Rural Markets - What, Why and How By Ms.

Charu Bharti Lecturer Amity School of Business, Amity University Noida Mr. Ashu Jain Lecturer Amity International Business School, Amity University Noida

In recent years, rural markets of India have acquired significance, as the overall growth of the Indian economy has resulted into substantial increase in the purchasing power of the rural communities. On account of green revolution, the rural areas are consuming a large quantity of industrial and urban manufactured products. In this context, a special marketing strategy, namely, rural marketing has emerged. Rural India with its traditional perception has grown over the years, not only in terms of income, but also in terms of thinking. The rural markets are growing at above two times faster pace than urban markets; not surprisingly, rural India accounts for 60% of the total national demand. Today, rural market occupies a larger part of our economy and it is expected to grow at least four times the existing size. Another contributing factor for rural push was growing saturation in urban markets. To be precise, rural marketing in Indian economy covers two broad sections: 1. Selling of agricultural products in the urban areas 2. Selling of manufactured products in the rural regions In present situation, our huge population is helping marketers to think new marketing strategies. 630 Billion rural populations are greater than total consuming markets of many countries like Canada, South Korea, etc. Tapping the rural market is one of the most important marketing strategies followed by various MNCs and Indian companies now-a-days.

A number of companies in FMCG, consumer durables as well as telecom sector have adapted strategies to expand their base in rural market. Among those who have already taken remarkable initiative in rural market are HLL, Colgate, LG Electronics, Philips, BSNL, LIC, CavinKare, Britannia and Hero Honda. Rural Marketing in simple word is planning and implementation of marketing function for rural areas. Rural marketing has been defined as the process of developing, pricing, promoting, distributing rural specific products and services leading to exchange between urban and rural markets which satisfies consumer demands and also achieves organizational objective Rural Consumer insights Rural India buys :* Products more often (mostly weekly) ; * Buys small packs, low unit price more important than economy ; * In rural India, brands rarely fight with each other; they just have to be present at the right place ; * Many brands are building strong rural base without much advertising support, like Shampoos, detergent etc. * Fewer brand choices in rural areas; number of FMCG brands in rural areas is half that of urban. * Buys value for money, not cheap products Exposure of Rural Markets in India. * 630 million people ; * According to a study by the Chennai-based Francis Kanoi Marketing Planning Services, estimated annual size of market is FMCG Rs. 65,000 Crore Consumer Durables Rs. 5000 Crore Agri Inputs (e.g., Tractors) Rs. 45,000 Crore 2/4 Wheelers Rs. 8,000 crore Total Rs. 1,23,000 Crore

* In 2001-02, LIC sold 55% of its policies in rural India. * Of the two million BSNL mobile connections, 50% are in small towns / villages. * Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT). * 42 million rural households are availing banking services in comparison to 27 million urban households. * Investment in formal savings instruments: 6.6 millions households in rural and 6.7 million in urban India. Importance of Rural Market * Large Population: Approximately 75% of India's population resides in around 6,38,365 villages of India spread over 32 lakh square kilometer. 41% of India's middle class resides in rural areas. ; * Higher Purchasing Capacity: Purchasing power of rural people is on rise; * Market Growth: Market is growing at a rate of 3-4% per annum. Major Initiatives of Some Market Players * Hariyali Kisaan Bazaar , was set up by DCM Shriram Consolidated Ltd. to facilitate sale of agri-inputs such as fertilizers, pesticides, farming equipment, seeds, animal feed, etc. * ITC 's internet-enabled rural interface to help sale of agri outputs, e-Choupal, is presently operational in 6 states and there are 5200 kiosks. * TRIVENI KUSHALI Bazaar, a rural agri-inputs store run by Thriven Engineering Industries Ltd. in the sugarcane belt of U.P., is also used to sell cement and FMCG products. * HUL's Project SHAKTHI - Through the state governments and NGOs involved in micro-finance, women entrepreneurs in villages are identified to act as local distribution and sales point for HUL products. Challenges Faced by Marketers in Rural Market * Low literacy rate. * Traditional outlook of rural consumers due to which they are resistant to change. Their buying decision is low and delayed.

* Demand in rural market depends on the agricultural situation as it is the main source of income. Again agriculture depends on monsoon. So buying capacity of rural consumers varies and it becomes difficult to predict demand. * Lack of infrastructure facilities. * Retailers pushing imitation or fake products in place of branded ones for better commission. * Communication problems. * Problems related to distribution and channel management The journey of markets to the rural markets has indeed been one of surmounting one hurdle after another; these include the 4 As - Availability, Affordability, Acceptance & Awareness - adopting themselves to the rural atmosphere marketers. So, in the context of growth aspects of the Rural markets and their adoption and application by major MNCs and Indian companies, I want to take this Project as my Research Project so that I could go in to the in-depth study of the rural markets- their future scope, challenges etc. in the context of India 'Rural markets are future battlegrounds' Objectives of the study "Any task without sound objectives is like Tree without roots". Similarly in case of any research study undertaken, initially the objectives of the same are determined and accordingly the further steps are taken on. A research study may have many objectives but all these objectives revolve around one major objective which is the focus of the study. In this study, the focus is on the emergence of Rural markets as the most happening market on which every marketer has an eye. And so this study will be based on studying the emergence of rural market in various contexts. The following are the objectives of this research study :* To study the emergence of Rural markets in the context of India. * To study the present scenario of rural marketing in India. * To study the future prospects of rural markets and their scope for the MNCs and Indian companies, in India. * To study the challenges faced by rural marketers in India. * To study the reasons of popularity of rural markets in India. Review of related Literature

* The Marketing Mastermind (2003), Hindustan Lever rural marketing Initiatives by "A Mukund" Marketing Mastermind has given the perspectives in which HLL has approached towards rural markets. * The Economic Times (2003), "The rural market likes it strong" the strength of rural markets for Indian companies. Financial express, June 19, 2000 has published the strategy about FMCG majors, HLL, Marico Industries, Colgate Palmolive have formula had for rural markets * Ramanathan V, Sudhamathi S, Brand Building Exercises Adopted by Life Insurance Companies in Indian Rural Markets; Icfai University Journal of Rural Management : "The very nature of economic activities of rural market extending the provision of quality access to financial solutions is vital for the development of people residing in rural areas". * Khan N. A., Building Competitiveness in Small-Scale and Rural Industries in India; Icfai University Journal of Rural Management : "The significance of competitiveness in the rural marketing was neglected for a long time in India, but now it is being recognized". * Dr. N. Rajendhiran, Rural Marketing - A Critical Review ; Icfai University Journal of Rural Management : " The success of a brand in the Indian rural market is as unpredictable as rain. It has always been difficult to gauge the rural market. Many brands, which should have been successful, have failed miserably. More often than not, people attribute rural market success to luck".Reasons for improvement of business in rural area :* Socio-economic changes (lifestyle, habits and tastes, economic status) * Literacy level (25% before independence more than 65% in 2001) * Infrastructure facilities (roads, electricity, media) * Increase in income * Increase in expectations * Ariff Peer Mohamed, Babu Dhinesh, Emerging Trends in Rural Marketing ; indianmba.com/facultycolumn/articles : Rural market has the following facts substantiate their future growth : * 742 million people. * In 2001-02, LIC sold 55 % of its policies in rural India. * Of two million BSNL mobile connections, 50% in small towns/villages. * Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT). * 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.

* Of 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 * Dr. Venkatesh Tamlurkar, Assessing the Marketing for Rural India ; indianmba.com/facultycolumn/articles : In many villages, one can see today the alternate use of the products other than for their actual purpose. People in the state of Bihar feed the cattle with Horlicks as a health drink to fatten them! Similarly, people in Punjab use washing machine not for washing clothes but to make frothy lassi in huge quantities! Animals are rubbed with Iodex on their skins to relieve them from muscular pains after a day's hard work. Paints meant for houses are used on the horns of cattle for easy identification and theft prevention. * Pankaj Dhingra, Rural Paradise for Corporates - Get, Set and Go; indianmba.com/facultycolumn/articles : This article published some facts about Rural Markets validating the notion of its potentiality:* Low Penetration rates in rural markets facilitates opportunities Durables Urban Rural Total

(%of rural House hold ) Colour TV 30.4 4.8 12.1 Refrigerator 33.5 3.5 12

FMCGs

Urban Rural Total

(%of rural House hold )

Shampoo 66.3 35.2 44.2 Toothpaste 82.2 44.9 55.6 * According to a study by the Chennai-based Francis Kanoi Marketing Planning Services, estimated annual size of market is FMCG Rs. 65,000 Crore Consumer Durables Rs. 5000 Crore Agri Inputs (e.g., Tractors) Rs. 45,000 Crore 2/4 Wheelers Rs. 8,000 crore Total Rs. 1,23,000 Crore References

* Jha Neeraj, Gung-ho on rural marketing; The Financial Express, June 19, 2000. * The Marketing Mastermind Case study HLL- Rural Marketing Initiatives ICFAI Press, PP. 62, Feb 2003. * Bargal Hitendra, Dr. Pithadia Vijay, Promotion of Brand in Rural Market of India; indianmba.com/facultycolumn/articles. * Ramanathan V, Sudhamathi S, Brand Building Exercises Adopted by Life Insurance Companies in Indian Rural Markets; Icfai University Journal of Rural Management. * Khan N. A. , Building Competitiveness in Small-Scale and Rural Industries in India; Icfai University Journal of Rural Management. * Dr. N. Rajendhiran, Rural Marketing - A Critical Review ; Icfai University Journal of Rural Management. * Ariff Peer Mohamed, Babu Dhinesh, Emerging Trends in Rural Marketing ; indianmba.com/facultycolumn/articles. * Dr. Naik C.N. Krishna, Going Rural: The New Marketing Mantra; indianmba.com/facultycolumn/articles. * Dr. Venkatesh Tamlurkar, Assessing the Marketing for Rural India ; indianmba.com/facultycolumn/articles. * Pankaj Dhingra, Rural Paradise for Corporates - Get, Set and Go; indianmba.com/facultycolumn/articles. * Soumen Banerjee, Rural Marketing: Challenges in Distribution & Channel Management; coolavenues.com/knowledgezone. * The Economic Times * www.hill.com * www.rediff.com/money/2005/jun/02inter.htm