Lecture notes on Rural Marketing

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Subject: RURAL & AGRICULTURAL MARKETING Course Code: MM-310 Author: Dr. V.K. Bishnoi Lesson: 1 Vetter: Dr. Atul Dhingra RURAL MARKETING: AN INTRODUCTION STRUCTURE 1.0 Objective 1.1 Introduction 1.2 Meaning and definition of rural marketing 1.3 Nature and characteristics of rural market 1.4 Significance of the rural markets 1.5 Factors contributing to the change in the rural market 1.5.1 Green revolution 1.5.2 Emerging Role of Bio-Tech. in Indian Agriculture Sector 1.5.3 Rural communication 1.5.4 Development programmes 1.6 Problems in rural marketing 1.7 Summary 1.8 Keywords 1.9 Self assessment Questions 1.10 References/suggested readings 1.0 OBJECTIVE After reading this lesson, you will be able- • To develop an insight into rural marketing regarding different concepts and basic practices in this area. 2 • To discuss the challenges and opportunities in the field of rural marketing. 1.1 INTRODUCTION Marketing may aptly be described as the process of defining, anticipating and knowing customer needs, and organizing all the resources of the company to satisfy them. In fact, satisfaction of customer’s needs and wants provides the rationale for the firm’s existence. Knowledge of consumer behaviour, therefore, is vital for a firm to achieve its marketing goals. The consumer’s behaviour comprises the acts, processes and social relationships exhibited by individuals, groups and organizations in searching, obtainment, use of, and consequent experience with products and services. An understanding and knowledge of the motives underlying consumer behaviour helps a firm in seeking better and more effective ways to satisfy its customers. It helps to select appropriate sales and advertising strategies, and to plan marketing programme in a more efficient manner. The rural market of India started showing its potential in the 1960s. The 70s and 80s witnessed its steady development. And, there are st clear indications that the 21 century is going to see its full blossoming. In our country, where research on consumer behaviour has been nominal, not much systematized information is available about the rural consumers. Only a few enlightened companies, known for their marketing orientation, viz., Hindustan Lever, Philips India, Asian Paints, Singer and Larsen and Toubro have made concrete efforts in this direction. But, by and large, we have still to understand the rural buyer, 3 his habits, attitudes and behaviour, particularly from the marketing point of view. Many assumptions prevail about rural marketing. For instance, one assumption is that the rural buyer is not very discriminating. Once he is persuaded to buy a particular product, he develops a strong affinity for it, and if satisfied, becomes brand loyal. As a result, Indian manufacturers are generally known to prefer selling fewer items at higher prices than selling more items at lower prices. A contrary view is that the rural buyer, being suspicious of the marketer’s hardsell techniques, is quite discriminating, and is not easily persuaded. Yet another assumption is that the rural buyer is not particularly keen about quality and packaging. Some other assumptions can be quoted. But, all these need deep probing for arriving at valid and reliable conclusions. Consumer research, thus, is indispensable for entering the rural segment of the market. 1.2 MEANING AND DEFINITION OF RURAL MARKETING The term ‘rural marketing’ used to be an umbrella term for the people who dealt with rural people in one way or other. This term got a separate meaning and importance after the economic revaluation in Indian after 1990. So, before venturing into the other aspects of rural marketing let us discuss the development of this area in different parts which is briefly explained here. Part I (Before 1960): Rural marketing referred to selling of rural products in rural and urban areas and agricultural inputs in rural markets. It was treated as synonymous to ‘agricultural marketing’. 4 Agricultural produces like food grains and industrial inputs like cotton, oil seeds, sugarcane etc. occupied the central place of discussion during this period. The supply-chain activities of firms supplying agricultural inputs and of artisans in rural areas received secondary attention. The local marketing of products like bamboo baskets, ropes, window and door frames, small agricultural tools like ploughs by sellers like black smiths, carpenters, cobblers, and pot makers were emphasised in general. This was totally an unorganized market where all banias and mahajans (local business people) dominated this market. Part II (1960 to 1990): In this era, green revolution resulted from scientific farming and transferred many of the poor villages into prosperous business centers. As a result, the demand for agricultural inputs went up especially in terms of wheats and paddies. Better irrigation facilities, soil testing, use of high yield variety seeds, fertilizers, pesticides and deployment of machinery like powder tillers, harvesters, threshers etc. changed the rural scenario. In this context, marketing of agricultural inputs took the importance. Two separate areas of activities had emerged- during this period ‘marketing of agricultural inputs’ and the conventional “Agricultural Marketing”. During this period, the marketing of rural products received considerable attention in the general marketing frame work. The formation of agencies like Khadi and Village Industries Commission, Girijan Cooperative Societies APCO Fabrics, IFFCO, KRIBHCO, etc., and also the special attention government had paid to promote these products were responsible for this upsurge. Village industries flourished and products like handicrafts, handloom textiles, soaps, safety matches, crackers etc. hit the urban market on a large scale from rural areas. 5 Part III (After Mid 1990s): The products which were not given attention so far during the two earlier phases were that of marketing of household consumables and durables to the rural markets due to obvious reasons. The economic conditions of the country were as such that the rural people were not in a position to buy these kinds of products. Secondly, our market was in a close shape and we newer allowed companies (foreign) to operate in Indian market. But we lifted the … and opened up economy, consequently companies started flourishing in India. The small villages/hamlets were widely scattered making reach difficult and expensive consequently. Rural markets were seen an adjunct to urban market and conveniently ignored. However, since 1990s, India’s industrial sector had gained in strength and maturity. Its contribution to GNP increased substantially. A new service sector had emerged signifying the metamorphosis of agricultural society into industrial society. Meanwhile, due to the development programmes of the central and state governments, service organizations and socially responsible business groups like Mafatlal, Tatas, Birlas, Goenkas and others, the rural area witnessed an all round socio-economic progress. The economic reforms further accelerated the process by introducing competition in the markets. Steadily, the rural market has grown for household consumables and durables. Rural marketing represented the emergent distinct activity of attracting and serving rural markets to fulfil the needs and wants of persons, households and occupations of rural people. As a result of the above analysis, we are in a position to define rural marketing “Rural marketing can be seen as a function which manages all those activities involved in assessing, stimulating and converting the purchasing power 6 into an effective demand for specific products and services, and moving them to the people in rural area to create satisfaction and a standard of living for them and thereby achieves the goals of the organization”. 1.3 NATURE AND CHARACTERISTICS OF RURAL MARKET There goes a saying that the proof of the pudding lies in the eating. So also the proof of all production lies in consumption/marketing. With the rapid pace of technological improvement and increase in peoples buying capacity, more and better goods and services now are in continuous demand. The liberalization and globalization of the Indian economy have given an added advantage to sophisticated production, proliferation and mass distribution of goods and services. Taking these into consideration, the question may arise whether marketers should concentrate their activities in urban India consisting of metros, district headquarters and large industrial townships only, or extend their activities to rural India. Rural India is the real India. The bulk of India’s population lives in villages. In terms of the number of people, the Indian rural market is almost twice as large as the entire market of the USA or that of the USSR. • Agriculture is main source of income. • The income is seasonal in nature. It is fluctuating also as it depends on crop production. • Though large, the rural market is geographically scattered. • It shows linguistic, religious and cultural diversities and economic disparities. 7 • The market is undeveloped, as the people who constitute it still lack adequate purchasing power. • It is largely agricultural oriented, with poor standard of living, low-per capital income, and socio-cultural backwardness. • It exhibits sharper and varied regional preferences with distinct predilections, habit patterns and behaviorual characteristics. • Rural marketing process is both a catalyst as well as an outcome of the general rural development process. Initiation and management of social and economic change in the rural sector is the core of the rural marketing process. It becomes in this process both benefactor and beneficiary. 1.4 SIGNIFICANCE OF THE RURAL MARKETS If you meet a sales executive today and ask which market he would prefer to serve, the immediate answer would be, “Rural Markets” as they are still unexploited. A number of factors have been recognized as responsible for the rural market boom. Some of them are: 1. Increase in population, and hence increase in demand. The rural population in 1971 was 43.80 crores, which increased to 50.20 crores in 1981, 60.21 crores in 1991 and 66.0 crores in 2001. 2. A marked increase in the rural income due to agrarian prosperity. 3. Large inflow of investment for rural development programmes from government and other sources. 8 4. Increased contact of rural people with their urban counterparts due to development of transport and a wide communication network. 5. Increase in literacy and educational level among rural folks, and the resultant inclination to lead sophisticated lives. 6. Inflow of foreign remittances and foreign made goods in rural areas. 7. Changes in the land tenure system causing a structural change in the ownership pattern and consequent changes in the buying behaviour. The general rise in the level of prosperity appears to have resulted in two dominant shifts in the rural consuming system. One is conspicuous consumption of consumer durables by almost all segments of rural consumers, and the obvious preference for branded goods as compared to non-branded goods of rural. 1.5 FACTORS CONTRIBUTING TO THE CHANGE IN THE RURAL MARKET 1.5.1 Green revolution The substantial attention accorded to agriculture during the successive five-year plans has helped in improving agricultural productivity. Adoption of new agronomic practices, selective mechanisation, multiple cropping, inclusion of cash crops and development of allied activities like dairy, fisheries and other commercial activities have helped in increasing disposable income of rural consumers. Over 75 percent villages in India have been electrified. There is also a shift from rain dependence to irrigation. Farmers are getting 9 high return for their cash and food crops. In the whole process, the dependence on seasonality has reduced, and in return there has been increasing disposable income. By observing this scenario, India’s one of the biggest giant Hindustan Lever Ltd. has entered into rural market for more penetration through the operation ‘Bharat’. Since December 1999, HLL has reached out to 35,000 villages, 22 million households and spent Rs. 20 crore. This has been one of the largest sampling exercises in recent times conducted by a big business house. 1.5.2 Emerging Role of Bio-Tech. in Indian Agriculture Sector It is evident from the facts that Indian agriculture is trailing in terms of yield when compared with leading countries of the world. Countries like USA, Canada, Israel and Germany have achieved high yield in agriculture production but countries like India, Brazil and Nigeria are having agriculture yield much lower than international average. The major difference created in this respect is the use of the applications of bio-technology. Bio-technology has vital role to play in so far as enhancement of agriculture yield is concerned. For instance the yield of wheat in USA per hectare is almost three times more than that of India and the yield of sugar cane is two and half times more if compared with the Indian yield of sugar cane per hectare. These advance countries have been making an extensive use of bio-technology whereas in developing countries the concept is not yet very popular. When we are living in the era of globalisation everything is becoming globally competitive and therefore, we cannot live in isolation in terms of agriculture yield also. We have to make use of the applications of the bio-technology in an 10 agriculture sector both in terms of generating quality seeds and cropping the same in compliance with the theories of biotechnology. Our farmers, who are normally not aware of this fact have to be educated and the responsibility lies on the shoulders of researchers, scientists, administrators and the policy makers of the country. It will provide more discretionary income in the hands of the rural farmers. 1.5.3 Rural communication Around 50 percent of the villages are today connected by all weather roads and can be accessed throughout the year. But there are states, which are almost 100 percent connected with the metal roads. Road networking besides enhancing the mobility of rural consumers has increased their exposure to products and services. By watching such a scenario in these areas Korean consumer durable companies have decided to look beyond their noses. They are now placing their bets on rural markets. Two giants namely LG and Samsung have already made their strategies for entering into rural India. As per survey conducted by Indian Market Research Bureau (IMRB) 77 percent of the villages are covered by TV network. Now even villages are going for dish antennas and they have already been enjoying exposure to various products through advertisements. All the villages are about to be connected with telephone facilities in the near future and already there are some villages, which are connected with this facility. Apart from this, internet is not a distant reality. Recently Mr. Ram Vilas Paswan, the minister for communication has announced that in the coming days there would be 100 percent connectivity through telephones in the rural areas. Seeing these types of opportunities and interests of the ruralites, Tata cellular 11 has already entered into rural India by making its first entry into Andhra Pradesh. Tata cellular has created India’s largest cellular ‘corridor’ to provide connectivity to non-metro and rural centres. 1.5.4 Development programmes The five-year plans have witnessed massive investments in rural areas in terms of number of development programmes implemented by the central and state Government. These programmes have generated incomes to ruralites and helped them to change their life-styles. Some of these programmes are: • Intensive Agricultural District Programme (IADP- Package Programme) • Intensive Agricultural Area Programme (IAAP) • High Yielding Varieties Programme (HYVP- Green Revolution) • Drought Prone Areas Programme (DPAP) • Small Farmers Development Agency (SFDA) • Hill Area Development Programme • Operation Flood I, II and III (White Revolution) • Fisheries Development (Blue Revolution) • Integrated Rural Development Programme (IRDP) • Jawahar Rojgar Yojna (JRY). These programmes are related with agriculture and allied activities but there are certain other policies which are specifically meant to raise the standard of the rural people in the field of health, education, sanitation etc. After the beginning of economic reforms in 1991, the Government has been giving special attention to the rural India by providing certain developmental schemes for these areas. Some 12 announcements were made by the finance minister in the Union Budget 2000 to enrich the existing programmes and to initiate some new schemes for the rural areas like Kisan Credit Cards, Micro Finance and Pardhan Mantri Gramodyog Yojna etc. In the latest budget (2004) focus has been on agriculture and rural development. Since special attention is being given in the union budget through some schemes, and due to progress of economic reforms, poverty is declining at a faster pace and there is a substantial increase in the per capita income of the people especially in case of majority of the states of Indian union. For example per capita income of the Punjab is Rs. 20,606 followed by Maharashtra Rs. 19,207, Haryana Rs. 18,171, Gujrat Rs. 15,723, Tamilnadu Rs. 13,248 and Karnatka Rs. 11,578 and if we see the average of 14 states it is Rs. 10,886 at a growth rate of 4.4 per cent. Hence, we can see that today changes are taking place rapidly in all walks of life and rural areas are no exception to this. Improved infrastructure facilities, economic liberalisation, renewed emphasis on agribusiness and small industries, fast changing agricultural technology, scope for commercialisation of agriculture, greater budgetary provision for rural people are few reasons to mention. Moreover, various socio- cultural, psychological and political aspects of rural life are also changing. Rural people today are less fatalistic, less attached to religious beliefs, getting more individualistic, achievement-oriented and aspiring than before. All this has opened up new vistas for the marketers of millennium at least in the states, which are leading in per capita income with a sustained growth, like Punjab, Haryana, Maharashtra, Tamilnadu, Karnatka, Gujrat, Delhi and Western UP etc. 13 1.6 PROBLEMS IN RURAL MARKETING There are many problems to be tackled in rural marketing, despite rapid strides in the development of the rural sector. Some of the common problems are discussed below: Transportation: Transportation is an important aspect in the process of movement of products from urban production centers to remote villages. The transportation infrastructure is extremely poor in rural India. Due to this reason, most of the villages are not accessible to the marketing man. In our country, there are six lakhs villages. Nearly 50 per cent of them are not connected by road at all. Many parts in rural India have only kachcha roads. During the monsoons, even these roads become unserviceable. Regarding rail transport, though India has the second largest railway system in the world, many parts of rural India however, remain outside the rail network. Communication: Marketing communication in rural markets suffers from a variety of constraints. The literacy rate among the rural consumers is very low. Print media, therefore, have limited scope in the rural context. Apart from low levels of literacy, the tradition-bound nature of rural people, their cultural barriers and their overall economic backwardness add to the difficulties of the communication task. Post, telegraph, and telephones are the main components of the communication infrastructure. These facilities are extremely inadequate in the rural parts of our country. In rural areas, the literacy percentage is still low, compared to urban areas. In India, there are 18 recognized languages. All these languages and many dialects are spoken in rural areas. English and Hindi are not understood by many people. Due to 14 these problems, rural consumers, unlike urban consumers do not have exposure to new products. Availability of appropriate media: It has been estimated that all organized media in the country put together can reach only 30 per cent of the rural population of India. The print media covers only 18 per cent of the rural population. The radio network, in theory, covers 90 per cent. But, actual listenership is much less. TV is popular, and is an ideal medium for communicating with the rural masses. But, it is not available in all interior parts of the country. It is estimated that TV covers 20 per cent of the rural population. But, the actual viewership is meager. The cinema, however, is a good medium for rural communication. But, these opportunities are very low in rural areas. Warehousing: A storage function is necessary because production and consumption cycles rarely match. Many agricultural commodities are produced seasonally, whereas demand for them is continuous. The storage function overcomes discrepancies in desired quantities and timing. In warehousing too, there are special problems in the rural context. The central warehousing corporation and state warehousing, which constitute the top tier in public warehousing in our country, have not extended their network of warehouses to the rural parts. It is almost impossible to distribute effectively in the interior outlets in the absence of adequate storage facilities. Due to lack of adequate and scientific storage facilities in rural areas, stocks are being maintained in towns only. Village structure in India: In our country, the village structure itself causes many problems. Most of the villages are small and scattered. It is estimated that 60 per cent of the villages are in the population group 15 of below 1,000. The scattered nature of the villages increases distribution costs, and their small size affects economic viability of establishing distribution points. Rural markets and sales management: Rural marketing involves a greater amount of personal selling effort compared to urban marketing. The rural salesman must also be able to guide the rural customers in the choice of the products. It has been observed that rural salesmen do not properly motivate rural consumers. The rural salesman has to be a patient listener as his customers are extremely traditional. He may have to spend a lot of time on consumer visits to gain a favourable response from him. Channel management is also a difficult task in rural marketing. The distribution channels in villages are lengthy involving more intermediaries and consequently higher consumer prices. In many cases, dealers with required qualities are not available. Inadequate banking and credit facilities: In rural markets, distribution is also handicapped due to lack of adequate banking and credit facilities. The rural outlets require banking support to enable remittances, to get replenishment of stocks, to facilitate credit transactions in general, and to obtain credit support from the bank. Retailers are unable to carry optimum stocks in the absence of adequate credit facilities. Because of this problem, they are not able to offer credit to the consumers. All these problems lead to low marketing activities in rural areas. It is estimated that there is one bank for every 50 villages, showing the poor banking facilities in rural areas. Market segmentation in rural markets: Market segmentation is the process of dividing the total market into a number of sub-markets. 16 The heterogeneous market is broken up into a number of relatively homogeneous units. Market segmentation is as important in rural marketing as it is in urban marketing. Most firms assume that rural markets are homogeneous. It is unwise on the part of these firms to assume that the rural market can be served with the same product, price and promotion combination. Branding: The brand is the surest means of conveying quality to rural consumers. Day by day, though national brands are getting popular, local brands are also playing a significant role in rural areas. This may be due to illiteracy, ignorance and low purchasing power of rural consumers. It has been observed that there is greater dissatisfaction among the rural consumers with regard to selling of low quality duplicate brands, particularly soaps, creams, clothes, etc. whose prices are often half of those of national brands, but sold at prices on par or slightly les than the prices of national brands. Local brands are becoming popular in rural markets in spite of their lower quality. Packaging: As far as packaging is concerned, as a general rule, smaller packages are more popular in the rural areas. At present, all essential products are not available in villages in smaller packaging. The lower income group consumers are not able to purchase large and medium size packaged goods. It is also found that the labeling on the package is not in the local language. This is a major constraint to rural consumers understanding the product characteristics. 17 1.7 SUMMARY The rural market of India is fascinating and challenging at the same time. It offers large scope on account of its sheer size and it is growing steadily. Even a small growth can push up the sales of a product substantially, in view of the huge base despite the fact that there are enormous amount of problems. It is an attractive market from this angle also that the urban market is highly competitive, the rural market is relatively quiet. In fact, for certain products, it is a totally virgin market. Economic reforms in India have brought about major changes in the whole market environment. With these changes, rural marketing will become an important playground for our marketers. Successful rural marketing calls for a review of the rural marketing environment, developing proper understanding of the nature and profile of rural consumers, designing the right products to appeal to them, and adopting suitable media as well as appropriate strategies for communication and distribution. It is generally believed that markets are created, not found. This is especially true in case of the rural market of India. It is a market for the truly creative marketer. 1.8 KEYWORDS Agricultural inputs: All the products which are used in agriculture sector and are responsible for better productivity in farming such as chemical fertilizers, quality seeds, tractors, engines, and other irrigational equipments etc. 18 Green revolution: The revolution in the field of agriculture where productivity in this sector increased by leaps and bounds. Adoption of new technology, multiple cropping, and other commercial activities have helped in increasing disposable income of normal consumers. Warehousing: A storage function which is necessary for consumption cycles for agricultural commodities which are used seasonally. Branding: Any name, term, symbol, design or combination of these which differentiate the product of one producer from the competitors. Mahajans: The business people who deal with the villagers at local level. These people lend the money and other facilities to the villagers. 1.9 SELF ASSESSMENT QUESTIONS 1. Define rural marketing. How will you add value to rural marketing? 2. Explain the factors, which have made rural markets attractive. 3. How does rural marketing differ from urban marketing? 4. What qualities should a rural marketer possess? 5. Provide suitable guidelines to companies planning to go rural. 19 1.10 REFERENCES 1. Kotler, Philip, “Marketing Management-Analysis, planning, th implementation and control”, Prentice Hall of India, 9 edition, 1997. 2. Bijoor, Harish, “Go Rural”, Economic Times, June 14, 1999. 3. Shukla, R.K., “New Perspective in Marketing”, Rural Marketing: Thrust and Challenges, National Publishing House, New Delhi, 1997. 4. Gopalaswamy, T.P., “Environment, Problems, and Strategies”, Wheeler Publishing, New Delhi, 1997. 5. Business India, Feb. 23-March 8, 1998. 6. Census of India, 1991 and 2001. 7. Budget 2000, Kurukshetra, April, 2000. 8. Tyagi, Kumar, Lalit, “Rural Communication”, Kurukshetra, May, 2000. 9. Statistical abstract of India, 1999-2000. 20 Subject: RURAL & AGRICULTURAL MARKETING Course Code: MM-310 Author: Dr. V.K. Bishnoi Lesson: 2 Vetter: Dr. Atul Dhingra RURAL MARKETING ENVIRONMENT STRUCTURE 2.0 Objective 2.1 Introduction 2.2 Size of the population 2.3 Scenario of Literacy in Rural Areas 2.4 Income generation in rural areas 2.5 Occupation Pattern 2.6 Infrastructure facilities 2.7 Rural communication 2.8 Summary 2.9 Keywords 2.10 Self assessment Questions 2.11 References/suggested readings 2.0 OBJECTIVE The objectives of this lesson are • To acquaint the students regarding rural marketing environment. • To explore the opportunities for the marketers who are eyeing this market.

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