Rural Marketing Opportunities
Upon completion of this chapter, you will be able to:
• Understand the meaning of rural marketing, its scope and nature
• Analyse the emergence of rural markets and classify them
• Use the 4 A’s and 4 P’s frameworks and the bottom-of-the-pyramid theory to take three important decisions—(i) going rural, (ii) adopting a suitable approach and implementing it and (iii) becoming a rural marketer
• Test whether you have the potential to become a rural marketer
Seventy per cent of India’s population, 56 per cent of its income, 64 per cent of its expenditure and 33 per cent of its savings come from rural India. A recent study on rural marketing by the Confederation of Indian Industry (CII) points out that the consumption trend in rural areas has shown a paradigm shift from price-driven to quality-driven products. The winds of liberalization removed barriers and presently, many national as well as international manufacturers have made a foray into different markets. Each of the companies has products in several categories, for example, Hindustan Unilever Limited (HUL) is in hair care (shampoos, hair oil, and creams), skin care, fabric care, home care, food and beverages, etc. Similarly, in the durables category there are players such as Philips which has products such as TVs, audio systems, DVD players, etc.
New companies are fighting an intense battle to get a foothold while the existing players are putting in all their counter strategies in this battle for survival. The battle is on across all the product categories—be it consumer non-durables, consumer durables or the service industry—though the degree or nature of battle may vary in each case. According to Pradeep Lokhande, head of Rural Relations, “Marketing a product or service in a rural centre is like sowing a seed. You have to wait for it to take root.” Indeed, the seeds of some of the foremost innovations in rural marketing were sown by FMCG companies, such as HUL, that were looking for new ways to reach out to rural consumers.1
What kind of marketing strategies are required in the present marketing environment characterized by dynamic changes and challenges? What kind of innovations have companies such as HUL, ITC, LG and HPCL introduced to become successful? Are they sustainable? Do they have to look in new directions?
The questions raised above are indicative of the fascinating subject matter this book deals with. Chapter 1 serves as an introduction to this intriguing area. It introduces the concepts and approaches that a marketer can consider for designing appropriate strategies.
Rural marketing has gained recognition as a growing profession, a distinct academic discipline and a rewarding career for young management students and executives. The predictions of eminent business persons that rural markets would outstrip urban markets have proved right. Today, rural markets are not only attractive but also responsive. With this new opportunity the marketing battlefield has expanded from the cities to the villages. “Go rural and be rural” seems to be the guiding principle of marketing.
All smart marketers, Indian as well as MNCs, seem to have embraced this tenet. Companies such as Asian Paints, HUL, ITC, Colgate–Palmolive, Godrej, Philips, LG, Nokia and Dabur have made inroads into the countryside. New approaches, new strategic alternatives and new operational techniques are being evolved to gain competitive advantage.
The different definitions of the term “rural” may be classified under three perspectives— public administration, action oriented and marketing oriented.
The public administration perspective considers urbanization as a sign of development and focuses on the urban concept to move from a panchayat set up to a corporation.
The census of India (2001) defines rural as that which is not urban. Urban is defined as:
- All locations within a municipality/corporation, cantonment board or a notified town area committee.
- All other locations that satisfy the following criteria:
- Minimum population of 5,000.
- At least 75 per cent of the male workforce engaged in non-agricultural activities, and
- A population density of over 400 persons per sq. km.
The is definition is not useful when you consider the marketing-oriented perspective because of the following paradoxes:
- A city may be classified as a mini-metro on the basis of its population, the occupation of its residents, population density. However, some of its other characteristics may be that of a rural market even though the administrative setup may be that of a corporation.
- Similarly, a slum in a metro could have the attributes of a rural market for some products and the attributes of an urban market for some others.
- Many towns are actually overgrown villages and are classified as towns only because they have a municipality. On the other hand, many administratively-defined villages that are surrounded by cities, are more like urban centres.
As such, the census of India (2001) definition is not appealing to rural marketers. They need a definition that signifies market potential or lifestyles for initiating action. Consider the following case that shows how an action-oriented definition is provided by the Insurance Regulatory Development Authority (IRDA).2
The IRDA definition of rural areas included all areas with a population of less than 5,000, with a density of population less than 400 per sq.km and where at least 75 per cent of the male working population was engaged in agricultural pursuits. The IRDA had amended the definition earlier in 2002 to bring down the required stipulated percentage of the population that had to be engaged in agricultural pursuits to at least 25. The revised definition has widened the market. Mr Vivek Khanna, Director of Marketing, Aviva Life Insurance Company, said, “A couple of thousand villages would now be brought under the fold. The earlier definition meant that only some remote villages could be tapped. And there is no ambiguity now.” Ms Anjana Grewal, Vice-President of Marketing at Birla Sun Life Insurance Company, said, “The revised definition brings a larger part of the population under ‘rural’, almost 72 per cent compared to 42 per cent under the earlier definition. What this would do is make it possible for insurance companies to introduce different products with higher premiums.”
Innovation-focused marketers may like the following definition from the sociological point of view:
Rural is defined as a group of people who are traditionalists in outlook, rooted in the land, and who resist change.
Action-based definitions aim at providing specifications of the target markets that remove ambiguity and improve decision making. In doing so, they enable decision makers to define possible areas of action, help focus on variables in the decision situation, assist in information search and guide decision making and implementation. They are generally based on the calculation of market potential value (MPV) of a particular area. They differ from one product group to another as given here:
- Most companies in the FMCG and agri-input sector would define rural as a place with a population of up to 20,000.
- Durable goods’ companies would consider any town with a population of below 50,000 as a rural market.
Rural markets can be classified in a manner similar to urban markets. They can be classified into consumer markets, industrial markets, and services markets.
Constituents: Individuals and households
Products: Consumables—Food products, toiletries, cosmetics, textiles and garments, foot wear, etc.
Durables: Watches, bicycles, radios, TVs, kitchen appliances, furniture, sewing machines, two-wheelers, etc.
Constituents: Agricultural and allied activities, poultry farming, fishing, animal husbandry, cottage industries, health centres, schools, co-operatives, Panchayat offices, etc.
Products: Consumables—Seeds, fertilizers, pesticides, animal feed, fishnets, medicines, petrol/diesel, etc.
Durables: Tillers, tractors, pump sets, generators, harvesters, boats, etc.
Constituents: Individuals, households, offices, and production firms
Services: Repairs, transport, banking, credit, insurance, health care, education, communication, power, etc.
The factors influencing the decision to enter a rural market can be divided into three categories as given below. The first two factors have a positive influence whereas the third one exercises a negative influence on the “go rural” decision.
- Urban push factors
- Rural pull factors
- Rural inhibiting factors
Urban push factors
Companies that have so far successfully operated in the urban markets have found them no longer attractive for the following reasons:
Many products such as soaps, detergents, shampoos, fairness products and consumer durables such as refrigerators, TVs and air coolers/conditioners have achieved maturity in the urban market on account of their high penetration levels.
Urban markets have become congested with too many competitors. Heavy expenditure on marketing has become necessary as there are too many brands, both domestic and foreign, fighting for a justifiable share. Sustaining brand image and growth in sales have become difficult and challenging tasks.
The market is now dominated by the youth. According to MindShare Insights, the research division of a media buying agency MindShare, 65 per cent or over 700 million Indians are younger than 35 years. They are “trysumers”—open to risk and are willing to try anything that is trendsetting, an attribute that has been accentuated by their growing purchasing power. As a result, marketers are forced to try innovative strategies.
Rural pull factors
The rural pull factors or the factors that make rural markets attractive are as follows:
- Rising affordability
- Growing acceptance
- Increasing availability needs
- Improving accessibility
- Success stories of corporations
Rural markets are now dominating the urban markets in terms of demand and potential. According to McKinsey & Company3:
“In 20 years the rural Indian market will be larger than the total consumer markets in countries such as South Korea or Canada today, and almost four times the size of today’s urban Indian market. The estimated size of the rural market will be USD 577 billion.”
Rural India is a major part of India’s domestic consumption story not just because it is home to 70 per cent of India’s population, but because of its growth potential. The purchasing power of the rural population is on the rise on account of the good monsoon and development programmes by the government. There is also a shift from total dependence on farm income to non-farm incomes.
We will now examine the key parameters of the rural economy to know why rural markets have become attractive.4-6
- Population: The rural market is attractive because of its size and growth of population and households despite the exodus by migration to urban areas. About 70 per cent of the more than 1.1 billion people in India live in rural areas. Approximately 70 per cent of the households in India are in the rural regions. The number is expected to rise from 135 million in 2001–02 to 153 million in 2009–10.
- Occupation: The country has 235 million farmers and agriculture accounts for about a fifth of the USD 775 billion economy. About 4 per cent of rural Indian households comprise large farmers with landholdings of more than 10 acres. 30 per cent of rural households are marginal farmers with less than two acres, and another 15 per cent have 2–4 acres. Half of the rural Indian economy is non-agriculture-based and a third of the households—around 50 million—are engaged in non-agricultural activities with people working in manufacturing, or as traders, shopkeepers, providing services such as electricity generation, construction, mining and quarrying, transportation and haulage.
- Income: As per current estimates, the annual household income of urbanites is Rs 95,827 against Rs 5,19,222 of ruralites. The per capita income among semi-urban folks is around Rs 14,000 to 15,000 per annum while for rural folks it is less than Rs 7,000 per annum. The per capita income of rural and semi-urban people would double by 2012 thereby leading to an increase in demand. It is estimated that if rural incomes rise by one per cent, buying power would increase by Rs 100 billion.
- Consumption Expenditure as a percentage of income is 78 per cent in rural areas and 72 per cent in urban areas. The rural share of popular consumer goods and durables ranges from 30 per cent to 60 per cent of sales. The expenditure as a percentage of income of rural areas is higher for many categories.
- On food, it is 36.6 per cent as against 24.6 per cent in urban areas
- On FMCGs, it is 5.6 per cent as against 4.9 per cent in urban areas
- On clothing and footwear, it is 5 per cent as against 4 per cent in urban areas
- On durables, it is 3.8 per cent as against 3.7 per cent in urban areas
The only exception is miscellaneous goods. On miscellaneous goods and services, it is 48.7 per cent as against 62.8 per cent in urban areas.
- Disposable income: The disposable surplus is 22 per cent of total income in rural and 28 per cent in urban areas. The marginal difference is positive news to marketers as it leads to an increase in purchases in many categories including construction materials, apparel and durables.
The rural society is also urbanizing gradually with the increase in literacy rates and exposure to global trends. It is showing interest in branded products and services.
The literacy in urban areas was 80.3 per cent and that in rural areas 59.4 per cent. The encouraging point is that the literacy growth rate in the decade ending 2001 has been higher in the rural areas, at 14.75 per cent as compared to the 7.2 per cent increase in urban areas. The total literacy goal is not far off. There is progress in e-learning opportunities and community development projects of universities and corporations that are focusing on this.7
Many lifestyle changes have been witnessed in the rural areas. These can be attributed to three sources of influence.
- Increasing literacy levels and education: Most of the elders in rural areas can now read newspapers and magazines and understand the changing trends in the country. The sons of the rural soil are now benefited by charitable foundations of IT companies that are imparting computer education in villages. The young go to urban areas for higher education and bring home urban lifestyles.
- Media explosion: With the advent of satellite television, the rural populace has been exposed to the rich lifestyle of urban households. This has created awareness about branded products and also induced an attraction for premium products such as Surf, Ariel, Pantene and Denim.
- Cinemas: The portrayal of heroes growing from rags to riches and challenging the rich has an impact on the psyche of rural people.
Shifts in decision making
Decision making is no longer dominated by the male head of the family. The self-help group (SHG) movement is empowering women. Education is empowering rural youth. The youth are emerging as key decision makers in the family. Since women are more home-oriented, they buy related products. As the youth are more open to fresh concepts, they become innovation adopters and prefer lifestyle products. Thus, some rural households possess a range of products comparable to urban households. Surprisingly, the experimenting households are more or less evenly spread across the various socioeconomic clusters of the rural market.
The entry into rural market is encouraged by two factors—growing usage and demand for branded products.
Growing usage and demand for products
According to Indicus Analytics, the rural market is almost equal to the urban market in size, being worth Rs 13,170 vis-à-vis the Rs 13,650 billion worth of the urban market. According to a study by the Chennai-based Francis Kanoi Marketing Planning Services,8 the estimated annual size of the rural market is as follows (Table 1.1):
Table 1.1 Size of the Rural Market
|FMCGs||Rs 650 billion|
|Consumer Durables||Rs 50 billion|
|Agri-inputs (e.g., tractors)||Rs 450 billion|
|2/4 Wheelers||Rs 80 billion|
|Total||Rs 1,230 billion|
Information from various agencies indicates growth in rural demand:
- The FMCG sector continues to grow at 20 per cent (urban growth 17 per cent) with no downgrading of brands despite price increase in some categories, durables at around 15 per cent with upgrading from regular to flat screen colour TVs and a sharp rise in DVD sales and DTH connections.5
- The insurance sector was estimated to be worth USD 2.8 billion and it is likely to grow by 200 per cent, reaching USD 51.2 billion by 2009–10. Rural India is expected to provide business opportunities worth USD 23 billion for insurance companies providing them with the right product mix.9
- The service sector is also growing.6
- From 2008 to 2009, there was a steep increase in sales of DTH connections. In case of telecom services, 71 per cent of new subscribers are from rural areas as against 29 per cent in urban areas. Of the two million BSNL mobile connections, 50 per cent are in rural areas. Of the 0.6 million villages, 0.522 million villages have a Village Public Telephone (VPT).
- Villagers hold 41 million kisan credit cards with a cumulative credit of Rs 977 billion. About 42 million households are availing banking services in comparison to 27 million households in urban areas. About 6.6 million households have invested in savings schemes in rural areas. This is close to the urban count of 6.7 million households.
Upgrading of purchases
In rural households, there is an upgradation in the form of the product used. For example, households are upgrading from traditional mosquito repellants such as gober to coils and mats. There is also an upgradation from local or unbranded products to national brands and from low-priced brands to premium brands. This is primarily due to the influence of the youth in households. This has resulted in the use of products of more than one brand for the same purpose in the household. This phenomenon was noticed way back in 1999. An interesting insight made by the R-panel of ORG-MARG (June 1999) was that trials for premium products were not restricted to the more affluent classes of rural India.
For instance, 20 per cent of the households using toothpowder also use toothpaste. The difference in choice of products has thus led to dual usage of product categories. Many of the households using premium brands also use mass-market washing powders.
Growing brand consciousness
The rural market is flooded with local brands and fake products. The view that rural people don’t use quality brands is based on a wrong understanding of the rural mindset. Rural people have readily accepted several brands when they have been offered in small pack sizes and at low price points.
Infrastructure is improving rapidly in rural India. The government is spending more to build roads to connect villages, expand irrigation networks and supply electricity to improve productivity and raise incomes. Prime Minister Manmohan Singh started the Bharat Nirman, or Building India, project with a plan to spend Rs 1.76 trillion by 2009 to build roads, provide electricity to 100,000 villages, extend irrigation to 10 million hectares, or 24.7 million acres, and build 6 million houses.10 The important highlights are:
- There has been a steep change in rural road connectivity from less than 40 per cent connectivity in 2004 to at least 70 per cent connectivity at the end of 2008, according to an IIFL (India Infoline) research report.
- There has been real improvement in phone connectivity as well. The growth in rural teledensity from 2000 to 2008 is significant as it rose to 9.43 per 100 population from 0.68. Every 1000+ population is connected by STD.
- More than 90 per cent of villages have electricity and investments in the power sector are being made to make them functional.
- PC penetration in rural homes grew by 24 per cent in 2008 as compared to 7 per cent in urban areas. With IT companies partnering with government projects, every student will have a laptop and many more rural homes will have PCs.
- Rural retail distribution has been made less complex by several available facilities (Table 1.2).
- Corporations have invested in their own retail chains that other companies can make use of by arriving at a mutual agreement. For instance, DCM Shriram Consolidated Limited (DSCL) started Haryali Stores, M&M opened Subhlabh stores, and IOC set up Kisan Seva Kendras (KSK).
Table 1.2 Retail Distribution Facilities
|Public distribution shops||3,80,000|
Companies like HUL, ITC, Nirma, Dabur, Godrej, Coca-Cola, Pepsi, LG, Samsung, Maruti, Hyundai Bharti Airtel, Idea Cellular and many others have succeeded by using innovative strategies. Some of the success stories are as follows:
- Hindustan Unilever, the Mumbai-based local unit of Unilever, sells its products through 6.3 million shops, reaching eight out of 10 households in India. Its Project Shakti is a resounding success.
- ITC revolutionized village life by starting e-choupals.
- Reader’s Digest has 0.6 million customers in rural and semi-urban areas.
- Bharti Airtel started focusing on rural markets in 2007 and gained 60 per cent of its customer base in rural areas within two years.
- Hero Honda launched its rural vertical “Har gaon, Har Angan” and its sales went up.
Companies entering rural markets need to prepare themselves for some surprises and shocks. The media reports are contradictory—some report stark poverty in rural areas and others showcase the urban style of living. The truth obviously lies somewhere in between. This is why companies should exercise caution while taking entry decisions. We will now identify some of the problems that inhibit the successful operations of corporations in the rural market.
Anecdotal evidence shows very visible signs of marked modernity and progress, yet census data corroborates the “stuck in the dark ages” description of rural India. Only 25 per cent of rural households have access to tap water (compared with 70 per cent in urban India); 30 per cent do not have road connectivity; 40 per cent do not have electricity in households; and only 52 per cent have semi-pucca houses (compared with 80 per cent in urban areas). There are remote villages which are not touched by the economic and social reforms. There are many below poverty line (BPL) households. Occasionally, we see media reports on suicides of farmers and weavers. The development programmes of the government are subverted by corrupt officials. The poor villager continues to be ignored. He suffers from lack of proper information and awareness. Inadequate infrastructure such as the non-availability of gas supply, frequent power cuts, improper sanitary conditions, etc. are common problems in many villages.
The average population in the villages of India is 100 for 15 per cent of villages, 345 for 21 per cent of villages, 724 for 24 per cent of villages, and 2,974 for 32 per cent of villages. Thus, about 96 per cent of the villages have a population that is less than 5,000 people. Thus, we are dealing with extremely fragmented markets where the population density is extremely low. This is vastly different from urban markets where population density is high and distribution is standardized.
Diversity in occupations
The rural consumer could be a bank clerk commuting to the nearest town or an agricultural labourer in a thatched-roof hut. Employees in government, business, industry and service organizations, people engaged in farming and animal husbandry, traditional artisans and contract or daily labourers in organized and unorganized sector all constitute the rural market. They may be engaged in more than one business or occupation. For instance, a farmer may be engaged in land cultivation, poultry farming, a chit fund business and money lending.
Heterogeneity in lifestyles
The heterogeneity in lifestyles is mainly on account of the geography, varied income levels and cultural differences of the consumers.
The Punjabi farmer has a better standard of living as compared to farmers in Bihar and UP. The villagers in South India are better educated than those in North India. Women occupy an important role in the society and more often than not, are responsible for a number of product decisions.11
Rural consumers have small disposable incomes and very little storage space. Rural India has an average per capita income that is half of that of urban India. Extrapolating from income data from the National Council for Applied Economic Research (NCAER), we know that 21.7 per cent of the rural population is below the poverty line; for urban populations, the incidence of poverty is 20.8 per cent, not much lower.
Lack of steady and sustainable consumption
Even today, agriculture accounts for half of rural income. The Green Revolution and other reforms have encouraged productivity-driven income growth (as opposed to price-driven growth) in the agricultural sector on a sustained basis. In some states like Punjab and Haryana we may see better crops, captive buyers, export-focused higher price. However, in other places, the income growth is because of better prices (either market or support prices). The popular view is that non-agricultural income, which accounts for a hefty 50 per cent of rural income, is far more stable than agricultural income. Data from the National Service Schemes (NSS) show that rural households with non-agriculture as the main source of income are far higher spenders than agricultural households and are more urban-like in their proportion of food expenditure. Non-agricultural income is widespread, and of different kinds. Research from IIFL indicates that of the 54 per cent of non-farm rural income, 12 per cent is dependent on the urban or overseas markets while 42 per cent is dependent on farming or hunting. This is worrying indeed.
Promotional agencies lack marketing skills
The promotional agencies (Khadi Commission, Handicrafts, Handlooms, etc.) and NGOs that are engaged in the non-farm sector lack professional marketing support and hence are unable to help the poor get better value for products made by them. This affects the purchasing power of rural consumers.
Reach and penetration of most companies, other than the likes of HUL, is poor. Almost 25 per cent of the villages with less than 500 people have no access to a shop.
Limited awareness and acceptance
The awareness as well as acceptance levels for branded products and services have been low among rural consumers. This is due to the low level of education of the rural people on the one hand and less focused and less creative educative campaigns of corporations on the other.
Low level of education
Rural India still has a low level of traditional education, making rural Indians different kind of consumers. 26 per cent of rural India’s chief wage earners (CWEs) are illiterate compared to eight per cent in urban India. Seven per cent of rural CWEs are graduates compared to 29 per cent in urban India.
Low budget for promotion
According to estimates by the Rural Marketing Agencies Association of India, the total budget for rural marketing is only about Rs 5 billion, compared to the over Rs 130 billion allotted to mass media. This is grossly inadequate to cover the huge marketing potential for different products in the rural markets.
Cut-throat competition pressurizes the margins of big firms such as Nirma, Hindustan Unilever, Dabur, ITC, Godrej, Britannia, Coca-Cola and Pepsi. Competition is found at three levels: foreign and national brands, regional brands and fake products.
Bhag Bakri tea, Ghadi detergent powder and Power soap are proofs that regional brands can become brands to reckon with at the national level. Similarly, Nirma began as a regional player and is now a national giant. They all started in small, concentrated markets, appealing to the local ethos and aspirations of the targeted area.
Brands such as “Jifebuoy”, “Bonds Talcum” and “Funny & Lovely” are counterfeit products. It is estimated that FMCG companies lose more than Rs 100 billion to spurious products every year, mostly sold through local haats and bazaars.
Failure of some companies
It is true that some companies had earlier failed to make a dent in rural markets. This can be attributed to their half-hearted efforts and faulty tactical approaches.
Many FMCG companies had applied faulty tactical approaches. They appointed vendors who implemented the company’s ideas blindly, whether they were van campaigns or below-the-line activities. Very little effort to tailor the communication to suit the local audience or fit it with the overall campaign initiatives in the mass media was made. This invariably led to less than satisfactory results in terms of awareness of the brands and long-term impact of the efforts in the targeted markets.
What are the different approaches to rural marketing? What are the philosophical orientations of the companies operating in the rural hinterland? Do they consider rural marketing as a part of their corporate social responsibility? Are they entering rural markets guided by their business growth philosophy? Are they inspired by the bottom-of-the-pyramid theory proposed by Dr C.K. Prahalad? We will now examine the rural marketing approaches in relation to urban marketing and philosophical orientations of business organizations.
There are four rural marketing approaches found in practice and they are:
- Trickle-down approach
- Undifferentiated approach
- Differentiated approach
- Bottom-of-the-pyramid marketing
Companies that focused mainly on urban areas for sales and experienced growth in urban sales relied only on the “trickle-down approach” for the rural market. They believe that there is absolutely no need for designing marketing programmes to reach rural areas (See Figure 1.1).
This approach is based on the following premises.
First, the rural market can be conveniently ignored. The top-end rural market is small in size and the sales from rural areas are only a bonus.
Second, the top-end, urban-society culture approximates the culture of the West at the aspirational level. Similarly, the top-end, rural-society culture comes close to the top-end urban one.
Third, the rural householder buys his wares from the nearby “feeder town” either on a special visit or when he is there on work.
Figure 1.1 Trickle-down Approach
Companies offering top-end, urban-centric premium and luxury products do not have any concern for rural markets.
Luxury-products market in India is estimated to be in excess of USD 500 million and is likely to grow at a Compound Annual Growth Rate (CAGR) of 28 per cent to reach USD 1.2 billion by 2010. The market is expected to double by 2015, touching USD 2.5 billion. Brands like Damro, ETAM, Zegna, Fendi, Nike, Llardo, Rino Greggio and Lee Cooper, high-end LCD TVs and plasma TVs, “dual-tech” larger-capacity (two-door, four-door and six-door) refrigerators, luxury cars like Mercedes-Benz India, BMW and Audi are essentially urban market products.
Many companies operating in the urban markets are engaged in rural development activities as a part of their corporate social responsibility (CSR).
The World Business Council for Sustainable Development states,
Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.12
CSR has a long history in India and the Tatas have been the role models in this regard. Commitment to CSR has been displayed by several corporations in India. Box 1.1 discusses the initiatives undertaken by some companies that are not directly related to their business.
The drivers of CSR
Why do corporations undertake social responsibility? Is it a philanthropic gesture or a business development initiative?
Box 1.1 CSR Initiatives Undertaken by Some Prominent Organizations
- The Malanpur plant of Godrej Consumer Products Ltd has adopted a school at a village ‘Singwari’ and granted financial help by way of scholarships to the best performing child belonging to SC/ST from the fifth to the eighth standard.
- Dabur India Ltd established Sustainable Development Society, or Sundesh, in 1993—a non-profit organization to promote research and welfare activities in rural areas.
- Lafarge Cement worldwide gives prime importance to sustainable development for sustain-able economic performance. Their major initiatives in India are: Project Employability, Project Low Cost Housing, and Project Education.
- BPCL has adopted 37 villages across India. The programme includes making substantial investments in them for nearly a decade-and-a-half to make them fully self-reliant, providing them fresh drinking water, sanitation facilities, medical facilities, enhancing their income standards by imparting vocational training and providing agricultural innovations.
- ACC’s first formal Village Welfare Scheme was launched in 1952. The range of activities begins with extending educational and medical facilities and goes on to cover vocational guidance and supporting employment-oriented and income-generating projects such as agriculture, animal husbandry, cottage industries by developing local skills, using local raw materials and helping create marketing outlets.
Ratan N. Tata, the chairman of the Tata Group, maintains:
We do not do it for propaganda. We do not do it for publicity. We do it for the satisfaction of having really achieved something worthwhile.
The key drivers of corporate social responsibility in India were diverse, ranging from stated philosophy of founding fathers to improving the relationship with local communities to availing of tax benefits.
Private-sector companies have been encouraged by the government to undertake rural development programmes over the years through fiscal incentives. For instance, special benefits are offered in the industrial policy to companies that set up industries in backward areas and tax incentives are also offered to companies that set up water purification projects.
Role of marketing
Marketing is, at best, public relations and publicity under this model. Its twin objectives are:
- Educating the target beneficiary groups in order to encourage and engage them in the development process.
- Building the image of the corporate enterprise as a good citizen and promoting sales of the company’s products and services in the urban and, to some extent, in rural areas by adopting a trickle-down approach (see Figure 1.1).
When the rural markets started growing, some FMCG and consumer durables companies found the trickle-down approach and its assumptions inappropriate. They felt that it was high time that the largely ignored but valuable rural population was paid attention to. However, they believed that to reach rural markets urban market strategies with minor modifications to suit rural conditions would serve the need. They sought to benefit from corporate social responsibility programmes that promote cause branding (See Figure 1.2).
This belief is based on the following assumptions:
- Affordability: The top-and upper-middle income holders in rural markets are fewer in number. The poor, who form a large chunk of the rural market, cannot afford to buy the products. For the middle-income holders, incomes are less stable as they are derived mostly from agriculture that is subject to the vagaries of monsoon. Thus, affordability is low. A typical view for achieving scalability is: The richest quintile of urban India and the poorest of rural India are the outliers. The rest are fairly comparable showing that scaling is possible by skillfully combining urban and rural consumers, especially in geographies connected by good roads.
- Accessibility: Poor road connectivity and lack of proper transport facilities make it difficult to reach rural areas. Logistics and supply-chain management are not only expensive, but also inconvenient.
- Acceptance: Rural people are also like urban people and have the same needs, desires and aspirations. The “rural–urban,” construct is born of convenience. The rural consumer moulds his aspirations to mach those of his urban cousin. The urbanization of rural India is a reality of the 1990s. Rural India is catching up when it comes to attitudes and aspirations.
- Availability: The availability of branded products of FMCG companies is insignificant. The only players in the rural market are the agri-business companies.
Figure 1.2 Undifferentiated Approach
Companies employing the undifferentiated approach found evidence that supported their assumptions.
For instance, the NCAER Survey conducted in 1994 showed that the variations in asset preferences of rural and urban consumers are minor.
Fans and wrist watches are preferred by all income groups of urban and rural areas. TVs are preferred by all income groups. The exceptions are the rural upper middle-and low-income groups. They preferred two-in-ones. Two-wheelers are preferred by all income groups. The refrigerator is preferred by all income groups except the middle-income group in rural and low-income group in urban areas. The brand choices of rural consumers are not that different from their urban counterparts. The brand leaders are the same: Popular soaps (Lifebuoy, Lux), Premium Soaps (Liril, Cinthol), Washing Powder (Nirma, Surf), Toothpaste (Colgate, Promise) and Batteries (Eveready, Nippo).13
Based on the above assumptions and supporting evidence, the following argument can be made.
In urban markets, there are differences between towns and cities. However, the same strategies are used to attract both markets. In a similar manner, rural markets can be attracted to buy the products offered to urban consumers by making them available to them at the nearest points of purchase. The rural market is an adaptive, adjunct to the urban market and does not require a differentiated strategy.
This approach was adopted by many FMCG and consumer durables companies offering products to middle-and lower-end market segments.
Is the focus on rural areas confined to gaining from the limited rural business opportunities? Has corporate social responsibility remained an isolated philanthropic activity unrelated to business growth goals? The answer is a definite “no.” Companies tried to leverage corporate social responsibility to enhance corporate profitability. Good corporate citizenship and CSR initiatives are inextricably linked with improved brand reputation, which is one of the most important drivers of CSR (according to a CSR Survey conducted in 2002).14
CSR decisions are taken to give if not short-term, then at least long-term economic benefits to the company in addition to an improved corporate image. Thus, CSR helped strengthen the “pull” strategy of the firms. This approach is similar to “cause branding” advocated by Carole Cone.15 Cause marketing has evolved from a short-term tactic used to spike sales into a powerful positioning discipline used to enliven brand equity and enhance corporate image with significant bottom-line and community impacts.
Many Indian companies are now employing CSR with a rural focus to further their business. Box 1.2 showcases the initiatives of three leading companies.
The experiences of these companies reinforce the fact that the rural market can become viable for corporations, which practice the developmental approach of social marketing. Organizations can launch social responsibility initiatives in order to build brands in the rural areas. The social responsibility initiatives are far more effective in building brands in rural markets than commercial advertisements.
Box 1.2 Cause-branding CSR Initiatives
- ITC: ITC focuses on social forestry related to its paper boards business and also on primary education, livestock development, and integrated watershed development in states.
- HUL: The Fair & Lovely Foundation seeks to encourage economic empowerment of Indian women through information and resources in the areas of career and enterprise. Other projects are: Project Saraswati (scholarships for girls), Project Disha (career guidance for young girls) Project Kaladarshan (skill development in embroidery and garment designing) and Project Sanjivini (3-month nurse training in collaboration with Dr Reddy’s Labs).
- Colgate: In 1998, Colgate started project Jagruti, a rural hygiene drive along with the Indian Dental Association. This project covers 6 million people in 20,000 villages out of which 15,000 villages had no access to toothpaste and tooth powder. The aim of the drive is to promote the brand in rural areas but the overall strategy is also to spread the vital information of oral hygiene among the less aware rural people.
Its main focus is on distribution and less on the adaptation of the other 3 P’s (Product, Price and Promotion) to rural markets supported by limited rural communication and promotion. Communication is disseminated through CSR activities and limited media channels, depending upon sales. Advertisements are not specially designed. Radio advertisements, van campaigns, cinema commercials, and wall paintings make up the media mix. The urban messages are dubbed into the local languages. The distribution pattern can be as follows.
FMCG companies cover as many as 0.1 million villages by appointing 2,000 stockists in towns with a population of 20,000. Even stockists can conveniently redistribute products to 50 locations around the towns. For durables, 90 per cent of products are bought in the 2,000 small town markets. Yet another of way selling products to people in villages below a population of 5,000 is by generating a consumer pull. It obviates the necessity to personally distribute it in the remotest villages.
The differentiated approach has more proponents now as the untapped rural markets are found to have huge and stable potential. The emergence of rural markets as the business targets for corporations is a new turn in the history of the economic development of our nation. In this approach, marketers design separate marketing programmes for rural markets and leverage on cause branding.
This approach is based on the following assumptions.
- Affordability: The incomes of the rural people have substantially increased and become stable with increase in the income from non-farming occupations. Government schemes of employment, subsidies, loan waivers, microfinance, free meal and education schemes have boosted rural buying power. IT and mobile telephony have enabled farmers and rural entrepreneurs to produce more and sell at better prices. There is latent purchasing power that can be tapped by suitable promotion and distribution.
- Accessibility: Infrastructure development programmes by Central and State governments have improved road connectivity to a large extent. Government and private transport facilities have improved with the rise in the production of automobiles. There are many villages cut off from towns and cities but their numbers are decreasing. Farmers today keep abreast of the latest information and maximize gains at both ends—the input as well as output and sales. They search Web sites and use their cell phones to stay constantly connected to the global markets. The market information (like price, products and demand) seems to drive their local business strategies.
- Acceptance: IT and telephone services have brought in new connectivity. The rural and the urban divide is shrinking. Rural people, especially the youth, share the same visions as their urban cousins and are adopting similar lifestyles. About 40 per cent of graduates passing out of Indian universities are from rural areas. They are the decision makers and are not very different in education, exposure, attitudes and aspirations from their urban counterparts. The effects of globalization are percolating to rural areas. The availability of satellite channels in rural India provided the required exposure to enhance acceptance of new brands.
- Availability: The reforms adopted by corporations are now reaching the rural hinterlands. Many Indian firms and MNCs have become suppliers to rural markets and there is scope for other players to enter this market.
With substantial improvements in villages in terms of affordability, accessibility and acceptance, companies have started giving rural business a separate status. At the same time they have found that rural markets comprising middle-and lower-income groups have certain peculiar features that warrant a differentiated approach in marketing. The differences are both in the environment and lifestyles. Some of them are:
- They have infrastructural constraints. Electric power supply is interrupted frequently. Drinking water is not available in many villages. Therefore, they need products that are not based on power supply and water consumption.
- They are value conscious. They prefer solid and functional products. No-frills products with good quality are preferred. An innovation that speaks of finer points like—“now with calcium”—may not appeal to them.
- They are price sensitive since their income streams are small. They cannot purchase large packs. That is why sachets with low price points brought about a revolution in rural marketing.
- They value relationships and respect elders, the educated and the administrative heads. They don’t take decisions independently. They take the opinion of the persons whom they consider competent to give advice.
- They are adoptive. When they don’t find a product, they invent intelligent ways of using available products. This is the reason for peculiar uses of some products (hair dye make up for buffaloes, Iodex application for pain management of animals, Horlicks nourishment for cattle and lassi making in washing machines and so on).
- They are slow in processing information. It is difficult for them to understand complex and nonlinear messages. Messages should be closely related to life and should be decent and pragmatic.
Many FMCG and consumer durables companies that had ignored this segment considering it to be a heavy investment–low returns market have started foraying into it and have developed differentiated strategies.
Focus on rural market development
The focus is on rural market development as well as rural development. Accordingly, companies used CSR as a promoter of business and creator of good image. There is a tight integration of CSR with marketing strategy. CSR programmes are designed and implemented to subserve the marketing goals of enterprises. Consider the following examples.
Union Bank of India set apart one per cent of its annual public profits to undertake corporate social responsibility activities through its trust named “Union Bank Social Foundation.” Its activities include: Rural Development and Self-Employment Training Institute (RUDSETI) to train rural youth for self employment, Farmers’ clubs to encourage learning by discussion of issues, Village Knowledge Centres (VKC) to provide information related to farming and marketing of produce, and Union Mitr to provide counselling on financial issues like savings and investments. Its financial product innovations include: Bhumiheen Green Card (loans without security), Joint Liability Groups (group financing), “No Frills” accounts (for the poor) and its campaign for “100 per cent Banking Habit Villages.”
Rural marketing is now a full fledged and challenging function with an emphasis on marketing research to understand the rural market, segmentation, targeting and positioning for designing the marketing mix of 4 P’s and evolving and implementing marketing strategies. It is supported by marketing-oriented CSR that is developmental in spirit and approach (See Figure 1.3).
The differentiated approach is improved radically by injecting social entrepreneurship into the marketing philosophy by path-breaking companies such as HUL and ITC in India. They have rightly understood that development is not a CSR or philanthropic act but a business that benefits the company and the poor. Since business cannot succeed in a society that fails, a new win–win sustainable model is necessary. The key idea in this model is developing rural people into entrepreneurs or participants in business. This has resulted in the creation of opportunities for partnerships between companies and non-governmental organizations, not-for-profit organizations, governmental agencies and other social enterprises. Examples of such sustainable partnerships are presented in Box 1.3. Two such initiatives that have changed the lives of rural women are described in Box 1.4.
Figure 1.3 Differentiated Approach
Box 1.3 Sustainable Partnership Models of Corporate Organizations
HUL–Vindhya Valley Project: In 2000, HUL helped the state-owned Khadi Board through an advisory relationship with the government of Madhya Pradesh. It helped the board to brand local produce from villages and tribal areas, such as natural honey collected from forests, in the state under the brand name Vindhya Valley. The product range includes edible products like papads, pickles, masala and turmeric. HUL provided the corporate expertise, marketing acumen and quality parameters, while the state government bore the marketing expenses for the brand building.
CFCL: Uttam Bandhan is the community welfare initiative launched in Rajasthan in 2000 by Chambal Fertilisers and Chemicals Ltd, the flagship company of the K.K. Birla group. Under this programme, CFCL trains unemployed rural youths as extension workers known as krishi sewaks, who interact with the farmers and advice them.
Canara Bank: The bank’s main thrust is on imparting vocational skills to unemployed people. The bank has partnered with the Syndicate Bank and the Dharmastala Manjunatheshwara Educational Trust to set up 20 Rural Entrepreneurship Institutes across India. Then there are the projects it undertakes alone, such as artisans’ training and computer literacy initiatives.
HUL: Project Shakti was piloted in 2001 in 50 villages in the state of Andhra Pradesh by involving members of Self-help groups (SHG). They are trained and provided micro credit to buy and sell HUL’s products. On average, each Shakti entrepreneur earns enough each month to approximately double their previous household income—this makes a significant difference to family living standards. Through the nature of the products sold, the project is helping to increase awareness on health, hygiene and nutrition, thus improving the standard of living of the rural community. In addition, health educators known as “Shakti Vanis”, talk to self-help groups about HUL’s brands and the importance of good nutrition and hygiene practices in combating diseases. In 2003, HUL piloted I-Shakti, an IT-based rural information service providing access to these key rural information needs in areas such as agriculture, education, health and hygiene, veterinary, etc.
The approach has been captured and articulated in an effective and intelligent way by C.K. Prahalad and Stuart Hart.16 They opined that the poor can be the engine of global trade and prosperity if we stop thinking of the poor as victims or as a burden and start recognizing them as resilient entrepreneurs and value-conscious consumers.
The important ideas emphasized by the theory are given below:
New opportunity—the invisible BoP
The distribution of wealth and the capacity to generate incomes in the world can be captured in the form of an economic pyramid. At the top of the pyramid are the wealthy with numerous opportunities for generating high levels of income. More than 4 billion people live at the bottom of the pyramid (BoP) on less than USD 2 per day. The poor represent a “latent market” for goods and services. These markets remained “invisible” for too long.
Box 1.4 Project Shakti: Changing Lives in Rural India
HUL’s Shakti Entrepreneur programme contributes by creating profitable micro-enterprise opportunities for rural women. Armed with micro-credit, rural women become Shakti entrepreneurs—direct-to-home distributors in rural markets. A Shakti Amma earns about Rs 1000 per month and the income is significant to them as most of them are from below the poverty line.
The project has been successfully implemented in fifteen states: Andhra Pradesh, Karnataka, Tamil Nadu, Gujarat, Madhya Pradesh, Chattisgarh, Maharashtra, Uttar Pradesh, Punjab, Haryana, Rajasthan, West Bengal, Bihar, Jharkhand and Orissa.
This model has been the growth driver for HUL and presently about half of HUL’s FMCG sales come from the rural markets. The Shakti network at the end of 2008 was 45,000 Ammas covering 100,000+ villages across 15 states reaching 3 million homes. The long-term aim of the company is to have 100,000 Ammas covering 500,000 villages and reaching 600 million people.
Nagajyothi—An HUL Shakti Amma
Nagajyothi, a 35-year-old Vysya woman from the revenue village of Mannesamudram in Anantapur district of Andhra Pradesh, is a fine example of how Project Shakti has positively impacted the lives of rural women in India. She found it extremely difficult to make ends meet with her husband, the sole earning member, earning only a daily wage of Rs 100 and two young children to provide for. Nagajyothi heard about HUL after becoming a member of her local Development of Women and Children in Rural Areas (DWACRA) group, a self-employment scheme for rural women and children of the Andhra Pradesh government. She decided to join Shakti in 2004 after obtaining guidance from HUL officials. She started her dealership with an investment of Rs 10,000. With the support of the HUL rural sales promoter and her friends she has overcome the initial hiccups in selling her products and today her monthly turnover is approximately Rs 24,000.
She covers her own village comprising a population of about 3,800 by home-to-home sales and also covers retailers. She is confident of providing for her two children, a 15-year-old son who works as a labourer in a factory and a daughter who is interested in studies. Her confidence in facing the future is evident from what she often says to her new acquaintances, “Shakti not only gave me an additional source of income but also has introduced us to a number of people who help our family in promoting our business.” She was also appreciated for her involvement in organizing a dental camp sponsored by HUL officials.
The Shakti initiative has been one of the main growth drivers for HUL and presently about half of HUL’s FMCG sales come from rural markets.
Source: Field survey of authors and their research scholar Mrs V. Bhargavi Reddy in 2008.
BoP, as a market, provides a new growth opportunity for the private sector and a forum for innovations. Innovations in technology, products and services, and business models will be needed to serve BoP consumers.
Figure 1.4 Bottom-of-the-pyramid Marketing
Large scale and wide spread entrepreneurship is at the heart of the solution to poverty. For this, there is a strong need for large organizations to collaborate with the poor, who are to be uplifted, and the supporting organizations that provide resources and counselling. The supporting organizations may include social organizations and government agencies. Through such public–private partnerships (PPPs) markets can be created at the bottom of the pyramid for eradicating poverty.
Free and transparent private-sector competition, unlike local village and shanty-town monopolies controlled by slum lords, can transform the “poor” into consumers. Market development at BoP level will also create millions of new entrepreneurs at the grass roots level—from women working as distributors and entrepreneurs to village level micro enterprises.
Core business, not social responsibility
BoP markets must become an integral part of the work of the private sector. They must become part of the firm’s core businesses; they cannot merely be relegated to the realm of corporate social responsibility initiatives.
As shown in Figure 1.4, the four marketing tasks required to meet the challenge are: (i) Creating buyer power (entrepreneurial/inclusive), (ii) Shaping aspirations (educative), (iii) Tailoring local solutions (innovative) and (iv) Improving access (integrative).
The rural Indian market and consumer calls for sophisticated new marketing strategies and paradigms, not a transplantation of old ideas. The demand is for development not by charity but by entrepreneurship, and supply of goods and services not based on the convenience of the producer but based on innovation to meet consumer requirements. The new, comprehensive model should address the bottom of the pyramid with a commitment to uplift the masses and the company goals of profitability. Given this, the three elements that constitute the new model are: integrated marketing, innovative marketing and inclusive marketing (Figure 1.5).
Figure 1.5 Integrated–Innovative–Inclusive Approach
It involves devising marketing activities, programmes and networking with other functional areas to create, communicate and deliver value for consumers with the goal of profitability along with consumer satisfaction. The two components of this approach are transactional marketing (4 P’s) and relationship marketing. In this context linkages are necessary with research agencies, customer relationship management (CRM) agencies, and consumer groups.
This looks for breakthrough ideas in products and processes for continuously offering exciting experiences and values to the customers. One process innovation is developmental marketing. Developmental marketing refers to taking up marketing programmes keeping the development objective in mind and using various managerial and other inputs of marketing to achieve these objectives. Its aim in the present context is to develop the rural people by social entrepreneurship as advocated by the bottom-of-the-pyramid approach. For innovation, linkages are necessary with R&D institutions, public, consumers, NGOs, and competitors.
Pradeep Kashyap (CEO, MART), advocated the adoption of inclusive marketing by corporations as an “enlightened strategy” to serve their own long-term interests in growing the mass market. It aims at triggering development at the bottom of the pyramid by partnering with change agents.17
If marketing skills of promotional agencies (Khadi Commission, Handicrafts, Handlooms, etc.) and NGOs that are engaged in the non-farm sector are enhanced, these agencies will then be able to help the poor get better value for their products and earn higher incomes. Public–private partnership is one such approach that can benefit the poor. However, it should be a win–win model that offers benefits to all stakeholders equally. Such equitable, market-based models are more likely to be sustainable as they utilize the best strengths of each partner. The microfinance model is one PPP initiative that has achieved scale and sustainability because of the active involvement of the different stakeholders—the poor themselves, NGOs, government and financial institutions.
The term “rural marketing” that was earlier used us an umbrella term to refer to all commercial transactions of rural people, acquired a separate meaning of great significance in 1990s. The evolution is briefly explained here and depicted in Table (1.3–1.5).
Phase I (before mid-1960s)
Rural marketing was referred to as the marketing of rural products in rural and urban areas and agricultural inputs in rural markets. It was considered synonymous with “agricultural marketing” (Table 1.3).
Agricultural produces such as food grains and industrial inputs such as cotton, oil seeds, sugar cane, etc. occupied the central place of discussion during this period. The marketing activities of firms supplying agricultural inputs and of artisans in rural areas received secondary attention. Agricultural inputs mainly included fertilizers, seeds, and pesticides. The market for durables such as tractors, harvesters, threshers, power tillers, pump sets, oil engines, and electric motors was miniscule.
The local marketing of products such as bamboo baskets, ropes, window and door frames, household earthen and small agricultural tools such as ploughs, products by sellers like black smiths, carpenters, cobblers and pot makers were discussed in general. This was an unorganized market.
Phase II (mid-1960s–mid–1990s)
The green revolution ushered in scientific farming practices and transformed many of the poor villages into prosperous busy centres. As a result, the demand for agricultural inputs went up. Better irrigation facilities, soil testing, use of high-yield-variety seeds, fertilizers, pesticides and employment of machinery such as power tillers, harvesters, threshers, etc. changed the rural scenario.
In this context, marketing of agricultural inputs assumed significance. Two separate areas of activities had emerged—the new “marketing of agricultural inputs” and the conventional “agricultural marketing”. Table 1.4 presents the overview of the marketing in this phase.
During this period, the marketing of rural products received considerable attention in the general marketing framework. The formation of agencies like Khadi and Village Industries Commission, Girijan Cooperative Societies and APCO Fabrics (in Andhra Pradesh) and the special attention paid by government to promote these products were responsible for this upsurge. Village industries flourished and products such as handicrafts, handloom textiles, soaps, safety matches, crackers, etc. hit the urban market on a large scale.
Table 1.3 Rural Marketing Before Mid-1990s
|Urban||Agricultural inputs–consumables||Not relevant|
|Rural||Artisan services and products||Agricultural products|
Table 1.4 Rural Marketing in Phase II
|Urban||Agricultural inputs||Not relevant|
|Rural||Artisan services and products||Agricultural produce|
Table 1.5 Rural Marketing—Phase III
|Agri-inputs marketing (occupational inputs)|
|Consumer marketing (products and services to households)|
|Products and services of rural origin.|
Phase III (after mid-1990s)
The marketing of household consumables and durables in the rural markets were not considered in the two earlier phases. The reasons are obvious:
First, there was no rural market as such. The existing rural markets for these products were not substantial—not large enough to attract the attention of the urban marketers.
Second, they were inaccessible. The small villages/hamlets were widely scattered making reach difficult and expensive.
Consequently, the rural market was seen as an adjunct of the urban market and was conveniently ignored.
However, India’s industrial sector had gained in strength and maturity since the 1980s. Its contribution to the Gross National Product (GNP) increased substantially. A new service sector had emerged signifying the metamorphosis of the agricultural society into an industrial society. Meanwhile, due to the development programmes of the Central and State governments, service organizations and socially responsible business groups such as Mafatlal, Tata, Birla, Goenka and others, the rural areas witnessed an all round socio-economic progress. The economic reforms of 1991–92 further accelerated the process by introducing competition in the rural market. The rural market for household consumables and durables has also grown steadily.
Rural marketing represented the emergent distinct activity of attracting and serving rural markets to fulfill the needs and wants of persons, households and occupations of rural people. Table 1.5 depicts the present rural market structure.
Phase IV (around 2015)
Global rural marketing will emerge. Some of the key drivers for the emergence of global rural markets as an attractive business proposition are globalization, information revolution, the bottom-of-the-pyramid theory, growth in size of Indian organizations, ability to create appropriate technologies by our R&D institutions for the rural market, heavy competition in domestic rural markets and increasing urbanization promoted by the formation of greater cities and corporations leading to disappearance of many rural areas.
How do you define rural marketing? We find that different writers have offered different definitions. The definitions may create some confusion for the following reasons.
- Time differences—They represent the scope of rural marketing of their times.
- Approach differences—Some are process oriented and some are content based.
- Target differences—The focus is on the market or people.
Now we will take a look at the definitions of rural marketing provided by some writers to appreciate the above argument.
The National Commission on Agriculture defined it as:
Rural marketing is a process that starts with a decision to produce a saleable farm commodity and it involves all the aspects of market structure and system, both functional and institutional, based on technical and economic considerations and includes pre-and post-harvest operations, assembling, grading, storage, transportation and distribution.
T.P. Gopalaswamy18 observed:
Rural marketing is a two-way marketing process. Its content now encompasses inflow of products into rural areas for production and consumption purposes and also outflow of products to urban areas.
Rural marketing can be defined as a function that manages all activities involved in assessing, stimulating and converting the purchasing power of rural consumers into an effective demand for specific products and services and moving these products and services to the people in rural areas to create satisfaction and a better standard of living and thereby achieving organizational goals.
Balaram Dogra and Karminder Ghuman21 explained the concept as follows:
Rural marketing is a distinct specialized field of the marketing discipline that encompasses a customized application of the marketing tools and strategies to understand the psyche of the rural consumer in terms of needs, tailoring the products to meet such needs and effectively delivering them to enable a profitable exchange of goods and services to and from the rural market.
An academician who does not subscribe to the “place” concept (“market is a place where exchanges take place between buyers and sellers”) of marketing says, “Rural marketing is marketing to a rural ‘mindset’; not a rural market.”
Given the above definitions and views, we can identify the following important aspects about rural marketing:
- It is a function and a discipline.
- It is a process with two objectives—(i) customer satisfaction and enhancement of standard of living and (ii) reaching organizational goals.
- It is a process involving activities such as assessing, stimulating and converting the purchasing power of prospects.
- It involves application of strategies and tools based on understanding the consumer.
- It involves design of products and related components of the marketing mix.
A new dimension is to be added to the points discussed above to make the definition contemporary.
Rural marketing involves creating purchasing power by partnering with consumers and other development agencies.
Therefore, rural marketing can be defined as follows.
Rural marketing is an entrepreneurial process of developing rural people by partnering with development agencies and a business function that involves assessing, stimulating and satisfying demand for products and services through innovative approaches with a concern for customer satisfaction and corporate profitability.
Nature of Rural Marketing
What are the characteristics of rural marketing? From the definitions and observation about the evolution of rural marketing discussed in the previous sections, we can identify the following characteristics.
- Elastic: Rural marketing has broadened with changing times. It has changed in nature from being transactional to developmental and from going alone to partnerships. It has benefited from information technology developments to embrace virtual solutions to rural problems.
- Developmental: The role of rural marketing is more developmental than transactional. It is more a process of delivering a better standard of living and quality of life to the rural consumers, taking into consideration the prevailing rural milieu.
- Innovation-driven: Innovation is the essence of marketing. Innovative methods of social change for successful transformation of traditional society are vital. Such a change narrows the rural–urban divide.
- Social process: Communication is the vital element of rural marketing. It should serve to resolve social conflicts, encourage cooperation and strengthen competitive spirit during interactions between rural and urban locations as well as within rural areas. Another critical point for communication is the point of conversion of a “ruralite” from an “induced beneficiary” to an “entrepreneur” and “intelligent buyer.”
- Strategy-based: The process of transformation can only be evolutionary and not revolutionary. The growth of the rural market can be a planned evolutionary process based on strategic instruments of change rather than just constituting short-term opportunities for commercial gains.
- Win–win process: Rural marketing process is both a catalyst as well as 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. It becomes both the benefactor and beneficiary in this process.
- A discipline: Rural marketing has emerged as a separate discipline and is offered as a subject of study in management programmes of institutes, universities and colleges. Several text books on the subject are available in the market. A large number of articles on different aspects of rural marketing highlighting experiments and experiences of different companies can be found in the print and electronic media. The subject has also caught the attention of researchers. Many researchers are investigating the rural marketing phenomenon. With all these efforts we find a new theory with concepts, principles, and tools developing.
- A growing profession: In order to qualify as a profession, an occupation has to fulfill the following criteria also satisfied by rural marketing:
- A distinct body of knowledge: Rural marketing is a distinct theory with knowledge and techniques drawn from different fields such as marketing, sociology, psychology and information technology. Though basic frameworks are drawn from marketing, the theory is developed based on rural-oriented behavioural sciences. As such it differs from urban and international marketing applications.
- Skills: Rural marketing requires a different skill set. The rural marketer is a barefoot manager, having communication skills with working knowledge of local dialect. Patience, ability to convince and good technical knowledge of the product are important for the rural marketer.
- Training: Many institutes are offering rural marketing as a subject or course. Well known among them are the Indian Institute of Rural Management, Anand, National Institute of Rural Management, Ahmedabad, and Indian Institute of Management Ahmedabad. Xavier Institute of Management, Bhubaneswar (XIMB) and Thiagarajar School of Management (TSM), Madurai have organized Gramotsavs as part of the training offered to students. The Indian Institute of Planning and Management (IIPM), Ahmedabad organized a “Rural Sensitization Drive” in a village called Upariyala in North Gujarat. The students were given a project to conduct a rural lifestyle and consumer behaviour survey.
- Social status and remuneration:The job opportunities in rural areas are increasing and there is good response to them from the youth. It is reported that the Shakti Ammas of HUL’s Project Shakti have gained new respect in their areas. A survey revealed that rural retailers influence 35 per cent of purchases. The rural salaries are reasonable and they will soon catch up with the urban ones as scalability and sustainability of operations are established.
- Association:Every profession has an association that creates a forum for exchange of ideas and improvement of practices. Such associations lay out a code of conduct for its members to follow and also design standards for excellence. Though there is no such association, the formation of Rural Marketing Agencies Association of India (RMAAI) is a happy augury to this growing profession.
How do you implement the 3-I model (Integrated, Innovative and Inclusive growth model) of rural marketing? Some guidelines are given below:
Create a right organization
Rural marketing requires an organization that is innovative and organic. Based on the well known Mckinsey 7-S framework, we suggest the following guidelines.
Rural marketing requires strategies for five reasons.
- The projection of household income distribution for 2015 by NCAER holds a big promise for success in the long run. According to it, the consuming class will be 54 per cent of the rural population, followed by climbers who will be about 34 per cent. The market is growing at a rate of 3 to 4 per cent per annum adding more than one million new customers every year.
- The experiences of many companies indicate that tactical approaches do not work.
- A long-term approach for building a rural market is necessary.
- It involves developing partnerships and coordinating their work.
- Innovation is necessary for creating appropriate product distribution and communications.
A comprehensive brand building strategy, with both short-term and long-term goals, is a must to have sustainable growth in sales in rural India. Tactical approach leads to temporary and limited benefits.
Guideline 1: Define mission, vision and value statements. Develop an inclusive growth strategy, set goals and make proper resource allocation. Work out partnerships and alliances.
Obviously, structural arrangements for implementing rural marketing strategies are essential. Beginning with a task force, a company may go for a separate marketing and sales vertical supported by a field team. Many companies have started their rural retail chains.
Guideline 2: Consider setting up a task force, sales vertical and rural malls.
Marketers need marketing research systems and intelligence to make wise choices. An efficient human resource system is essential to recruit, train and reward people. Design planning and control systems are required to set objectives and monitor the progress.
Guideline 3: Establish appropriate systems covering the key operational areas.
Total commitment from the top leadership is imperative and it should be communicated to all the employees. To establish enduring and effective teamwork, (i) formulate mission and vision statements and (ii) develop a description of values. The value statements may include recognition for the dignity and abilities of the poor, positive regard for entrepreneurship, a development gateway, thrust on innovation to achieve excellence, concern for quality, desire to build good image and provide better standard of living.
Guideline 4: Prepare a statement of values and communicate it to employees.
Rural marketing efforts need a special mindset that many of the urban-oriented management graduates do not possess. The best bet is to recruit students from specialized institutes such as the Indian Institute of Rural Management, or at least, management graduates who have studied the subject as an elective. Students from small towns, who want to prove themselves in big companies and have no issues about working in smaller markets, are ideal for rural jobs.
Guideline 5: Choose people with rural orientation and experience.
Social skills for understanding the rural market by interaction and participant observation techniques, technical skills to create products based on rural-appropriate technologies, entrepreneurial skills for innovation and risk management and design skills to formulate marketing programmes are essential. It is very important to create such skill sets.
Guideline 6: Train employees to gain relevant social, technical, entrepreneurial and design skills.
The style suitable for leading the organization is participative as the organization functions in association with many other organizations—governments, NGOs, microfinance institutions, the rural poor who are channel or production partners.
Guideline 7: Encourage and employ participative style to educate, engage and empower people.
Understand, segment and target markets
A good understanding of rural markets is necessary to initiate action.
Marketers often look for common points to simplify their decisions. However, strategic marketing calls for finding out differences and gaining competitive advantage by focusing on them. Rural markets are fragmented, scattered and thinly populated making the task of understanding complex.
Rural consumers are people living under the following conditions that are different from urban ones.
- Environment of constraints (poor road connectivity, irregular power supply, no drinking water, poor sanitary conditions, lack of health care and so on)
- Traditional culture (respect for elders, saving for future, simple living, family orientation, regard for ceremonies and festivals, worship of gods, etc.)
- Occupations that are temporary/seasonal and provide low incomes
- Caste or political affiliations
- Small area with few households
As such their purchase preferences are likely to be shaped by five aspects: functionality (products that do not require electricity or that provide pure drinking water), economic considerations (simple and low priced), ease of use and maintenance (lack of support from service centres), sturdiness with longevity of life (saving for future) and decency (social acceptance). Their buying behaviour is characterized by the following features:
- Long process of inquiry and evaluation that involves many people to gain social acceptance and make rational choices.
- Domination of the father, influence of patriarchy and joint family (this of course is changing; women and youth are now playing important roles in decision making)
- Preference of cash purchases—habit of buying when farm proceeds are sold and money is available (but this is also changing with the increase in non-farming income)
- Weekly buying at weekly fairs and haats (this too, is alterring with availability of products)
- Collective decisions guided by village head or a dominating person—this is found in some villages where all villagers purchase products of the same brand.
Evidently, rural people face different situations and have different preferences compared to urban consumers. More significantly, a wind of change is sweeping the countryside.
Guideline 8: Understand that rural markets are different and changing. Get first-hand information from personal observation and get problem-specific information from rural research agencies. Also remember that any description made today cannot be comprehensive, definitive and enduring.
Spending time researching the rural Indian market before diving in can help prevent failures. Rural consumers, their living environment and product usage are different, leading to differences in usage patterns. Research has provided the following understanding of consumers and their needs.
The purchase decision is characterized by collective decision making and it is highly influenced and opinion driven. Rural choices are guided by quality–value paradigms and stress on the functionality of the products rather than on the frills attached with it. In general, it is a recognized fact that rural consumers are relatively more brand loyal than their urban counterparts. And here too, the collective principle works. That is why there are Nirma villages, Wheel villages, Escorts villages and Mahindra and Mahindra villages. Against this, there are reports that rural people are also exhibiting tendencies of disloyalty.
However, caution should also be exercised. Complexities such as recalibrating the scales and usage of the right dialect of language in research instruments must be taken care of for proper rural market research. Associations with colour and symbols work well. The individual–interview technique may suffer from some limitations as rural people believe in participatory approaches.
Guideline 9: Rural marketing research requires customization in terms of questions and research tools based on language, level of literacy, and style of participation of subjects.
Marketers have to find appropriate variables to segment the rural market. Rural markets are deceptively simple; segmentation is by no means an easy task. The heterogeneity in geographic locations, occupations, incomes and languages require attention. Here are some confusing variables:
- Family size, not income, determines the purchase of durables like TVs.
- Land holdings and incomes are not strongly correlated. Factors like crop pattern, rainfall and method of farming make a difference.
- Income of a family cannot be easily ascertained. There are multiple employments, differential wage structures and irregular receipts. Expenditures as such, are seasonally varied.
Guideline 10: Marketers have to choose multiple and relevant variables to segment the rural market.
Tailoring products, including packaging them and giving them brand names, to give them a rural image is the first mile in rural marketing strategy. This is possible when the products are related to the rural life and mindset.
- Products based on resource constraints: A refrigerator with standby power for 12 hours, pressure cookers with two handles and a radio with key-winding mechanism were developed keeping resource problems in view. Samsung introduced stabilizer free operations in its direct cool refrigerators to take care of voltage fluctuations.
- Products related to health and protection: IFFCO Tokio General Insurance offered a free insurance cover worth Rs 40,000 with every fertilizer bag through its Sankat Haran policy. Nokia introduced pest-resistant covers for its mobiles. Cadbury launched a chocolate flavoured biscuit that is based on the consumer insight that rural mothers opt for biscuits rather than chocolates for their children.
- Products based on affordability: Small-size packs with low price points are popular in the rural market. Chik Shampoo sachets at Re 1, Parle G Tikki packs at Rs 2, mini Amrutanjan satchets priced at Rs 2, Cinthol, Fair Glow and Godrej in 50 g packs priced at Rs 4–5 are some examples. Baron International ran a successful exchange for TVs in urban areas and sold old exchanged sets after reconditioning them in the rural market.
- Products packed for convenience in use: Bubble pack (30 ml) Clinic Plus is offered at Rs 8 as there are more storage related problems in rural areas. It allows the use of the right quantity.
- Products with simple packaging: Nirma washing powder is an example of this.
- Products branded for easy recognition: LG’s Sampoorna TV, Meera shampoo and Kuttihamam soap can be mentioned here.
- Products with multiple uses: Paints from Asian Paints are used for painting houses as well as the horns of buffalos.
Guideline 11: Innovate to create appropriate technology products ensuring utility and affordability.
Rural consumers are price sensitive in general. They prefer to buy low-priced, large packs of popular products or low-priced, small unit packs of premium products. However, they are willing to upgrade their purchases by buying branded, quality products priced at higher levels. In case of durables, they look for reasonably priced products. Therefore, pricing of routine buying products should be at lower levels. This can be achieved by taking advantage of packaging techniques. In case of durables, peg prices at affordable or at slightly higher levels by offering two variants—one with no frills and another with fascinating frills.
Guideline 12: Offer products at multiple price points to meet the expectations of the different segments of the market. Price low for repeat purchase items and provide small packs. Adopt value-pricing for low-end economy/popular products in regular pack sizes as well as consumer durables. Adopt high-priced, high-quality strategy for premium products in all categories to encourage upgrading by middle-income segment and to satisfy the top-end consumers.
The rural area is a market where large portions of the population are illiterate. Therefore, communication should depend on two important principles—simplicity and visibility.
Print and electronic media: One can make use of different media to promote products in the rural market. Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. It doubled its spending on advertising on Doordarshan, which alone reached 41 per cent of rural households. It has also used banners, posters and tapped all the local forms of entertainment.
Mobile advertising: Marketers can make use of all moving modes of advertisement such as cycles, bikes, cars, buses, cattle, bullock carts, and T-shirts.
- Point-of-purchase: Loud, bright colours are typically used on packages to differentiate a product from the others on the shelf and to create a lasting impression in a consumer’s mind.
- Point-of-use: Wall paintings, tin plates tied to trees, large sized rocks and so on could be used.
- Traffic places: Hoardings, wall paints, and so on are used.
Traditional oral media: They include Burraktha, Harikatha, puppetry, street theatre, drama and music programmes.
Distribution-related advertising: Mandis, fairs, melas, haats, jataraas, gramotsavs, and so on fall under this category.
Message choices: Rural people are less educated and are nave when it comes to communication. They value functionality, decency, social acceptance and affiliation. Experience indicates that messages should be linear, address benefits, solve problems, involve people and be musical, and create an optimistic mood. Rural people may be simple but judge things based on common sense.
Rural brands are mostly recognized through symbols, logos and colours. They consider heavy watches to be high quality ones. They taste cement to determine its quality.
Opinion leadership and group relations can be effective approaches to promote products.
During a study conducted by Anugrah Madison Advertising Pvt. Ltd for Philips in Tamil Nadu, it was found that almost an entire village owned a single brand of TV such as BPL or Videocon.
Music, demonstration and intelligent advice will form the right combination to promote products in rural areas.
An award winning ad of Xpanse Asia, the rural marketing arm of Starcom Media Vest Group, shown at the Festival of Media Awards, Spain, 2009, illustrates how people and music can be employed to woo rural folk. Procter & Gamble wanted to increase penetration of hygiene essentials such as shampoos (Head & Shoulders) and detergents (Tide) in villages. It engaged Xpanese Asia who created a character called Sangeeta Bhabhi, whom rural women could trust. Sangeeta Bhabhi was a semi-urban, educated woman, married into a typically rural family who wins appreciation by performing household chores using products of Procter & Gamble. The story was told by teams of two male communicators armed with kits that included games, signage and the products. They travelled on motorbikes through 100 villages. Visiting many locations, they gathered 20–30 households together, entertaining them with games and raffle draws to maximize participation before introducing Sangeeta Bhabhi’s story.22
Guideline 13: Promotion should be innovative in choosing media and simple in communicating the messages to individuals and groups.
For a product to reach 0.6 million villages spread over 3.2 million sq. metres of area, it is important for the marketer to have a good distribution system. Limited transport facilities act as a constraint to marketing action. Innovations are required in three areas:
- Physical transportation modes: These include existing ones like animals (bullocks, horses, donkeys, yaks, and zebras and carts driven by them), boats, cycles, and motor vehicles, tractors, light commercial vehicles, mini-lorries, and vans.
- People involved: Sales persons, social workers, rural people (village heads, part-time business people and consumers (HUL’s Shakti ammas). “Consumers as sellers” is the new trend in rural marketing.
A new breed of consumers is emerging in the rural markets. A consumer can be an insurance agent, the intermediary for a financial product, and the person who acts as an intermediary distributor of a detergent or a cake of soap alike. This channel, uniquely, is not restricted to the efforts of multi-level channel marketers like Amway, but equally involved in selling products and services as a distributor on a direct mode of distribution. Self-help groups are another channel that are becoming micro-entrepreneurs assisted by corporations and micro-finance agencies.
- Retail outlets: The traditional and innovative modes are these.
- Traditional selling points: Retailers, cooperatives, mandis, haats and melas.
- Innovative initiatives: Fair prices shops (becoming malls), NGOs, post offices, anganwadis, rural malls, van marketing and road shows.
- Innovative IT-based initiatives: ITC-e choupal, i-Shakti and others.
Marketers are on an innovation spree to overcome the hurdles of distribution. While state governments are expanding fair price shops to create malls, private entrepreneurs are venturing to start modernized retail outlets.
Nadeem Jafri’s Hearty Mart chain of supermarkets, that targets business at the “bottom of the pyramid” in rural areas in Gujarat, is an example of this. Hearty Mart’s saral is modelled on the neighbourhood kirana stores found in cities.
Guideline 14: Distribution should be innovative in leveraging a rural retail revolution, IT developments and people participation.
Rural marketing is different from urban marketing for various reasons.
Let us make an attempt to highlight the differences between rural and urban marketing (Table 1.6).
Table 1.6 Urban Versus Rural Marketing.
This is a mind-boggling proposition for two types of persons—one, the manager interested in expanding the business of his enterprise and the other, the management student aspiring for a rewarding career. The answer is simple—if you have motivation, ability and knowledge, you can perform well in rural markets and you can choose to be a rural marketer. However, assessing the three aspects is not as simple as one may think. Some of the important requirements to help you assess your potential are discussed below.
Motivation to work in rural markets may have the following sources:
Accepting the challenging assignment to prove oneself, the desire to take up a different job, staying in rural areas (being a rural native), serving the nation (patriotic spirit), helping the poor to change their lives (service challenge) and expecting acceptable rewards (salary and benefits that are enough to lead a good life).
Strategies are made by top executives in board rooms. However, they are practised on the dusty roads of villages. Effective formulation and implementation of strategy requires understanding at the grass roots level. As such, the middle-to lower-level managers require exposure and experience relevant to rural markets. A deeper understanding of the rural milieu is needed to be successful and comfortable in rural operations. Knowledge of rural areas—the geographical spread of rural villages, demographics, culture and language, lifestyles and preferences, competition, political and caste affiliations and rivalries, administration and development plans and progresses and other related information is important.
Till recently, marketers had exposure mostly to urban markets and they chose people from urban areas to work in rural villages. They have to reorient themselves to be successful in their mission.
Rural people don’t easily trust urban people. Establishing mutual trust is a big challenge for urban marketers. In view of this, it can be said that a rural marketer requires the following skills and attributes:
- Social skills: Rural marketers have to go beyond relationship marketing. Rather, they should include humour and recreation in their plan of action. Using an interactive approach, they may organize games and events that attract the attention of villagers of all professions uniformly. This would require local-level goodwill creation and social negotiation skills.
- Respect and humility: Rural folk look up to the urbanites and hence, the behaviour of marketers, while conducting business in villages, should be respectful and humble.
- Patience: Rural buyers take a long time to make up their mind to buy. Therefore, marketers need to learn to exercise more patience in dealing with the less educated rural traders and consumers.
- Courtesy and concern: Rural India is a network of relationships. Marketers have to show courtesy and concern in dealing with rural consumers. The focus should be on “relationship” building and not mere product selling. Mobile traders selling a variety of products by visiting the same home for years have been practicing relationship marketing for centuries in India.
Box 1.5 Choosing a Career in Rural Marketing
Young men and women can now boldly choose rural marketing as their career option as it is exciting and rewarding.
Agri-business management, NGO management, natural resource management, rural infrastructure, micro-finance and corporate social responsibility (CSR) are just some of the emerging areas in rural management. FMCG companies, rural marketing agencies, non-governmental organizations, agencies under the United Nations, micro-finance companies, banking and insurance sectors, companies engaged in agro-based businesses and others foresee exponential growth in rural India.
ICICI Bank, HDFC Bank, Hindustan Unilever, ITC, Tata Chemicals, Maruti Udyog and Proctor & Gamble are hiring professionals with expertise in rural management to try and reach out into the untapped markets of Indian villages. The salaries offered to students have also boomed over the years.
Although the demand for rural managers is very high, the availability of competent human resources is rather limited. Institutions like the Xavier Institute of Management, Bhubaneswar (XIMB), Institute of Rural Management, Anand, S.P. Jain Institute of Management and Research (SPJIMR), Pune, Mudra Institute of Communications (MICA), Ahmedabad and National Institute of Rural Management, Jaipur also offer management programmes that are in great demand. Various universities in the country also offer rural marketing as a specialization in their MBA programmes. Witnessing the trends, Rural Marketing Agencies Association of India (RMAAI) has started organizing various activities to promote talent among youth.
One such initiative is the announcement of awards for the best summer projects in rural marketing by students from premier management schools across the country. A team of experts nominated by RMAAI will evaluate the projects and the top 10 entries will be invited to an awards event where each project team will make a presentation. The three best presentations receive the following awards:
- Gold Award (Rs 15,000)
- Silver Award (Rs 10,000)
- Bronze Award (Rs 5,000)
Source: N. Jojo Joy, “In Search of Rural Expertise,” Rural Marketing Association of India Journal (March 2008).
Answer the following questions using one of the three following responses: Yes, No and Uncertain. If you have more number of “Yes” responses, you are a rural marketer.
- Am I interested in working in rural areas?
- Is my motivation factor strong?
- Can I sustain my motivation for at least two years?
- Have I travelled and visited rural villages so that I can say that “I know the rural areas” of a particular region?
- Have I completed a project that gave me first-hand exposure to rural life?
- Have I completed a rural marketing course that gave me conceptual and analytical understanding of rural marketing operations?
- Have I undergone training in any institute to gain the knowledge and skills needed by a rural marketer?
- Am I good at conversations in the local language of rural people?
- Am I known to rural people?
- Am I accepted and respected by rural people?
- Can I negotiate well with simple people to convince them to agree with my points?
- Can I use the demonstration method in making explanations?
- Do I have a positive regard for people in rural areas irrespective of caste and income considerations?
- Can I speak clearly with respect and consideration to my customers?
- Do I have the patience to talk to less educated farmers and traders?
- Do I show courtesy to people naturally?
- Am I rated as a social person who cares for relationships?
- Do I have good energy levels to move around the villages, scattered and unconnected by road?
- Do I have robust health to stay in dusty and dirty village environments?
- Do I have a feeling that I am the right person for a rural job?
You have interesting news if you have received a good score. For students engaged in rural marketing studies and looking for bright careers, opportunities to prove themselves start much early.
Box 1.5 discusses how you can win and gain recognition from prospective employers as a student.
Rural marketing is gaining recognition as a growing profession, distinct academic discipline and rewarding career for young management students and executives. A rural area can be defined at the convenience of companies, based on market potential. Rural demand exists for several products and services required for household consumption and occupational needs. Rural market entry decisions are influenced by three types of factors—urban push, rural pull and rural inhibiting. Urban push factors include saturated market, fierce competition and changing lifestyles of urban people. Rural pull factors comprise rising affordability due to changes in population size, occupations, incomes, consumption and disposable incomes, growing acceptance for new products and services owing to increasing literacy, lifestyle changes and shifts in decision making, increasing availability needs due to growing usage and demand for products, upgrading of purchases and growing brand consciousness and improving accessibility by road and communication connectivity. The success of several companies is an important motivator. However, there are certain inhibiting factors too. Uneven development, fragmented markets, diversity in occupations, heterogeneity in lifestyles, low income streams, lack of steady and sustainable consumption, poor marketing skills of promotional agencies, difficulty in accessing, less acceptance for urban lifestyle products (this is due to low education levels and few creative efforts of corporations in changing traditional thinking), intensifying competition and failure of some companies.
Four distinct approaches are identified to operate in rural markets. They are the trickle-down approach, the undifferentiated approach, the differentiated approach and the Integrated–Innovative–and–Inclusive (3-I) approach based on the bottom-of-the-pyramid theory.
The following guidelines help implement the 3-I approach.
- Define mission, vision and value statements. Develop an inclusive growth strategy, set goals and make proper resource allocation. Work out partnerships and alliances.
- Consider setting up a task force, sales verticals and rural malls.
- Establish appropriate systems covering the key operational areas.
- Prepare a value statement and circulate it among employees.
- Choose people with rural orientation and experience.
- Train employees to gain relevant skills in the skills set—social, technical, entrepreneurial and design.
- Encourage and employ participative style to educate, engage and empower people.
- Understand that rural markets are different and changing. Acquire first-hand information by personal observation and get problem-specific information from rural research agencies.
- Rural marketing research requires customization in terms of questions and research tools based on language, level of literacy, and style of participation of subjects.
- Marketers have to choose multiple and relevant variables to segment the rural market.
- Innovate to create appropriate technology products ensuring utility and affordability.
- Offer products at multiple price points to meet the expectations of different segments of the market. Price the products low for repeat purchase items and provide small packs. Adopt value-pricing for low-end economy/popular products in regular pack sizes as well as consumer durables. Adopt high-priced, high-quality strategy for premium products in all categories to encourage upgrading by the middle-income segment and satisfy the top-end consumers.
- Promotion should be innovative in choosing media and simple in communicating the messages to individuals and groups.
- Distribution should be innovative in leveraging rural retail revolution, IT developments and people participation.
One can be a rural marketer provided the person has the motivation, knowledge and skills necessary to function effectively.
- Discuss the approaches to rural marketing and identify their suitability to companies offering FMCGs, services and agri-inputs.
- There are two views on rural markets. One view is that “a market thriving on subsidies, loan waivers, migration to urban areas and the vagaries of the monsoon cannot be sustainable.” Another view suggests that “the formation of SEZs, industrialization and BoP approach by companies are leading to sustainable rural markets.” Discuss.
- Sketch the evolution of rural marketing.
- Define rural marketing.
- Explain the nature of rural marketing.
- Make a classification of the rural market and identify the major players in each category.
- Explain development marketing.
- What is innovative marketing?
- Elucidate the concept of inclusive marketing.
- What do you understand by bottom-of-the identify the major players in each category. pyramid marketing?
- Explain the factors that have made rural markets attractive.
- Explain the approaches to rural marketing and decide which one is suitable for the following:
- Jewellery: Nakshatra
- Tractors of M&M
- Nirma washing powder.
- How does rural marketing differ from urban marketing? What qualities should a rural marketer possess?
- Explain the Integrated–Innovative–Inclusive marketing model. Provide suitable guidelines for companies planning to go rural.
Visit the Web sites of two companies of your choice initiatives of the two companies. and prepare a note on the rural marketing initiatives of the two companies.
Prepare a questionnaire to investigate the intentions of management students to become rural marketers and to accumulate data on their experience, exposure and to accumulate data on their experience, exposure, abilities and efforts in that direction. Prepare a report and present it in the class room.
Case 1.1 Trials of a Rural Sales Trainee
When choosing to be a rural sales trainee in the largest consumer durables company of India, Bhalla did not size up the challenges a woman sales trainee might face, perhaps overwhelmed by the enthusiasm of going rural and serving the nation. As she battles to find a foothold in the male-dominated distribution chain and retail world, one question that looms large in her mind is—Is India liberated?
Encountering the prejudiced and patronizing attitude of distributors and shopkeepers on a daily basis, handling questions like “why didn’t you join Citibank?”, listening to her superiors proclaim that the “single-most definitive thing about sales is that it is a man’s world,” Bhalla learns to take it in her stride as she goes through bumpy rides on delivery vans, assignments with no basic amenities, and junior sales managers who watch porn movies in conference rooms.
In the “real” India, the girl-child is routinely used to serve the father, the brother and the husband even today. Even meritorious girls have to forego their dreams at the altar of tradition and marriage, the lines of religious divide are sacrosanct and a poor village girl can get her nose chopped off for talking to a strange man.
Bhalla counsels, “You certainly need a strong positive attitude for facing life head-on, as you often land in weird adventures—dealing with eve-teasers, floods and crocodiles, getting stranded with a much touted stain-removing detergent that fails to work its magic in front of a crowd, dealing with a blackmailing policeman or a bus ride with a goat—all in the daily life of a sales trainee!”
Bhalla further observes, “I learnt the rules of survival when after trying hard for a year “to be one of the boys” and “to feel comfortable in the Martian territory”, I discovered how to turn my handicap of being a woman into an advantage. Though frustrated at being designated either a sister or a daughter by sundry distributors and shopkeepers, I later found that these very roles allowed me access into their family and to their womenfolk (how many males can manage that) and thus, I understood not only the efficacy of my company’s products but also I indulged in some smart bonding, a factor that provided the much-needed edge over my male colleagues.”
Bhalla goes back to Mumbai with the pleasure of doing what others said “I could not do” and says, “The lesson I learnt is—in rural India, it’s best to stick to popular wisdom.”
Identify the problems and challenges faced by sales trainees of both genders.
Suggest steps to be taken by (i) educational institutions, (ii) recruiting companies and (iii) career aspirants in developing effective rural sales skills.
Source: Debasree Bhattacharjee, “Retail’s Tryst with Rural India,” The Financial Express, 1 December 2007.
Case 1.2 Rural Entrepreneurship
Nadeem Jafri is beaming with joy as his dream of serving the rural folk by venturing into business in rural areas has become a reality. He set up “Hearty Mart,” a chain of supermarkets, in little-known villages such as Pipodar, Kakoshi, Vadnagar and Idar in Madhya Pradesh.
“Previously the people of Illol village travelled to the nearest town of Himmatnagar, Gujarat, to buy a sachet of shampoo. But now they are able to buy it from the shop in the village,” says Jafri. Hearty Mart provides a modern retail experience for rural folk aspiring for brands that television has introduced into their homes.
Jafri has made four important decisions in promoting his chain. They are:
- Adoption of a franchisee model
- Introduction of private labels in the stores
- Introduction of new brands
- Use of promotion
The stores are generally 500 to 800 sq. ft in size. A smaller format of stores of less than 300 sq. ft, have also been devised to enable villagers with limited space to tie-up with the chain. The small formats are known as “Hearty Mart Saral” shops and they are modelled after the neighbourhood kirana stores found in cities. Jafri and his team take care of the initial stocking for the store and claim 1.5 per cent of annual royalty from the franchisees. The first franchise was issued at Illol for a deposit of Rs 25,000. The chain intends to set up about 15 stores in a couple of years.
To reduce the risk of franchisees, Jafri allowed people to sell private labels to him. He observed, “In the event that we decide to pull out of the association, the shopkeeper should be able to operate on his own.” Sahyog, Easy Shop and Tiny Shop are the second brand names chosen by the franchisees in Illol, Kakoshi and Pipodar, respectively. The stocking of private labels for products such as papad, pickle, besan and so on, that are not available locally, is done with an expectation to generate more revenue.
Introduction of New Brands
Jafri is innovative in the supply of his brands. Two latest introductions are Lutf, a homemade ketchup that is sold to hotels and other institutions and Good Time packaged spices.
Jafri floated a wholesale partnership venture called Hearty Mart Enterprise to help sustain this model of business. The company supplies the grocery requirements of hotels and restaurants in and around Ahmedabad from its rented godown on the SG Highway. Besides the rural retail venture, he has floated an advertising firm with his friend and also gives guest lectures in colleges across Gujarat.
“Sabse khaas, ghar ke paas (the best, closer home)” is the tagline of the Hearty Mart chain. Having worked in the advertising industry, Jafri knew only too well the impact of advertising on sales. Within a year the mart broke even and recorded an average sales of Rs 7,000 a day.
On its first anniversary, the mart sent a packet of sugar to all its customers along with a signed letter that acknowledged their support and expressed a desire to continue the “sweet relationship.” He was aware of the importance attached to sugar in that region and the gesture did indeed impact footfalls tremendously.
A first-time entrepreneur, Jafri ventured into this business two years ago with an initial capital of Rs 4 million. Last year the venture clocked a retail turnover of Rs 6 million, which is expected to cross Rs 7.5 million this year.
Jafri’s background has been quite useful to him in his venture. He did his MBA from IMS Indore and worked for companies such as The Bhaskar Group, AT&T, Indian Express, Grey Worldwide and Bennett Coleman.
He made a careful move from his family business to follow passion. Getting into the family’s restaurant business would have been easy but he chose to become a retailer instead. With limited funds and resources, he set up the first Hearty Mart at Vishala Circle, Ahmedabad. “People from my community, Chiliya, are in the hotel business and I could leverage my family name to tap this network of hoteliers to supply groceries. Adding this bulk-buying capacity also allowed me to negotiate a better deal with vendors,” he says.
Identify the reasons for Jafri’s success.
Evaluate the decisions taken by Jafri in setting and operating the chain.
Do you have ideas to help Jafri expand and strengthen his business?
Source: Divya Trivedi, “Mart with a Rural Heart,” The Hindu Business Line, 3 April 2009.