Segmenting and Targeting Rural

Markets
Readings:
1. Text/ Ch. 5, Pp. 86-105
2. Ch 6, Krishnamacharyulu and Ramakrishnan (K&R) [ pp. 185
onwards]
 Segmentation is necessary in Rural Markets too:
Heterogeneity in Rural Markets
• Rural Markets are heterogeneous in nature.
• Rural Markets differ from village to village and within villages

• Differences:
Socio-cultural differences across regions
Population size and density of villages
Differences in level of infrastructural development (developed versus
developing )
Media exposure level (media dark, media grey and media green regions)
Variation in literacy levels (Kerala versus villages in other states)
Differences in income levels and patterns of economic flow (farmers
versus daily wage earners)
Family structure (large joint families, individualised joint families, nuclear
families)
5 major ways of segmentation of rural
markets
1. Geographic
2. Demographic
3. Psychographic
4. Behavioural
5. Multiple attributes
AN IN CLASS EXERCISE

• Identify segments for following: (geographic, demographic,

behavioural)
1. Mobile phones
2. Toilet soap
3. TV
4. Agri inputs
5. Jewellery
 Geographic Demographics Psychographics Behavioral

Mobile Corridor Age: youth; Aspiring to match Benefits sought:

Phone villages NCCS urban lifestyle, emotional and
technology adopters rational;
[R1]; ‘Young purchased from
enthusiasts’ nearby towns
 Demographics Psychographics Behavioral
Toilet Soap Family, age Aspiring to match Benefits sought:
urban lifestyle; emotional and
‘Village elites’; rational
‘steady climbers’:
Buy branded
products
 Geographic Demographics Psychographics Behavioral
TV Corridor NCCS; family Want children to get Benefits
villages; educated, consult sought;
accessible friends and relatives place of
villages; in urban areas for purchase
technology
adoption, conscious
of status [R2-MART
];
Village elites; Steady
Climbers
 Geographic Psychographics Behavioral
Agri inputs Corridor Land Ownership: modern farming
villages; Size of methods; consult
accessible landholding, friends and
villages ; quality of land, relatives in urban
Climate area under areas for
cultivation, technology
irrigation method adoption,
(rain fed, tube
well, etc.),
agricultural
productivity, crop
mix
5 major ways of segmentation of rural
markets
1. Geographic
2. Demographic
3. Psychographic
4. Behavioural
5. Multiple attributes
Bases for segmenting Rural Consumer Markets
1. Geographic Segmentation:
i. Regions: North, South, West, East
Regional diversity within rural India is evident by the
variations in the cultural and behavioural traits of consumers
across the 4 regions
ii. Village population and density: village size: < 1000, 1000-
2000, 2000-5000, >5000 [most companies target villages
with population of more than 2000]
iii. Density: low, moderate, high
iv. Climate: hot, rainy, cold [affect agriculture: agro-based
technology companies segment India into geo-climatic
regions based on climate and condition of soil]
v. Culture: 56 socio-cultural regions(e.g.: Avadh,
Bundelkhand, Malwa, etc.)
• Density:

Density No. of Villages

Population of 500 or less 150,000

inhabitants
500-1000 inhabitants 316,800

1000-5000 102,900
https://www.nielsen.com/in/en/insights/report/2018/planning-the-route-to-growth-in-rural-markets/
Proximity to Characteristics
towns/cities
Corridor Close to town (within 2 Kms radius)
Villages Connected by public and private
transportation
Free movement to town, exposure to
urban lifestyles and markets
Accessible Away from towns. Connected by public
villages transport. Journey to town is time
consuming and tiring. Occasional visits
to town. Social links with urban people
and exposure to urban life: moderate
Mostly dependent on local markets
Remote Far flung and widely scattered small
villages villages with population of 200-500
Marketing Implications
An extension of urban
market
Adopt the same marketing
strategy with minor
modifications
Design channels to reach
these villages; Devise
innovative marketing
strategy to cater to unique
needs; Supplement with
CSR programmes
Design innovative
distribution strategy with
high CSR /developmental
programmes
 2. Demographic Segmentation
i. Age and Life Cycle Stage:
• Product and brand preferences change according to consumer’s age and
life cycle stages.
• In rural India: Young adults: prefer mobile handsets with latest features
and technology, elders are satisfied with second hand, basic and simple
phones. Influence in purchase also differs according to age
Segments: Children, teens, young adults, elders, seniors
ii. Family Structure: As family size increases, so does consumption.
Larger families also translates to more income due to more number of
working family members. Structures such as joint or individualized
joint or nuclear affects consumption.
Segments: joint ; individualized joint ; nuclear families.
iii. Land ownership:
Taken into consideration: Size of landholding, quality of land, area under
cultivation, irrigation method (rain fed, tube well, etc.), agricultural
productivity, crop mix, money realisation.
Segments: Landless, marginal, small, large farmers.
• Family Size and structure:
Segments Marketing Implications according to consumption
patterns and preferences
Unitary, Nuclear •Personalised goods and
•goods that offer liberty, status, luxury, comfort
can be targeted to these.
Joint (more than one • Larger families with low incomes buy consumer durables
married sibling) and such as TVs.
extended Families •Promotion of consumables as ‘family products’, especially
(parents with one in economy, refill packs
married child) •Buy more than one brand of a product for individual
preferences.
•Multi-brand consumption of a product thus may exist
•Example:
Colgate: perceived as a family toothpaste
Close Up: more personalised and youth focused. Co-
exists with Colgate

Source: Indicus Analytics, K&R

iv. Occupation: Both product categories and consumption patterns differ
across different occupation groups.
Segments: Self employed in agriculture; labourer (agriculture/non
agriculture); self employment in non-agriculture; regular salary/wages.
iv. Income: Difficult to use income due to seasonality of income and
difficulty in getting income related information as agricultural income
is not taxable
v. Socio Economic classification: on basis of education of main wage
earner and type of house (R1, R2, R3, R4) or education of main wage
earner and types and number of durables owned (as per the New SEC
classification)
Segments: R1, R2, R3,R4
 The New SEC classification- NCCS
• co-developed by MRSI (Market Research Society of India) and MRUC
(Media Research Users Council) as the new classification system for
industry use.
• developed after extensive analysis of various discriminators that would
best define the purchasing power of a household.
• Variety of parameters considered : education of CWE, press exposure
of housewife, ownership of durables and usership of consumer goods;
and a system considering ‘best type’ of consumer durables owned
• leading to a system that brings forth more inequalities is more
discriminating.
• Under the new system, Indian households classified by using two
parameters—
i. educational qualifications of the chief wage earner in the
household and
ii. the number of assets owned (out of a pre-specified list of 11
assets).; for rural- agricultural land is part of the assets owned
• Based on these two parameters, each household will be classified in
one of 12 SEC groups—A1, A2, A3, B1, B2, C1, C2, D1, D2, E1, E2 and
E3.
https://www.barcindia.co.in/resources/pdf/NCCS%20is%20the%20New%20SEC-Sept%2015.pdf; accessed Jan 2018
3. Psychographic Segmentation

i. Lifestyle:
 Defined by activities, interests and opinions (AIO) of the person.
 Reflects overall manner in which the person lives and spends his
time and money
 People with similarities in socio-economic and demographic
characteristics may exhibit similar lifestyles
 LIFESTYLE SEGMENTS IN RURAL INDIA (as per MART knowledge centre)

Rural Socio Rural Demographics Rural Lifestyles

Economic
Classificatio
n (SEC )
R1 Landlord farmers, educated, exposed to an Aspiring to match urban
urban environment, children in schools/colleges lifestyle, technology
in nearby towns, own durables such as tractor, adopters, experiment with
two-wheeler, TV, music system, steel cupboard, modern farming methods,
LPG, refrigerator, mixer-grinder eager for additional sources
of income, socially and
politically well connected,
high spenders on social
occasions
R2 Rich farmers with about 5 acres of land, may Want children to get
not be educated, friends and relatives living in educated, consult friends and
urban areas, own durables like tractors, two relatives in urban areas for
wheeler, TV, LPG technology adoption,
conscious of status, aspire to
be well known in social and
political circles
 Rural Lifestyle continued…

SEC Demographics Lifestyles

Average landholding 2-5 acres , Chooses time-tested

R3 manages small savings, children sent to technology, low risk
village school, owns durables like TV, taker, desires more
tractor (self/rental) knowledge, follower
R4 Have little or no land, agricultural Laggards, averse to latest
labourer, living below poverty line, technology, risk-averse,
major purchaser from public uninformed
distribution system
• Around 50% of soaps produced are sold in rural markets. Increasing
awareness of hygienic standards in rural areas is providing growth
opportunities to several players.
• Manufacturers are introducing soaps in different sizes and ranges,
targeting consumers from low-income groups.
• Currently, there are around 5 Mn retail outlets in India which sell
soaps, out of which 3.75 Mn operate in rural areas.
4. Behavioural Segmentation

i. Occasions
ii. Benefits Sought
iii. User Status
iv. Usage Rate
v. Loyalty Status
vi. Place of Purchase
i. Occasions:
 Some products can use occasions as a segmentation basis.
 in rural areas, most durables are purchased during or after
harvest season as farmers have cash after selling their
agricultural produce. E.g.: Baisakhi, Onam, Ugadi,
 Festivals are other occasions when villagers like to buy new
items. E.g.: Diwali, Dusshera
 Melas and Weekly Haat Days: other occasions when villagers
purchase daily use products, vegetables, spices, personal care
products
ii. Benefits Sought:
 Different benefits can be sought for the same products by
different customers

 Different segments may purchase for benefits such as

economy, performance, durability, status, taste, flavour, etc.

 Mostly, rural customers’ major decision criterion is utility of a

product rather than its appearance and style
 Aesthetics Emotional Rational Moral/Values
Benefits

Products
Motorcycles Sturdy, sleek Sense of Easy, quick Provides
design, strong, fulfilment, transport; support to
macho like, staus, affiliation family mobility; family
pleasant colour fuel efficiency;
low cost
maintenance

Toilet soap Fragrance, skin- Pleasant Value for Ensures hygiene

glow experience money, at social places
cleanliness,
durability

Mobile phones Slim, elegant, Connected to Reasonable Helps people in

pleasant colour the world price, low unit needs
recharge facility,
low cost calling,
connectivity
 • Conservative • Aspire for more
• Necessity based comfortable life
purchases • Want to enhance
• Cheapest priced social standing
products • Buy branded
• Traditional channels products

Steady
Traditionalists
Climbers

• Age: 18-28 yrs • Advanced

• Use digital Young • High education
Village Elite
technology Enthusiasts
and Awareness
• Buy branded levels
products for • Desire best in
social image product quality,
• Powerful features,
influencers on aesthetics
EMERGING BEHAVIOURAL ;
other segments
PSCHOGRAPHICS PATTERNS IN RURAL
INDIA
Emerging Behavioural Segments Characteristics of the Segment in terms of
Patterns emerging new behaviours
Aspiration Brand Savvy Willing to invest in branded products to ensure
[As income levels have quality
grown, monthly per
capita spending in rural
increased by 17% from Trading Up Want more features, better design to boost
2010-12, urban= 12%] social image
Exploring Adopting new categories, using alternative
channels
Connected Increased online and offline interaction with
urban counterparts
Networked Proactive Seek information through multiple source
Empowered Active role of women in decision making
Street Smart More aware, not prone to fraudulent schemes
Value Seeking Evaluate total value of investment, not just
Discerning price
Social Information sharing with strong peer effect

Source : Accenture Report , ‘From Touchpoints to Trustpoints: Winning Over India’s Aspiring Rural Consumers’
 Rising Aspirations Planned expenditure
Children are the focus, do not want children to go Education: 51% increase
1
through the hardships they have undergone; Personal Gadgets: 22% inc
want them to gain knowledge and have a better
future Internet: 16% inc
Health and Pharma: 49% inc
2 Want to ensure good health of family

Automobiles: 29%
3 Want family to lead a more comfortable life Consumer durables: 20%
Packaged food: 36%
4 Want to enjoy life Leisure, holidays
Want to lead an urban lifestyle and enhance self Personal Care, Home care,
5
image apparel and shoes
Financial services, jewellery
6 Want to ensure financial security

Telecom: 21%; DTH/Cable:

7 Want to be better connected with outside world
30%
iii. User Status:
 On basis of usage of a product, customers can be segmented as first
time users and regular user.

User Status Description Rural Marketer’s Approach

Ex-User •Stopped using •Explore reasons for shift,

•Using other brand •address it and convince ex-user about
advantage of the brand over current
brand of use
First Time User •Thinking of Trial •Assure benefits through demonstration
purchase
Regular User •Repeat purchase •Ensure regular availability,
•reward loyalty
Potential User •Non User •Induce free trial/samples
•User of another brand •Explain advantages of using the
brand/product over current products
being used
In rural India, majority of the customers come in the categories of
potential users or first time users for most product categories
Thus, focus on product trials and demonstrations in crucial in rural
markets
iv. Usage Rate:
 Segmentation based on amount of consumption or usage
 Segments: light, medium, heavy users
 Based on usage rate, marketers introduce different pack sizes
 Rural customers being light users, purchase small packs such as
sachets, rather than ‘family packs’ as purchased in urban markets
 Marketers have introduced smaller pack sizes of various products
at lower prices ‘chota coke’ at Rs. 5
v. Loyalty Status:
 Segmentation based on loyalty enables marketers to tailor their
promotion strategies accordingly to retain loyal customers,
convert non-loyal customers to loyal customers or to attract
customers of rival brands
 In rural India, customers purchase a brand after a long time of
thought and effort and once a brand is selected and used, rural
customers ‘stick’ to it: ‘brand stickiness’ : rural customers thus
are more ‘loyal’ to brands with minimal marketing effort
 Implication ?...
 Rural India: First Mover Advantage works
 vi. Place and time of Purchase:
Time Place of Purchase Products

Daily Village Shop Tea, kerosene, edible oil, salt, cigarettes,

match box, bidis
Weekly Haat Food grain, pulses, spices, vegetables,
cosmetics, soaps, utensils, agricultural
tools
Monthly/occasionally Nearest town Fertilisers, seeds, pesticides, consumer
goods like radio, TV, electrical goods,
motor bike, tractor, etc.
Occasionally Melas; State Capital Clothes, cheap jewellery, cosmetics,
agricultural tools, livestock,
entertainment; Legal matters, Casual
visits

Tata Steel: Tata Shaktee roofing sheets; Colgate-Palmolive and Marico use traditional
rural retail spaces such haats , having recognised the potential of haats in terms of
sales and promotional activities
Example of segmentation in rural markets

• Fullerton India (an NBFC) identified segmented rural customers on

the basis of their credit and investment needs and identified 5
segments: salaried class; large businessmen (traders and producers);
small businessmen (traders and producers); service providers and
farmers.
• These segments differed in terms of credit and investment benefits
sought. The company, accordingly designed a new financial product
targeting the most potential segment for its business, the ‘small
businessmen’
 Rural India Financial Products: Fullerton Gramshakti
Key Rural Financial services :
1. Rural Housing Finance
Rural households aspiring for a better quality home or wanting to
construct a new home are often short of financial resources to
fulfill their aspiration. Co. offers financing to rural households, for
self-construction of homes, home extensions, construction of
productive-housing like shops, workshops, small manufacturing
units. These loans are offered to Salaried & Self-employed
individuals, Farmers & Wage-earners.
The co. offers Housing Loans to rural customers ranging from Rs.
50,000 to Rs. 10 Lakhs for tenor extending up to 7 years. The
unique aspects of Fullerton India's rural housing loans are higher
loans against value of property mortgaged, simplified processes,
minimal documentation, door-step service and flexible
assessment process.
2. Loans Against Property:
offer Loans against Property to micro enterprises and small
businesses in rural areas, to help fund their working capital and
business expansion needs.
3. Livelihood Advancement Loans for Women's Groups: Women in villages
form small solidarity groups of 10-30 women. Livelihood Advancement
Loans offered range from Rs. 10,000 to Rs. 40,000 to individual women
within the group. These loans are used to finance traditional and new rural
livelihoods ranging from dairy farming, handloom weaving, handicrafts,
small retail trade, food services, etc.
4. Growing Enterprise Loans: The Rural Indian market comprises largely of
self-employed individuals besides those engaged directly in farming. Most
of these self-employed are engaged in retail or wholesale trading, dairy
farming, small manufacturing, handloom and power loom textile trade and
services. Co. offers loans to such small enterprises to invest in their
businesses. Termed as Growing Enterprise Loans, these loans range from
Rs. 30,000 to Rs. 2 Lakhs.
5. Two-wheeler Loans: While the rural road network has improved vastly,
public transportation in interior rural areas is still not adequate. Two-
wheelers have become the most popular mode of transportation. Since a
majority of population is self-employed, a motorcycle or scooter has
become a necessity for conducting their trade.
Fullerton India Gramshakti offers unique financing options for men and
women, who wish to buy their own two-wheeler and offers loans up to Rs.
60,000.
6. Commercial Vehicle Loans
• Most of the rural produce is consumed in surrounding towns and cities.
Transportation of goods from villages to the urban markets and other
finished goods and hardware from urban centers to rural areas is a
normal phenomenon. The expansion of the rural road network has
facilitated movement of goods between rural production centers and
urban markets.
Fullerton India Gramshakti finances purchase of small commercial
vehicles & light commercial vehicles for small & big traders, dairies and
those engaged in services and offers loans up to Rs. 10 Lakhs.
(Source: http://www.fullertonindia.com/rural-financial-services/rural-
financial-services.aspx)
 Fullerton India : Gramshakti
Financial product Segment Purpose Characteristics

Rural Housing Salaried & Self- self-construction of unique aspects of

Finance employed individuals, homes, home Fullerton India's rural
Farmers & Wage- extensions, housing loans are
earners construction of higher loans against
productive-housing value of property
like shops, mortgaged,
workshops, small simplified processes,
manufacturing units. minimal
documentation, door-
step service and
flexible assessment
process.
Loans Against micro enterprises and fund their working
Property: small businesses capital and business
expansion needs.
Effective Segmentation for Hybrid Seeds and Crop
Protection Products : a Hybrid Segmentation Strategy

• Segment 1: Optimal Farmers:

i. 1/3rd of the total market
ii. Agri rich states of Punjab, Haryana, Tamil Nadu and Maharashtra
iii. First to have capitalised on the Green Revolution
iv. Early adopters of new farming technology
v. Preferred preventive rather than curative crop protection methods
vi. Information seekers
vii. Greater access to agricultural markets
viii. Business Outlook towards Farming
 Existing Products targeted to Segment 1
• Segment 2: Sub Optimal Farmers:
New products that can be developed targeted to Segment 2
• Segment 3: Marginal Farmers
MART MAS (Market Attractiveness Score)

• A tool allowing marketers to select (target) locations on basis of

market attractiveness score
• Market Attractiveness Score: (Consumption + Awareness +
Infrastructure) Population Size
• Reading: ‘Rural Marketing Insight-MART Market Attractiveness Score:
Urban and Rural ‘Prosperity Plus’ Index’, pp. 99-100, Text
Positioning

• E.g: Tata Ace positioned as ‘Chota Haathi’: using 4 parameters of

savings, service, performance, style and comfort, the truck was
positioned as India’s first mini truck
• A gap in the low price-high quality area was identified and Ghari
detergent occupied this position, becoming a rural super brand in
short time.
 Tata Ace: Segmentation and Targeting
• There were primarily two sets of customers: entry-cost sensitive
customers and others who valued return-on-investment.

• The company decided to focus on the ROI-sensitive customer who

would be willing to pay a slightly higher price, but would require lower
operating costs (Need Based Segmentation)

• The ACE is a small vehicle that is ideal for short, narrow roads as well as
long highway hauls, for small bulky loads and large heavy ones, the ACE
is an innovative 4-wheeler offering from Tata Motors. The small exterior
belies the power-packed technologically-superior engine which gives the
ACE high power and high loading capacity.

(http://www.rediff.com/money/2006/may/13tata1.htm; Aug, 2017)

 Building a solution to meet the
requirements of the Target Segment
• The Segment Profile: More than half of Tata Ace’s owners are first-
time entrepreneurs. The socio-economic profile of the customers
indicate that most of the buyers are males, belong to the lower
income group and are aged between 20 to 40 years. Also, around 50
% of Tata Ace consumers are from towns with populations under
100,000.
• The Segment characteristics: The operators of the vehicle travel for a
shorter distance as it is primarily used for last mile transport between
the outskirts of a city to the centre (60-100 kilometres).
• Tata Motors had to address a key concerns (Benefits sought) of
commercial vehicle buyers –
lead time taken to travel a distance and load (weight it could take).
• To address the Need of Lead Time: the Ace was built to achieve top
speeds of 64 kmph compared to 50-56 kmph in the case of three-
wheelers.
• To address Load bearing capacity need: In terms of load bearing
capacity, the cargo bed of the Ace was bigger at 2,200X1,500 mm,
compared to an average of 1,950X1,450 mm of other three-wheelers.
• At a value price point of Rs.2,20,000, the Ace was targeted to attract
buyers who would otherwise buy three-wheelers at price points from
Rs. 1,20,000-Rs 1,90,000.
 The Tata Ace Performance

• Demonstrated sturdiness, dependability, and reliability on the roads.

• Success:
When Ace was launched in May 2005, it swept the market.
Tata Motors got the first mover advantage. Other manufacturers
rushed in seeing the success of Ace but are still not able to compete
with it.
At the peak of its success, every fourth commercial vehicle sold in
India was a Tata Ace.
Tata Motors created an all-new segment, that of the small light
commercial vehicle, forcing competitors to follow in its footsteps.

• Competition: M&M’s Maxximo and Ashok Leyland’s Dost

Multi-attribute segmentation Approaches

1. MARKET POTENTIAL VALUE (mpv): R K Swamy BBDO’s index

five broad factors to determine MPV which include: means or
propensity; consumption pattern; awareness through media
exposure;; size of market or population
2. HOUSEHOLD POTENTIAL INDEX (HPI): Hansa Research:
‘Premiumness’ value attached to households wherein premiumness
defined as ‘wanted by many’ and ‘consumed by few’
A basket of 50 variables used to calculate HPI score
3. MARKET ATTRACTIVENESS SCORE- MART MAS:
Some five factors: means; consumption, awareness, infrastructure,
population size
• Thomson Rural Market Index (TRMI):
• Hindustan Thomson Associates developed a guide to rural
market segmentation in 1972 and revised it in 1986. They
collected data in 335 districts based on 26 variables. The
TRMI is based on 10 variables having strong correlation to
rural market potential.
• They are: Agricultural labourers; Gross cropped area; Gross
irrigated area; Area under non-food crops; Pump sets;
Fertilizers consumption; Tractors; Rural credit; Rural
deposits, and Electrification
• Based on these factors, the districts are classified as A, B, C,
D and E, in order of high to low market potential.
MICA Rural Market Ratings (MRMR):
• developed by the Mudra Institute of Communications
Ahmedabad (MICA) in association with ML Infomap Pvt. Ltd.,
New Delhi.
• The rural market index indicates the rural market potential of
all the districts of India, analyzed on 42 variables.
• Using digital mapping technology, it presents maps of all
districts, shaded to indicate the level of market potential.
• Managers can thus graphically see areas with different
patterns of market potential, along with related data such as
bank loans, demographics, infrastructure, and so on.
• The tool also gives location of ‘haats’, or actual rural markets.
By clicking on a haat, one gets to know the days of the week
the market takes place. Routing can be done through the road
and railway map of India, which is incorporated in the
software.