In this article we shall discuss about the Rural Marketing in India, it’s Nature, Scope, Objectives, Characteristics, Market Structure, Product-Pricing Strategies, Rural Marketing Mix, Importance and Problems of Rural Marketing in India.
Rural Marketing in India: Meaning, Objectives, Challenges, Strategies, Environment, Principles, Examples, Problems and Solutions for Improving Rural Marketing
Rural Marketing in India – Meaning
It is said that mother India lives in her villages. There are about six lakh villages and over 70 per cent of the population lives in these villages.
The thrust on rural development and the Green Revolution during the late 1960s and early 1970s that focused on the use of high- yielding varieties of seeds, increased use of fertilisers and modern pest-management practices have resulted in higher yields.
From a food-deficit nation in the mid-60s, our country became self-sufficient in food production in 1971 and we are now exporting agricultural produce to other countries.
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The Government has taken a number of measures for rural development under ‘Bharat Nirman.’ The rise in income, coupled with increased awareness and the need for possessing modern goods, has influenced the rural marketing environment in our country.
Expansion of TV network, rising aspirations of rural people and packaging revolution, have contributed to the growth of rural markets. Further, there has been a shift from an agricultural economy to manufacturing and service economy and this development has resulted in increase in job opportunities, income and demand for goods and services in rural markets.
Rural India is emerging as a large market for a number of goods and services. Consumer goods, consumer durables, financial services, education, health care, telecommunication and the list continues. We are moving into a new area of development and the base is shifting towards Indian villages.
While rural markets offer big attractions to the marketers, it is not easy to enter the market and take a sizeable share of the market within a short period. This is due to low literacy, low income, seasonal demand and problems with respect to transportation, communication and distribution.
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Rural marketing has become a buzz word among marketing professionals and preachers. Delivering a better standard of living and quality of life will be the new role of rural marketing. The companies entering rural markets have a major role to play by carrying developmental messages to less informed rural population.
Late C.K. Prahalad, the Management Guru, in his famous book on “The Fortune at the Bottom of the Pyramid,” has rightly said, the real source of market promise is not the wealthy few in the developing world or even the emerging middle income consumers. It is the billions of aspiring poor who are joining the market economy for the first time.” Thus, rural markets offer opportunities and challenges for the marketers.
Rural Marketing in India – Nature and Scope
Marketing in management is taken as “hard sell”. However, “marketing is what happens in the markets……… i.e., buying and selling.
Markets need not necessarily be spot markets where goods are brought in and buyers and sellers are at the same place.
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Market means interface and interaction between buyers and sellers. Markets set the prices; they function on the prices. Markets are where there is supply and demand and not merely stocks and wants. “Stock” can be for consumption and for selling. Stock becomes “supply” only at a given price. If the price does not bring normal profits, the intended supplies can be converted back into stocks i.e., will not be sold at a loss. “Stock” is “marketable surplus”; supply is “marketed surplus”.
Just as supply is never expressed without reference to price, demand is also never expressed without reference to price. People have demand for different quantities at different prices; and for different quantities at the same prices at different times; or different persons can have different degrees of demand at the same price and at the same time.
There are price and non-price factors that determine demand and supply. Agricultural supplies first emerge as a result to techno-economic and agro-climatic conditions.
Markets have:
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(i) Goods component [“commodities” come from primary sector; “goods” come from the secondary sector and “services” come from the tertiary sector];
(ii) Persons-institutions- organisation component [the buyers and sellers]; and
(iii) Spatial component [local market to international market].
Marketing is the process that happens in the market. One producer’s production becomes other person’s consumption or input. There is buying of raw material, machines etc., for production; and, production is for further selling. Adding use-values (utilities) and exchange- values (prices or value-adding) are the two pre-requisites of production. The buying and selling can take from of imports and exports. The terms “imports” and “exports” can be used for interregional buying and selling also…….. though this is done only in “regional economics”.
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One can make a fine distinction between “selling” and “marketing”. In “selling” the customers/buyers come and the seller sells. In “marketing” the seller reaches the buyer and creates market for selling. Marketing is also selling of the ideas.
Rural Marketing in India – Objectives and Significance
We cannot imagine what inconveniences we will have if there are no exchanges and without market these exchanges shall remain rudimentary.
1. Marketing first enables agriculture and allied activities to get all physical, financial, technical, manpower and extension (including research embodied in new goods) inputs. Both the scale of operations and scope of operations increase.
2. Through the marketing of the factors of production, the production process itself is optimised, and made most efficient.
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3. Marketing then allocated the things sold over different spatial markets and over different clients. Marketing is not something that the sellers can be happy about; it satisfies the buyers also.
4. Marketing directly and indirectly helps in the income propagation and employment generation in the economy through backward and forward linkages. There are spread effects of national and international marketing and they are good. “Backwash effects” of marketing are realised when one group mulcts the other groups.
5. The entire business of “truck, barter and exchange” which promotes the self-interests of all is decided by the market. Adam Smith once opined that markets function blindly but not arbitrarily. Sugar or vegetables are sold in the perfectly competitive market.
No single seller or no single buyer determines the price. They all take price as given. Then who determines the prices? “The invisible hand”…………..the market ……….which has profound influence is running the economy as God manages the cosmos without our being able to comprehend how that is done.
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6. Marketing ultimately influences who produces what, where, how, when and how much. Markets have multiplier effect on all variables of development. Markets develop as the economy develops; economy develops as the markets develop.
7. Market-activities influence production, exchange, distribution, public revenue and consumption ultimately.
Rural Marketing in India – Characteristics
Some of the important features or characteristics of rural marketing in India economy are being listed below:
(i) Rural markets are widely scattered in India. There are across six lakh inhabited villages in India. The population size varies form ten thousand to two hundred people. Only 3.2 per cent of the villages have population more than five thousand.
(ii) There is heterogeneity in rural consumers in terms of socio cultural, and demographic factors, which varies from one region to other.
(iii) Education level is increasing rapidly. Children and youth in the family are being educated and are the source of information on new products and brands in their family. Rural buyers are much conscious of products and brands as their urban counterparts.
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(iv) Income level is rising in rural areas, the middle income group in rural areas is expending their purchasing power in the aggregate is as large as that of urban areas.
(v) Rural consumer is differ with in the region to region and state to state, in the matter of socio-economic status farmers in Haryana, U.P, and Punjab are mare progressive as compare to Bihar and Rajasthan.
(vi) Agriculture is not only the occupation of rural people but almost thirty five per cent of population is now engaged in non-agriculture activities.
(vii) Attitude and lifestyle of rural population is changing due to various factors like growth of disposable income, education and enlargement of media reach like television and newspaper.
(viii) With the initiation of various rural development programmes there have been an upsurge of employment opportunities for the rural poor. One of the biggest cause behind the steady growth of rural market is that it is not exploited and also yet to be explored.
(ix) The social status of the rural regions is precarious as the income level and literacy is extremely low along with the range of traditional values and superstitious beliefs that have always been a major impediment in the progression of this sector.
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(x) Now rural people are having more opportunities of growth because center and state government both are having programmes for generation of employment.
Rural Marketing in India – Rural Markets
Rural markets are green pastures for any marketer provided his marketing plans are attuned to specialities of rural markets.
Salient Features:
Increase in population has led to an increase in demand. The rural population in 1971 was 438 million which became 736 million in 2007, an increase of 68%.
(i) There is a marked increase in rural income due to agrarian prosperity.
(ii) Large inflow of investment for rural development programmes from Government and other sources.
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(iii) Increased contact of rural people with their urban counterparts due to development of transport and wide communication network.
(iv) Increase in literary and educational level and resultant inclination to sophisticated lives by the rural people.
(v) Inflow of foreign remittances and foreign made goods into rural areas.
Thus, prosperity in rural areas is very much reflected in the buying and consumption habits of rural folks. Their inclination to spend on the modern gadgets has increased as a result of their increased purchasing power.
While planning a marketing mix for a brand of televisions for rural markets, the marketer must keep in view the following factors in contrast to urban markets:
(i) Low density of population, low infrastructural level, low literacy level — but market is contiguous.
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(ii) Social norms are more dominant and caste influence is strong,
(iii) Seasonality of income receipts. Labourers’ category receives income on daily or weekly basis.
(iv) There is low product exposure and retail outlets are lower in number. Difficulty is faced in changing beliefs.
(v) A rural environment friendly advertising campaign for the spread of a branded television can do a lot. Assistance from educated youth volunteers can be sought. Help from the Block Development Officer can be of immense use.
It is necessary to examine distribution logistics, location and concentration of demand, dealer’s attitude and motivation, consumer motivation and buying pattern and organisational alternatives.
Appropriate changes in tangible and intangible features of the pre duct should be made. Product Adoption Strategy, Backward Invention and Forward Invention may be adopted by the FMCG Company.
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The price mix is another critical marketing decision area. The price should tally with the “Ability to Pay” by the rural population. Adjustments in quantity, size, package, etc. need to be made in order to make inroads in the rural market.
Branding and packaging are important tools that could be used to meet the requirements of distribution and promotion in the rural market.
Rural Marketing in India – Market Structure and Rural Areas
Most of the sellers in rural areas are from the industrial/ manufacturing sectors and their products are usually sold under conditions 1 to 7. The farmers, agriculturists and rural people, on the other hand, sell homogeneous products. The price is “taken” in the perfectly competitive market. Buyers and sellers in perfect competition are “price-takers” and not “price-makers”.
Those who sell in rural areas usually do business in non-perfectly competitive world. Those who buy from the rural areas usually buy in the competitive market paradigm. The former is organised while the perfectly competitive set-up is usually informal.
“Management”, “Regulation” and “Administration” of the Spectrum of the Market Structure:
(a) If the industries are selling goods in rural areas they “manage” the selling. The monopolies, duopolies and oligopolies manage the selling. Monopsonies, duopsonies and oligopsonies manage the buying. (Models 1 to 6)
(b) Monopolies and monopsonies are rare in the era of globalisation, liberalization and privatisation. If at all there are monopolies they may be in the public sector. Electricity Boards are a monopoly which the rural producers/consumers have to deal with. Railways are a monopoly but nowhere near the “pure monopoly” because alternative modes of transport and conveyance are available. Hence all decisions which involve transport costs will be taken on the principle of least cost with safety.
(c) Rural people sell their agricultural and non-agricultural products mostly in the perfectly competitive market. Some rural products can be of the type conforming to “monopolistic competition” e.g., Kanjeevaram sarees or Chanderi sarees because they are known by their “brand” name.
However, it is rare indeed that even these producers can earn extra-ordinary profits. They may not be operating under “perfect competition” but under “intense competition”. Competitive markets can also be regulated by the governments.
(d) Model 6 above is for localised agro-industries. Model 5 above is for capital or/and costly consumer durable goods. Model 1 is best exemplified by Electricity Boards supplying electricity to farmers for various production purposes.
Model 2 can be a case of any agro-industries taking its raw material from the hinterland in which case it will not be a national monopsony but a regional or rather sub-regional monopsony. Model 3 is rarest of the rare case. Model 4 is rarest of the rare case. Model 7 is a very common case in selling anywhere. Model 8 is a little bit of extension of model 6. Model 9 is common for the selling of goods by the rural people.
In a country like India rural markets are flooded with branded (better word is ‘badged’ but rarely used) goods. In India rural markets are full with fake products of well-known brands or brands which look similar except on close inspection.
PODREJ soaps instead of GODREJ with letter so printed that anyone can get deceived.
COTGATE instead of COLGATE toothpaste, with total resemblance of colour and printing except for T instead of L, or as “Coglate”.
Rural Marketing in India – Production-Product-Price Mix
Nature is the only producer on earth; Human-beings change the form, place, time and possession only. Even if tree-crops, cereals or vegetables or whatever are grown through intense labour, the production scheme is entirely devised by the Nature. The seed comes from the Nature; so do water and all agro-climatic conditions. Human-beings are powerless to create anything. They can only change the form, as we can make furniture from wood or tool from the iron.
Sand brought from the river site to the construction site is creation of utilities by changing the place. Production of wine and allowing it to mature over a period of time so that it can be priced higher is creation of ‘time-utility’. Paper with the seller of stationery items is of little value to him but sold to a student it acquires ‘possession utility’ and this is production.
Production is creation of use-values first and exchange values later on. Human-beings can produce goods and services which have use values but may not command exchange values i.e., highly useful things may not be marketed at all. However, it is never possible to create exchange values without first creating use-values.
Any study of marketing should first concentrate on production then on pricing, then on distribution and then on promotion. Hence study of production is not a digression but essential part of marketing. Marketing manager can sell what has been produced and he can sell more if production is efficient quality and price-wise.
Needless to say that the price has got to be profit-inclusive for the producer and within the means for the consumers. In purely theoretical terms we say that the price should conform to the utility—to marginal utilities as the theorists say. Thereafter the distribution network and the promotion efforts should be efficient.
The factor-factor model simply emphasises that all factors of production should be so employed that the remunerations they receive do not exceed their marginal productivities. If their remunerations/ returns are to increase their marginal productivities have to increase first. Then the marginal significance of all factors of production should be equal—no one should be over employed or under-employed.
The factor-product model highlights three types of the “returns to scale” under the “law of variable proportions” and they determine the costs— decreasing, constant or increasing. Decreasing returns to scale or increasing costs are obtained in the long run due to niggardliness of the Nature. If that trend is to be arrested, then it is necessary that innovations should be introduced. The production function should be once again of the increasing type. Decreasing returns can be postponed but cannot be avoided.
The product-product model is about the trade-off between one product and the other. The opportunity costs of producing wheat in a given area is not having gram. If the same piece of land produces 100 kg and 50 kg of the two crops, we can say that the opportunity cost of growing 1 kg of wheat is sacrificing 1 kg of gram. In quantity terms gram is produced in lesser quantity and hence its price may be higher. The prices are to be compared for monetary returns and the quantities for the real (important for consumption) returns.
Complementary, supplementary, and competitive products are to be planned. Cereals and pulses are complementary. If cattle are fed with grains, the undigested grains in dung can be partaken by fowls and fowls can be eaten by people. This is supplementary chain. Gram and wheat are competitive. Utilities expected (needs) and prices (demand and supply interface) decide these relationships.
What is produced is marketed; what can be marketed is to be produced or is produced. Production function is techno-economic function. It is the study of output-input relations. Same outputs should be obtained with lesser inputs or/and higher outputs should be obtained with the same or less inputs.
Both in the agri-business (things to be sold by the farmers), and agro-industries business (who buys inputs from the farmers and sells their outputs to people of all regions, sectors, activities and functions) there can be five types of arrangements that help in higher marketing:
1. New sources of raw materials are to be found for the same product. If sugarcane becomes short for the required production of sugar; beet is to be grown.
2. New outputs are to be found for the same inputs. If direct consumption of potatoes gets stabilised, production of chips, meshed sweet potato pie or anything can be produced through processing and manufacturing activities.
3. New users are to be found; new markets are to be found.
4. The rural production and marketing activities can be reorganised, most importantly, in the form of cooperatives.
5. New techniques of production are to be implemented for higher production, outputs, yields and value productivities. The last objective will require optimisation of the distribution and promotion mix of marketing.
Agricultural production is converting low entropy resources into high entropy resources, as indeed all types of production processes can be defined this way. Coal, before it is put into furnace has chemical value of low entropy. Its energy is free. After its particular use it becomes bound. Application of right fertilisers to different crops is also of the same type. We exchange high entropy outputs for low entropy inputs. Sun is the ‘unlimited sources’ of our energy and we can catch that with a net i.e., the earth.
Land is a chemical laboratory par excellence and with proper planning large marketable surpluses can be taken out of it; but very hard labour is also required. Use of the low entropy resources for converting them into high entropy resources should be with minimum waste.
Manufacturing is a high entropy activity vis-a-vis agriculture. Photosynthesis is the source of food and more food is the source of balanced diet and high production of agro-industries. Marketing enables rural people to get all inputs of development and consumption and to sell their outputs for consumption and investment in other sectors.
Rural production and marketing activities first involve cooperation of human-beings with matter through an exosomatic process.
Rural Marketing in India – Agriculturists and Producers of Sundry Rural Commodities
They are producers in perfect competition and are price takers and not price makers. Hence all that they can do is to take advantage of the price differences that may be existing. They can sell in the market wherefrom the most remunerative prices are obtained provided they cover the costs of transportation and the time costs, unless there is zero opportunity costs related to time costs.
In other words if the farmers have ample of time and cannot utilise it elsewhere and do not suffer from the irksomeness of moving into different markets then price differences after transport/movement costs should be taken note of.
Forming cooperatives will be good measures provided the cooperatives are not dominated by the politicians and follow the sound commercial principles.
Sellers of inputs have to reach the buyers through their appropriate distribution channels well in time. If they are selling high yielding variety seeds, they should be in the distribution point’s atleast a fortnight before the sowing season. The same can be said about other variable inputs e.g., fertilisers of various types, pesticides and herbicides of various types.
Those who are intending to sell tractors, trollies, tillers, seeding instruments/attachments, levelers, irrigation pumps (immersion pumps or diesel pumps or electricity pumps or any other type of irrigation system) should sell the same according to the requirements of the farmers. The farmers approach the selling points where their needs should be properly attended to. Now-a-days the banks are coming forward for credit. The sellers can act in unison with them.
Producers of these industries should produce things of quality requiring less repairs. It creates lasting bad impressions if there are frequent break-downs and that impression will continue even if the repair facilities are there.
Fair and competitive prices alone can rule in the long run. The very best of the combination of ‘product-mix’, ‘price-mix’, ‘distribution-mix’ and ‘promotion-mix’ will be necessary.
Sellers of consumer goods, consumer durables and services to the rural population/populace.
The golden principles are:
(i) Take those things to the rural areas for which the demand already exists; and
(ii) Do proper homework to prepare a leeway for introducing new, better or costly things.
Rural people are not impulsive like urban people. They do not buy on impulses. Most of the rural, people have low purchasing power; but in addition to that they practise economy and are sometimes parsimonious also.
It is a crime to sell sub-standard medicines and other things that can pose serious health hazards to the urban and rural people. It is common practice of the industrialists in India to manufacture substandard goods for rural people and to sell even those things for which expiry dates have gone by. This is true to packaged food items, soft- drinks and even medicines.
One is not sure whether these practices will ever end in India. The ‘regulators’ need be regulated; the inspection staffs are usually hands-in-gloves with the nefarious traders. They become active for some time mostly when there are deaths. From cosmetics to clothes/ cloths, from electrical goods (wrongly given ISI mark also) to electronic goods, from automobile spare parts to any mentionable items, “duplicates” (bearing the name of standard firms, not in that line of business, or imitations or fake companies) are sold in villages.
It will be too much to expect the tigers changing their stripes overnight; unfortunately this market will continue.
It is a different thing that if goods of good quality but of cheap- price types (like less sophisticated TVs) are sold.
Rural people also adulterate their agricultural items (they mix water in milk or can mix the milk of cows and buffaloes or prepare mava / khoya with goat milk also. Or, khesri pulse may be mixed with tuar. These things are done by the villagers. Urban people also do unto them what the rural people do unto the urban people.
Buying of consumer durables does depend upon the experiences and an advice of the fellow villagers’ effect is prominent. So far as the concerned the villagers have their own (of the advocates or residential physicians) or have to avail from single sources (one bank or one phone company).
Rural Marketing in India – Product-Pricing Strategies
Livelihood modes, asset and land holdings, skewness in income generation and socio-cultural factors will decide the product-price strategies of rural marketing. Marketing strategy will also depend upon the size class distribution of marginal, small, semi-medium, medium, large and very large farmers.
Companies which sell inputs of agricultural development should have their own data base about the demand-and supply conditions in different villages. The studies have to be retrospective studies, current-status studies and prospective studies. Rural persons prefer small packing as millions of them do not have adequate purchasing power.
They prefer higgling and bargaining and someone should be able to tackle the same. In the long run, the big companies should make the villagers believe that fixed prices will rule. Once discounting is done, there will be very persistent higgling and bargaining. Villagers are quick to pick up cheap substitutes and marketing strategies are to be devised whether one is bringing a substitute or is facing a substitute. It is also seen that villagers prefer down to earth names.
“Titanic” brand will not appeal as much as “Janata” brand. It will not be a bad idea if the brand name is written in regional language, even a translated version. Sometimes odd sounding names click…..one can see that Haldiram brand; or “Vagh-Bakri” (Tiger-Goat) brand.
Sapat Chaha (tea) or lotion is popular in Maharashtra. Rural people do not want to pay for exotic packaging. Cheap refill packs are popular. Rural people are very fond of gifts attached to the product, and are not much conscious of the fact that the seller recovers the cost of both from them. Market does not give anything free.
(i) No farmer in India can become a crorepati, much less a multi- crorepati unless the incumbent is a HPP (high powered person from politics and administration).
(ii) Those who supply inputs to agriculture and those who buy agricultural outputs for the use in their industries can be billionaires.
Agriculturists and rural people are petty sellers and petty buyers but those who buy from them (except household consumers) or sell industrial goods to them can be very rich persons.
(iii) Farmers can seldom take advantage of changes in prices. If they have bumper crops the prices go down and the incomes may go up marginally only despite large marketable surpluses due to low income elasticity of demand. If the crops fail completely they have nothing to sell and zero marketable surpluses multiplied by very high prices will yield zero.
If the crops fail partially agricultural prices (in percentage terms) will rise at a high rate but again low volumes of marketable surpluses will not enable them to reap “economic rents” or super-normal profits.
Farmers have inelastic supplies due to perishability of their commodities and their low incomes. They have to sell a lot of portion of their marketable stocks immediately after harvesting. It is good that there is the support price system which saves them from the depressed- price effects yet at the same time allows them to reap the advantages of higher market price over the support prices in other periods.
While this can be termed as double advantage but the total gains are low in terms of absolute figures for most of the farmers. It is seldom, if ever, that the farmers can reap the twin advantages of (i) elastic supplies (which can be there if the farmers can take their commodities to the most remunerative markets which exist as options), and (ii) inelastic demand in the country/abroad at the same time.
If the farmers are in weak position about disposing off their supplies the same can be said about the buyers who too have compulsions to buy the consumables or inputs in time for good quality. The problem, however, lies in number. The weakness of the farmers lies in their large number.
The theory of price-mix tells us that one should receive the highest possible price for whatever is sold and should pay the lowest possible prices whatever is bought. THE FARMERS FREQUENTLY FIND “UNFRIENDLY MARKET”—when they go to sell they find the prices are falling; when they go to buy they find prices are rising. Compromises about quality of purchases are to be made by the rural people.
The industries which sell their outputs to agriculturists for being, used as inputs always have upper hand because timely delivery of inputs in the required quantity is desired. Similarly the industries which buy the outputs of agriculturists in their agro-industries also enjoy the status of oligopsonies i.e., of “a few” buyers (relative to sellers) and hence they too can dictate prices to be paid to the farmers.
The sugar mills of India for example- keep thousands of crores in arrears of the farmers and do not pay the same on time. The Centre and then the State Governments make “provisions” of credit and/or grants (God alone knows what) to be paid to farmers on behalf of the sugar mills.
There is no transparency now-a-days. The Governments seem to be taking actions in favour of the farmers with an eye on the votes during election. They help the industries on the sly not with the very honest intentions of promoting industries but helping the industrialists. Rural marketing has a dose of politics mixed in it.
Such is the true price-mix scenario in India:
Monopsonies for different products are not there with which farmers have to deal; they can enjoy that ‘status’ in a small region. The same is true of duopsonies (two buyers of the produce of the farmers). Oligopsonies are there in the form of agro-industries.
The household buyers operate in the perfectly competitive market.
If agricultural produce is exported, we cannot include the same in rural marketing because the rural marketable surpluses are collected by the urban intermediaries and they export. Hence we have to note this special feature of international marketing in agricultural/rural produce separately.
The cost of production of commodities sold in the domestic and international market can be taken to be the same. If the demand in international market is high and inelastic, higher prices will be charged in international market and there will be super-normal profits. This will provide indirect boost to the activities of farmers because they too are to be encouraged to produce more and efficiently in the subsequent cropping seasons.
If the demand abroad is elastic and there is competition with other nations, then in the event of the government needing foreign exchange there can be export subsidies in domestic currencies to the domestic products/exporters, subject to the WTO provisions.
What sort of management principles/practices be followed by those who are engaged in rural marketing?
Rural Marketing in India – Industry-Centric Versus Rural-Centric Marketing
The study of rural marketing should not be “industry-centric” only (as it is in many books on rural marketing management) but should include the concerns of both sellers and buyers. Many management books show concern about one aspect each of buying and selling i.e. (i) how can the agri-industries sell inputs of rural activities and other industries their consumer goods to rural people, and (ii) how can the agro- industries and urban trading interests of all sorts buy the produce of the earth at the cheap rates. Interests of the rural people are seldom addressed. That is half-economics only.
Issues that find mention generally are:
1. How can the producers of tractors, harvesters, irrigation pumps, electric and diesel motors, irrigation system, implements mechanised tillers and levelers, barbed wires for fencing transportation trollies etc. (agri-industries) can sell more in rural areas.
2. How can the producers of fertilisers/fertilizers, packaged high yielding variety seeds, pesticides, herbicides etc. can sell more to the rural people
3. How can the consumers’ durables and non-durable consumption items be sold in large quantities in the “vast and limitless” rural markets.
4. In fact some so-called “gurus” of management dare suggest ways and means about how to (a) sell at the highest possible prices and sell more and (b) how to buy at the cheapest prices and get best quality things.
Some neglected aspects of rural marketing management are that the teachers and the books seldom write about, except in the passing, the following:
1. How can the farmers improve their production (total of one crop), outputs (total of all crops during a year), yields (physical production per hectare) and value-productivities (value of commodities produced per hectare).
2. How can the farmer improve their marketable surpluses i.e. how can they obtain higher outputs with less than proportionate increase in inputs or the same inputs.
3. How can the farmers and non-farmers in rural areas improve their income “terms of trade”.
4. How can the factors of production in the rural economy obtain remunerative/fair prices to improve their entitlements (purchasing power in their hands) through the improvement in livelihood profiles.
Rural Marketing in India – Concentration Ratio
Study of the concentration ratio of localisation is important to big marketing houses of agri-business. [For example tractors were most purchased in the Gwalior region of Madhya Pradesh, particularly in Bhind and Morena districts. What could have been the reasons? At least two were obvious; one, the farmers in that region must be owning big plots of land, must be having money and then were practicing progressive commercial crop growing.
Second reason could be that many retired military men were given pieces of land there and they included many Punjabis who were used to using the tractors.] This concentration ratio will relate to oligopolies (the number of producers and/or sellers is limited to being “a few” only).
For the agro-business the study of concentration ratio will relate to production than to selling. This will be of interest of the oligopsonies (a few buyers while the number of sellers is large e.g., there can be a few sugar-mills only where the number of sugarcane growers is large in a region). Sugarcane growing is concentrated in the Dabra region of Madhya Pradesh and not in the Betul and Chhindwara region of Madhya Pradesh, to give one example.
The sellers and the buyers in rural areas are of atomistic size and the best they can do is to move to the nearest market where ‘relatively’ cheaper’ things are available. Villagers can move out to urban markets only when things are not available in the rural market. There are time costs and money costs of going to the urban markets. These people go to the metropolitan markets only in case of very costly goods.
If a tractor manufacturer has dealerships at the capital city of a state and also in the districts, the company ensures that the buyers buy from the district markets; the price differences, if any, are always equal to the conveyance charges of the people and transportation charges of the tractor. If the company cannot do this, the purpose of locating the selling points in dispersed way will be defeated.
Rural producers too have to unload their supplies to the nearest point because the commodities which they sell are usually of large bulk and of relatively low “value” (i.e., prices-the “utility values” of agricultural commodities are so high that their non-availability means death!).
The transportation charges per unit value of agricultural/rural commodities/wares are high and the market is a circle around their production point. The circumference of the market will be low with high bulk and low values. The concentric circles will enlarge with the reduction in transport costs relatively to value. The radius will increase with reduction in the ratio of transport costs to the value of the products.
The nature of the things available, the “economic size of the buyers” (their total purchasing power), the population, the type of things bought and sold, distances and the costs of transport and a host of other factors determine concentration ratio of interest to the buyers and sellers of the and for the rural areas.
Rural Marketing in India – Terms of Trade
The “terms of trade” of agriculture (the ratio of the prices received by the agriculturists and those paid by the agriculturists as also the ratio of changes) improve during the early stages of economic development. The demand for agricultural goods comes in the category of “essentials” and the income elasticity of demand of the poor masses is high for agricultural goods. Hence terms of trade improve.
Thereafter the price inelasticity of demand of agricultural goods remains but not the high income elasticity of demand. (In simple words it means that people do not reduce the consumption of agricultural goods because of the price rise or if some do it is much less than proportionate.
On the other hand, as the incomes rise less and less is spent on agricultural goods till a time comes when no part of the incremental income is spent on agricultural goods. The family members a rich person of must be spending as much as they want on agricultural goods and not a single paise of the incremental income will go to increase the demand for those products for consumption purposes.
The Government of India has been showing that right after Independence the terms of trade of agriculture are between 5 to 10 per cent higher than of the manufacturing. This means net transfer to the agriculturists. This proves efficient markets. However, the farmers’ lobbies do not agree and agitate for higher price support, subsidies, no taxes and prompt payment of dues by the industrialists/traders who buy from the agriculturists.
The Government of India does not include in the calculation of “improvement in terms of trade of agriculturists” the amount of interest that the farmers lose in receiving late payments (as sugarcane farmers lose due to late payment by the sugar mills). Besides the irregularities in deducting various charges are not taken into account and taking extra weightage of supplies by middlemen are not included.
How often do we see that the agriculturists, rural people, lower income group persons and even middle class persons operate in “unfriendly markets”.
It is said that the free economies are equally friendly to buyers and sellers. In practice the disadvantaged find that:
(a) When they go to sell they find prices falling; and
(b) When they go to buy they find prices rising!
Rural Marketing in India – Growing Popularity
In recent years, rural markets have acquired a lot of significance, as the overall growth of the economy has resulted in a substantial increase in the purchasing power of the rural communities.
The rural markets are growing speedily and steadily compared to the urban markets which are attaining a point of saturation. The potential of rural markets is said to be like “waking up a sleeping gaint”.
Reasons for Growing Popularity of Rural Market:
(i) Untapped potential – Rural markets offer a great potential for marketing branded goods and services. As rural areas have a great population, size of the untapped market which is yet to be discovered is quite large.
(ii) Increasing income and purchasing power – The agricultural development programs, land acquisition schemes etc. have helped in increasing the income in the agricultural sector and thus the purchasing power.
(iii) Lifestyle changes – Rural customers are also looking for comfort and luxury in their lifestyles.
(iv) Market growth rates are high in rural areas vis-a-vis urban areas specially in FMCG sector.
(v) Rural market is not expensive in terms of advertising since general modes of advertising are radio, word of mouth.
(vi) Marketers can sell their obsolete products in rural markets. For example, LCD and LED TVs are the new technology in urban areas but in rural areas colour TV (flat screen/normal) is still in demand.
There are many companies which are taking advantage of this rural population. For example – HUL has launched its campaign “i-shakti”, in which it has empowered few “shakti ammas” to sell their products to the villagers. The products are generally low cost, small in quantity focussing on value for money.
Opportunities in rural markets are dependent on various factors, which are:
(i) Spatial Factors – Characteristics of rural population like low density, low mobility, low infrastructure level, low literacy level etc., come under spatial factors affecting the opportunities in rural market.
(ii) Social factors – Rural markets have a strong impact on the social and cultural factors. Social norms are more dominant here. Caste influence is also very strong. Marketing communication works better if it is passed through social leaders. Thus individuals within the society should be chosen for promoting the products as done by ITC in project i-shakti.
(iii) Economic Factors – The purchasing power in rural areas is low and it is seasonal. Generally people postpone their buying till the festive season.
(iv) Marketing Factors – It is a challenge to promote a product in rural markets in the absence of product exposure and proper distribution network. Promotional activities require a lot of efforts as the people remain stuck to their own beliefs.
All these factors pose certain problems in marketing in rural areas which are:
(i) Distribution logistics, storage, transport and handling.
(ii) Location and degree of connection of demands.
(iii) Dealer’s attitude and motivation.
(iv) Consumer motivation and buying habits.
(v) Lack of Mass Communication media, their reach and influence.
(vi) Organisational alternatives.
Rural Marketing in India – Rural Marketing Mix
Marketing mix consists of 4 Ps, viz., Product, Price, Place, Promotion. These mixes need to be modified accordingly on the basis of markets which the firm is catering to. As far as rural markets are concerned, whole marketing mix needs to be changed as the scenario of rural markets is totally different from an urban market.
1. Product Mix:
Since the rural market has low per capita income and less purchasing power, thus a vast majority of rural people would require low cost, sturdy and utility products. Hence, there arises a need for re-designing products that exactly suit the requirements of rural customers.
The following strategies can be adopted for rural markets:
(i) Straight Extension Strategy – Same products are introduced with minimum modifications, for example, Sachet packets of shampoo are preferred in rural markets since buying a bottle would not be feasible.
(ii) Product Adoption Strategy – Products are modified to suit the specific needs of rural population. For example, detergent cakes are valued more in rural markets than detergent powder since people do not have washing machines in rural areas.
(iii) Backward Invention – Selling less complex products which are cheap and easier to use, for example, 14, 21 inch coloured TVs still have a market in rural India.
(iv) Forward Invention – Entirely new product-range is developed especially for rural markets. For example, in place of heat connectors, gas heaters are selling more in rural markets as they are portable and do not need electricity.
2. Price Mix:
Marketers should aim for low-cost products so that these would be within the reach of rural people. For example, Parle G biscuits are being sold in one rupee packs, Maggi Chhotu is introduced @ Rs.6, Coke bottles are also selling in smaller sizes.
3. Place Mix (Distribution):
Distribution channel management is the biggest challenge in the rural markets, because the consumers are scattered and problems like poor communication facilities, less off-take and scattered distribution outlets are persistent in the market.
At times, even though rural people are aware of substitutes, still they are forced to buy whichever brand is available with the distributors. Marketers are now focusing on direct distribution channels like haats and agent distribution system in which every village has a local villager working as an agent, he not only promotes the product but also takes orders and keeps the inventory.
4. Promotion Mix:
This is an area in which a separate strategy is needed for rural customers as promotion strategies like internet marketing, sales promotions, road shows, television ads etc. are not at all effective. Radio is the main medium within easy reach of rural people, thus radio ads are more effective.
Publicity through special shows, nukkad nataks, films with the help of mobile vans etc. are good methods of promotion.
Rural Marketing in India – Importance
i. Rural market is getting an importance because of the saturation of the urban market and high competition in the urban market.
ii. National, multinational and non-government organizations are having various projects for the upliftment of rural socioeconomic status. As a part of Corporate social responsibility, big business houses in India like ITC, Sail, TATA, Reliance etc. are helping urban poor people and specially women to attain empowerment and wealth, wealth to spend on their product categories. For example, Project Shakti by HUL for helping the poor women and E-Chaupal by ITC which is helping the poor farmers get all the information prices of agricultural commodities. These efforts are surely going to increase their purchasing power.
iii. Rural products of India are unique, innovative and have good utility and values. Large number of these rural products like handicraft items, food products, embroidery, clothes and other products sustains a significant segment of the population in the rural areas. These products have a big market in urban as well as rural areas.
iv. There is a high scope of economic development through micro finance in rural sector. With the emerging entrepreneurs from rural areas and success of Self Help Groups (SHGs), rural community is now participating in economic restructuring and growth. This effort would increase the demand of durable and non-durable consumer goods.
Rural Marketing in India – Opportunities and Challenges
Opportunities:
There are opportunities for both entrepreneurs and industries. As the income and demand of consumer and non-consumer products are increasing in rural area, they can explore new markets for their products. The prime scope of rural marketing is the creation of opportunities for the rural entrepreneurs for product differentiation and innovation by offering them choices. Because of this sustainable market linkages, rural producers can participate in the benefits of globalization and will also develop their capacity to maintain global quality standard.
The involvement of the private industry sector at the rural product and market development can also provide opportunities for the development of new services and values to the customers, which will find application in the developed markets.
Large companies are entering in rural markets through modern retail concept like ITC Chaupal Sagar, M & M Shubh Labh Stores, Escort’s Rural Stores etc. These developments are good indicators for the growth of rural markets.
Challenges:
There are significant challenges faced by rural marketing are due to institution voids, numerous intermediaries and infrastructure bottlenecks. Global brands may try to suppress the rural products in the markets with their pricing and promotion competences. Therefore, developing alternative and additional market linkages for these products is an absolute necessity. Moreover, the low volumes of rural products, high operating costs, high attrition, and absence of local know how and relationships may also create problem in the process.
Rural Marketing in India – Top Ten Socio-Cultural Aspects
1. It is to be noted that even in 2003, two-third of India was dependent for its employment on agriculture which contributes only 26.5 per cent of the Gross Domestic Product (GDP) of India.
The rest of the 73.5 per cent GDP is contributed by 33.4 per cent people of India.
It can be seen that the contribution coefficient is 0.398 [26.5÷66.6]. This comes to 2.2 for non-rural persons [73.5÷33.4].
If we divide 2.2 by 0.398, we get 5.53; and this is the number of times the GDP is generated by the non-rural people.
This simple calculation highlights how the per capita income of the people in rural areas is very low compared with the per capita incomes of the urban people. There are obviously no “crorepaties” in agriculture. If at all there are, they are urban- based rich persons owning progressive farms. In most cases the urban rich do not cultivate but own land to show huge incomes accruing from agriculture which are not taxable. It is a method of converting the “black income” (now called “grey” income) into “white income”, as they are known in India.
There is vast rural market in terms of space; it is not so vast in terms of purchasing power. The basic issue that needs to be addressed even after 56 years of freedom (2003) is how to improve the livelihood and income profiles of the bottom 60 per cent of the population, more particularly of the bottom 30 per cent population which is below the poverty line.
“Poverty anywhere is a danger to prosperity everywhere”, so observed President Kennedy of the USA, though it was a lip service only. [For example- if India faces a serious drinking water crisis, rich families in urban areas will not be able to get water by tankers even at very high price because these water tankers will be looted by the poor as they are on their way to the houses of the rich. Instances can be multiplied].
Rural marketing is a “micro-management subject”, while it should merit “macro management and development attention”.
2. Liberalisaiton, privatisation and globalisation are increasing the growth rate in the Indian economy. Indian economy is now market friendly but not poor friendly. The Government advises the savers to go to the stock exchange rather than to the safety of banks, where depositors are not welcome. Inequalities are increasing because the development strategy is high on growth and low on employment. Employment generation is now a by-product of “happenstance economics”………… let whatever that happens, happen”.
Rural people have lost right of usufruct in the forest produce for all practical purposes. The aspects and the assetlessness, landlessness and skilllessness of nearly 25 to 30 crore rural people keeps the rural markets depressed. Bare essentials are bought.
3. The merchant-moneylender circuit in rural marketing is not being decried because without it rural marketing cannot get started but it is a fact that they usurp disproportionately large share in the gains. Merchant-money-lenders take small marketable surpluses of the poor producers from their houses (more so in the difficult regions as desert regions or forest regions or hill-regions). The Kutch handiworks on cloth with exotic and traditional designs and beautiful colour-schemes are prepared with the support of the middlemen who give them all inputs (cloth, thread, finance etc.).
4. The high powered persons in politics and administration as decimating forests in India The share of the rural people/tribal in the marketing of forest produce got reduced in terms of monetary shares. Success in politics made people de facto landlords and water-lords not to speak of the “credit-lords” and the “trading-lords”. These positions mutually strengthen other positions.
5. Excessive marketing of the rural minor minerals and forest produce have adversely affected the ecology and environment of the rural people and their livelihood and production profiles got degraded. Naturally they were losers in marketing.
6. The rural poor do not have a good place in the production processes and hence do not have marketable surpluses. [Tripura tribals had a “full belly” model of running their economy. In case of a bumper crop of rice, they took with them only as much as was required for self-consumption and the rest was left in the fields to be eaten by wild animals. The tribals took away with them only as much as was required for self-consumption and the rest was left in the fields to be eaten by wild animals.
The above state of affairs was due to-
(i) Lack of infrastructure facilities,
(ii) Lack of marketing facilities, and
(iii) Insurgency.
See this circuit of trading:
(a) Traders take tamarind, turmeric and tendu leaves from Chhattisgarh area and distribute them in Andhra Pradesh and Kerala mainly, with networking in Tamil Nadu and Karnataka.
(b) From Andhra Pradesh they take tobacco to be taken to Kerala along with tendu leaves.
(c) From Kerala they take spices, cloves, black pepper and cashew nuts back to other States and then bring Andhra Chilies back to Chhattisgarh and Madhya Pradesh. Each circuit is of buying and selling; the irksomeness borne is to be appreciated. But their marketing margins are exorbitant.
7. There is “social fencing” in the rural societies and economies Caste system is based upon the production patterns e.g., potters blacksmiths, cobblers, goldsmiths etc. and production and marketing in rural areas are also a function of the caste systems.
8. It is to be kept in view that the idols of the deities and other types of the idols crafted in the past (including the erotic idols of which smuggling brings crores of rupees from foreign countries, depending upon their antique values) are the handiworks of the past master craftsmen of the villages.
There are master weavers in all States of India and their products command high values in the national and international market. Alas, government support to them is decreasing in recent years.
9. Though there are cooperatives in rural areas but the real cooperation is missing in most cases! The rural people have great preference to deal with the private operators. That is what free market is. The cooperatives, dominated by the shady politicians in most cases, are shunned by the rural people, great success stories of the cooperatives notwithstanding.
10. Producers/Sellers from the rural areas can sell their products directly to the consumers but only when the volume of transactions is small as in the weekly markets in the rural areas.
Weekly markets are there in many big cities also. For example- Bhopal (capital city of Madhya Pradesh) has weekly vegetables (and some rural products market) on each day in one part of the city or the other.
Rural Marketing in India – Problems
There are several roadblocks that make it difficult to progress in rural markets.
Few of them are listed below:
(i) Standard of living – Number of people living below the poverty line is more in rural markets.
(ii) Low literacy level – This leads to problems of communication especially faced by the print media.
(iii) Low per capita income – Main source of income is agriculture which is not stable, or regularised so the demand is low.
(iv) Transportation – Major problem faced in rural markets is that most of the marketers use tractors or bullock carts in rural areas to distribute their products.
(v) Ineffective distribution channels.
(vi) Many languages and diversity in cultures – Factors like cultural congruence, different behavior and language of the respective areas make it difficult to handle the customers. Only trained and experienced sales force can handle rural market.
(vii) Lack of communication – Lack of communication facilities continues to be a problem.
(viii) Spurious brands – Cost is an important factor that determines purchasing decisions in rural areas. A lot of spurious or look-alike brands are available, which provide a low cost option to the rural customers. Many a time, the customer may not be aware of the difference due to illiteracy.
(ix) Seasonal demand – Due to dependency on agricultural income, harvest season might see an increase in disposable incomes in the rural areas and vice-versa.
(x) Dispersed markets – Rural population is highly dispersed and requires a lot of marketing efforts in terms of distribution and communication.
Rural markets are offering large scope of business in terms of sales and profits to marketers because of the following reasons:
(i) Large population – Rural areas continue to be the living place for majority of Indians in spite of huge migration.
(ii) Rising rural prosperity – Due to rising income levels, income from other sources, land acquisition etc., the rural consuming class is growing day by day.
(iii) Life style changes – Rural customers are also looking for comfort and luxury.
(iv) Market growth rates are high in rural areas especially in FMCG sector where the market is at growth stage in rural areas and vice-versa at maturity stage in urban areas.
(v) Rural market is not expensive in terms of marketing and advertising since the cost of advertisement is very low.
(vi) Remoteness is no longer a problem as the marketers focus a on their distribution through Haats and Melas.
Strategies to be adopted by the Indian marketers for tapping rural India are:
(i) Proper communication in local language for promotion of product.
(ii) Exploitation of social and cultural bonding and values to promote the brands.
(iii) The rural customer wants the basic product at best price thus there is no need for companies to add frills to the products and increase cost.
(iv) Marketer should associate themselves with India celebrating Independence and Republic day, for example, Nokia has launched 5110 model with tricolor and ringtone “sarey jahan se acha” which was a big hit in the rural India.
(v) Effective media communication is the need of the hour. Mediums like puppet shows, magic shows, theatre etc. are used by companies to attract people.
(vi) Adopting localized way of distribution like local paanwala, local baniya etc.
(vii) Association with celebrities, with public figures, big actors like Amitabh Bachchan.
(viii) Capture Melas and Haats for increasing customer base since people save money for these Melas.
(ix) Packaging of product should be small with small unit price so that it would be affordable.
(x) Introduce refill packs so as to increase usability.
(xi) Emphasise on opinion leaders – Identify people like Sarpanch, youngsters who are educated or are working in companies, for the reason that if they start using the product they can convince others also to do the same.
The Indian rural market, with its vast size and demand base, offers great opportunities to marketers. About 75% of the country’s consumers live in rural areas and 50% of the national income is generated there. It is only natural that the rural market forms an important part of the total market of India.
While the rural market of India certainly offers a big attraction to marketers, it would be totally naive to think that any firm can easily enter the market and walk away with a sizeable share of it.
A firm seeking a share of this market has to work for it as the market bristles with a variety of programmes. The enterprise has to grapple with these problems and find innovative solutions to them.
In fact, only because a few pioneering firms correctly understood these problems and came up with innovative solutions to them, and the result is wonderful growth in rural markets.
Main problem areas in rural marketing are:
(i) Physical distribution;
(ii) Channel management;
(iii) Sales force management; and
(iv) Promotion and marketing communication.
The firms have to squarely encounter these problems and put in a great deal of effort to get a sizeable share of the market. They must recognise that rural marketing is an out-and-out developmental marketing.
Rural Marketing in India – How to Improve Rural Marketing?
1. Rural rich are hell lot “poorer” in comparison to the urban rich. They are akin to the lower middle classes of the urban areas. The strategies about product, pricing, distribution and promotion should be devised keeping in mind the skewed distribution of purchasing power in rural areas.
The villagers prefer low-priced goods or atleast in such small packages that do not require a lot of spending at one time.
2. Big companies have to take greater action against the imitators but should earn fewer profit margins from rural market. Let their total profits be due to “output effect” rather than from the high profit-margin effect.
3. There should be no problem if the small companies come with their own products with their own brand names and logos. They should be encouraged and one measure of forcing them should be heavy fines for counterfeit goods. In future fake drug producers will face death penalty (2003 Law).
4. Goods should conform to the rural ethos. Complicated pushing of buttons to make things operational (as say in VCR-TV combination) becomes too complicated for the villagers to handle.
5. The companies should ensure quality control acting in tandem with the government agencies. Instead of corrupting the administrative system, they should act as watchdogs.
6. The service market in rural areas has got to be efficient and cheap. If it is not cheap, people will prefer to avail services in the urban area. Combination of both is necessary.
7. Big producers in rural market should organise public meetings with some ‘freebies” to educate villagers about the imitation products.
8. Mobile delivery vans for selling those goods which are imitated will oust the imitators, though initially the cost of such marketing may be high. The action can be taken after weighing the pros and cons—in terms of the costs.
9. All non-consumer durables should be backed with good after- sales service. That will instill confidence about the consumer products also.
10. Rural people should be helped and serve rather than exploited. The big producers should have a little less insouciant attitude about these aspects.