Tag: University of Mumbai BMS Notes

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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

2. 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.

3. 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.

4. 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.

5. 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.

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).

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

2. 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.

3. 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.

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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

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.

2. 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.

3. 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.

4. 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 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.

2. 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.

3. 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.

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.

2. 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.

3. 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.

4. 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 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.

2. 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.

2. 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.

3. 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.

4. 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.

The concept of “marketing mix” was introduced over 60 years ago. In 1953, Neil Borden mentioned it in his presidential address to the American Marketing Association (AMA).

In general terms, marketing mix is a variety of different factors that can influence a consumer’s decision to purchase a product or use a service. It most commonly refers to the 4Ps of marketing product, price, promotion and place.

These four factors can be controlled by a business to a certain extent. When “mixed” or blended strategically, they can produce desired behaviors from your target audiences (i.e. signing up as a subscriber or making a purchase).

It can also help businesses further understand their product and service offerings and the best ways to plan for a successful launch and marketing strategy.

The 4Ps were created by marketing professor E. Jerome McCarthy in 1960, seven years after Borden’s speech. They are a framework that marketers and businesses can use when designing strategies and campaigns to promote their products and services.

Instead of leaving it up to chance and hoping that people will do what you want, you can increase your conversions by using a framework. Each P stands for a different element that influences a consumer’s decision-making process.

1. Product

Product refers to the physical goods or the intangible services that you offer, but there’s more to it than that. It’s also about the experience that users and customers have with your product. What makes customers choose your product over others? What problem does it solve? What attracts people to your products or services?

They may be attracted to the product packaging, features, ease-of-use, name, quality, design or support. The transaction may be for the physical product. But, the purchase is influenced by the entire buying experience.

All of the four elements are centered around the customer. It is important to know who your audience is and what they care about. Create buyer personas. Conduct customer research. Learn as much about your current or potential customer base as you can. This will help you make decisions that are more likely to resonate and appeal to your target audiences.

2. Price

It is critical to choose the right price for your product or service. If your product is underpriced, consumers may question its effectiveness or think that it’s “too good to be true”. On the other hand, if you price your product too high, consumers may see it as overpriced and unnecessary. Unless you are an established luxury brand like Coach or Chanel, you’ll find it hard to make a sell.

There are a number of pricing strategies that businesses employ. Some models are: bundle, subscription, competitive, economy, discount, and psychological pricing.

At grocery stores, generic food brands are priced lower than name-brands. This is an example of economy pricing. In department stores, prices with odd decimals like “53.99” or “3.97” are psychological pricing. People tend to perceive it as less expensive than an even “$54.00” or “4.00”. It’s also a common practice in auto sales.

The strategy that you choose should be based on the value of your product, the production and distribution costs, consumer demand and competitive landscape.

Price is also heavily influenced by your consumers. Of course, you need to price to make a profit. However, if your target market is in the middle-income bracket, charging $900+ for a handbag is unrealistic.

3. Promotion

How are you going to tell people about your products and services? Promotion covers all of the communication tactics that you will use to spread the word.

Note that promotion isn’t synonymous with marketing. Promotion focuses on how you will communicate your product to people. It doesn’t only encompass the entire marketing function. It also addresses the sales process and other areas such as public relations and advertising.

Also, the purpose of promotion isn’t to simply sell your products and services. (Yes, that would be an ideal result.) Before you can jump to the transaction part, you need to let people know what your products and services are, what they offer customers, and why they are worth buying.

Promotion lets people know that your product solves a specific need. In the promotion stage, your message should be clear and geared towards your target audiences. Tell them why they need your product and how it will benefit them. What makes your business different from the competitors? Is it a lower-price? Higher quality? Faster service? More flexibility?

Identify what sets you apart from everyone else. It is key to include those differentiators into your promotional messages. When selecting which channels to use for promotion, remember that your audience is the focus. What types of content do they consume on a daily basis? Where are they located? What times are they most actively consuming content?

Some channels that you may use for promotion are: word-of-mouth, podcasts, radio, social media, email, press releases, public relations, print, television ads, and pay-per-click (PPC) ads.

4. Place or Distribution

Place refers to the distribution of your product. How will customers find and purchase what you’re trying to sell? Will it be sold in retail stores or exclusively online? Two of the most common distribution channels are: direct sales and wholesalers.

If you run a local retail business, you will likely use direct sales at your location. You may also offer certain items through an online store. Whether in-store or online, you are the primary contact managing and shaping the customer experience.

Another option for businesses is to sell through an intermediary a wholesaler or reseller. If you sell through Walmart or Amazon, you would fit into this category. The advantage of working with a wholesaler is that they tend to have a wider distribution network and larger customer-base.

Although it makes it possible to reach more customers, you lose some of that customer connection that is associated with direct sales. It can also be extremely difficult and lengthy process to land a deal with big name wholesalers like Walmart.

If your business doesn’t have a year-round consistent supply of products, it is not an ideal fit for intermediary sales. If your sales are more seasonal or available for a limited-time only, then direct sales are a more suitable option.

There’s a difference between knowing the framework and actually putting it into practice in your strategy. Below, we’ll take you through the process step by step with examples.

Primary market

Primary market is that market where the debt instruments are issued for the first time. Which can be issued as follows:

Public prospectus: invites public to buy

Private placement: Invites few selected individuals, as the cost of public issuing is quite a large

Rights issue: to the already exciting members, but they can refer to their beneficiaries in case of unwillingness to buy

However, the issuer has to inform the exchanges in case of issuing debts. To notify the investors, about associated risk changes

Secondary market

Secondary market is where the debt instruments can be traded. It can take place by the following two ways based on the characteristics of the investors and the structure of the market are :

Wholesale debt market segment of NSE & Over the counter of BSE : Where the investors are mostly Banks , Financial Institutions , RBI , Primary dealers , Insurance companies , Provident Funds , MFs , Corporates and FIIs .

Retail debt Market: involves participation by individual investors, small trusts and other legal entities in addition to the wholesale investor’s classes.

Types of debt Instruments

Government Securities

• It is the Reserve Bank of India that issues Government Securities or G-Secs on behalf of the Government of India.
• These securities have a maturity period of 1 to 30 years. G-Secs offer fixed interest rate, where interests are payable semi-annually.
• For shorter term, there are Treasury Bills or T-Bills, which are issued by the RBI for 91 days, 182 days and 364 days

Corporate Bonds

• These bonds come from PSUs and private corporations and are offered for an extensive range of tenures up to 15 years.
• Comparing to Government Securities, corporate bonds carry higher risks, which depend upon the corporation, the industry where the corporation is currently operating, the current market conditions, and the rating of the corporation

Certificate of Deposit

• Certificate of Deposits (CDs), which usually offer higher returns than Bank term deposits, are issued in Demat form
• Banks can offer CDs which have maturity between 7 days and 1 year.
• CDs from financial institutions have maturity between 1 and 3 years

Commercial Papers

• There are short term securities with maturity of 7 to 365 days.

Structured Debt

• Structured debt is some type of debt instrument that the lender has created and adapted to fit the needs and circumstances of the borrower.
• A debt package of this type usually includes one or more incentives that encourage the debtor to do business with the lender, rather than seeking to develop a working relationship with other lenders.
• While the overall structure of the debt is adapted to the needs of the borrower, the terms also benefit the lender in the long term.
• The main goal of structured debt is to create a debt situation that provides the debtor with as many benefits as possible, while also keeping the overall debt load as low as possible
• At the same time, the lender receives an equitable return for the structured debt arrangement

The Indian debt market has traditionally been a wholesale market with participation restricted to few institutional players mainly banks. The banks were the major participants in the government securities market due to statutory requirements. The turnover in the debt market
too was quite low a few hundred crores till the early 1990s. The debt market was fairly underdeveloped due to the administrated interest rate regime and the availability of investment avenues which gave a higher rate of return to investors.

In the early 1990s, the government needed a large amount of money for investment in development and infrastructure projects. The government realized the need of a vibrant, efficient and healthy debt market and undertook reform measures. The Reserve Bank put in substantial efforts to develop the government securities market but its two segments, the private corporate debt market and public sector undertaking bond market, have not yet fully developed in terms of volume and liquidity.

It is debt market which can provide returns commensurate to the risk, a variety of instruments to match the risk and liquidity preferences of investors, greater safety and lower volatility. Hence the debt market has a lot of potential for growth in the future. The debt market is critical to the development of a developing country like India which requires a large amount of capital for achieving industrial and infrastructure growth.

Regulation of Debt Market: The Reserve Bank of India regulates the government securities market and money market while the corporate debt market comes under the purview of the Securities Exchange and Board of India (SEBI).

In order to promote an orderly development of the market, the government issued a notification on March 2, 2000 delineating the areas of responsibility between the Reserve Bank and SEBI. The contracts for sale and purchase of government securities, gold related securities, Money market securities and securities derived from these securities and ready forward contracts in debt securities shall be regulated by the Reserve Bank. Such contracts, if executed on the stock exchanges shall, however, be regulated by SEBI in manner that is consistent with the guidelines issued by the Reserve Bank.

Link between Money Market and Debt Market:

The money market is market dealing in short term debt instruments (up to one year) while the debt market is a market for long term instruments (more than one year) The money market supports the long term debt market by increasing the liquidity of securities. A developed money market is a prerequisite of the development of a debt market.

Characteristics of Debt Market:

The characteristics of an efficient debt market are a competitive market structure, low transaction costs, a strong and safe market infrastructure and a high level of heterogeneity among market participants.

There are different kinds of Debt Instruments available in India such as;
Below given are the important debt instruments available in India:

• Bonds
• Certificates of Deposit
• Commercial Papers
• Debentures
• FD
• G – Secs (Government Securities)
• National savings Certificate (NSC)

Bonds

A Bond is simply an ‘IOU’ in which an investor agrees to lend money to a company or government in exchange for a predetermined interest rate. If a business wants to expand, one of its options is to borrow money from individual investors. The company issues bonds at different interest rates and sells them to the public. Investors purchase them with the understanding that the company will pay back their original principal with some interest that is due by a set date (this is known as the “maturity”). The interest a bondholder earns depends on the strength of the corporation.

For example, a blue chip is more stable and has a lower risk of defaulting on its debt. Sometimes some big companies issue bonds and they may only pay 7% interest, but some other small companies may pay you 10%. A general rule of thumb when investing in bonds is that “the higher the interest rate, the riskier the bond.”

Following are allowed to issue bonds

1. Governments
2. Municipalities
3. Variety of institutions
4. Corporations

There are many types of bonds, each having diverse features and characteristics. Bonds and stocks are both securities, but the major difference between the two is that stockholders have an equity stake in the company (i.e., they are owners), whereas bondholders have a creditor stake in the company (i.e., they are lenders). Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely.

Returns in Bonds Returns is depends on the nature of the bonds that have been purchased by the investor. Bonds may be secured or unsecured. Firstly, always check up the credit rating of the issuing company before purchasing the bond. This gives you a working knowledge of the company’s financial health and an idea about the risk considerations of the instrument itself. Interest payments depend on the health and credit rating of the issuer. Therefore, it is essential to check the credit rating and financial health of the issuer before loosening up the bond. If you do invest in bonds issued by the top-rated Corporates, there is no guarantee that you will receive your payments on time.

Risks in Bonds In certain cases, the issuer has a call option mentioned in the prospectus. This means that after a certain period, the issuer has the choice of redeeming the bonds before their maturity. In that case, while you will receive your principal and the interest accrued till that date, you might lose out on the interest that would have accrued on your sum in the future had the bond not been redeemed. Always remember that if interest rates go up, bond prices go down and vice-versa.

Buying and Holding of Bonds Investors can subscribe to primary issues of Corporates and Financial Institutions (FIs). It is common practice for FIs and corporates to raise funds for asset financing or capital expenditure through primary bond issues. Some bonds are also available in the secondary market. The minimum investment for bonds can either be Rs 5,000 or Rs 10,000. However, this amount varies from issue to issue. There is no prescribed upper limit to your investment. The duration of a bond issue usually varies between 5 and 7 years.

Selling of Bonds Selling bonds in the secondary market has its own drawbacks. First, there is a liquidity problem which means that it is a tough job to find a buyer. Second, even if you find a buyer, the prices may be at a sharp discount to its intrinsic value. Third, you are subject to market forces and, hence, market risk. If interest rates are running high, bond prices will be down and you may well end up incurring losses. On the other hand, Debentures are always secured.

Liquidity of a Bond: Selling in the debt market is an obvious option. Some issues also offer Put and Call option.

• In Put option, the investor has the option to approach the issuing entity after a specified period (say, three years), and sell back the bond to the issuer.
• In Call option, the company has the right to recall its debt obligation after a particular time frame.

Debenture

A debenture is similar to a bond except the securitization conditions are different. A debenture is generally unsecured in the sense that there are no liens or pledges on specific assets. It is defined as a certificate of agreement of loans which is given under the company’s stamp and carries an undertaking that the debenture holder will get a fixed return (fixed on the basis of interest rates) and the principal amount whenever the debenture matures.

In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. The advantage of debentures to the issuer is they leave specific assets burden free, and thereby leave them open for subsequent financing. Debentures are generally freely transferrable by the debenture holder. Debenture holders have no voting rights and the interest given to them is a charge against profit.

Debentures vs. Bonds

Debentures and bonds are similar except for one difference bonds are more secure than debentures. In case of both, you are paid a guaranteed interest that does not change in value irrespective of the fortunes of the company. However, bonds are more secure than debentures, but carry a lower interest rate. The company provides collateral for the loan. Moreover, in case of liquidation, bondholders will be paid off before debenture holders.

A debenture is more secure than a stock, but not as secure as a bond. In case of bankruptcy, you have no collateral you can claim from the company. To compensate for this, companies pay higher interest rates to debenture holders. All investment, including stocks bonds or debentures carry an element of risk.

Commercial Papers

Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. It was introduced in India in 1990 with a view to enable highly rated corporate borrowers/ to diversify their sources of short-term borrowings and to provide an additional instrument to investors. Subsequently, primary dealers and satellite dealers were also permitted to issue CP to enable them to meet their short-term funding requirements for their operations. CP can be issued in denominations of Rs.5 lakh or multiples thereof. Amount invested by a single investor should not be less than Rs.5 lakh (face value). It will be issued foe a duration of 30/45/60/90/120/180/270/364 days. Only a scheduled bank can act as an Issuing and Paying Agent IPA for issuance of CP.

Features of Commercial Papers

Following are the important features of commercial papers

• They are unsecured debts of corporates and are issued in the form of promissory notes, redeemable at par to the holder at maturity.
• Only corporates who get an investment grade rating can issue CPs, as per RBI rules.
• It is issued at a discount to face value
• Attracts issuance stamp duty in primary issue
• Has to be mandatorily rated by one of the credit rating agencies
• It is issued as per RBI guidelines
• It is held in Demat form
• CP can be issued in denominations of Rs.5 lakh or multiples thereof. Amount invested by a single investor should not be less than Rs.5 lakh (face value).
• Issued at discount to face value as may be determined by the issuer.
• Bank and FI’s are prohibited from issuance and underwriting of CP’s.
• Can be issued for a maturity for a minimum of 15 days and a maximum upto one year from the date of issue.