Rural Marketing

Posted on Sep 20 2012 - 11:50am by Fayaz
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Introduction

74% of Indian population comprises of rural denizens, which shows potentials high customer base. 1% increase in rural economy will push up the buying power by Rs. 1000 cr. There is gradual shift in buying pattern in rural economy. People are shifting from need based purchase to aspirational products. This change is brought in through shift in demographics and psychographics of rural India. The mindset of companies has to be changed because Rural Consumer does not want to be seen as deprived cousin.

The successful companies in rural market are the one which have started early and were able to position themselves in the mind of rural consumers. Changing psychographics of rural consumers have created a new market unfilled by current market players in rural economy. To further support the business case for importance of rural market, Farm income is insulated compared to urban income, also minimum support price has risen the by more than 67% in last few years while inflation in total has gone up by 30%. Rural economy is a cash economy and less dependent on credit/mortgages.

Rural citizens’ usage of product is sometime considerable different from urban users. Understanding the usage of rural markets is a key to develop and market the product in the rural arena. The product development should be done keeping in mind the behavioral conduct of rural inhabitants. Adopting and innovating would be a key to develop a new product so as to support the behavior and continue it.

“Rural” is a mindset. There can be rural islands in urban domain, and there can be urban islands in rural domain.Mindless bonding is considered rural, Purposeful bonding is Urban. Bonding within rural masses is stronger, purposeful bonding is seen in urban culture.

Rural market research

Step 1      Classifying the village is the first step. Village on top of hills are generally considered richer than plains. As people residing on hills have to get resource upto the mountain and it requires money. Similarly, villagers near the river bed are considered to be richer than away from river. On the other hand, villages close to sea shore are considered to be poor.

Step 2      Before going to the village one should a mapping of the village to understand the ethos of the village. Focus group of richer residents should happen in front of the richer people in the village. And peer group discussion of the poorer should not happen in front of the richer community.

Step 3      Observation is better way of doing research in rural market. However, it is difficult, costly and time consuming. Quantitative research is not a recommended process.

Step 4    Brand Price trade Off (BPTO) gives an idea of “till what price will you pay for the brand and when will you drop out of the deal?”. This is done for existing products and brands. Product Price trade Off (PPTO) is done for a new product and in this case researcher needs to educate the villagers.

 Food Market Analysis

74% that forms $629 billion is the expenditure on food by Rural Bottom of Pyramid. The Bottom of Pyramid 1500 and BOP 1000 are the largest market for rural BOP in food. The BOP Food Market in Asia is about 2.5 times the urban food market. If we consider only Indian market, it is close to 3 times the urban food market. Hence, there is a clear need for a market based approach as the traditional methods have failed in recent past. A large number of companies have already started conducting pilot tests, market research and a few companies such as ITC, HUL, Amul have been able to implement successful sustainable strategies.

Few of the issues identified in the rural food market can be classified as follows:

  • Malnutrition
    • A large part of the Rural BOP in India are malnourished
    • 70 million people in India suffer from iodine deficiency
    • India ranks a dismal 66th out of 84 developing countries in Global Hunger Index
    • Distribution and Supply Chain Challenge
      • PDS and TPDS are failure in current domain
      • Food insecurity in India is an irony – India being surplus in food and grain level, yet poor do not have an access to it
      • A challenge to private companies is in a very similar context à To establish a rural distribution center at a low cost, due to high  price sensitivity of rural consumers
      • A strong need of backward and forward integration in order to effectively reach the deep pockets of the rural India

Pricing

Rural markets are “sanctum sanctorum” segments in products. It means that price sensitivity of rural consumers varies according to product category and does not depend on consumer segments. Below is the list of different categories in increasing order of price sensitivity:

ü  Food & Beverages

ü  Clothing

ü  Household Products (Soap, Powder etc.)

ü  Health and Education

ü  Religion and spirituality

The second important factor in deciding the pricing of a product is to understand the cash inflow behavior of rural consumers. It is very seasonal and has a direct correlation with the harvest. January and July are months of high expenditure. 1/20th of the total expenditure during these months is on Food compared to 3/4th during other months. A good example can be taken from HUL which change their inventory packing to 2kg during high spending months to just 100gm during low spending period. But point should be noted down that overall consumption remains same, only difference is in the stocking level of product.

Some of the innovative and common pricing strategies already existing in rural areas are as follows

  • Differential pricing: It is based on consumer behavior. For examples gyms in villages charge low deposit but high monthly rates which is inconsistent with urban areas.
  • High vs. low involvement products: Traditional concept/categories may not hold true in rural areas. As income levels are low, even food or cigarettes could be categorized as high involvement over the long term. An approach is to build lifetime value maps for each consumer, for all such products.
  • Trial consumer pricing: Companies should encourage trial of products by consumers. Touch and feel accentuate the purchase intentions. It Helps consumers to evaluate product, develop desire, and get peer/family approval/opinions.
  • Barter pricing: Barter is still prevalent in most of the rural India and familiarity of process should be leveraged. E.g. exchange older mobile phones or vehicles for new in addition of differential price.
  • Little Drops pricing: There is an Installment scheme for durables. Some companies tie up with money lenders!
  • Discriminatory package pricing: This is a common phenomenon that we can see in rural market. E.g refill packs, Nivia metal vs. plastic pack 

Rural promotion strategy

  1. Rural promotional strategy has to be centered on the 1:1 promotional philosophy. It is very important to have an intimate connection with the rural people to sell the products. Therefore conventional advertising medium like the Print Media is not very effective. Direct Touch Points are very important. Product Sampling is very critical in rural markets unlike urban markets.
  2. Effective promotions are done in Madaris,Haats and Melas, Exhibitions, Van and Mobile Campaigns, street plays and puppet shows .One of the effective means of communication is through Wall Paintings. Regional artists and folk artists can also be used to promote the product. Walking Posters and talking posters are some innovative modes of promotions in Rural India.
  3. In urban Market “Solus Medium” works whereas in rural market “Multiple Mediums” work very well. So it is very important to use multiple mediums. We need to use TV ads (both above the line and below the line means of promotion), Radio advertisements and Ads on Hoardings.
  4. Similarly “SolusCreative” work very well in urban market whereas “Multiple Creative” work very well in Rural Market.
  5. Rural Marketers have to be careful with rural advertisements. For Example: Rural people may shun advertisements where women are not properly dressed.
  6. Even in Rural India, there exists a Brand Caste system where people are a function of the brands they use.

Conclusion

The Challenges in Rural Distribution are fragmented customer base, lack of infrastructure and presence of intermediaries. The prevalent distribution models in FMCG sector are:

  • 2 Tier system: Company sales representative interacting with retailers
  • 3 Tier system: Company sales representative interacting with wholesalers and retailers
  • Hub and Spoke model: Tier 1 cities acting as hubs and feeder towns (tier 2 and tier 3) acting as spokes
  • Partnership with other agencies

The critical attempt should be to find a way to reach out as many people as possible in rural India. The offering should be more value for money so as to convert them into a persistent brand loyalist. Strong emphasis should be on innovation of not only product development but also of distribution and marketing campaign so as to counteract counterfeits and distribution inefficiencies.

The article is authored by Vikas Tripathy from IIM Ahmedabad. If you wish to write for us then kindly check this

About the Author

Fayaz is the founder of Marketing Bloggers. Apart from the jibber-jabber he is Human by birth, Engineer by mistake, Marketer by Choice.. That says it all :)

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