The Rural Consumer: Meaning and Characteristics

Rural consumers go to their nearest cities when they have to buy products like tractors, televisions, motorcycles, etc. For most villages, the nearest cities can be as far as 50 kms away. Most of these cities are district towns. Rural consumers go to the ‘local market’ which is normally around 5-10 km. from their villages to buy the daily household requirements like sugar, tea, vegetable oil, etc.

Some family member, more likely the eldest male member, may be going to this local market even daily and buying requirements of the family. Rural families buy their products as they get exhausted and do not buy all their requirements once a month or fortnight as urban consumers do. There is no scheduled, periodic purchasing of household requirements in rural markets.

A product is bought when it is required. So when a product is not available to a rural consumer when it is required, he will do without it and the company loses the sale of the product that the rural consumer would have consumed.

It is important that the products are available locally so that the rural consumer can buy them conveniently when need for them arises. It is not uncommon to send a youngster to buy tea, sugar and biscuits when a guest arrives. It is not even uncommon to rush a child to buy cooking oil when the lady of the house discovers that she has run out of cooking oil after she has put the vegetables in the frying pan.

These incidents are not embarrassing for rural consumers. They just postpone purchasing for as long as they can. To be able to cater to this sort of unpredictable but urgent demand, products have to be made available at the village level. It is not enough to make products available at the local market.

Most companies feel that it is not economically viable to have a retailer in each village. Interested companies will have to promote a common retailer in one village. The chosen retailer will stock practically everything that the rural consumer of the village may require. He will stock fast moving consumer goods, fertilizers, cement, diesel, products needed for marriage and other ceremonies, all types of food items, gas cylinders, etc.

The idea is that if all these products are sold by one retailer, it will have sufficient volumes and the retailer would be interested in making adequate investments. Running a rural retail operation is not very costly. The retailer is a resident of the village and his house is the shop. He need not build any extra space for the shop.

Since the shop is in the house, all the family members help in running the shop as and when they are available. The shop can be open for long hours without causing much stress to the retailer. And since the retailer is based in the village, he will not seek higher margins as he may be having some other means of income too. But the companies whose products will be sold will have to manage the back-end of the rural retail operations.

Rural retailing has so far failed because the rural retailer bought goods from the local market and sold them in the shop in his village. Therefore he had to sell the products at a price higher than what they were being sold in the local markets. And since the local market was easily accessible to the rural consumers, they preferred to buy from the local market than from the retailer in the village. This perception of the products sold at rural retail shop as being costly has to be removed.

The companies will have to combine their supplies and transport them in a common vehicle to a rural retailer and make him competitive in comparison to retailers in the local market. If companies co-operate among themselves to supply their items to the rural retailer efficiently, rural retailing will be economically viable and will be a very important tool to get rural consumers to buy more frequently, and more variety of products. Rural retailing is imperative if companies want to create a consumerist rural society.

There is an alternative to rural retailing. Door-to-door selling or some version of it can be employed. Retailers at the local market can employ door-to-door salespeople. These salespeople can move on bicycles and should agree to accept payment in grains. Door-to-door selling is very effective in overcoming consumers’ reluctance to buy. Consumers keep postponing going to a retail store because they do not want to spend money but when a door-to-door salesperson arrives, they are likely to succumb to his offerings.

Characteristics of rural consumer

  1. Reference Group

Typically, in a rural area the reference groups are primary health workers, doctors, teachers and panchayat members, the village trader or the grocer, commonly called ‘Baniya’ or ‘Mahajan’ are an important influencer in the decision making of rural customer. A marketer needs to be aware of these influences that can effect changes in the rural customer’s consumption patterns.

  1. Occupation

Consumption patterns differ according to income levels. Typically, in a rural area the principal occupation is farming, trading, crafts, plumbing, electric works, primary health workers and teachers.

Agriculture and related activities continue to be the main occupation for majority of the rural population. Land is the major source of income for about 77% of the population.

  1. Media Habits

Rural people are fond of music and folklore. In rural areas a popular form of entertainment is the ‘Tamasha’ and ‘Nautanki’. And then there are television, radio and video films.

  1. Rural Electrification

The main objective is to provide electricity for agricultural operations and for small industries in rural areas. About 5 lakh villages (77%) have electric supply and this has increased the demand for electric supply and this has increased the demand for electric motors, pumps and agricultural machinery.

  1. Other Variables

Culture, language, religion, caste and social customs are some other important variables for profiling a rural customer. Rural consumers have a lot of inhibitions and tend to be rigid in their behavior. A company has to take intense care while targeting them.

Factors Influencing Rural Purchase Decision

India in last twenty years showed a remarkable shift in its economic, social and technological environment. By the liberalization and privatization policies and the subsequent phenomenon of globalization have led to huge inflow of foreign investments and entry of large MNCs in India.

Many domestic Indian organizations of the field those in ICT, automobile, textile and engineering products have expanded their operations into overseas markets. As products and markets are turning global, organizations are facing competition both in the domestic as well as in the international markets.

Task of marketers has become more challenging due to shift in the demographic profile and demands of consumers. Organizations of industries such as FMCG, telecom, insurance, financial services, consumer durable and automobiles are nowadays employing innovative marketing practices for their survival and also to increase their market share.

These organizations are now shifting their focus from the saturated metros and tier-I cities to the rural and semi urban towns, to increase their revenues and market. But rural areas have their own limitations in terms of number of villages with low population density, accessibility, infrastructure, telecommunication network, illiteracy, social and cultural backwardness and low income.

Besides this almost seventy percent of Indian population stays in the rural areas and the revenue generated by the agricultural sector in the total GDP is less than seventeen percent. The maximum of rural population has comparatively low income as well as consumption rate compared to their urban areas. Still yet they have aspirations and wants for most of the urban products.

The factors that have created rising demands among rural buyers are increase in literacy levels, migration to urban sectors, growth in media and telecommunication, availability of bank credit schemes, globalization of market, low price technology products (such as television, mobile, fridge, camera, etc.), government sponsored employment generation, and tax concessions and loan waivers.

Rural people nowadays are no longer ignorant and resigned to their fate. Today a rural buyer not only has purchasing power but he is also better informed about the price and demand of the products for which the money is being spent. They are looking for better quality, durability and multi utility of the products and services offered in the market to them.

Socio-cultural Factors

Socio-cultural environment is an important part of environment — culture, traditions, beliefs, values and lifestyle of the people within a limitation of society constitute the socio-cultural environment.

The following elements play a big role in the decision making stage to a large extent as to what the people will buy and how they will consume.

Culture

Culture is the combination of factors like religion, language, education and upbringing. Accurate information on the consumption habits, lifestyle and buying behavior of the rural people can be obtained through a survey of the socio-cultural environment.

Cultural shifts carry the marketing opportunity as well as threats and also carry the cultural dynamics, the needs and feelings of rural people which need to be understood.

Social Class

Social class is one of the main concepts in socio-cultural environment. A society consists of different social classes and all social classes are determined by income, occupation, literacy level etc. of its members. Each class has its own class values according to lifestyle, behavior etc. These values have a strong consumption pattern and paying behavior of the member of the class.

Social and Cultural Environment

The society and polity across the country varies between different religions, castes and linguistic groups. Common socio-cultural behavior has been mapped as distinct sociocultural regions, which may be spread across political boundaries. The influence of social practices shows itself in consumer preference for product features, product size, shape and color.

The source of information also gets influenced by social practices. Along with cultural dynamics, the needs feelings of rural people also need to be understood. Marketers would first understand this and then design and launch products accordingly. For example, Cadbury’s has launched Chocobix, a chocolate- flavored biscuit, on the basis of research theory and understanding that rural mothers will always opt for biscuits instead chocolates for their children.

Caste System

Indian Society had a scheme of social gradation, with the Brahmins at the head of the hierarchy, followed by the Kshatriyas, the Vaishya’s and the Shudras at the bottom. The castes in themselves have sub-castes which are claiming social supremacy over the other.

Marketers have to be sensitive towards the caste systems and accordingly products in rural areas. While developing advertisements, brand communication and promotion plans, marketers should have to be sensitive to ensure relevance of characters and message which doesn’t affect any caste system.

Occupation

Occupational pattern of rural people also has an impact on the nature of income generation, which will in turn affect the expenditure pattern. Purchase behavior of the rural consumers depends upon the nature of occupation and the consistency in the generation of income.

Literacy Level

The literacy level of rural people has a considerable impact on the marketing strategies to be adopted by the marketing team especially in communication with the rural people. Higher the level of literacy, the easier it becomes for companies to penetrate into rural areas.

Land Distribution & Use

One of the main obstacles for marketers to exploit the rural market potential has been the largeness of rural markets in terms of the areas it covered. It is much easier to divide it according to the needs of the urban population because of concentration, but it is very difficult in the case of rural market because of their widespread nature.

Rural Demand: Nature

One of the key endeavours of the Modi government has been to double farm incomes by 2022. In that direction, the government announced a farmer friendly budget in 2017 which assured minimum support prices (MSP) at 150% of cost. The intent was twofold. Firstly, this would increase farm incomes and secondly, it would create demand for seeds, fertilizers, tractors and agrochemicals, triggering a major demand cycle in the rural areas. However, farmer stress appears to have continued and rural consumption has fallen.

The importance of rural and semi-urban consumption was highlighted when the CFO of Parle hinted that the company may have to cut nearly 8,000 jobs due to weak demand. Now, Parle sells biscuits at the market entry point and has a strong presence in the rural and semi-urban areas. This was a clear indication that rural demand was faltering to the extent that even a biscuit packet at Rs5 was not finding willing buyers. That brings us to a much bigger question; why is rural demand so critical for India?

Rural India is all about jobs and consumption

Agriculture, which is the predominant occupation of rural India, is still restricted to just 15% of GDP in terms of overall contribution. But it directly and indirectly employs more than 70% of the all-India workface. That share would be a lot higher in rural areas. In other words, the rural household economy and demand generation is largely farm dependent.

Why has rural demand slowed in the last few years?

The slowdown in rural demand has seen a gradual aggravation in the last five years and that has been driven by a variety of reasons.

In the last five years, only 2016 was a year of above average monsoons. The remaining years saw average or below-average monsoons. Years like 2019 may have seen adequate rainfall but the onset of monsoons was delayed impacting the sowing season.

Demonetization was one of the major reasons for the slowdown in rural consumption. Rural India is still largely cash driven and that took its toll on rural businesses, rural transactions and rural spending power. However, with currency levels coming back to pre-demonetization levels, that should get sorted out.

GST implementation in July 2017 also played its part in slowing rural consumption. The stringent compliance requirements put tremendous pressure on small and medium sized businesses putting many of them out of business. That did impact demand.

Why rural demand matters to Indian economy?

In an interesting study conducted by CSFB, it was found that the willingness of the Indian consumer to postpone purchases of consumer durables had touched a high of 1 year. Effectively, consumers were willing to put off purchase of durables like white goods, two wheelers, entry level cars, etc. by up to one year as they were not confident of the economic conditions. The liquidity crunch in the aftermath of the NBFC crisis has also created problems for rural demand as NBFCs and MFIs were virtually acting as the last mile delivery agents for banks. That has hit fund flows into rural areas in a big way.

There are 3 principal reasons why this rural slowdown impacts consumption in general.

  1. Rural India accounts for 37% of overall FMCG spend and, according to Nielsen, this is likely to get closer to 50% in the next 5 years. That is a very large chunk of the consumption market and that explains why consumption stories are under strain.
  2. Rural sector consumption demand for FMCG products has traditionally grown at 3-5% more than the urban demand growth and that differential has been the key to creating alpha for the FMCG companies
  3. Finally, the high marginally propensity to consume among the rural population makes it an important and lucrative consumption market.

Rural Marketing:

The main reason why the companies are focusing on rural market and developing effective strategies is to tap the market potential, that can be identified as follows:

  1. Large and scattered population:

According to the 2001 census, 740 million Indians forming 70 per cent of India’s population live in rural areas. The rate of increase in rural population is also greater than that of urban population. The rural population is scattered in over 6 lakhs villages. The rural population is highly scattered, but holds a big promise for the marketers.

  1. Higher purchasing capacity:

Purchasing power of the rural people is on rise. Marketers have real­ized the potential of rural markets, and thus are expanding their operations in rural India. In recent years, rural markets have acquired significance in countries like China and India, as the overall growth of the economy has resulted into substantial increase in purchasing power of rural communities.

  1. Market growth:

The rural market is growing steadily over the years. Demand for traditional products such as bicycles, mopeds and agricultural inputs; branded products such as toothpaste, tea, soaps and other FMCGs; and consumer durables such as refrigerators, TV and washing machines has also grown over the years.

  1. Development of infrastructure:

There is development of infrastructure facilities such as con­struction of roads and transportation, communication network, rural electrification and public service projects in rural India, which has increased the scope of rural marketing.

  1. Low standard of living:

The standard of living of rural areas is low and rural consumers have diverse socio-economic backwardness. This is different in different parts of the country. A con­sumer in a village area has a low standard of living because of low literacy, low per capita income, social backwardness and low savings.

  1. Traditional outlook:

The rural consumer values old customs and traditions. They do not prefer changes. Gradually, the rural population is changing its demand pattern, and there is demand for branded products in villages.

  1. Marketing mix:

The urban products cannot be dumped on rural population; separate sets of prod­ucts are designed for rural consumers to suit the rural demands. The marketing mix elements are to be adjusted according to the requirements of the rural consumers.

Types of Requirements of Rural Demand

Rural marketing in Indian economy can be classified mostly under the following two categories:

  • The markets for consumer durables consists of both durable and non-durable goods
  • The markets for agricultural products which include fertilizers, pesticides, seeds, and so on.

Rural marketing in India is sometimes mistaken by people who think rural marketing is all only about agricultural marketing. Rural marketing determines the carrier of business activities from urban sectors to the rural regions as well as the marketing of various products manufactured by the non-agricultural workers from rural to urban areas.

The following are the characteristics of rural markets:

  • Here agriculture is first and also the main source of income.
  • This income is seasonal in nature and fluctuates as it depends on crop production.
  • Though it is large, the rural market is geographically scattered.
  • It shows religious, cultural and economic disparities.
  • The market is not much developed, because the people here exercise adequate purchasing power.
  • These markets have their orientation in agriculture, with poor standard of living, low per capital income and backwardness.
  • It shows sharper and different regional preferences with distinct predictions, habit patterns and behavioral aspects.
  • Rural marketing process is an outcome of the general rural development process initiation and management of social and economic change in the rural sector is the core of the rural marketing process.

Challenges in Rural Market

There are various challenges that hinder the progress of rural market. Marketers face a number of problems like physical distribution, logistics, no proper and effective sales force and no effective marketing communication when they enter into the business of rural markets.

The following are the major problems faced in the rural markets:

  1. Standard of Living

A large part of the population in rural areas lies below poverty line. Thus the rural market is also underdeveloped and the marketing strategies have to be different from the strategies used in urban marketing.

  1. Low literacy levels

The low literacy levels in rural areas leads to problem in communication with the market and the print media has less utility as compared to the other media of communication.

  1. Low per Capita Income

In rural market, agriculture is the main source of income and hence expense capacity depends upon the agricultural produce. Demand may or may not be stable.

  1. Transportation and Warehousing

Transportation and supply chain management are the biggest challenges in rural markets. As far as by road transportation is concerned, about 50% of Indian villages are connected by roads to the nearest big cities. The rest of the rural markets do not have proper road linkage to other cities which causes problems in physical distribution.

Many villages are located in hilly remote areas which is difficult to connect with them through roads. Warehousing is another major problem in rural areas, as there you will hardly get any organized agency to look after the storage issue. The services given by central warehousing corporation and state warehousing corporations are limited only to urban and suburban areas.

  1. Ineffective Distribution Channels

The distribution chain is not organized and also requires a large number of intermediates, which in return increases the cost. Due to lack of appropriate infrastructure, manufacturers are giving back steps to open outlets in these areas. That is why they need to dependent on dealers, who are rarely available for rural area which increases the challenges for marketers.

  1. Many Languages and Diversity in Culture

Factors like different behavior and language of every respective area increases difficulties to handle the customers. The sales force is required to match the various requirements of the specific areas according to their culture.

  1. Lack of Communication System

Quick communications facilities like computer, internet and telecommunication systems etc. are the need of rural market which is a biggest problem due to lack of availability. The literacy level in the rural areas is quite low and consumer’s behavior is kind of traditional, which is a cause of problem for effective communication.

  1. Dummy Brands

Cost is an important factor for rural consumers which determine purchasing decision in rural areas. A lot of fake brands or products that look similar to the original one are available, providing low cost options to the rural consumers. Most of the time, the rural consumers may not be aware of the difference due to illiteracy.

  1. Seasonal Demand

Demand may be seasonal in rural market due to dependency on seasonal production of agricultural products and the income due to those products. Harvest season might see an increase in disposable income and hence more purchasing power.

Opportunities in Rural Market

To solve the problems of rural market and rural marketing in India, the following points need to be considered by marketers:

  1. Physical Distribution and transportation

Regarding the problems of physical distribution, the marketers may have stockiest/ clearing-cum-forwarding (C&F) agents at strategic location for facilitate the physical distribution for its products in the rural market. The important advantage of this scheme is that the costs of physical distribution can be shared between the companies and stockiest.

The different modes of transportation based on availability of tracks should also be beneficial to the companies. Even to this day, bullock-cart plays a very vital role in physical distribution where the roads are not available. Some of the leading MNCs use delivery vans in rural areas. These delivery vans take the products to the retail shops in every corner of the rural market and enable the companies to establish direct sales contact with majority of the rural consumers. This in turn helps in sales promotion.

In rural market, agriculture is the main source of income and hence expense capacity depends upon the agricultural produce. Demand may or may not be stable.

  1. Rural Market and Retail Sales Outlets

The rural market consists of a number of retail sales outlets along with low price shops under the public distribution system. The government should take initiatives to encourage private shopkeepers and cooperative stores to come forward and establish their business in rural areas.

Fertilizer companies should open their outlets for proper distribution of fertilizer to the farmers. In addition, the companies dealing in consumer goods can also apply this model and appoint a number of retailers in rural market and attach them to the stockiest who distributes the goods to the retailers as per the potential demand of the market. This approach will help the companies penetrate into the interior areas of the rural markets.

  1. Sales Force Management

To solve the problems of sales force management, the company takes due care in the recruitment and selection of sales people because the traits they require are different from that of the urban sales persons. These sales people must be fluent in the local/regional language and also have patience to deal with rural consumers.

Controlling and operating of such a large and scattered sales force, supervising them in sales calls, guiding and attending to their official and personal problems, and motivating them for getting better results should be an exciting and challenging task for the sales manager. Thus, the people operating in rural areas should have an inherent zeal to serve the rural peoples and to connect with them.

  1. Marketing Communication

For marketing communication in rural areas, the companies should use organized forms of media like TV, Radio, cinema and POP (point of purchase) advertising. In recent times, television is gaining popularity in rural areas but due to lack of supply of electricity, radio is performing quite better.

The rural people need demonstration, short-feature films and direct advertisement films that combine knowledge and perform as better rural marketing communication. The companies now also use audiovisual publicity vans that sell the products with promotion campaign directly. Companies can also organize village fairs, drama shows, and group meetings to convince the rural consumers about the products and services.

For the rural markets, those sales people are preferred for selection who are willing to work in rural areas like Sarpanch, Pradhan’s and other elderly persons. Marketers can also approach them to propagate their messages, because these persons could be effective communicators within the rural peoples.

  1. Demand Base and Size

Indian rural market has a vast demand base and size. Rural marketing involves the process of developing, promoting, distributing rural area specific products and service exchange between rural and urban market which satisfies customer demand and also achieves organizational goals. As a part of development program economic development is concern, government is making continuous efforts towards rural development.

Hierarchy of Markets and Rural Market Index

Markets are defined by their boundaries, what is in and what is outside the market, and markets may be found within markets. In understanding your market, a whole set of nested markets may be analyzed to ensure these are appropriate and to make decisions about the contents of each market.

  1. Population

The largest possible market is the entire population of the world. Of course no company can serve everyone (although some, such as Coca-Cola, make a pretty good effort at this).

  1. Potential market

The potential market is everyone who could use the products and services that you provide. If you sell food and drink, this market is close to the population. If you sell specialist machine tools, then your potential market is much smaller, although still global.

A common problem in identifying markets is that companies miss the potential market, for example in not considering customers overseas or people who may put the products to different uses as compared with traditional customers.

  1. Available market

The available market is that which you can reach, or where it is cost-effective to reach. A typical example of non-available markets are those in foreign countries where different languages and customs barriers make these too difficult to serve. Retail stores are usually constrained to local people and passing traffic.

Other factors can limit market availability for example fresh food which does not travel well will limit the geography which can be served.

Small companies have traditionally had very limited available markets, due simply to limited marketing budgets. The advent of the internet has been very helpful here as any website is available around the world.

  1. Target market

The target market is that which a company seeks to serve and is a subset of the available market. Selection of this market is a key task as there can be significant costs in reaching potential customers.

A good target market is one which will be sufficiently profitable, and where:

  • Potential customers will want to buy our products and services.
  • They will spend enough money to cover our marketing costs to them as well as production and shipment costs.
  • The overall profit margin makes it worth our while to market to them.
  • There is not a preferable target market elsewhere.
  1. Served market

Within the target market, there is a served market of actual customers who have already bought products and services. With real customers, you can get to understand them far more than the target market, getting feedback on their experience of learning and using the product as well as any associated experience, from buying to disposal.

When you have actual customers you can conduct a more detailed research process, asking them all kinds of questions and even going out to watch them use your products in their natural environments. Such close observation can be extremely valuable for improving future products and services.

  1. Core market

When a customer has bought from you, this hopefully results in them buying the same thing again, buying other things and recommending you to their friends.

Understanding these factors can help you identify your core market of valuable customers who are most profitable and who should probably be nurtured more than the occasional buyer.

Rural Market Index

Rural Market Ratings (MRMR)

The MRMR is a useful marketing tool and a multimedia guide to rural India. It has been devel­oped by the Mudra Institute of Communications Ahmedabad (MICA) in association with ML Infomap Pvt. Ltd., New Delhi. The rural market index indicates the rural market potential of all the districts of India, analyzed on 42 variables. Using digital mapping technology, it pre­sents maps of all districts, shaded to indicate the level of market potential.

Managers can thus graphically see areas with different patterns of market potential, along with related data such as bank loans, demographics, infrastructure, and so on. The tool also gives location of ‘haats’, or actual rural markets. By clicking on a haat, one gets to know the days of the week the market takes place. Routing can be done through the road and railway map of India, which is incorporated in the software.

Income and Savings

 The 68th round survey on level and pattern of consumption expenditure was conducted between July 2011 and June 2012 by the NSSO. The household MPCE shows that the average MPCE was around Rs. 1,430 for rural India and about Rs. 2,630 for urban India. Thus, the average urban MPCE was about 84 percent higher than the average rural MPCE for the country as a whole, although there were wide variations in this differential across states.

An analysis in Mint (2014) shows that:

(i) Low Levels of Consumption

For rural India, the median MPCE was Rs. 1,198. Only about 10 percent of the rural population reported household MPCE above Rs. 2,296 and only 5 percent reported MPCE above Rs. 2,886. While average MPCE was Rs. 1,054, the median rural MPCE was Rs. 895, signifying half the rural population belonged to house­holds with consumption expenditure below Rs. 30 per day. For urban India, the median MPCE was Rs. 2,019. Only about 10 percent of the urban population reported household MPCE above Rs. 4,610 and only 5 percent reported MPCE above Rs. 6,383.

(ii) Food Accounts for Half the Expenditure

For the average rural Indian, food accounted for 52.9 percent of the value of consumption during 2011-12. This included 10.8 percent for cereals and cereal substitutes, 8 percent for milk and milk products, 7.9 percent on beverages, refreshments and processed food and 6.6 percent on vegeta­bles. Among non-food item categories, fuel and light for household purposes accounted for 8 percent, clothing and footwear for 7 percent, medical expenses for 6.7 percent, education for 3.5 percent, conveyance for 4.2 percent, other consumer services for 4 percent and consumer durables for 4.5 percent. For the average urban Indian, 42.6 percent of the value of household consumption was accounted for by food.

(iii) Inequalities have Risen:

The data shows that the per capita expenditure level of the urban consumer is now 91 percent higher than his rural counterpart, compared with 80 percent in the earlier 61st round of the survey conducted in 2004-05.

(iv) Consumption Expenditures are Rising

The survey shows an increase in consump­tion power across the country. The rural per capita consumption has grown 6 percent in 2009-10 against 1.2 percent in 2004-05. Similarly, urban per capita consumption has risen 6.8 percent compared to 2.9 percent in the earlier survey.

The study shows that average rural MPCE during 2011-12 stood at around Rs. 1,430 for rural India, a 35.7 percent increase compared to the 2009-10. Of the total expenditure, rural households spent less than half on food items, suggesting rise in wages. The average urban MPCE was 84 percent higher than rural areas. The share of expenditure on food declined substantially from 53.6 percent to 48.6 percent in rural areas and from 40.7 percent to 38.5 percent in the urban areas. The faster rise in the share of non-food expenditure in rural areas suggests a rise in wages. The rural wages went up from Rs. 231.59 a day in 2009-10 to Rs. 299 a day in 2011-12, a 29 percent increase.

The Economic Times (2013) reports that as MGNREGA has led to increase in wages, people in rural areas are spending more on non-food items. Within food, the share of protein-based items went up in the consumption basket. The share of milk and milk products went up from 8.6 percent in 2009-10 to 9.1 percent. Among non-food items, the share of durable goods in the consumption basket of rural areas went up from 4.8 percent to 6.1 percent.

The highest score for rural areas in India is from Kerala where monthly per capita consumer expenditure is almost one-third more than the national average. Nine out of India’s 17 large states do better than the national average for rural areas. Among the northern states, he three states doing better than the national average are Haryana, Punjab and Rajasthan.

Segmentation on incomes show a wide variation in consumer behaviour as described below:

  1. High Income

Those belonging to upper strata—landlords, large farmers, businessmen and traders—exhibit distinct buying and consuming patterns. Much of their buying is done from nearby towns since they have large vehicles like jeeps and tractor trolleys. A trip to the town means buying goods for the whole month; most of the buying is done in bulk. In this way, their buying behaviour is closest to consumers in developed coun­tries, who stock goods in their basements. Only a few daily consumables are bought from the local market. The high income group is also most likely to be influenced by brands and advertising.

  1. Middle Income

Large middle income families also buy many products in bulk. Food items like grains are purchased in bulk while fresh produce is bought on a daily or weekly basis. Small middle class families are likely to buy most of their needs from the local market. The middle income group is likely to be more dependent on local stores than the high income group. Rather than buying brands, people in the middle income group are likely to get their clothes stitched locally.

  1. Lower Income

People in the lower income group depend on local stores and markets for all their needs. Local shopkeepers provide them credit, advice and easy delivery, which suits these consumers. Purchasing is done more often, though in lesser quanti­ties. People in the lower income group are also likely to buy smaller packs.

Problems in Rural Marketing

  1. Deprived people and deprived markets

The number of people below the poverty line has not decreased in any appreciable manner. Thus, poor people and consequently underdevel­oped markets characterize rural markets. A vast majority of rural people is tradition bound, and they also face problems such as inconsistent electrical power, scarce infrastructure and unreliable telephone system, and politico-business associations that hinder development efforts.

  1. Lack of communication facilities

Even today, most villages in the country are inaccessible dur­ing the monsoons. A large number of villages in the country have no access to telephones. Other communication infrastructure is also highly underdeveloped.

  1. Transport

Many rural areas are not connected by rail transport. Many roads have been poorly surfaced and got severely damaged during monsoons. The use of bullock carts is inevitable even today. Camel carts are used in Rajasthan and Gujarat in both rural and urban sectors.

  1. Many languages and dialects

The languages and dialects vary from state to state, region to region and probably from district to district. Since messages have to be delivered in the local language, it is difficult for the marketers to design promotional strategies for each of these areas. Facilities such as phone, telegram and fax are less developed in villages adding to the communica­tion problems faced by the marketers.

  1. Dispersed markets

Rural population is scattered over a large land area. And it is almost impos­sible to ensure the availability of a brand all over the country. District fairs are periodic and occa­sional in nature. Manufacturers and retailers prefer such occasions, as they allow greater visibility and capture the attention of the target audience for larger spans of time. Advertising in such a highly heterogeneous market is also very expensive.

  1. Low per capita Income

The per capita income of rural people is low as compared to the urban people. Moreover, demand in rural markets depends on the agricultural situation, which in turn depends on the monsoons. Therefore, the demand is not stable or regular. Hence, the per-capita income is low in villages compared with urban areas.

  1. Low levels of literacy

The level of literacy is lower compared with urban areas. This again leads to a problem of communication in these rural areas. Print medium becomes ineffective and to an extent irrelevant, since its reach is poor.

  1. Prevalence of spurious brands and seasonal demand

For any branded product, there are a multitude of local variants, which are cheaper and hence more desirable. Also, due to illiteracy, the consumer can hardly make out a spurious brand from an original one. Rural consumers are cautious in buying and their decisions are slow, they generally give a product a trial and only after complete satisfaction they buy it again.

  1. Different way of thinking

There is a vast difference in the lifestyles of the people. The choice of brands that an urban customer enjoys is not available to the rural customer, who usually has two to three choices. As such, the rural customer has a fairly simple thinking and their decisions are still governed by customs and traditions. It is difficult to make them adopt new practices.

  1. Warehousing problem

Warehousing facilities in the form of godowns are not available in rural India. The available godowns are not properly maintained to keep goods in proper conditions. This is a major problem because of which the warehousing cost increases in rural India.

  1. Problems in sales force management

Sales force is generally reluctant to work in rural areas. The languages and dialects vary from state to state, region to region, and probably from district to district. Since messages have to be delivered in the local language, it is difficult for sales force to communicate with the rural consumers. Sales force finds it difficult to adjust to the rural environ­ment and inadequate facilities available in rural areas.

  1. Distribution problem

Effective distribution requires village-level shopkeeper, toluka-level wholesaler/dealer, district-level stockist/distributor, and company-owned depot at state level. These many tiers increase the cost of distribution.

Rural markets typically signify complex logistical challenges that directly translate into high distribution costs. Bad roads, inadequate warehousing and lack of good distributors pose as major problems to the marketers.

Composition of Products, Price, Distribution and Promotions

In the sixties professor Neil Borden at Harvard Business School suggested that all actions of the entrepreneur, that are able to have an impact on buyer’s behaviour should make a marketing composition and be planned in such a way as to have the best effect together. Later Jerome McCarthy proposed a marketing composition consisting of the four “p”, thus: product, price, place and promotion, and each of them consisting of several actions.

  1. Product

The product (or service) is the foundation of any business because it is offered by an entrepreneur to customers who pay for it. Products are designed to fulfil specific needs of buyers. In turn, it is the duty of marketing specialist to find anything that will distinguish the product in comparison to others, and make the customers able to pay more for it.

  1. Price

Price is the element of the marketing mix that brings profit, while the other only generate costs. It is also one of its most flexible elements, because it may be changed rather quickly. Fixing the right price is not easy- the lowest price is not always the best. While setting it, you have to look for additional benefits that will make the product more attractive and thanks to it you can require a higher rate.

  1. Distribution

Distribution is related with the methods of delivery to the customer. You can sell either directly or through trade agents. The manufactures, who do not want to pay for their own distribution channels, often decide to sell using middlemen. The choice of the method of distribution is very important because it raises the commitments and the difficulties associated with possible changes.

  1. Promotion

On the other hand, promotion includes those activities that allow the customer getting information on product. This does not mean, however, that the content of the message is left to itself .It is the entrepreneur who decides what to communicate, to whom, with what frequency and the like. Instruments used here include among others: advertising, personal promotion, sales promotion, public relations.

Philip Kotler (1999: 133-134) added another two “p” to the presented this way the marketing mix, i.e. politics and public opinion. According to him, the policy significantly affects the sale, and therefore marketing specialists should use various lobby and engage in political activities. If, for example, legislature has ordered the purchase of a certain device, their sales would increase.

And in turn, the public is prone to new trends which can affect the interest in some products or services. If there is an opinion that some products are dangerous, producers should lead campaigns aiming to convince consumers that it is not.

It is not important how many elements will be there in the model adopted by you, it is important, however, to make them help to create an effective marketing strategy. Usually adopted strategies are summarized in four groups corresponding to the main elements of marketing (product, price, distribution, promotion). They are presented together with the relevant tactical plans.

Product Redesign or Modification Needs

Product design as a verb is to create a new product to be sold by a business to its customers. A very broad coefficient and effective generation and development of ideas through a process that leads to new products. Thus, it is a major aspect of new product development.

Due to the absence of a consensually accepted definition that reflects the breadth of the topic sufficiently, two discrete, yet interdependent, definitions are needed: one that explicitly defines product design in reference to the artifact, the other that defines the product design process in relation to this artifact.

Product design as a noun: the set of properties of an artifact, consisting of the discrete properties of the form (i.e., the aesthetics of the tangible good or service) and the function (i.e. its capabilities) together with the holistic properties of the integrated form and function.

Product design process: the set of strategic and tactical activities, from idea generation to commercialization, used to create a product design. In a systematic approach, product designers conceptualize and evaluate ideas, turning them into tangible inventions and products. The product designer’s role is to combine art, science, and technology to create new products that people can use. Their evolving role has been facilitated by digital tools that now allow designers to do things that include communicate, visualize, analyze, 3D modeling and actually produce tangible ideas in a way that would have taken greater manpower in the past.

Product design is sometimes confused with (and certainly overlaps with) industrial design, and has recently become a broad term inclusive of service, software, and physical product design. Industrial design is concerned with bringing artistic form and usability, usually associated with craft design and ergonomics, together in order to mass-produce goods. Other aspects of product design and industrial design include engineering design, particularly when matters of functionality or utility (e.g. problem-solving) are at issue, though such boundaries are not always clear.

An adjustment in one or more of a product’s characteristics. It is most likely to be employed in the maturity stage of the product life cycle to give a brand a competitive advantage. Product line extensions represent new sizes, flavors, or packaging. This approach to altering a product mix entails less risk than developing a new product.

There are three major ways of product modification, i.e. quality modifications, functional modifications, and style modifications.

  1. Quality modifications

These are changes that relate to a product’s dependability and durability and usually are executed by alterations in the materials or production process employed. Reducing a product’s quality may allow an organization to lower the price and direct the item at a larger target market.

The quality of a product may give a firm an advantage over competing brands and may allow the firm to charge a higher price because of increased quality. Or the firm may be forced to charge more because of higher costs to achieve the increased quality.

  1. Functional modifications

Changes that affect a product’s versatility, effectiveness, convenience, or safety are called functional modifications. They usually require redesigning the product.

Functional modifications can make a product useful to more people, which enlarges the market for it. This type of change can place a product in a favorable competitive position by providing benefits not offered by competing items. Functional modifications can also help an organization to achieve and maintain a progressive image.

  1. Style modifications

Style modifications are directed at changing the sensory appeal of a product by altering its taste, texture, sound, smell, or visual characteristics. Since a buyer’s purchase decision is affected by how the product looks, smells, tastes, feels, or sounds, a style modification may have a definite impact on purchases.

Through style modifications a firm can differentiate its product from competing brands and perhaps gain a sizable market share for this unique product. The major drawback in using style modifications is that their value is determined subjectively. Although a firm may modify a product to improve the product’s style, customers may find the modified product to be less appealing.

Rural Marketing Strategies

A rural marketing strategy refers to the planning of adequate supply of consumer goods and agricultural input to the villages at an affordable price to fulfil the needs of the consumers residing in these rural areas. Rural markets have a high potential and can generate huge sales volume for the companies which manufacture cost-efficient products and have active supply chain management.

For Example; In rural markets, most of the selling products belong to spurious brands. These with a name similar to those of well-known brands have penetrated the Indian rural markets due to the product’s look-alike feature (copy of branded products) and cheap prices.

A brand named ‘Vinovo’ (often misunderstood as ‘Lenovo’ which is a renowned smartphone brand) is selling budget mobile phones to the rural consumers, that look identical to the Lenovo handsets.

However, brands like GlaxoSmithKline (GSK), a UK based multinational FMCG launched a product, Asha-milk food drink for rural consumers. The product was 40% cheaper than the outcomes of well-known brands like Horlicks. It gained popularity due to its excellent pricing strategy.

Rural Marketing Strategies

When we talk about 4 P’s of marketing mix of a product, the first thing that strikes us is the combination of product, price, place and promotion. This is what we will be discussing under rural marketing strategies.

Four components of the marketing mix concerning the product being introduced in the rural market

  1. Product Strategies

The company first needs to analyze the requirements and demand of the rural consumers. Since whatever products are being sold in the urban areas may not be acceptable in the villages also.

Following are some of the factors which are taken into consideration while framing the product strategies:

  • Product Launch: The rural consumers earn a lump sum amount two times a year according to the crop cycle. Therefore the product must be launched only in these harvesting seasons, i.e., rabi and kharif.
  • New Product Design: The product design for an urban market may not perform well in the rural market too. Thus, the company must plan for a robust model of the product (especially of durable goods) while launching it for rural consumers.
  • Brand Name: Brands are gaining significance in the rural markets as the people are becoming aware and informed. However, in these markets, brands are recognized by the simplicity of their name, visual logos, taste and colour of the products.
  • Small Unit Low Price Packaging: Considering the daily wage earners who have less disposable income; the product should be packed in small units with a minimal price to serve the requirements of the rural consumers.
  1. Pricing Strategies

In rural markets, consumers are less brand conscious and more responsive to the price of the products. The company’s pricing decision is dependant upon the consumers’ occupation and income pattern.

Various strategies followed by marketers while planning for the product pricing in rural markets:

  • Differential Pricing: The pricing strategy for the rural markets should be different from that in urban markets. The product should be priced slightly cheaper to grab the attention of rural consumers.
  • Psychological Pricing: The psychological pricing is a tactic used to make the deal appealing to the consumers. A product is priced at odd amounts like ₹9, ₹59, ₹99, etc. which seems less than ₹10, ₹60 and ₹100 respectively. It is a fruitful strategy in rural marketing.
  • Create Value for Money: The rural consumers are more concerned about the durability of the products, i.e., the value it generates to the customer. They tend to pay a slightly higher amount for a better product with additional features.
  • Pricing on Special Events: In the rural areas, occasions and festival are highly valued and celebrated. Therefore, companies make use of these special events to attract rural consumers by giving them various offers and discounts.
  • Simple Packing: Rural consumers have a basic living standard. They don’t like to spend much on the products which have fancy packaging; instead, they look for the utility of the product. So it would be a waste of time and money if the brand spends on sophisticated product packaging.
  • Low Price Points: A consumer belonging to the rural area have limited resources out of which he or she needs to buy various daily utility products. Therefore, a product must be priced quite low to make it affordable for such consumers.
  • Schemes for Retailers: Rural retailers are the most significant medium of sales in the village. The companies must come up with cash discounts, gift schemes, offers and quantity discounts to build the loyalty of such retailers towards the brand and increase product sales.
  • Bundle Pricing: A bundle is a mix of different products in a single pack available to the consumer for a reasonable price. The marketers must plan for a product bundle pricing to make the offer appealing to the consumers and survive in the competitive rural market.
  1. Distribution Strategies

To create a regular demand for the product, the marketer must ensure the uninterrupted supply of the goods in the rural markets. The product availability can be achieved by implementing the following strategies:

  • Local Markets: In rural areas, local markets exist in the form of fares, farmers’ market, Sunday market and feeder market. Here, rural people gather to buy goods and communicate with each other.
  • Company Depots: The company owns warehouses and depots in some major rural areas to make the goods readily available to the native consumers and that of nearby cities.
  • Public Distribution System: The government runs fair price shops in the villages to sell the daily utility and durable products at a nominal price. In India, one such PDS is the ration shops.
  • Retailers: The most straightforward way a rural consumer can acquire a product is through a retail shop located in the village. Therefore, companies must plan their supply chain management in such a way that the goods are regularly made available to these retailers.
  • Redistribution Stockists and Clearing Agents: The redistribution stockists and the clearing agents are the intermediaries between the companies and rural consumers. They supply goods to the retailers from where it reaches the consumers.
  • Delivery Vans, Traders, Sales Person, NGO: The company must run its van for delivering goods in the remote areas where there is lack of proper transportation facility.
  1. Promotion Strategies

Promotion is the stage where the product is introduced in the market. In rural markets, the promotion mix should be planned in such a way that rural consumers can easily understand the product features.

Following promotional strategies are used by the marketers:

  • Mass Media: The villages have limited means of entertainment which include tv, radio, press and cinema. The companies advertise their products through these popular mass media.
  • Personalised Media: It can be seen as hiring a salesperson for performing door to door sales and collecting information and queries related to the product and the brand.
  • Local Media: As we have already discussed in the distribution strategy, local media includes audiovisual vans, animal parades, fares, folk programmes, etc. Displaying advertisements, video clippings, short films, posters and paintings at these places is also useful promotional activity.
  • Hiring Models and Actors for Promotion: Rural people are fascinated by the television actors and models and consider them as their role models. Therefore the marketers must engage famous faces in their tv commercials to promote the brand.
  • Advertise Through Paintings: The rural consumers are attracted towards the bright colours and the pictorial representation of the products; hence, wall paintings are a good idea in the rural markets.

Other Marketing Strategies to Conquer Rural Markets

The rural markets function diversely from the urban markets. Therefore, marketers need to customize a whole set of different strategies to penetrate the rural market.

Being updated with the traditions and values of the rural consumers and planning the marketing strategies accordingly, like a promotion campaign targeting a festival is another suitable option.

Rural marketing should not be used as a means of demoting under-performing managers. Instead, an enthusiastic person belonging to the rural background having the willingness to work in villages must be appointed.

The marketers can introduce new business models and programmes with a social concern like promoting education or empowering women for overall growth.

To understand the market in a better way, the company can hire a rural marketing specialist agency which has prior knowledge and experience in the field and is well-versed with the regional language.

To estimate the feasibility of expenditure in rural marketing, the organization should determine its per capita sales in advance. The company must time the marketing cycle of products by the sowing, growing and harvesting seasons of the crops.

Rural consumers are slowly upgrading to technology with the help of smartphones and computers. The companies must make use of simple and easy to access technological means to create awareness about the products in rural areas.

As a means of digital marketing in the villages, marketers can opt for mobile messaging, internet ads, applications and interactive voice response to promote their products.

The companies must invest in rural marketing with a long-term perspective and should have the patience to achieve the desired results.

To develop a sharp brand image and loyalty in a rural market, the best way is the word of mouth publicity by the locals.

Rural Market Segmentation

Rural marketing is now a two-way marketing process. There is inflow of products into rural markets for production or consumption and there is also outflow of products to urban areas. The urban to rural flow consists of agricultural inputs, fast-moving consumer goods (FMCG) such as soaps, detergents, cosmetics, textiles, and so on. The rural to urban flow consists of agricultural produce such as rice, wheat, sugar, and cotton. There is also a movement of rural products within rural areas for consumption.

Rural marketing can be described as any marketing activity in which a dominant participant will be from a rural area which implies that it consists of two things that is marketing of inputs to the rural in addition to that marketing of outputs from the rural markets to other geographical area. Rural areas are those areas which are not urbanized and low population density and much of the land is devoted to agriculture. Rural Marketing is growing at a much faster rate than its urban counterpart. Indian Rural Market is becoming the powerhouse of the country. 12 % of the world population is residing in rural areas witnessing enormous growth in their incomes and crucial shift in consumer behaviour.

Facts that strengthen the rural India is given below:

  • Rural India accounts for a total of 55% of the manufacturing GDP. They were host to nearly 75% of new factories built in the last decade.
  • Rural consumption per person has increased by 38% yearly between 2019 and 2020.

Degrees of Segmentation:

  1. Mass Marketing

In this all consumers are being treated the same. It allows the company to target the maximum number of consumers. For example HUL has offered only one detergent that is “Surf” to all consumers but Nirma entered the market and grabbed a sizeable market share because of which HUL woke up and introduced wheel.

  1. Segment Marketing

Marketers determines the potential of consumers segments which are substanial enough to target and respond by offering low-priced sachets and products that are designed appropriatley.

Segmenting the rural market

There are various dimensions on basis of which the rural market can be segmented these dimensions include geographic, demographic, psychographic and behavioural. The rural areas can be also classified on the basis of socioeconomic classes bases on the occupation and the type of house in which they live. The consumers are classified into four classes which are as follows:-

  1. SEC R1

This section consists of the landlord farmers, people who are exposed to urban areas like if their children studying in the nearby towns, who lifestyle as of the urban people, those who own consumer durable goods like refrigerator, two wheeler etc.

  1. SEC R2

They include the rich farmers, who themselves are not educated but want their children to be educated, own some of the consumer durable products like television, tractor etc.

  1. SEC R3

They include those who have their children studying in the villages, those who are conservative in adopting technology and have some consumer durable products.

  1. SEC R4

These include low income labours, agricultural farmers and uneducated people of labour class.

Characteristics of the Rural Market

Few characteristics which are unique to the rural market these are:-

  • Level of literacy
  • Family structure
  • Pattern of occupation
  • Household settlements distribution

There are few features that have importance in the rural market, these are:-

  • Demographic features of the rural India
  • Unique characteristics of the rural economy
  • Cultural and social behavior
  • Consumer response in the rural market
  • Marketing in rural areas

The market structure in the rural areas is different from that of the urban areas. There are different means to reach the rural consumers unlike the urban consumers who have retail stores, supermarkets etc. The rural consumers can be reached through periodic markets in the village known as haats, agricultural markets known as mandis and fairs in the rural areas known as melas.

Rural market is said to be heterogeneous market where there are many variations in income, population, density, socio- cultural aspects, literacy level, consuming habits, tastes, preferences which influence the response of the consumers to a greater extent.

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