Rural Marketing

MARKETING STRATEGIES FOR RURAL INDIAN MARKETS S. Preetha ∗

INTRODUCTION Rural marketing can be defined as a function which manages all those activities involved in assessing, stimulating and converting the purchasing power into an effective demand for specific products and services, and moving them to the people in rural areas to create satisfaction and a standard of living to them and thereby achieve the goals of the organization. Liberalisation policies of the Government of India have brought a shift towards greater emphasis on marketing. Companies in the field of consumer and Industrial Goods as well as Services now realize that their success will depend upon their understanding and identification of the real needs and wants of customers and matching it with appropriate product and service offerings. The gaps to be bridged by the Government and Development Agencies are: 1) Low priority to Agriculture. 2) Subsistence orientation of Agriculture. 3) Failure of Land Reforms. 4) Inadequate Food Supplies. 5) Slow growth of Infrastructure. 6) Inadequate Inputs and 7) Slowdown of rural Industrialisation.

EVOLUTION OF THE CONCEPT OF RURAL MARKETING The term "Rural Marketing", which was used earlier as an Umbrella term to refer to all commercial transactions of rural people, acquired a separate meaning of great significance in 1990'5. The evolution can be briefly explained in three phases.

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M.B.A., M.Phil, Lecturer, MBA Department , Vet's College of Science, P .V. Vaidhyatingam Road,

Paltavaram, Chennai -600 117

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PHASE I (before mid 1960's) It was considered synonymous with "Agricultural Marketing". It referred to marketing of !18 rural products in Rural and Urban areas and agricultural inputs in rural markets.

PHASE II (mid 1960's-mid 1990's) Green Revolution ushered in scientific taming practices and transferred many of the poor villages into prosperous and busy centers. As a result, the demand for agricultural inputs went up. Better irrigation facilities, soil testing, use of high yield variety seeds, fertilizers, pesticides and employment of machinery like power tillers, harvesters' crushers etc changed the rural scenario. Two separate areas of activity had emerged- the new "marketing of agricultural inputs " and the conventional "agricultural marketing". The formation of agencies like Khadi and Village Industries Commission, Girijan CooperatIve Societies and Apco Fabrics (In AP) and the special attention Government had paid to promote these products was responsible for this upsurge.

PHASE III (After mid 1990's) India's Industrial Sector had gained strength and maturity. Due to development programs of Central and State Governments, service organizations and socially responsible business groups like Mafatlals, Tatas, Birlas, Goenkas and others, many rural areas witnessed all round socioeconomic progress. The economic reforms of 1991-1992 introduced competition in markets. Steadily, the market has grown for household consumables and durables. Rural Marketing represented the emergent distinct activity of attracting and serving rural markets to fulfill the needs and wants of persons, households and occupations of rural people.

TAXONOMY OF RURAL MARKET This can be classified as follows:

a) CONSUMER MARKET: Constituents

:

Individuals and Households.

Products

:

Consumables, Food- Products, Toiletries, Cosmetics, Textiles and Garments, Footwear etc.

D-urables

:

Watches, Bicycles, Radio, T.V, Kitchen Appliances Furniture, Sewing Machines, Two Wheeler etc.

b) INDUSTRIAL MARKET: Constituents

:

Products

:

Durables

:

Agricultural and allied activities, poultry farming, fishing, Animal husbandry, Cottage Industries, Health center, School, Co-operatives, Panchayat office etc. Consumables, seeds, Fertilizers, Pesticides, Animal feed, Fishnets, V Medicines, Petroll diesel etc. Tillers, Tractors, Pump sets, Generators, Harvesters, Boat etc.

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c) SERVICES MARKET Constituents Services

: :

Individuals, Households, offices and Production firms. Repairs, Transport, Banking credit, Insurance, Healthcare, Education, communications, Power etc.

MARKET DIFFERENCES WITH URBAN MARKET Environment Differences: The Rural environment presents a picture of 1. Small contiguous settlement units of villages widely dispersed. 2. Low Infrastructure level (such as road, electricity etc., 3. Low Density of population per square kilometer of space and 4. Poor physical connectivity with other villages and towns, Low mobility.

Social Relations-Peculiar Aspects: The outlook of rural society is a mixture of both traditional and modem "isms" The traditional picture is: 1. Less number of impersonal interactions) more frequent interactions between the same people. 2. Individual better known and identified 3. Social norms influencing individuals are more visible. 4. Status is ascribed, determined by births in a family II 5. Caste Influence is direct and strong.

LESS EXPOSURE TO MARKETING STIMULI: The apathetic situation in Rural Markets: •

Less Product exposure, low exposure to branded products.

•

Low exposure, low comprehension of Ads, low brand awareness.

•

Low exposure to marketing researchers limited source of information and learning.

•

Less convenient buying, low rate of retail outlets per 1000 of population and low market reach, availability of limited range of branded products along with imitation product

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DEPENDENCE ON NATURE Rural life is dependent on: •

Abundance of Natural Resources and high dependence on them for a large number of households needs.

•

Differential access to resources based on Caste, Political and Money Power etc.

•

High dependence on livelihoodsl employment and Income on Natural factors.

SEASONAL NATURE OF EMPLOYMENT AND INCOMES •

Agrarian base, mostly small land holdings per household (two hectares or less) and more than 70% people in small-scale agricultural occupation.

•

Acute seasonality in Income Receipts, high chance of element in income receipts (because of the dependence on agriculture and natural factors)

But the experience of companies engaged in selling in rural areas suggests that the urban rural divide is disappearing. Products designed for urban sector have found more takers in rural areas and vice versa. This is owing to the existence of large size middle class in Rural Areas as well as Urban areas.

INSIGHTS Marketing Information System It has four components: 1. Internal Reporting System 2. Marketing Research System 3. Marketing Intelligence system . 4. Decision Support system Internal Reporting system provides Transactional Data Analysis and reports for routine decisionmaking. Marketing Intelligence system provides up-to-date information. Marketing Research is problem specific non-routine data collection and analysis activity that provides solutions to decisions of strategic importance. Decision support system uses a wide array of statistical and mathematical tools to support manager in analysis of data and interpretation.

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Marketing Research involves the following steps: Problem definition, Research budget decision, Research design decision, Research proposal preparations, Data collections, Data analysis and Report writing. Urban research techniques cannot be replicated in rural markets. New research tools like Ladder Images of faces and colours are being tested by rural marketing research agencies. Rural research is growing in size and value.

SELECTING AND ATTRACTING MARKETS This involves three key decisions. 1. Segmenting 2. Targeting 3. Positioning of the brand in the mind of the target audience. Four approad1es emerge: 1. Mass marketing, 2. Segment marketing 3. Niche marketing and 4. Micro marketing

STRATEGIES PRODUCT STRATEGIES This includes product mix changes, Product line stretches or modernization and product design considerations. Competitive product strategies include: Identity strategies, Customer value strategies, Packaging strategies and Branding strategies.

PRICING STRATEGIES Price is the revenue generation to the company, purchase power index of the consumer and allocator of scarce resources in an economy. Objectives include profit maximization, target return, sales growth, market share growth, maintenance of sales volume or market share, survival, offsetting competition and destroying competition. One or more of the listed objectives may be pursued simultaneously. The appropriate methods for different segments are: Quality conscious

: Discriminatory, perceived value and psychological pricing.

Value conscious

: Psychological, value, penetration and skimming.

Price conscious

: Low prices, Premium pricing (small units) and barter pricing.

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Other strategies are : Geographic pricing and discounts to motivate distributors. Five standard types of discounts are: volume, trade, payment terms, seasonal and promotional. Government policies such as Taxation and Regulation may affect prices. Competitive policies include: price rise, maintenance or cut. Promotional pricing practices include: special event pricing, cash rebates, low interest financing, longer payment terms; warranties and services, captive product offering and product unbundling. Another practice is two part pricing at company level and every day low pricing at retailer level.

PROMOTION STRATEGIES Various media vehicles may be classified into: Mass media (Radio, Cinema, Press and 1V), Local media (Haats and Me/as, Wall painting! Leaflets, Video vans, Folk media, Animal parade and Transit media). Personalised media includes direct communication, dealers, sales persons and researches. Designing a right promotion strategy is the crux of the problem. The message can be disseminated with the right choice of media -mix (Personal and non-personal) aided by sales promotion and direct marketing efforts.

DISTRIBUTION STRATEGIES Distribution channels include a) company depot b) Redistribution stockiests, clearing agents c) Semi wholesalers and retailers d) Itinerant traders, Vans, Sales people, NGOs and garment agencies. Newer approaches include syndicated distribution, relationship marketing through I&. service centers and direct to home selling.

MARKETERS IN ACTION The strategies adopted by different marketers are: a) classification by positioning, b) offering "value for money" proposition, c) reviving category magic, d) finding new category values e) forcing inter-category competition and f} positioning for different segments.

What kinds of themes are attractive to rural consumers? Need category

:

Quality of life messages -nutritious, healthy.

Problem category

:

Convenience, economy I hassle free, easy to maintain, lifetime companion, a friend in need and the way to prosperity.

Desire category

:

Independence, status, luxury etc.

Ideal category

:

Communal harmony, social cohesiveness, religious conformity, national integration and peace.

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CASE SUMMARIES NIRMA : This washing powder adopted a market penetration strategy based on price which was 40% lower than the highest priced product in the market. Its distribution efforts were highly concentrated in Western and Northern zones. It made the industry leader lose its market share substantially in those zones. Nirma is possibly the largest detergent brand in the world with sales of 700,000 tonnes a year.

PROMISE TOOTHPASTE: The Company, Balsara, decided to "against position" the new product and aimed at No.2 position. The advertisements were framed so as to offer all the benefits being claimed by No.1 in a positive sense plus something more, the antiseptic and anesthetic properties of clove oil. The product became a success with growth rate of 30% in a market expanding at the rate of 7%.

LIFEBUOY SOAP : Success of this soap can be attributed to the right market focus. The market segment is clearly identified as the lower income segment and price sensitive. Recently HLL introduced a new segment "Fighting sweat", for relatively higher incomes. This culminated in "Lifebuoy Plus" a pink coloured deodorant soap at a price higher than Lifebuoy.

ASIAN PAINTS: They entered the exterior decorative segment with "ace", focusing on non-metro markets. "Utsav" and "Opal PuB followed. Advertisements in lV and cinema are resor1ed to before festivals like Pongal in Tamilnadu and other festivals elsewhere when demand for outdoor decorative paints would be heavy. It is recognized that turnover and volume growth will come from rural markets, while urban markets provide the margins. It is targeting sub five thousand localities. Mobile vans and demonstration cum sales techniques are used to flog "Utsav" brand.

RUF AND TUF JEANS: A ready to stitch jeans for the first time users priced at Rs.195/- as against the unorganized sector's range of Rs.150-3501- Arvind mills, India's leading denim manufacturer created this new product specifically for the rural market. The kit included a denim trouser length with specific tailoring instruction and the branded zipper, rivets and buttons that distinguish jeans in the consumer's mind. Success depended on the local tailor's finesse. The product was made available in villages with a population as small as five thousand. Local cloth shops were used as retail outlets. Seminars were organized to train tailors in denim fits and inform them about the changes required in sewing machines for stitching jeans. The additional machine accessories were initially provided free of cost and later at a subsidized rate.

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OUTCOME The strategy worked. In the first two months, demand crossed a million pieces as against a production capacity of 2,50,000 kits. So, the company had to stop advertising. Consumer feed back showed that nearly 75% were first time jean wearers. R& T shorts and ready-made jeans were' launched for the slightly more evolved customer who demanded jean specifics like the right wash. This is a perfect example of brilliant product promotion.

HLL's DETERGENT PYRAMID The Indian market for detergent is structurally like a pyramid from base to top -Laundry soap, low priced detergents, mid priced detergents and premium powders. HLL has Wheel Laundry soap, Blue wheel powder and international Wheel active powder at the base. RIN Sakthi Powder and bar, Sun light powder and Super 501 bar at the mid price level and International Surf Excel at the top end. This is a very good example of segmented marketing.

PSYCHOGRAPHIC SEGMENTATION In some parts of Gujarat, it is reported that farmers are going in for big 50 HP tractors when their need was for smaller 25 to 30 HP ones. The reason was compulsion to "Keep up with the neighbours". (A.P.Sonalkar, Head of R&D, Mahindra & Mahindra). Now M&M has come out with 35 HP and 45 HP tractors named "Sarpanch" to flatter the ego of such buyers and retain them.

INNOVATIONS ARE KEY TO SUCCESS The "Little Hearts" brand of puffed pastry biscuit was launched when surveys showed that there was a demand for such a product. This was a success. The sweet and salt product "Fifty fifty" targeting Parle's "KrackjaCk" started with a teaser press campaign in colour. A 10 second teaser 1V campaign followed. Deliberately,the ads did not mention the competititor or ,the salt and sweet characteristic. Curiosity created by these led to initial purchases, which were retained and scaled to large volumes. Britannia launched "Tiger" Biscuit focusing on the mass market in rural areas, which makes up half of the total. The name Tiger stands for Energy and red colour pack denotes auspicious.

PRODUCT LINE PRUNING HLL is pruning its eighty strong brand portfolio to the 30 power brands, which account for 75% of its FMCG turnover. This is an example of optimization of resources to achieve more with the same ad-spend and marketing effort.

LINE MODERNISATION HLL relaunched VIM dish wash bar with a superior formulation. Vim bar, the first such product fuelled the growth of dish wash bar segment by over two hundred percent in five years. It converted customers from unbranded proxy products like ash and mud.

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BRAND AWARENESS BUILDING In 1990, TVS launched TVS 50 XL as a "value for money" vehicle. This was supported by massive advertising campaigns on TV to increase awareness of the brand. By then, , " many villages had IV and TVS spent around Rs.1.5 crore on the "Namma ooru Vandi" (Our own vehicle) which showed people from various walks of life swearing by TVS 50 XL.

USE OF INTERNET FOR RURAL MARKETING ITC has launched three web-based initiatives (E-Choupals in company speak) as part of its strategies to vertically integrate its sourcing operations. Aqua Choupal.com in Andhra Pradesh, Soyachoupal.com in M.P and Planters net.com in Karnataka. These act as facilitators for inputs to farmers in Aqua, Soya and Coffee domains. In the 3 states, ITC - .has setup 235 Internet kiosks, which cater to 10,000 farmers and cover 2,50,000 hectares of land. ITC Info Tech structured the entire virtual interaction model and Meta markets for inputs like fertilizers, pesticides etc. that the farmers in different states can use. Its plan was to set up 3000 kiosks to cover 100000 farmers. The idea is to use this network as a distribution channel for other products also. EID Parry and Nagarjuna Fertilizers have also setup similar networks.

INNOVATION Asian paints created the paste distemper, "Tractor" a product unique to India, which planked itself in the middle of the price gap and opened up the market.

REGIONAL BRANDS Mass consumption products like soap, detergent and dish wash powder have several regional brands with loyal customers. 'They are perceived to give value for money at a lower price. 'Bhakar wadi', a savoury much relished in homes in Maharashtra has no competition worth the name.

AMUL It recognized the fragmented and rural nature of milk production in India. It organized a very efficient milk collection network and supported small dairy farmers with a variety of extension services. It installed very modem processing and packaging facilities and used mass advertising very effectively to build high levels of brand awareness and preference for its products.

THE OUTLOOK 1. This new century brings a host of challenges and opportunities in the rural market as the younger generation frees itself from the bonds that tied down the previous one. (This is evident from the Tables given in Annexure) 2. India's democracy allows the people to change the government if the majority of the voters feel strongly about the lack of basic amenities, as the recent assembly elections have shown.

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3. Any government that is elected this year (2004 ) has to provide the rural electorate amenities like water, roads and electricity very fast. This will enable rural people to get more income, mobility and interaction with the nearest urban center, 4. Though marketers are alive to the importance of rural markets it would be very difficult to wean the rural customer away from regional or local brands unless there is perceived benefit in price or value. 5. Local brands have so far used gut feeling and plain common sense in their marketing operations, as well as direct contact with the retailers. When they scale up to regional level, they use low cost media as Cable 1V, Radio and Regional print media. This enables them to reach more customers while retaining existing ones. . 6. In FMCG Sector, the next battle for a market share in rural areas would be between local or regional brands on one side and national brands on the other. The former would fight like hell using all means fair and foul to retain their share of market and survive. 7. In the white goods sector the battle would be between new producers with latest technology and the older ones. The success of LG and SAMSUNG in penetrating both urban and rural sectors in a short time is a lesson in market approach. 8. Agricultural inputs such as fertilizers and pesticides may see a price increase and volumes may fall as more and more farmers turn to "Precision farming" advocated by Sri. M.S. Swaminathan. 9. He has pleaded for a new systematic approach to services for the small farmer. This comprises inputs by way of knowledge or precision farming, prudent water management, crop selection, price information and weather data. 10. Increased incomes in the rural sector should result in investment in goods and services enabling a better quality of life, like better housing schooling and more white goods. But a portion may be wasted in conspicuous consumption and even wasteful expenditure as on liquor. Campaigns should be launched in such areas to avoid such evils.

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REFERENCES 1. Krishnamacharlu C.S.G and Lalitha Ramakrishnan, Rural Marketing Text and Cases, Pearson Education (Singapore) Pvt. Ltd. New Delhi, 2002. 2. Neelamegam.S, Marketing In India -Cases and Readings, Vikas Publishing House (P) Ltd., New Delhi, 2001 3. Rampal.M.K and Guptha.S.L, Simulations in Marketing Management, Galgotia Publishing Company, New Delhi, 1999. 4. Raghavendra Rao. K, The Rise and Rise of Regional Brands, Indian Management, October 2003 5. Tripathiand Misra, Impact of Economic Liberalisation, Indian Journal of Economics, April 2003. V

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Annexure Table I

Trends in Labour Force Participation Ratio in India {1977-78 to1999-2000) (% of population)

Population segment

1977-78

1983

1987-88

1993-94

1999-2000

Rural Male

56.1

55.5

54.9

55.3

53.1

Rural Female

33.8

34.2

33.1

32.8

29.9

Urban Male

53.7

54.0

53.4

52.0

51.3

Urban Female

17.8

15.9

16.2

15.4

13.9

Source: NSS 55th Round July 1999-2000 Dec 2000 and Sarvekshana Vol 20, No 1, July-Sep 1996. During the year 1999-2000, the labour force Participation Ratio declined more significantly in Rural Areas. This is not due to increase in Unemployment, but due to changes in composition of population, pace of Urbanisation, as well as Labour force Participation Ratio of different agegender groups

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Annexure Table II

Changes in Nature of Employment In India (1977-78 to 1993-94) Categories

Rural

Urban

All

19771978

19971998

19992000

19771978

19971998

19992000

19771978

19971998

19992000

Self Employed

61.7

59.4

56.3

43.2

42.2

42.2

58.3

55.9

52.9

Regular

7.8

6.7

6.8

42.0

40.4

40.1

14.0

13.7

14.8

Casual Wage Labourers

30.5

33.9

36.9

14.8

16.9

17.7

27.7

30.4

32.3

All

100

100

100

100

100

100

100

100

100

Source : N.S.S. 55th Round July 1999-2000 and Sarvekshana Vol No. 1, July- September 1996 Table 2 shows the changes in nature of employment in India. Self employment share is on the decline. Rural Self Employment has declined, but the Urban Ratio is constant Share of Casual labour has increased.

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