UNDERSTANDING THE RURAL MARKETS

“To get rich sell to the poor”- pradeep kashyap

An Overview

The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc.

Few Facts

70 % of India's population lives in 627000 villages in rural areas. According to the NCAER study, 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.
  
• Middle and high-income households in rural India are 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.

Opportunity

The above figures are a clear indication that the rural markets offer the great potential to help the India Inc which has reached the plateau of their business curve in urban India to bank upon the volume-driven growth.

The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban.

As a result of 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.

The 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.

The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart.

Features of Indian Rural Markets

• Large and Scattered market: The rural market of India is large and scattered in the sense that it consists of over 63 crore consumers from 5,70,000 villages spread throughout the country.

• Major income from agriculture: Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity.

• Large population: Almost 70% Indians still live in the rural markets.

• Growing purchasing power:With the increasing levels of income and so many reforms by the government and huge agricultural production the purchasing power of the rural mass has grown substantially the number of middle class in Rural till 2008 was 27.4 million and in the urban markets was29.5 million.

• Increasing aspiration levels:With the advent of television and FM radio information is flowing in the rural markets. The rural consumer also wants to be like the households shown in the television serials.

• Life style changes:Rural people have become very conscious about their outfits; they respond to fashion, they want to be like the urban consumers. Branded FMCG accounts for 80% of rural sales

• Remoteness is no longer a problem:With the infrastructural reforms by government almost 60% of rural villages have proper roads and connectivity and the figure is increasing day by day.

• In addition, an estimated induction of Rs 140 billion in the rural sector through the government's rural development schemes in the Seventh Plan and about Rs 300 billion in the Eighth Plan is also believed to have significantly contributed to the rapid growth in demand. The high incomes combined with low cost of living in the villages have meant more money to spend. And with the market providing them options, tastes are also changing.

Problems in the Booming Rural Marketing

Although the rural market does offer a vast untapped potential, it should also be recognized that it is not that easy to operate in rural market because of several problems. Rural marketing is thus a time consuming affair and requires considerable investments in terms of evolving appropriate strategies with a view to tackle the problems.

The major problems faced are:

• Underdeveloped People and Underdeveloped Markets: The number of people below poverty line has not decreased in any appreciable manner. Thus underdeveloped people and consequently underdeveloped market by and large characterize the rural markets. Vast majorities of the rural people are tradition bound, fatalistic and believe in old customs, traditions, habits, taboos and practices.

• Media for Rural Communication: Among the mass media at some point of time in the late 50's and 60's radio was considered to be a potential medium for communication to the rural people. Another mass media is television and cinemas. Statistics indicate that the rural areas account for hardly 2000 to 3500 mobile theatres, which is far less when compared to the number of villages.

• Many Languages and Dialects: The number of languages and dialects vary widely from state to state, region to region and probably from district to district. The messages have to be delivered in the local languages and dialects change within 50 to 100 Kms.. Even though the number of recognized languages is only 16, the dialects are estimated to be around 850.

• Dispersed Market: Rural areas are scattered and it is next to impossible to ensure the availability of a brand all over the country. Seven Indian states account for 76% of the country's rural retail outlets, the total number of which is placed at around 3.7 million. Advertising in such a highly heterogeneous market, which is widely spread, is very expensive.

• Low Per Capita Income: Even though about 33-35% of gross domestic product is generated in the rural areas it is shared by 74% of the population. Hence the per capita incomes are low compared to the urban areas.

• Low Levels of Literacy: The literacy rate is low in rural areas as compared to urban areas. This again leads to problem of communication for promotion purposes. Print medium becomes ineffective and to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy.

• Prevalence of spurious brands and seasonal demand: For any branded product there are a multitude of 'local variants', which are cheaper, and, therefore, more desirable to villagers. Demand is at the peak during the time of agricultural produce.

• Different way of thinking: There is a vast difference in the lifestyles of the people. The kind of choices of brands that an urban customer enjoys is different from the choices available to the rural customer. The rural customer usually has 2 or 3 brands to choose from whereas the urban one has multiple choices. The difference is also in the way of thinking. The rural customer has a fairly simple thinking as compared to the urban counterpart.

Hence one needs to be very careful while entering the rural markets. There have been some companies which have entered the rural markets with successful models which have proved to be very successful like ITC’s e-choupal, HUL’s project shakti; Mahindra’s subh labh. There has been a recent growth in targeting the rural markets but one should not take rural people for granted; illiteracy does not mean that they are fools. Rural consumer is more careful and seeks full information about the product before buying it. Rural consumer behavior is very complex as compared to the urban and the companies need to be really careful while studying it, every detail needs to be accounted to.

Rural markets are still highly untapped and if the companies target them well they can reap huge profits.

“The future lies with those companies who see the poor as their customers “

Successful Mantra in Rural “Business Mind, Social Heart”