1 rural quotes the future lies with those companies who see the “poor” as their customers. ck...

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Rural Quotes

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

CK Prahalad to Indian CEO's, Jan 2000.

To get rich, sell to the “poor”.Pradeep Kashyap.

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Lecture Plan

• Course Plan• Nature of Assignments• Rural Marketing – Issues,

Opportunities & Challenges

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RURAL MARKETING

Course Plan

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Rural Marketing – Course Plan Details

Issues, Opportunities & Challenges Rural Marketing Environment

Defining Rural India Evolution of Rural Marketing Rural Market Structure Size of Rural market

The Rural Economic Scenario Rural Economic Structure Incomes & Consumption Physical Infrastructure Marketing Infrastructure Commercial Infrastructure and Govt. policies

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Consumer Behaviour Cultural Factors Technological Factors Economic Factors Characteristics of the Rural Consumer Buying Behaviour Patterns Customer Relationship Management – and the Trade role

Rural Market Research Planning Rural Research Field Procedures & Rural realities Understanding the Rural Market Research Industry

Segmenting, Targeting & Positioning Demographic/Psychographic & Behavioural Segmentation Targeted/Differentiated Marketing Identifying/Selecting/Developing & Communicating the

positioning concept

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Product Strategy Product Concepts & Classification Rural Product Categories New Product Development Consumer adoption process The Role of Fakes

Pricing Strategy Pricing Influences Pricing Strategies Role of Retailer & Schemes/Margins

Distribution Strategy Coverage challenges & dilemma Channels of Distribution Existing Distribution Models Emerging Distribution Models

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Communication Strategy Challenges in Rural Communication The Communication Process Developing Effective Communication Rural Media Role of Innovative Media

Innovation in Rural Markets Role of Innovation in Rural India IT Interventions Emergence of Organised Retailing

Financial Services in Rural India Need for Credit Sources of Credit Other Financial Products

Future of Rural Marketing

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Rural Marketing – Nature of Assignments

Case Studies from Indian experiences

Visits to different rural markets, haats & melas

Interviewing Rural Practitioners Conducting Rural Market Research Attachments with strong rural

marketing organisations

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RURAL MARKETINGIssues, Opportunities &

Challenges

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Rural Market Has Arrived

742 million people Rural consumption is bigger than urban

FMCG's 53% Durables 59% Source: NCAER

Estimated annual size of the rural market FMCG Rs 65,000 Crore Durables Rs 5,000 Crore Agri-inputs (incl. tractors) Rs 45,000 Crore 2 / 4 wheelers Rs 8,000 Crore Total Rs 1,23,000

CroreSource: Francis Kanoi

Latest McKinsey Report estimates that by 2020, Rural Consumer MarketWill be worth Rs. 250,000 crores

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Some impressive facts about the rural sector. In the first 6 months of 2005-06, rural India

bought 30 lakh Life Insurance policies Of two million BSNL mobile connections, 50% in

small towns/villages. Of the six lakh villages, 5.40 lakh have a Village

Public Telephone (VPT). Additionally there are 2 lakh PCOs – 90% of villages covered.

By end 2007, there are likely to be 11.05 crore rural phone subscribers

For every Re.1/- per quintal increase in the Procurement Price for grains, Rs. 170 crores added to rural economy

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55.6 million Kisan Credit Cards issued (against 60 million credit-plus-debit cards in urban) resulting in tremendous liquidity.

Of HHs earning Rs. 20 lakh + per year, 34% in rural India. Also 15% of India’s crorepatis

42 million rural HHs availing banking services in comparison to 27 million urban HHs.

Investment in formal savings instruments: 6.6 million HHs in rural and and 6.7 million in urban

Over 50% of HLL’s Rs. 11700 crore sales turnover is from rural markets

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0.8 1.6

26.8

54.7

25.0

20.9

2001 - 02

41.3

63.3

14.7

12.2

2006-7

Very Rich

Consuming Class

Climbers

Aspirants

Destitutes

RURAL TARGET MARKETS - CLASSIFICATION

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Rural Income Dispersal Projection

Consumer Class

AnnualIncome

1995-96 2006-07

Very RichAbove Rs 215,000

0.3 0.9

Consuming Class

Rs 45,001- 215,000

13.5 25.0

ClimbersRs 22,001-

45,00031.6 49.0

AspirantsRs 16,001 -

22,00031.2 14.0

DestitutesRs 16,000 &

Below23.4 11.1

Total 100.0 100.0

> Projections Based on 7.2% GDP GrowthConsuming class households in rural nearly equal to urban. Rural Purchasing Power higher due to lower expenses on food, shelter, education & health

All figures in %

Source : NCAER Indian Market Demographics Report

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Issues In Rural

Distribution Understanding the rural consumer Communication Poor infrastructure

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Distribution of Villages

Source: Census 2001

Population No of villages % of total villages

Less than 200 92,541 15.6

200-500 127,054 21.4

501-1000 144,817 24.4

1001-2000 129,662 21.9

2001-5000 80,313 13.5

5001-10000 18,758 3.2

Total no of villages

593,154* 100.0

17% of villages

account for 50% of rural population &

60% rural wealth

Hardly any shops in these 2.2 lac villages

*Inhabited villages, total number of villages is 638, 691

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Distribution of Towns in India

Town Class Population No of towns % of total towns

Class I 1 lac and above 423* 8.2

Class II 50,000-99,999 498 9.6

Class III 20,000- 49,999 1386 26.9

Class IV 10,000- 19,999 1560 30.2

Class V 5,000- 9,999 1057 20.5

Class VI less than 5000 237 4.6

Total no of towns

5161 100.0

Source: Census 2001

90 % of durables

purchased by rural

people are from these 1900 towns

*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354

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Rural Consumer Insights

Rural India buys Products more often (mostly weekly). Buys small packs, low unit price more

important than economy. Distribution and pricing are the

mantras to success in rural India.

Even expensive brands like Close up, Marie biscuits, Clinic shampoo are doing well because of deep distribution.

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Rural Consumer Insights

In rural India, brands rarely fight with each other, they just have to be present at the right place.

Many brands are building strong rural base without much advertising support. Chik shampoo, second largest shampoo brand. Ghadi detergent, second largest brand.

Fewer brand choices in rural : number of FMCG brands in rural are half that of urban.

Buy “value for money”, not “cheap” products

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MYTH 1: Rural Market Is a Homogeneous Mass

REALITY Heterogeneous population

16 languages, 800+ dialects State wise variations in rural demographics

Literacy (Kerala 90%, Bihar 44%) Population below poverty line (Orissa 48%,

Punjab 6%)

Big Landlords

Traders,Small Farmers

Marginal Farmers

Laborers, Artisans

Source: Planning Commission, GoI

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MYTH 2: Disposable Income Is Low

REALITY Number of middle class HHs (annual income Rs

45,000- 2,15,000)Rural 27.4 millionUrban 29.5 million

Per Capita Annual Income (not Purchasing Power)Rural Rs 9,481 Urban Rs 19,407 Total Rs 12,128 Source: NCAER

Rural incomes CAGR now estimated @ 15% vs 10% in urban

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MYTH 3: Individuals Decide About Purchases

REALITY

Decision making process is collective

Purchase process- influencer, decider, buyer, one who pays can all be different. So marketers must address brand message at several levels

Rural youth brings brand knowledge to HH

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Infrastructure Improving Rapidly

In 50 years only 40% villages connected by road, in next 10 years another 30%.

More than 90 % villages electrified, though only 44% rural homes have electric connections.

Rural telephone density has gone up by 300% in the last 10 years, every 1000+ pop is connected by STD.

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Media Reach Improving Rapidly

70% of R1,R2, R3 can be reached through mass media.

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21

41

26

53

70

SatelliteTV

Radio Press Cinema TV All Media

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Climbing Social Indicators

Between 1981 to 2001 Number of pucca houses doubled from 22% to

41% and kuccha houses halved (41% to 23%)

Percentage of Below the Poverty Line families declined from 46% to 27%

Rural Literacy level improved from 36% to 59%

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Opportunity & Challenges

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Marketing Opportunities

Low penetration rates in rural

% of rural HH

Durables Urban Rural Total CTV 30.4 4.8 12.1 Refrigerator 33.5 3.5 12.0 Mobile Phones 40.0 12.0 18.0

FMCGs Urban Rural Total Shampoo 66.3 35.2 44.2 Toothpaste 82.2 44.9 55.6

Source: NCAER

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Marketing Opportunities

R1 - 4% R2 - 11% R3 - 37% R4 - 48% Low rural consumption in FMCGs (rich HHs)

urban rural

Annual consumption Rs 13,000 Rs 9,400

Rural consumption volumes (R1+R2+R3) Toothpaste 88% Toothpowder 79% Shampoo 88%

So this half of the population consumes over 75% of FMCG

volumes

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Challenges in the Future

Reaching the product to remote rural locations and entering more rural homes (penetration)

Increasing rural incomes (market growth)

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Making effective use of the large available infrastructure Post offices 1,38,000 Haats (periodic markets) 42,000 Melas (exhibitions) 25,000 Mandis (agri markets) 7,000 Public distribution shops 3,80,000 Bank branches 32,000

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Using IT to transform markets ITCs e-choupal and other IT initiatives

(EID Parry, Amul dairy information system kiosk)

STD revolution/ mobile connectivity

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Proliferation of large format rural retail stores DSCL Haryali stores M & M Shubh Labh stores TATA/Rallis Kisan Kendras Escorts rural stores Warnabazaar, Maharashtra (annual

sale Rs 120 crore)

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An interesting Option - RURBAN

Describes the clusters of migrants from rural to urban geographies

Rural psychography living in an Urban demography

Strong purchasing power because despite lower incomes, low “wasteful” expenditures

Become carriers and promoters of brands into rural geographies on their annual trip back home

1 rural quotes the future lies with those companies who see the “poor” as their customers. ck...

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