Lecture notes on Rural Marketing

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A Course Material on BA 7016- RURAL MARKETING By Mr.P.TAMILSELVAN ASSISTANT PROFESSOR DEPARTMENT OF MANAGEMENT SCIENCE SASURIE COLLEGE OF ENGINEERING VIJAYAMANGALAM – 638 056 1 SCE DEPARTMENT OF MANAGEMENT STUDIES CHAPTER-I AN OVERVIEW OF RURAL MARKETING 1.1 Definition Rural: Places far away from the town or city Rural Marketing According to National Commission on Agriculture ―Rural marketing is a process which starts with a decision to produce a saleable farm commodity and it involves all the aspects of market structure or system, both functional and institutional, based on technical and economic considerations and includes pre and post harvest operations, assembling, grading, storage, transportation, and distribution‖. 1.2 Scope of rural marketing 1. Large Population: According to 2001 census rural population is 72% of total population and it is scattered over a wide range of geographical area 2. Rising Rural Prosperity: Average income level has improved due to modern farming practices, contract farming, industrialization, migration to urban areas and remittance of money by family members settled abroad. 3. Growth in Consumption: There is a growth in purchasing power of rural consumers. The average per capita household expenditure is Rs. 382. 4. Changing Lifestyle: Lifestyle of rural consumer changed considerably. 5. Life Cycle Advantage: The products, which have attained the maturity stage in urban market, is still in growth stage in rural market. E.g. popular soaps, skin cream, talcum powder, etc. 6. Market Growth Rate Higher than Urban: As per the survey made by NCAER the growth rate of FMCG market and durables market is higher in rural areas. The rural market share is more than 50% for products like body talcum powder, toilet soaps cooking oil, hair oil etc. 7. Rural Marketing is not Expensive: To promote consumer durables inside a state costs Rs one crore while in urban areas it will costs in millions. 1.3 Concepts Rural Marketing is defined as any marketing activity in which the one dominant participant is from a rural area. This implies that rural marketing consists of marketing of inputs (products or 5 SCE DEPARTMENT OF MANAGEMENT STUDIES services) to the rural as well as marketing of outputs from the rural markets to other geographical areas. Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves. It is a function which manages all the activities involved in assessing, stimulating and converting the purchasing power to effective demand for a specific product and service. This moves them to the rural areas to create satisfaction and uplift the standard of living. Rural areas of the country or countryside are areas that are not urbanized, though when large areas are described country towns and smaller cities will be included. They have a low population density, and typically much of the land is devoted to agriculture. Defra have a working definition, The Rural/Urban Definition, that was introduced in 2004 as a joint project between a number of Government Departments and was delivered by the Rural Evidence Research Centre at Birkbeck College (RERC). 1.4 Components of rural markets For the market to exist, certain conditions must be satisfied. These conditions should be both necessary and sufficient. They may also be termed as the components of a market. 1. Existence of a good commodity for transactions (physical existence is, however, not necessary) 2. Existence of buyers and sellers 3. Business relationship or intercourse between buyers and sellers; and 4. Demarcation of area such as place, region, country or the whole world. The existence of perfect completion or a uniform price is not necessary. 1.5 Classification of rural markets This can be classified as follows: a) CONSUMER MARKET: Constituents: Individuals and Households. 6 SCE DEPARTMENT OF MANAGEMENT STUDIES Products : Consumables, Food- Products, Toiletries, Cosmetics, Textiles and Garments, Footwear etc. Durables : Watches, Bicycles, Radio, T.V, Kitchen Appliances Furniture, Sewing Machines, Two Wheeler etc. b) INDUSTRIAL MARKET: Constituents : Agricultural and allied activities, poultry farming, fishing, Animalhusbandry, Cottage Industries, Health center, School, Co-operatives, Panchayat office etc. Products : Consumables, seeds, Fertilizers, Pesticides, Animal feed, Fishnets, VMedicines, Petroll diesel etc. Durables : Tillers, Tractors, Pump sets, Generators, Harvesters, Boat etc. c) SERVICES MARKET Constituents : Individuals, Households, offices and Production firms. Services : Repairs, Transport, Banking credit, Insurance, Healthcare, Education, communications, Power etc. Rural Vs urban markets It is important to understand why rural marketing is different from urban marketing. Due to significant differences in almost all the major marketing variables, it becomes very difficult to optimally tap the rural market potential with an urban mindset. In most cases, it requires a modified approach, philosophy and marketing mix. Therefore the domain of rural marketing is significantly different from the way marketing is planned and implemented in urban areas. The positive results achieved by HLL‘s Project Shakti, Colgate‘s Project Jagaruti, etc., because they had structured their rural marketing in terms of planning, effort, operations, distinctively from their urban marketing. This proves the justification for treating and approaching rural marketing distinctively from urban marketing. 1.6 Factors differentiating Rural marketing from Urban marketing 1. Infrastructure availability: electricity supply, availability of finance facility, education level, roads, connectivity, And presence of organized markets: In these infrastructural aspects, the rural market varies widely from the urban market. 2. Income Streams: The pattern of income generation in rural areas based on agriculture is seasonal and highly unreliable unlike the fixed monthly income in the urban areas. This 7 SCE DEPARTMENT OF MANAGEMENT STUDIES created a consumption pattern that is quite different from the urban one. 3. Lifestyle: The lifestyle and daily routine of consumers in two markets is markedly different. This creates significantly different profile of urban and rural consumers for the same product. 4. Context: because of variation in infrastructure, lifestyle and the income aspects, the context in which an individual exists in rural areas is very different from the one urban areas. This creates difference in nature and priorities of needs in two markets. 5. Socio-cultural background: Value system and thus perception towards goods/services and consumption in general is quite different in the two markets. 6. Accessibility: The cost and logistics of accessing consumers in a highly widespread and heterogeneous rural market are very different from those involved in reaching urban consumers concentrated in good number in a single location. It demands two distinct marketing approaches. 7. Media reach and habits: The reach of media vehicles and the media habits, varying widely in rural and urban markets, requires different type of promotional strategy in these two markets. 8. Nature of competition: the nature and intensity of competition amongst the brands is very different in the two markets. 9. Consumer behavior: The consumer‘s response to marketing stimuli differs widely in two markets. The rural consumer behavior is quite different from that of urban buyer‘s behavior. 1.8 RURAL MARKETING ENVIRONMENT It is ironic that the census of India defines ‗rural‘ in the context of all that is not urban considering that there were only villages before the development of cities and towns. Population There are currently more than 20,000 villages in the 5,000-10,000 population strata as per the Census of 2001, so any population cut-off criteria should definitely include these villages as rural areas. Occupation pattern o The occupational pattern of people in a segment naturally affects their buying behavior. o A daily wage earner has to account for variations in income, whereas a salary earner brings home an assured fixed amount and therefore can plan expenses in a better way. o Three-fourths of rural household heads are either cultivators or wage earners, whereas 8 SCE DEPARTMENT OF MANAGEMENT STUDIES three-fourths of urban household heads are salary earners, petty shopkeepers and wage earners. o The cultivator‘s disposable income is highly seasonal, with more disposable income o available immediately after the harvesting season. This is therefore the time when he is more inclined to make purchases, especially of durables and high-involvement products. Basic occupations that exist and help directly agro-related works are: o Farm Labourer – The farm labourer helps a village through his agricultural activity directly. The labourer works by tilling, weeding out, sowing, reaping, cleaning the o Produce, guarding the field at harvest time and many other odd jobs related to agriculture. o Priest – He reads horoscopes, arranges poojas, tells villagers regarding auspicious dates for marriages, house warming, sowing in addition to his duties in the temple. o Blacksmith – The agricultural implements are made and repaired by the village blacksmith. o Carpenter o Washerman o Barber o Shoe maker o Potter o Milk man Demographic profile of people in a segment naturally affect their buying behavior. The wage earner and salary earner cannot be expected to behave in the same way. A daily wage earner has to account for variations in income, whereas a salary earner brings home an assured fixed amount and therefore can plan expenses in a better way. Three-fourth of rural household heads for either cultivators or wage earners, whereas three- fourth of urban household heads are salary earners, petty shopkeepers and wage earners. The cultivator‘s disposable income is highly seasonal, with more disposable income available immediately after the harvesting season. This is therefore the time when he is more inclined to make purchases, especially of durables, and high-involvement products. The purchases at such times are quite significant, as 40% of the rural population, i.e. 50 million families, are farmers. Income generation The pattern of income generation in rural areas based on agriculture is seasonal and highly unreliable unlike the fixed monthly income in the urban areas. This created a consumption pattern that is quite different from the urban one.  By sale of agricultural produce  By sale of animal produce 9 SCE DEPARTMENT OF MANAGEMENT STUDIES  By service – Rendered by teacher, doctor or nurse.  By interest on investment  Government subsidies and grants  By mortgage of properties and gold  By charities and donations  By labour and wages – Labourers do jobs in construction of roads, bridges and buildings.  Income of Rural Sector is rising at a considerable rate. Percentage of Very Rich, Consuming Class, and Climbers are rising whereas Aspirants and Destitutes are declining.  The structure of Rural Income depicts the following trends: 1. On the income ladder, the top two slots are occupied by the non-farm sector, whereas the farmer is at the third place and wage earner is at the bottom. 2. The highest per capita income in rural comes from the formal segment of the non-farm sector at Rs. 19514 which is higher than the urban per capita income at Rs. 19407. Location of rural population It has been observed that the majority of rural institutions, agri markets and rural banks are located in larger villages and towns, upto 10,000 populations. Moreover, the characteristics in terms of occupation, consumption, and buying behavior change from rural to urban in locations of more than 10,000 population. Expenditure pattern Per capita consumption expenditure in rural has increased four times over last 20 years. Rural spending in non-food items is increasing; out of a total per capita spending of Rs.486, approximately 40% is spent on non-food items. This shows an encouraging trend for consumer durables and non-durables (non food item)  Analysing the consumption patterns of non-food items of rural consumers, we find that the major share of spending goes to clothing, medical services and fuel needs, whereas urban consumers spend much more on rentals, education and conveyance. Literacy level and Rural demand Lower level of education in rural sector (approximately 60% of the population lies below the middle education bracket) lead to little or low demand for a range of products such as literacy books, magazines, notebooks, pen/pencils, drawing instruments, calculators, digital diaries, computers, etc. But change is taking place because the literacy retain the rural sector has risen 23% over the last 20 year. This has contributed significally to an improvement in the socio-economic status of the 10 SCE DEPARTMENT OF MANAGEMENT STUDIES people. With this growth, the demand for educational products has increased. Overall, products and brand awareness have increased and rural consumers have become more mature in purchase decision. Land use pattern  Land Management is gaining importance because of increasing demands on land and growth of the population.  Forest area and cultivable land percentages have increased. Forest has increased from a level of 14% to 22%. Area sown has increased from 20% to 43%.  Area not available for cultivation has reduced and  Change of mindset of common man towards ecology, increasing greenery and that every square meter of land be used gainfully. Multi-storeyed buildings form part of the city‘s landscape. Irrigation  In last four decades, the irrigated area has doubled.  For centuries, Indian agriculture has depended on rains. The special programmes launched by Government of India to increase the irrigation facilities along length and breadth of India have yielded results and reduced dependence on rain.  There is considerable difference in irrigation patterns from state to state in India. States like Punjab and Haryana, where there are enough natural water resources have a good percentage of gross irrigated area to total crop area.  If a farmer owns many patches scattered at distances, it makes the entire efforts in agriculture less remunerative.  Mechanical farming or agricultural methods cannot be adopted for small land holdings. 1.8 Mechanisms of Rural Marketing Year Net Gross Netarea Gross Area Gross Irrigated as Area Cropped Area Irrigated Irrigated % of Cropped Sown Area 1999- 142.9 185.7 48 63.2 34.0 2000 2000- 142.2 186.6 53.4 71.4 38.3 2001 2001- 142.8 189.5 55.1 73.3 38.7 2002 11 SCE DEPARTMENT OF MANAGEMENT STUDIES 2002- 142 190.8 54.6 76.4 39.7 2003 Development programs Green Revolution in the Agricultural Sector Period from 1967 to 1978 heralded a technological thrust into rural areas aimed at improving food grain production in the country and hence achieving food self- sufficiency. Green Revolution generated some notable economic results: 1. Crop areas under high-yield varieties required fertilizers, pesticides, fungicides and other inputs. Farm equipments like tractors with farm implements, diesel pump sets etc. introduced mechanization into the farm sector for the first time. 2. The increase in farm production also introduced mechanized processing, spurring growth of the local manufacturing sector. The modernization and mechanization of the farm sector boosted farm productivity, triggered industrial growth, created jobs and initiated a change in the quality of life in villages. White Revolution  Initiated by the government with the aim of achieving self-sufficiency in the area of milk production.  Cornerstone of the government dairy development policy was producing milk in rural areas through producer cooperatives and moving processed milk to urban-demand centres.  Gave a boost to dairy development and initiated the process of establishing the much- needed linkages between rural producers and urban consumers.  Formation of producer‘s cooperatives has played a significant role in institutionalizing milk production and processing.  Socio-economic and demographic factors such as urbanization and changing food habits and lifestyles have also reinforced the growth in demand for dairy products (ice creams, chocolate, yoghurt, butter, flavoured milk etc.).  Milk production has increased from 17 million tonnes in 1950-51 to 84.6 million tonnes in 2001-02.  Most successful story in dairy development has been in Gujarat, Punjab, Haryana, Uttar Pradesh and Andhra pradesh. 12 SCE DEPARTMENT OF MANAGEMENT STUDIES The NGO Movement  Important in providing assistance at the grassroots level assimilation of technological extensions in rural areas.  Stepped in to create awareness, build skills, introduce technology and develop capacities for maintenance and sustainability.  Government programmes implemented through NABARD, CAPART, KVIC and others are given shape by these organizations.  Introduction of low-cost spindles, weaving machinery, technology for leather processing, food processing, natural resources management etc have been some contributions in bringing about change at the grassroots.  NGO‘s have been also active in providing basic health and child care services, running homes for destitute and the distressed and providing education and training opportunities. Infrastructure facilities Road Connectivity Good road connectivity, particularly in rural areas, between sub-divisional towns and district headquarters is often the primary means of supplementing public efforts directed at providing basic health and educational services, as well as infrastructural support for production and trade and commerce at the local village level.  It is particularly relevant in the Indian context where over 70% of the population continues to live in rural areas and where over 50% of villages with population of less than 1000 have yet to be connected by roads.  Among the major states, Kerala has the highest road length per hundred square kilometres (375 km in 1997). Road connectivity at the village level Year Population Population between Population more less than 1000 1000 & 1500 than 1500 1991-92 36.52% 72.32% 89.82% 1997-98 37.45% 76.54% 91.72% 2005-06 49.18% 74.58% 78.04% 13 SCE DEPARTMENT OF MANAGEMENT STUDIES Post Offices  India with its 1,55,279 post offices as on 31 March 2002 (138756 post offices are in rural areas) has a postal network that is the largest in the world. On an average, a post office serves an area of 21.17 km and a population of 6614 persons.  For providing postal services, the whole country has been divided into 22 postal circles. Each circle is further divided into regions. A postmaster general who is the postal manager of the area heads each region.  Post offices in the country are categorized as head, sub and branch post offices. Rural Health Services Sub-centers: The health Sub-Centre is the contact point between the primary health care system and the community. The Staff at health Sub-Centres are assigned tasks related to  Interpersonal communication in order to bring about behavioral change in relation to maternal and child health, family welfare, nutrition, immunization, control of diarrhoea and control of communicable diseases.  Primary health Centres : First contact point between the village community and a medical officer. These are established and maintained by the State Government under the Minimum Needs / Basic Minimum Services Programme.  Manned by a medical officer and is supported by 14 paramedical and other staff.  Activities include curative, preventive and promotive health care as well as family welfare services.  Community Health Centres : Established and maintained by the State Governments under the MNP/BMS programme. Four medical specialists, i.e. surgeon, physician, gynaecologist and paediatrician supported by 21 paramediacal and other staff. 30 indoorbeds, with X-ray, labour room, operation theatre and laboratory facilities.  Radio From six radio stations at the time of Independence, All India Radio today has 208 radio stations. All Stations of All India Radio broadcast farm programmes and home programmes directed at rural audience. The thrust of the broadcast is on increasing production of agri-products and various programmes adopted by the Government of India.  Television DD-1 operates through a network of 1042 terrestrial transmitters of varying powers reaching over 87% of the population. Over the years, the viewership of Doordarshan as 14 SCE DEPARTMENT OF MANAGEMENT STUDIES increased enormously, reaching 7.5 crore homes. Community television sets have been introduced under various schemes operated by Central and State Government. Telecom Services  By 2004, over 80% of all villages had been connected through 5.4 lakh Village Public Telephones. Similarly, 1.42 crore telephone connections had been given in rural areas.  People who are unable to afford a telephone facility of their own can now have access to VPTs in rural areas in addition to Public Call Offices.  Rural credit institution  Asmitha – Provides rural poor women access to financial resources in the form of collateral free small loans for income generation and livelihood promotion. This enables them to set-off small start up business, which soon translates into adequate nutrition, medical aid and education. With increased businesses, these low-income women become economic agents intrinsic to development rather than simply homemakers  Bandhan MF- Bandhan was set up to address the dual objective of poverty alleviation and women empowerment. The microfinance activities are carried on by Bandhan Financial Services Pvt. Ltd. (BFSPL), incorporated under the Companies Act, 1956 and also registered as a Non Banking Financial Company (NBFC) with the Reserve Bank of India (RBI).  That apart, Bandhan is also engaged in development work through it‘s not for profit entity.  Cashpor India – Our mission is to identify and motivate poor women in the rural areas and to deliver financial services to them in an honest, timely and efficient manner so that our Vision is realized and CASHPOR itself becomes a financially sustainable micro finance institution for the poor.  Grameen Foundation – Works in 6 key areas : Connecting microfinance institutions with capital markets, Strengthening organizations by building people practices, Harnessing the power of technology, Helping track people‘s movement out of poverty, Sharing knowledge widely for broader impact and Social Business  Grameen Koota – Grameen Koota recognises the future competition and challenge of retaining exclusivity of clients. Instead of targeting a high market share in high competition areas we will focus on increasing the ‗mind share‘ amongst client and becoming a preferred microfinance provider. We will leverage our existing goodwill with the community and have a strong focus on orienting our field staff towards this objective. 15 SCE DEPARTMENT OF MANAGEMENT STUDIES  Hand in Hand – is a development organisation whose objective is to eliminate poverty by creating enterprises and jobs?  Focusing on help to self-help, we take a holistic approach that combines microfinance and support for women to start enterprises with work in four other areas that matter most too poor communities: education and child labour elimination, health and sanitation, a sustainable local environment and information technology access. With currently more than 450,000 members in Tamil Nadu, Karnataka and Madhya Pradesh, who have collectively started more than 250,000 micro-enterprises, our goal is to create 1.3 million jobs by 2013. Supported by international offices in the UK and Sweden, we are now taking our model to South Africa, Afghanistan and Latin America.  Micro Credit India – Microcredit Foundation of India (MFI) is a not-for-profit Section 25 Company in Tamil Nadu dedicated to promoting entrepreneurship and community level action in rural areas as a means to sustainable economic prosperity. Today MFI works primarily with women. Through its field staff, MFI helps them form Self Help Groups (SHGs), trains them in good financial practice, facilitates access to microcredit loans, equips them with business skills and facilitates access to new markets for their products.  MYRADA – MYRADA is a Non Governmental Organisation managing rural development programmes in 3 States of South India and providing on-going support including deputations of staff to programmes in 6 other States. It also promotes the Self Help Affinity strategy in Cambodia, Myanmar and Bangladesh  New Life – New Life designs projects based on survey of the socio,economic problems of the project area and support the poor, abused and abandoned children and women by executing the projects with a defined goals/objectives. The current projects of New Life includes orphanages for children of incarcerated parents,Save children from Child Labour,Ensuring primary education for the rural children in India,Early learning centres for children of vulnerable community groups,Read to Lead Project, Taking care of the medical needs of Physically handicapped and Mentally retarded children.  RangDe – Rang De‘s mission is to make microcredit accessible to every low income household by lowering loan interest rates through innovative means. Rang De is committed to enabling individuals to become social investors through a transparent platform. While strive to improve Rangde.org as an interface, we work extensively with 16 SCE DEPARTMENT OF MANAGEMENT STUDIES our field partners to ensure that we do not compromise on our vision – making credit available at affordable rates. Role of cooperative institution Cooperative society is an organization of group of people with collective responsibilities and thoughts for the development of needy, especially under privileged. Cooperatives helped in the development of agriculture, banking, credit, agro-processing, storage, marketing, dairy, fishing and housing and its network covers 85 per cent of rural households. It occupies a key position in agricultural development with support in resource and input use, harvesting of water resources, marketing channels, storage facilities, distribution channels, value addition, market information and a regular monitoring network system. Cooperatives are also engaged in economic activities like disbursement of credit, distribution of agricultural inputs (seeds, fertilizers, and agrochemicals), etc.  Financial service  Input supply services  Marketing services  Consumer services  Welfare Services  Extension services  Training centre  Scholarships Regulated market A regulated market or controlled market, is a market where the government controls the forces of supply and demand, such as who is allowed to enter the market or what prices may 1 be charged. It is common for some markets to be regulated under the claim that they are natural monopolies. For example, telecommunications, water, gas or electricity supplies. Often, regulated markets are established during the partial privatization of government controlled utility assets. A variety of forms of regulations exist in a regulated market. These include controls, oversights, anti-discrimination, environmental protection, taxation and labor laws. In a regulated market, the government regulatory agency may legislate regulations that privilege special interests, known as regulatory capture. 17 SCE DEPARTMENT OF MANAGEMENT STUDIES Agriculture Export Zone An Agri Export Zone or AEZ is a specific geographic region in a country demarcated for setting up agriculture based processing industries, mainly for export. The term is widely used mainly inIndia. AEZ are to be identified by the State Government, who would evolve a comprehensive package of services provided by all State Government agencies, State agriculture universities and all institutions and agencies of the Union Government for intensive delivery in these zones. Corporate sector with proven credentials would be encouraged to sponsor new agri export zone or take over already notified agri export zone or part of such zones for boosting agri exports from the zones. Establishments of marketing departments for various agricultural & non-agricultural produce KAPPAC COIR BOARD Main motive of this board is to purchase the coconut and prepare the coconut fibre. Scheme  Rejuvenation, modernization, & technology up gradation of coir industry  Scheme of fund for regeneration of traditional industries  Skill upgradation & quality improvement scheme  Science & technology scheme  Export market promotion scheme  Domestic market promotion scheme  Trade & Industry related functional support service scheme  Welfare measures. COFFEE BOARD Employee Welfare Scheme Allocation of fund for each region I. Educational stipends II. Incentive award III. Financial assistance. NHB (NATIONAL HOUSING BANK) The Sub-Group on Housing Finance for the Seventh Five Year Plan (1985-90) identified the non-availability of long-term finance to individual households on any significant scale as a 18 SCE DEPARTMENT OF MANAGEMENT STUDIES major lacuna impeding progress of the housing sector and recommended the setting up of a national level institution. NHB has been established to achieve, inter alia, the following objectives – a. To promote a sound, healthy, viable and cost effective housing finance system to cater to all segments of the population and to integrate the housing finance system with the overall financial system. b. To promote a network of dedicated housing finance institutions to adequately serve various regions and different income groups. c. To augment resources for the sector and channelise them for housing. d. To make housing credit more affordable. e. To regulate the activities of housing finance companies based on regulatory and supervisory authority derived under the Act. f. To encourage augmentation of supply of buildable land and also building materials for housing and to upgrade the housing stock in the country. g. To encourage public agencies to emerge as facilitators and suppliers of serviced land, for housing. INITIATIVES  Residential mortgage backed securitization process of national housing bank  Reserve mortgage loan  Reverse mortgage loan enabled annuity  Housing finance  Retail deposits 1.9 APEDA (Agricultural and Processed Food Products Export Development Authority) The Agricultural and Processed Food products Export Development Authority (APEDA) is an export promotion organization under Ministry of Commerce & Industries, Government of India. It is mandated with the responsibility of promotion and development of the export of its scheduled products. What are the scheduled products monitored by APEDA? All Agri Products APEDA provides financial assistance to its registered member exporters under the following schemes: Scheme for Market Development 19 SCE DEPARTMENT OF MANAGEMENT STUDIES Scheme for Infrastructure Development Scheme for Quality Development Scheme for Research and Development Scheme for Transport Assistance Rural retail outlet  Certainly market-driven¸ technology-based agriculture-India- an economic superpower.  The retail revolution is going to act as a catalyst  So the new concept that is hitting the market today is the ―Rural Retailing‖. Rural India accounts for over 50 percent of India‘s GDP. Rural retail-Tremendous potential as the rate of disposable income is increasing, growing middle class, advent of IT infrastructure and enormous grouped population. Though sales are expected to be much lower in early stage, but the break even is reached in four- five months of being set up, as against eight-nine months earlier. 1.9 APPROACHES TOWARDS RURAL RETAILING o Go to the producer directly o Set up knowledge exchange centers o Earn respect and confidence with locals o Provide retail environment with local flavors and needs. o Treat farmers with respect and serve them as customers. 1.10 SWOT analysis Strengths: • About 70% of India's population lives in 627000 villages in rural. A middle and higher income household in rural India is expected to grow from 80 million to 111 million by 2010. • In urban India, the same is expected to grow from 46 million to 59 million. Thus the absolute size of rural India is expected to be double to that of urban India. • Young population. • Weakness: Low literacy rates • Low standard of living • Traditional outlook • Prevalence of spurious brands and seasonal demand. Opportunities: 20 SCE DEPARTMENT OF MANAGEMENT STUDIES • 3 times more families lives in Rural India • Rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. • Population-becoming brand conscious • Exposure and increase in literacy rates will open market further. • Threats: Shifting of young generation-rural to urban cities • Entry of small time players – Study on buying behavior of rural consumer indicates that the rural retailers influences 35% of purchase occasions • Vast majorities-rural people-tradition bound, fatalistic and believe in old customs, traditions, habits, taboos and practices. Print media in rural areas  Print Media  The total number of newspapers and periodicals being published in the year 2000 was 49,145. Newspapers were published in as many as 101 languages and dialects during 2000.  The reach of newspapers in rural areas is very poor, only 15% of the copies of newspapers reach rural areas. Newspapers normally reach the feeder market or small towns and are read in shops or road side hotels.  People sometimes buy newspapers in small towns and take back home, where it is read at home or at common gathering or social gathering. 1.11 Rural areas requirement Considering the importance of agriculture and rural majority the nine five year plans have made considerable progress in improving the agriculture sector and the rural farmer. The rural requirements vary from state to state and the priorities also change. Rural requirements are listed under:  Improved seeds and fertilisers  Increased means and methods of irrigation  Multipurpose farming  Use of modern farming equipments and methods  Warehousing and preservation of agri-produce.  Marketing development and remunerative prices for the produce  Improvements in pest control and preservation of crops.  R & D work and benchmarking with the best agricultural practices, yields in the world  Training of Farmers 21 SCE DEPARTMENT OF MANAGEMENT STUDIES  Increased investments and credit facilities  Small land holdings to be consolidated and improvements in tenancy.  Animal heath and veterinary facilities.  Literacy of farmers and families.  Develop village agro-based industries/cottage and village industries  Population control  Crop insurance  Health of farmers  Environment friendly agriculture methods  Water availability management  Remunerative price for milk and milk products and  Provision for subsidiary occupations and incomes 1.11.1 Problems in rural marketing  Unevenly Scattered Population – The spread of population in about 4000 cities and towns is to the extent of 25% and the balance is in six lakh villages. Only 6300 villages have a population of more than 500. This makes the marketers go through a lot of difficulty to reach out to the rural masses effectively.  Underdeveloped People and Underdeveloped Market – Since 1947 a number of initiatives have been taken to improve the quality of life in rural areas. In 1947 the rank of India in terms of poverty, unemployment and level of development was 86 in the world but in 1991 it reached the level of 123. The situation has further worsened and the th 1996 report on Human Development Index shows that India rank 136 in 156 countries of the world.  Lack of proper Physical Communication Facilities – In India only 50% of the road length is provided with a proper surface. About 36% of the villages in the country do not have road connection and over 65% of our villages are without all-weather road. Thus the road grid makes distribution cost higher, as the road grid as a whole suffers from serious capacity constraints, delays, congestions, fuel wastage and higher vehicle operating costs, marketers face a lot of problems in distribution of products. Low per capita incomes – Share of rural income accounted for 55.6 percent with 74.6 percent of country‘s population, thus reducing the demand of expensive products.  Many Languages and Dialects – In India, the number of languages and dialects vary widely from state to state, region to region. The number of languages spoken is only 16, the total number of dialects is estimated to be around 850. The messages to be delivered in the local languages and dialects are a big problem to the marketers.  Low level of literacy – This leads to the problem of communication for promotion 22 SCE DEPARTMENT OF MANAGEMENT STUDIES purposes. In this case, print medium becomes less effective and the dependence on audio visual messages is more relevant in rural areas.  Logistics Problems – The rural markets have few selling points like retailers, co- operatives, haats and melas. Lack of infrastructure for storage and handling and limited transport facilities act as a constraint for marketing action.  Low Exposure to Market Stimuli – In rural areas, the rural people have low exposure to branded products, low product exposure, limited sources of information and learning which creates big challenge to the marketers to stimulate the rural consumers.  Less Retail Outlets – Due to less capital, the shops in the villages have limited availability of stock and limited or a few range of branded products to sell to rural people and these shops keep only fast moving items with a number of fake brands.  Seasonal Demand – As 70% of rural population depends on agriculture and most of them with small land holdings highly dependent of natural environment that is rain, if the rains and weather conditions are good and on time the farmers will get good harvest which leads to good income, otherwise, if there is shortage of water the demand may be minimal.  Traditional Life – Life in rural areas is still governed by customs and traditions and people do not easily adopt new practices. For eg. Even rich and educated class of farmers do not wear jeans or branded shoes in most of the rural areas. Rural Demand Some well Established products  Pressure cooker  Cooking utensils  Batteries  Cycle, bikes, scooters  Radio/tapes  Pesticides, fertilizers  Tea  Toothpowder/paste  Sewing Machine  Artificial Jewelry  Medicines  Tobacco & Products  Bathing Soaps, washing cakes, washing powder  Cell phones  Fans 23 SCE DEPARTMENT OF MANAGEMENT STUDIES

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