“Rural Marketing: the future

Battlegrounds”
--Strategies adopted for the launch of
products in the rural markets of India.

By: Saswat Kumar Sahu

Indian Institute of Foreign Trade

Email Id: Saswat_kd09@iift.ac.in

 Concept:

In recent years, rural markets of India have acquired significance, as the overall growth of the Indian economy
has resulted into substantial increase in the purchasing power of the rural communities. On account of green
revolution, the rural areas are consuming a large quantity of industrial and urban manufactured products. In this
context, a special marketing strategy, namely, rural marketing has emerged. But often, rural marketing is
confused with agricultural marketing - the latter denotes marketing of produce of the rural areas to the urban
consumers or industrial consumers, whereas rural marketing involves delivering manufactured or processed inputs
or services to rural producers or consumers. To launch a product especially in the FMCG sector a thorough market
analysis has to be done as psyche of rural consumers is totally different from the urban consumers in the Indian
subcontinent.

What makes Rural Markets of India Attractive?

It is an upcoming market and the following facts substantiate this.
 800 million people
 Estimated annual size of the rural market
• FMCG Rs 65,000 Crore
• Durables Rs 5,000 Crore
• Agri-inputs (incl. tractors) Rs 45,000 Crore
• 2 / 4 wheeler vehicles Rs 8,000 Crore
 In 2001-02, LIC sold 55 % of its policies in rural India.
 Of two million BSNL mobile connections, 50% are in small towns/villages.
 Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT)
 41 million Kisan Credit Cards issued (against 22 million credit-plus-debit cards in urban) with
cumulative credit of Rs 977 billion resulting in tremendous liquidity.
 42 million rural households are availing banking services in comparison to 27 million urban
households.
 Investment in formal savings instruments: 6.6 million households in rural and 6.7 million in urban
India.
 Nano-Marketing or sachets worked well in rural India and there is ample scope for the products to
be accepted by consumers if the price is competitive. 
 The rural market is highly fragmented and the supply chain for the FMCG goods has to be strong.
4 P’s of Marketing:
FMCG and consumer durables companies have in the past tried tinkering with all the four 'P's -- product,
pricing, promotion and place-- of the marketing mix. The area where innovation has moved to center stage is
in the fourth P -- place (or distribution). Infrastructure has always been the bugbear of the Indian Marketer.
Distribution channels can make or break a company's rural marketing efforts. To sell in villages, products
must be priced low, profit margins must be kept to the minimum and the marketing message must be kept
simple. Rural marketing seems to essentially be a problem of price and place (distribution). And products
designed for the urban market seem to do decently in rural India as well. Perhaps the Urban rural divide is
not as large as most people believe it to be. The problem for most companies is that Product and Promotion is
strangely enough, the easiest to redo or remake. Cost competencies which affect Price, and Distribution and
supply chains, which make Place irrelevant are far more difficult to obtain. They take experience, and initial
investment.

Opportunities in Rural India:

 Infrastructure is improving rapidly.
• In 50 years only 40% villages connected by road, in next 10 years another 30%.

• More than 90 % villages are electrified

 Social Indicators have improved a lot between 1981 and 2007
• Number of “pucca” houses tripled from 22% to 59% and “kuccha ” houses halved (41%
to 23%)
• Percentage of BPL(below poverty line) families declined from 46% to 27% .
• Rural Literacy level improved from 36% to 59%.
 Low penetration rates in rural so there are many marketing opportunities.
FMCGs Urban Rural Total (% of rural HH in India)
Shampoo 66.3 35.2 44.2
Toothpaste 82.2 44.9 55.6
Soap 95.7 42.6 48.6
 Marketers can make effective use of the large available infrastructure (approximate terms)
of India:
• Post offices 28,000
• Haats (periodic markets) 12,000
 • Melas (exhibitions) 4500
• Mandis (agri markets) 2000
• Public distribution shops 80,000
• Bank branches 8,000

Rural Consumer Insights:

 Rural India buys.
• Products more often (mostly weekly).
• Buys small packs, low unit price more important than economy.
 In rural India, brands rarely fight with each other; they just have to be present at the right place.
 Many brands are building strong rural base without much advertising support.
• Chik shampoo, second largest shampoo brand of India
• Ghadi detergent, third largest detergent brand in India
 Fewer brand choices in rural: number of FMCG brand in rural is half that of urban.
 Buy value for money, not cheap products

Discovery after market research:

1. Myth-1: Indian Rural Market Is a Homogeneous Mass
Reality: It’s a heterogeneous population. Various tiers are present depending on the incomes like Big
Landlords; Traders, small farmers; Marginal farmers: Labors, artisans. People belonging to different social
classes stay in a concentric area, so the available FMCG products should suffice the consumption for
everyone.
2. Myth-2: Disposable Income Is Low
Reality: Number of middle class HHs (annual income Rs 45,000- 2, 15,000) for rural sector is 27.4 million
as compared to the figure of 29.5 million for urban sector. Rural incomes CAGR was 10.95% compared to
10.74% in urban between 1970-71 and 1993-94. The disposable income is still higher in the rural market.
3. Myth-3: Individuals Decide About Purchases
Reality: Decision making process is collective. Purchase process- influencer, decider, and buyer, one who
pays can all be different. So marketers must address brand message at several levels. Rural youth brings
brand knowledge to Households (HH). Basic awareness of the product brand has to be there in the market.
This can be done by putting up small advertising sheets at the mandis and places where the rural masses
meet regularly.

Why Different Strategies?

These markets, as part of any economy, have untapped potential. There are several difficulties confronting the
 effort to fully explore rural markets. The concept of rural markets in India is still in evolving shape, and the sector
poses a variety of challenges. Distribution costs and non availability of retail outlets are major problems faced by
the marketers. The success of a brand in the rural market is as unpredictable as rain. Many brands, which should
have been successful, have failed miserably. This is because, most firms try to extend marketing plans that they
use in urban areas to the rural markets. The unique consumption patterns, tastes, and needs of the rural
consumers should be analyzed at the product planning stage so that they match the needs of the rural people.
MARKET ANALYSIS:
The process is comprised of analyzing the existing or potential market of FMCG for the launch of the product’s
output and then developing a marketing strategy and a marketing program.
 Defining objectives and scope of the market analysis: The primary objective is to launch
products in the rural market and flood it in the kirana (mom & pop stores) shops, so that
people also get into the habit of buying these products .
 Defining data requirements: The sample of people was carefully chosen so that the
analysis helps us to generalize it and extend it to the whole of the rural market in India. The
local taxi-drivers and shopkeepers are of great help as they provide an insight onto the
buying and bargaining habits of rural people.
 Collecting data: Once the data requirements were clear, collecting and jotting down the
necessary information i.e what kind of products generally people prefer, the reason why
they buy those FMCGs, whether they are delighted for the launch of new products, what do
they think about these promotions, their inhibitions and their likings & tastes?. Primary
data is first hand information gathered directly from prospective/existing customers,
competitors and trade channels in the form of surveys, test marketing (for new or
innovative products) and experimentation.
 Processing and analyzing data: Collating the data with statistical help to know what
percentage of people are ready to accept the new products if these products are suddenly
launched in the market and flooded everywhere. It gives a rough estimate of the
willingness of people to buy such a product. Spurious data is expurgated, but not discarded
in the event that further analysis reveals its relevance.
 Development/selection of forecasting model: Through either quantitative or qualitative
methods a forecast of demand is required. Judgmental methods employ the knowledge
and assessments of experts. Quantitative methods are based primarily on statistical
 tools. Complimentary models quantify links between the proposed and related activities
(e.g. end use or consumption coefficients). A forecasting model is prepared for the sales of
these new-entrant products and its profit.
 Forecast Demand: Once the need is taken care of by the marketers, obviously the demand
for the new-products will rise and will be adequately handled by the suppliers then. This
is just a forecast demand on the basis of which marketers sell their products in the rural
market of India.
 Development of marketing strategy: Analysis of information pertaining to customer
needs, competitors and the market environment leads to a set of market related
decisions covering the product features, packaging, branding, product mix, pricing
policies, distribution channels and the like - the marketing strategy to be employed in
securing customers and delivering the product. Mass marketing for the entrant-products
is profitable because it caters to people at the bottom of pyramid with lesser buying power.
 Determine Market Share: Market share is estimated on the basis of the demand
forecast and marketing strategy adopted. For new-products, the rate at which market
share can be realized will depend upon the strength and astuteness of competitors. It is
generally prudent to assume a gradual build-up of market share.
 Design marketing program: The marketing organization is designed to execute the
marketing strategy. The means of establishing the selected channels of distribution and
access to promotional media are defined. Marketing costs are then determined.
 Developing sales program: The sales forecast derives from the demand forecast and
analysis of market share. The sales program is linked to decisions on inventory policy and
plant capacity. The quantity and timing of market penetration will be a function of
marketing strategy in the face of competitive countermeasures for existing FMCG in the
market. Based on the sales program, revenues and marketing and distribution costs are
estimated.
 Production program: Product mix, schedule and volume of production of
FMCGs in rural India are predicated on the sales program.
The main problems in rural marketing in India are:

•Understanding the rural consumer

•Poor infrastructure
 • Physical Distribution
• Channel Management
• Promotion and Marketing Communication

Dynamics of rural markets differ from other market types, and similarly rural marketing strategies are also
significantly different from the marketing strategies aimed at an urban or industrial consumer.

Strategies to be followed:
 Marketing Strategy:
Marketers need to understand the psyche of the rural consumers and then act accordingly. Rural
marketing involves more intensive personal selling efforts compared to urban marketing. Firms
should refrain from designing goods for the urban markets and subsequently pushing them in the rural
areas. To effectively tap the rural market a brand must associate it with the same things the rural folks
do. This can be done by utilizing the various rural folk media to reach them in their own language and
in large numbers so that the brand can be associated with the myriad rituals, celebrations, festivals,
“melas” and other activities where they assemble.
 Distribution Strategy:
One of the ways could be using company delivery vans which can serve two purposes- it can take the
products to the customers in every nook and corner of the market and it also enables the firm to
establish direct contact with them and thereby facilitate sales promotion. However, only the bigwigs
can adopt this channel. The companies with relatively fewer resources can go in for
syndicated distribution where a tie -up between non-competitive marketers can be established
to facilitate distribution. Annual “melas” organized are quite popular and provide a very good
platform for distribution because people visit them to make several purchases. According to the
Indian Market Research Bureau, around 8000 such melas are held in rural India every year. Also,
every region consisting of several villages is generally served by one satellite town (termed as
“Mandis” or Agri-markets) where people prefer to go to buy their durable commodities. If
marketing managers use these feeder towns they will easily be able to cover a large section of the rural
population.
 Promotional Strategy:
Firms must be very careful in choosing the vehicle to be used for communication. Only 16% of the
rural population in India has access to a vernacular newspaper. So, the audio visuals must be
planned to convey a right message to the rural folk. The rich, traditional media forms like folk
dances, puppet shows, etc with which the rural consumers are familiar and comfortable, can be used
 for high impact product campaigns. The advertisement has to be done in the local languages. This
gives a powerful impact on the minds of rural people. We need to first grab their heart share by
inducing local elements and flavors to the product so that they have some emotional attachment to it,
then their mind share by advertising in the local medium that is easily accessible, and ultimately the
market share by being available abundantly in the rural market so that a competitor finds it difficult to
penetrate.

Sales strategy: Rural sales strategy will include hiring employees who genuinely like spending
time in the rural areas and who are comfortable with the local language. Marketers can continuously
assess all aspects of the business by interacting with people and their family members personally,
evaluating product choices for popularity and keeping favorites on the list so that we rotate the pumping
of products weekly and seasonally.

Looking at the challenges and the opportunities which these Indian rural markets offer to the marketers it can be
said that the future is very promising for those who understand the dynamics of rural markets and exploit them to
their best advantage. A radical change in attitudes of the consumers is expected in a short period of time and the
marketers should be ready to quench the needs of the rural customers. If the products are cost effective with a
marginal profit going to the manufacturer, then it will be a Win-Win situation for both the consumers and
producers. FMCG companies focus on urban markets for value and rural markets for volume. As rural markets
are extremely price-sensitive and vital for survival since the urban markets are getting saturated in India
continent, products have a distinct future in the hinterland as CK Prahalad had rightly said “The future lies with
those companies who see the poor as their customers.”