to the Commission Agents,
weigh men, and other functionaries.
The rate of Commission to be charged is fixed by the
Committee
Weighing is done properly by the weigh men appointed by the
Committee
There is an arbitration Sub-Committee to look into the
grievances of the farmers.
Amenities like rest house, place for parking of vehicles, coldstorages, etc. are also created in the market yards for the
benefit of the farmers
Open auction method of sale
Market charges vary from state to state
Payment of goods on the same day

Standardisation & Grading

Standardization refers to the process of setting up basic
measures or standards to which the products must conform
It ensures that the goods actually produced adhere to these
standards
Standards are established on the characteristics like weight,
size, color, appearance, texture, moisture, ripeness, taste, etc
Grading is the process of sorting individual units of a product
into well defined classes or grades of quality

 The goods are graded or sorted out into different lots in

accordance with the specified standards
The established standards lay down the grades of the product
In case of manufactured goods, goods can be of uniform
quality. But agricultural products like fruits and vegetables,
etc., vary in quality
Therefore, classes or grades of quality are set and different
units of the product are sorted into the established standard
grades
Thus, grading involves the division of products into classes
made up of units possessing similar characteristics of size and
quality.
Standardization and Grading are interdependent activities
Standardization lay down the standards or grade of quality
Grading involves classifying the products into specific lots as
per the established standards

Why Standardisation?
Improves physical handling of goods goods of similar
standards can be stored/transported together
Facilitates buying and selling of goods by sample or description,
avoids detailed inspection
Sell better and also fetch a better price
Reduces risk of purchase by wholesalers/firms

 Provides easy availability of finance

Helps increase exports
Improves appropriate targeting of right quality of produce to
the right market
Recent trends in Agricultural marketing
Reduction in length of supply chain
Modern communication methods
Better transportation
Improved infrastructure warehousing, cold storage etc
Standardisation and grading
Concept of contract farming becoming popular
Finance & Agricultural marketing
Traditionally dominance of private money lenders, traders and
agents
Role of financial institutions more prominent in recent years
Types of credit:
Short term
Medium Term
Long term

NABARD
National Bank for Agriculture and Rural Development

 Apex body looking after rural credit requirements

It provides loans to State Cooperative Banks and Regional Rural
Banks
Short term loans upto 18 months, medium term upto 7 years
and long term upto 25 years
Overlooks and inspects functioning of SCBs and RRBs
Maintains R & D fund for research in agriculture and rural
development
Impact of Globalisation on Indian Markets
Higher standard of living
Better profits to agro based firms
Improvement in product standards
Better employment opportunities
Optimum use of natural resources
Economic Growth
Attracts more FDI

E-Choupal
Initiative by ITC
Provides computer with internet connection to farmers
Good source of information and discussion for farmers across
the country
Main motive is to conduct agricultural commodity trading at
multiple locations

 By passes the middlemen and their charges

The internet kiosk located at an influential person in village
the Sanchalak
He has access to entire site contents

The process
Farmer brings sample to sanchalak
He inspects the produce, assesses the quality and gives a
quote to the farmer
The quote is given on basis of previous day mandi prices that
Sanchalak finds through the website
The farmer may choose to sell via ITC
He is given written note of details of the sample and the quoted
price
Sanchalak takes the sample to nearest ITC procurement centre
A chemist tests the sample
If approved, the farmer collects his full payment from the
centre