Lecture notes Rural Marketing

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Published Date:17-07-2017
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PONDICHERRY UNIVERSITY (A Central University) DIRECTORATE OF DISTANCE EDUCATION Rural Marketing Paper Code: MBMM 4001 MBA - MARKETING IV - SemesterUNIT - I Rural Economy Learning Objectives After studying this lesson, you should be in a position to: ➢ Explain the nature of rural economy ➢ Highlight the characteristics of rural markets ➢ Describe the differences between rural and the urban economy Introduction In the present competitive world marketing of product is a challenging task. Companies vie each other seriously for marketing the products. Identifying new market has become inevitable for growth and expansion of any business. Markets can be classified into urban and rural markets. At present urban markets have become more competitive and reached the saturation level. Rural markets are having a lot of potential for business. In the developing and developed nations, majority of the population live in the rural areas. Therefore the scope for marketing the products in the rural areas is very high. Today’s companies have realized the potential of rural markets to a great extent. Hence they start focusing on rural markets. The present subject ‘Rural Marketing’ mainly deals with analyzing rural economy and rural market. The nature of rural market and the characteristics of rural customers are discussed in this unit. Rural Economy India is highly populated country. Majority of the Indian population lives in the rural areas. Purchasing power of the rural people has increased significantly in the recent past. Awareness of the rural people also increased significantly. Companies which focus attention on rural market certainly can succeed. Rural marketing has become real marketing. Compared to other economy, Indian economy is rural economy. As Gandhiji 3once said India lives in rural areas. India has enormous potential for rural marketing. India’s economy is predominantly rural in character. The predominantly rural character of India’s national economy is reflected in the very high proportion of its population living in rural areas: They were given below: Year Rural Population In 1901 89 per cent In 1951 83 percent In 1971 80 percent In 1981 76 per cent In 1991 74 per cent In 2001 73 per cent With more than 700 million people living in rural areas, in some 5, 80,000 villages, about two-third of its workforce was engaged in agriculture and allied activities with a contribution of 29 percent of India’s Gross Domestic Product (GDP). Classification of Indian Economy India’s economy can be thought of as comprising of two main sectors, namely, the rural sector and the urban sector. The rural sector is, in turn, composed of two main sub- sectors i.e. the agricultural sub- sector and the non-agricultural sub -sector. Fig. gives the classification of Indian economy. INDI AN ECONOMY URBAN SECTOR RURAL SECTOR AGRICULTURAL NON—AGRICULTURAL 4Classification of Indian Economy The agricultural sector comprises agricultural and allied economic activities such as Crop Cultivation, Animal Husbandry, Dairying, Fisheries, Poultry and Forestry (Floriculture) etc. The non-agricultural sub-sector consists of economic activities relating to Industry, Business and Services. Industry refers to cottage and village industries, Khadi, handloom, handicraft, etc. Business refers to trading of general goods, small shops, petty traders etc. Services refer to transportation, communications, banking, postal, education etc. The size and potential market of the rural sector could be measured in terms of the rural population, the population of livestock, the extent of land, forest and other natural resources. According to the population census of 1991, India’s rural population was 62.87 crore, which accounted for 74.3 percent of the country’s total population. Till recently, the focus of marketers in India was the urban consumer and by large number specific efforts were made to reach the rural markets. But now it is felt that with the tempo of development accelerating in rural India, coupled with increase in purchasing power, because of scientific agriculture, the changing life style and consumption pattern of villagers with increase in education, social mobility, improved means of transportations and communication and other penetrations of mass media such as television and its various satellite channels have exposed rural India to the outside world and hence their outlook to life has also changed. Because of all these factors, rural India is now attracting more and more marketers. Increase in competition, saturated urban markets, more demand for new products by urban customers, made the companies to think about potential for new markets. Thus, Indian rural markets have caught the attention of many companies, advertisers and multinational companies. Rural marketing has become the latest mantra of most corporate. Companies like Hindustan Lever, Colgate Palmolive, Britannia and even Multinational Companies (MNCs) like Pepsi, Coca Cola, L.G., Philips, Cavin Kare are all eyeing rural markets to capture the large Indian market. According to a recent survey conducted by the National Council for Applied Economic Research (NCAER), the purchasing power of the rural people has increased due to increase in productivity and better price commanded by the agricultural products. By and large this rise in purchasing power remains unexploited and with the growing reach of the television, it is now quite easy for the marketers to capture these markets. 5Coming to the frame work of Rural Marketing, Rural Marketing broadly involves reaching the rural customer, understanding their needs and wants, supply of goods and services to meet their requirements, carrying out after sales service that leads to customer satisfaction and repeat purchase/sales. Earlier, the general impression was that the rural markets have potential only for agricultural inputs like seed, fertilizers, pesticides, cattle feed and agricultural machinery. There is a growing market for consumer goods as well. According to CIRCA 1998 survey report the rural nail polish market was pegged at ` 270 million against ` 81 million in the cities. The rural market for lipstick was around ` 250 million, compared to estimate at about 1,099 tonnes against 426 tonnes in the cities, while shampoos had a potential of 2,257 tonnes in the villages compared to 718 tonnes in the cities. Even the mosquito repellent market was reckoned at ` 173 million to ignore such a big segment i.e., Rural India. This has particularly been music to ears of big corporate as well as multinational companies. Development Indicators: India CARG CARG 1980 1985 1990 1995 Latest 1980 1990 Agriculture Unit Average size of Ha 1.8 1.7 1.6 - - -1.6 - holding Gross sown % of RA 56.6 58.5 60.2 61.2 61.7 .6 .4 area Area under % of GCA 23.2 23.1 23.0 22.7 23.0 .5 .4 Rice Area under % of GCA 13.0 13.3 13.0 13.5 13.8 .7 1.1 wheat Gross irrigated % of GCA 28.5 30.4 33.8 36.7 38.5 2.4 2.2 area Fertilizer Kg/ha 30.7 45.7 63.9 68.0 78.7 7.6 3.0 consumption 6Value of `/ha 1950.0 5462.0 8578.0 11691.0 - 16.0 6.4 production Value of `/capita 501.0 1305.0 1899.0 2370.0 - 14.3 4.5 agriculture production Value of - - 228.3 294.5 - - 5.2 `/capita mineral production Energy and infrastructure Villages % of villages 43.4 64.3 81.3 86.0 - 6.5 1.1 electrified Road length /100sq.km. 45.4 51.3 60.4 66.1 75.0 2.9 3.2 Railway route /100sq.km. 1.9 1.9 1.9 1.9 1.9 .2 .1 length Post offices /lakh pop 20.8 19.4 17.8 16.6 148.1 -1.5 30.4 Telephone /100 persons .3 .4 .6 1.1 2.2 6.3 16.3 connections Industries Banking Branches /lakh pop 4.8 7.1 7.3 6.9 6.7 4.3 -1.0 Deposits `/capita 466.0 1043.0 2075.0 4117.0 6967.0 16.1 14.4 Credit `/capita - 671.0 1259.0 2291.0 3816.0 13.4 13.1 Credit to `/capita - 118.0 201.0 271.0 408.0 11.2 8.2 agriculture Credit to `/capita - 277.0 614.0 1045.0 1876.0 17.2 13.2 industry Health Primary health .8 1.0 2.3 2.3 - 10.9 .4 `/lakh pop centers 7Hospital and `./lakh pop 84.8 88.1 97.3 94.5 - 1.4 -.6 dispensary beds Education Primary /lakh pop 73.7 70.9 67.7 66.3 64.9 -.9 -.7 schools Middle/ higher /lakh pop 17.7 18.1 18.3 20.1 19.7 .3 1.3 schools Source: Center for management of Indian economy, 2000 Notes 1. CARG: Compound Annual Rate of Growth 2. Ha: Hectare Characteristics of Rural Economy There are 6.27 lakh villages in India. 50% of the rural population lives in villages with a population between 1,000-5,000 people. Villages of population over 5,000 people account for 10% of the rural population. 20% of the rural people live in villages with population less than 500. The important characteristics of rural economy are given below: 1. Family System in India Family is an important unit which exercises social control. In villages majority of the families adopt the joint family system. The family bond among the family members in rural areas is very strong. Marriage is considered as the religious obligation. Divorce is uncommon and not accepted in the rural society. 2. Status of Women The status of women is not good compared to men. Women enjoy less freedom in the rural areas. Men dominate and in most cases they take decisions on their own without consulting their life partners. However now there is a lot of improvement in the condition of women in the rural economy. 83. Occupation Pattern Agriculture is the main occupation in the rural economy. Agricultural activities are traditionally carried out in villages. Supporting activities to the agriculture is also carried out by many rural people. Generally both male and female involve in agricultural activities. 4. Income Generation In the rural economy people mainly depend on agriculture and other related activities for income generation. Agricultural income is a seasonal one. During harvest season they get more income and spend money for purchasing various items. In other seasons rural people restrict their purchases and even go for borrowing from money lenders and banks. At present large number of rural people are migrating to urban areas as there is no assured income in agriculture. 5. Literacy Level The literacy level of people in rural areas is low. Particularly the literacy level of women in rural areas is very low. Because of the low literacy many duplicate companies sell their products easily in the rural market. Various exploitations are taking place in the rural areas. Creating awareness among the rural people is very important. Distinction between Rural and Urban Markets Rural markets have many unique features which make quite different from urban markets. In this section the importance difference between rural markets and urban markets are discussed. 1. Population Density It is low in the rural market. The population density in the urban area is high. Nowadays a lot of rural people are migrating to urban areas. Therefore, the population density in the urban areas is constantly increasing. 2. Occupation The main occupation in the rural areas is agriculture. Agriculture is considered as a major source for living in the rural areas. On the contrary trade, industry and service are considered as main occupation in the urban areas. 93. Economy The rural economy is closed and less monetized, whereas the urban economy is open and monetized. 4. Infrastructure The infrastructure facilities in the rural areas are poor and week. Governments give least importance for infrastructure facilities in the rural areas. In the urban areas infrastructure facilities are better. Nowadays urban areas becoming highly populated. Therefore governments must also improve the infrastructure facilities correspondingly. 5. Attitude to Modernization The attitude of rural people towards modernization is traditionally bound one. Urban people have more exposure. They are ready for adaptation and change. 6. Family Structure In rural economy people follow the joint family system. In urban nuclear family system is followed. The influence of urban family system seriously affect the joint family system of the rural markets. 7. Possession of Household Assets It is low in rural markets. In urban markets the possession of household asset is high. 8. Mobility People in the rural areas carry out their traditional occupation. Therefore, the mobility in the rural markets is low. In the urban the mobility is high. Nowadays the life time employment concept has gone in the private companies. People often change their companies. So the mobility in urban is constantly increasing. 9. Literacy The literacy level in the rural market is low. In urban the literacy rate is high. 1010. Exposure The level of exposure of people in the rural market is low. As their education level is low they get less opportunity for having exposure. Urban people have high level of exposure. High literacy level, access to various medias gives them more advantage for getting good exposure. 11. Attitude of Life People in the rural markets have fatalistic attitude. The attitude of people in the urban markets is more scientific. 12. Manufacturing Activity It is low in the rural markets. In the urban markets a lot of manufacturing activities are going on. 13. Distribution Outlets Rural markets have fewer outlets and urban markets have more outlets. Summary Broadly the markets can be classified into rural markets and urban markets. As the urban markets have become more competitive and reached the saturation point, lot of companies now focus on rural markets. Rural markets are scattered and less organized. Therefore, so far the potential of rural markets have not been utilized properly. But nowadays companies are focusing their attention towards rural markets. At present the purchasing power of rural people has increased significantly. Therefore, companies attempt to produce the products to suit the requirements of rural people. Indian economy is rural economy. Therefore, India has a lot scope for rural markets. The Indian economy can be classified into rural and urban sector. Rural sector again can be classified into agricultural and non-agricultural sectors. Crop cultivation, animal husbandry, dairying, fisheries, poultry and forestry are coming under agricultural sector. Industry, business and services come under non-agricultural sector. Rural markets have certain unique features. Low literacy, seasonal income, less organized, low level of exposure, joint family system, more restrictions in the life styles 11and decision making are some of the important features of rural markets. There is a vast difference between rural markets and urban markets. The purchasing power of people in the rural market is comparatively low. They are more traditional and reluctant to adopt change. People in the urban markets are just opposite of people in the rural markets. However, medias are now reducing the differences significantly. Even rural people get access to many electronic media. This increases their awareness and also now a lot of changes have taken place in their way of life. CASE STUDY Sudesh Alagh is the Marketing Manager for the company “MFL- Fabric Division”, a part of MFL groups of companies. The company was doing well and had earned a name in selling reasonable variety of goods, good quality of readymade. Garments for children and adults Sudesh received instruction from the Managing Director of the company to identify target market and work out marketing plan for selling garments in the rural market having a population of minimum 5000 and above. Pre market survey indicated certain new realities. ➢ More than seven out of ten rural households process watches. ➢ One in fifty hoseholds have a colour television set. ➢ Seven out of every hundred household own an electric iron. ➢ 70% of the sales of table and portable Radios, Bicycle and Cigarettes are from the rural market. ➢ Rural people are very particular when it comes to attributes and aspirations. ➢ Rural consumers are more brand loyal then the urban consumers. ➢ Rural consumers are even more particular about quality and value than their urban counterparts. Since the survey indicated tremendous rural market potential waiting to be tapped “MFL” company decided to enter the rural market with new brand of readymade Garments tailored to suit the need of the Rural Market. The company also decided to advertise the product to ensure knowledge about the company and the readymade garments be made available soon in the market. This was to be supported with sales promotion programmes including wall poster, radio and television advertisement offers of small freebies. 12For distribution the company decided to see that the product were available at the local shops, with arrangements to have an understanding with the local tailors who would be trained to make alterations to the ready-to-stitch and wear garments in various sizes, patterns and designs for rural customers interested in going for readymade garments. It was also decided to price the products reasonably to care of the competition from the unorganized sector. However, since social sanction plays an important role in rural consumer behavior, the marketing manager Sudesh Alagh was keen to identify the reference group like the village mukhia or panchayat head or local bank manager whose opinions carried out a lot of weight among the rural public. The views and facts expressed by such person can act as positive word of mouth advertising for the company. Questions 1. Do you agree with decision of the company to enter the rural market? Why or Why not? 2. Evaluate the marketing plan of the company. 3. Can you suggest any further improvement in the marketing plan? 13UNIT – II Unit Structure Lesson 2.1 - Rural Marketing – Concept and Scope Lesson 2.2 - Rural Consumers Lesson 2.3 - Rural Vs Urban Marketing Lesson 2.4 - Rural Marketing Information System Lesson 2.1 - Rural Marketing – Concept and Scope Learning Objectives After completing this lesson, you should be in a position to: ➢ Define the meaning and scope of rural markets ➢ Explain the features of rural markets ➢ Highlight the roadblocks of Indian rural markets ➢ Suggest the solutions for the problems of rural markets. Rural Marketing- Meaning and Scope National Commission on Agriculture defines rural marketing as “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.” According to Thomsen, the study of rural marketing comprises of all the operations, and the agencies conducting them, involved in the movement of farm produced food, raw materials and their derivatives, such as textiles, from the farms to the final consumers, and the effects of such operations on producers, middlemen and consumers. 15Processes and Scope of Rural Marketing Rural marketing has two major areas, namely, (a) marketing of agricultural products, from rural to urban areas, and marketing of manufactured goods and services in rural areas. In other words, rural marketing is a two-way marketing process. One is the flow of goods from rural to urban areas and the other one is flow of goods and services from urban to rural areas. Rural marketing also includes the flow of goods and services within the rural areas itself. The rural to urban transactions include the agricultural products like food gains, oilseeds, cotton, sugarcane, tobacco, etc. The urban to rural transactions cover the goods and services of all agricultural inputs. Fertilizers, pesticides, seeds, tractors, consumer durables like radio, bicycle, mopeds, electrical and electronic goods, etc. are transacted from urban to rural. The processes of rural marketing are explained below: Rural marketing involves the process of developing, pricing, promoting, distributing rural specific product and a service leading to exchange between rural and urban market which satisfies consumer demand and also achieves organizational objectives. It is a two-way marketing process wherein the transactions can be: 1. Urban to Rural It involves the selling of products and services by urban marketers in rural areas. These include: Pesticides, FMCG Products, Consumer durables, etc. 2. Rural to Urban Here, a rural producer (involved in agriculture) sells his produce in urban market. This may not be direct. There generally are middlemen, agencies, government co-operatives, etc who sell fruits, vegetables, grains, pulses and others. 3. Rural to Rural These include selling of agricultural tools, cattle, carts and others to another village in its proximity. India is a land of diversity and about 70% of the Indian population lives in villages. These villages contribute in the economic development of the nation through the production of food grains, vegetables, fruits, etc. Export of these agricultural commodities result in the generation of capital and earnings of foreign exchange. 16There are 600,000 villages in India. 25% of all villages account for 65% of the total rural population. So we can contact 65% of 680 million or 700 million population by simply contacting 1,50,000 villages, which shows the huge potential of this market. Indian rural market has a vast size and demand base. Before going into more aspects on rural marketing, let us understand how rural is defined. The Census defines urban India as - “All the places that fall within the administrative limits of a municipal corporation, municipality, cantonment board etc or have a population of at least 5,000 and have at least 75 per cent male working population in outside the primary sector and have a population density of at least 400 per square kilometer. Rural India, on the other hand, comprises all places that are not urban” The government of India only defines a non-urban market. An urban market is the one which has a population density of 400 people per sq/km. 7% of its population has to be involved in non-agricultural activities and there is a municipal body. If we go by statistics, roughly around 70% of the Indian population lives in the rural areas. That’s almost 12% of the world population. To expand the market by tapping the countryside, more and more MNCs are foraying into India’s rural markets. Among those that have made some headway are Hindustan Lever, Coca-Cola, LG Electronics, Britannia, Standard Life, Philips, Colgate Palmolive and the foreign-invested telecom companies. Features of Indian Rural Markets India is a peculiar country in the world. People from different religion, culture, and race live together. Therefore, Indian rural markets have some special features. The important features of Indian rural market are given below: ➢ Large, Diverse and Scattered Market: Rural market in India is large, and scattered into a number of regions. There may be less number of shops available to market products. ➢ Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied with agriculture prosperity. In the event of a crop failure, the income of the rural masses is directly affected. 17➢ Standard of Living and Rising Disposable Income of the Rural Customers: It is known that majority of the rural population lives below poverty line and has low literacy rate, low per capita income, societal backwardness, low savings, etc. But the new tax structure, good monsoon, government regulation on pricing has created disposable incomes. Today the rural customer spends money to get value and is aware of the happening around him. ➢ Traditional Outlook: Villages develop slowly and have a traditional outlook. Change is a continuous process but most rural people accept change gradually. This is gradually changing due to literacy especially in the youth who have begun to change the outlook in the villages. ➢ Rising literacy levels: It is documented that approximately 45% of rural Indians are literate. Hence awareness has increased and the farmers are well-informed about the world around them. They are also educating themselves on the new technology around them and aspiring for a better lifestyle. ➢ Diverse Socioeconomic background: Due to dispersion of geographical areas and uneven land fertility, rural people have disparate socioeconomic background, which ultimately affects the rural market. ➢ Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution is a challenge to marketers who have to find innovative ways to market their products. As part of planned economic development, the government is making continuous efforts towards rural development. In this age of liberalization, privatization and globalization, rural market offers a big attraction to the marketers to explore markets that are untapped. Opportunity and Size of Rural Markets The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With approximately 128 million households, the rural population is nearly three times the urban. Due to the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991, 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. 18The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased. Rural markets account for almost half of the total markets for products such as TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder. The rural market for FMCG products is growing much faster than the urban counterpart. The market size has always been large. The size of this rural market is well over 700 million. All these individuals have needs, wants, desires and aspirations that anyone in Urban India has. The fulfillment of these needs was by an unbranded commodity till a few years back. Today, however, there is a rampant craving for the brand offering for a host of needs. The main area of concern key dilemma for MNCs eager to tap the large and fast- growing rural market is whether they can do so without hurting the company’s profit margins as capturing rural markets could be costly. Mr. Carlo Donati, Chairman and Managing-Director, Nestle, while admitting that his company’s product portfolio is essentially designed for urban consumers, cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive. “Any generalization” says Mr. Donati, “about rural India could be wrong and one should focus on high GDP growth areas, be it urban, semi-urban or rural.” Trends indicate that the rural markets are coming up in a big way and growing twice as fast as the urban, witnessing a rise in sales of typical urban kitchen gadgets such as refrigerators, mixer-grinders and pressure cookers. According to a National Council for Applied Economic Research (NCAER) study, there are as many ‘middle income and above’ households in the rural areas as there are in the urban areas. There are almost twice as many ‘lower middle income’ households in rural areas as in the urban areas. At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas. As per NCAER projections, the number of middle and high income households in rural India is expected to grow from 80 million to 111 million by 2007. 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 that of urban India. 19The study on ownership of goods indicates the same trend. It segments durables under three groups: (1) Necessary products - Transistors, wristwatch and bicycle, (2) Emerging products – Black and White TV and cassette recorder, (3) Lifestyle products – Colour TV and refrigerators. Marketers have to depend on rural India for the first two categories for growth and size. Even in lifestyle products, rural India will be significant over next five years. The price-sensitivity of a consumer in a village is something the marketers should be alive to. It is very difficult to establish a demand pattern in rural markets as the disposable income is dependent on monsoon. Apart from increasing the geographical width of their product distribution, the focus of marketers should be on the introduction of brands and develop strategies specific to rural consumers. Britannia Industries launched Tiger Biscuits especially for the rural market. It clearly paid dividend. Its share of the glucose biscuit market has increased from 7 per cent to 15 per cent. District Marketing Mr. Francis Xavier, Managing Director, Francis Kanoi Marketing Research, wants to see the urban-like village dweller as an urbanized person from the districts. The district becomes the basic geographical entity. The village then becomes a location or a suburb of a district. Since the urban-like populations in the villages are taken as a part of the district, they will represent the dominant part of the market in most of the districts. This will compel the kind of attention that it deserves. This perspective removes the complexities, heterogeneity, access and targetability that have hindered rural marketing initiatives. He feels that rural marketing requires every element of marketing including product, pricing, packaging, advertising, and media planning to have the rural customer as the target. This becomes applicable if we have districts marketing as a separate entity. Impact of Globalization Globalization will have its impact on rural India also. It will be slow. It will have its impact on target groups like farmers, youth and women. Farmers, today ‘keep in touch’ with the latest information and also look up what is happening globally. Price movements and 20products’ availability in the international market place seem to drive their local business strategies. On youth its impact is on knowledge and information and while on women it still depends on the socio-economic aspect. The marketers who understand the rural consumer and fine tune their strategy are sure to reap benefits in the coming years. The leadership in any product or service is linked to leadership in the rural India except for few lifestyle-based products, which depend on urban India mainly. There has been a substantial increase in the penetration of consumer durables in the Indian rural sector. One thirds of the premium luxury goods are now sold in the rural market. Two thirds of the middle-income households are now in the rural market. A study which compared the rural income and buying power established that if the rural income in India goes up by 1%, there would be a corresponding increase of about ` 10,000 crores in the buying power. On the other hand, the urban sector has showed saturation in the recent years. The fact remains that the rural market in India has great potential, which is just waiting to be tapped. Some have progressed on this road, but there seems to be a long way for marketers to go in order to derive and reap maximum benefits. Rural India is not as poor as it used to be a decade or so back. Things are looking up Roadblocks of Indian Rural Markets There are several roadblocks that make it difficult to progress in the rural market. Marketers encounter a number of problems like dealing with physical distribution, logistics, proper and effective deployment of sales force and effective marketing communication when they enter rural markets. The major problems are listed below. 1. Standard of Living The number of people below the poverty line is more in rural markets. Thus the market is also underdeveloped and marketing strategies have to be different from those used in urban marketing. 2. Low Literacy Levels The low literacy levels in rural areas leads to a problem of communication. Print media has less utility compared to the other media of communication. 213. Low Per Capita Income Agriculture is the main source of income and hence spending capacity depends upon the agriculture produce. Demand may not be stable or regular. 4. Transportation and Warehousing Transportation is one of the biggest challenges in rural markets. As far as road transportation is concerned, about 50% of Indian villages are connected by roads. However, the rest of the rural markets do not even have a proper road linkage which makes physical distribution a tough task. Many villages are located in hilly terrains that make it difficult to connect them through roads. Most marketers use tractors or bullock carts in rural areas to distribute their products. Warehousing is another major problem in rural areas, as there is hardly any organized agency to look after the storage issue. The services rendered by central warehousing corporation and state warehousing corporations are limited only to urban and suburban areas. 5. Ineffective Distribution Channels The distribution chain is not very well organized and requires a large number of intermediaries, which in turn increases the cost and creates administrative problems. Due to lack of proper infrastructure, manufacturers are reluctant to open outlets in these areas. They are mainly dependent on dealers, who are not easily available for rural areas. This is a challenge to the marketers. 6. Many Languages and Diversity in Culture Factors like cultural congruence, different behavior and language of the respective areas make it difficult to handle the customers. Traits among the sales force are required to match the various requirements of these specific areas. 7. Lack of Effective Communication System Quick communication is the need of the hour for smooth conduct of business, but it continues to be a far cry in rural areas due to lack of communication facilities like telegraph and telecommunication systems etc. 22

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