1 Rural Quotes  The future lies with those companies who see the “poor” as their customers. CK Prahalad to Indian CEO's, Jan  To get rich, sell to the “poor”. Pradeep Kashyap.

2 Lecture Plan Course Plan Nature of Assignments Rural Marketing – Issues, Opportunities & Challenges

3 RURAL MARKETING Course Plan

4 Rural Marketing – Course Plan Details  Issues, Opportunities & Challenges  Rural Marketing Environment  Defining Rural India  Evolution of Rural Marketing  Rural Market Structure  Size of Rural market  The Rural Economic Scenario  Rural Economic Structure  Incomes & Consumption  Physical Infrastructure  Marketing Infrastructure  Commercial Infrastructure and Govt. policies

5 Rural Marketing – Course Plan Details  Consumer Behaviour  Cultural Factors  Technological Factors  Economic Factors  Characteristics of the Rural Consumer  Buying Behaviour Patterns  Customer Relationship Management – and the Trade role  Rural Market Research  Planning Rural Research  Field Procedures & Rural realities  Understanding the Rural Market Research Industry  Segmenting, Targeting & Positioning  Demographic/Psychographic & Behavioural Segmentation  Targeted/Differentiated Marketing  Identifying/Selecting/Developing & Communicating the positioning concept

6 Rural Marketing – Course Plan Details  Product Strategy  Product Concepts & Classification  Rural Product Categories  New Product Development  Consumer adoption process  The Role of Fakes  Pricing Strategy  Pricing Influences  Pricing Strategies  Role of Retailer & Schemes/Margins  Distribution Strategy  Coverage challenges & dilemma  Channels of Distribution  Existing Distribution Models  Emerging Distribution Models

7 Rural Marketing – Course Plan Details  Communication Strategy  Challenges in Rural Communication  The Communication Process  Developing Effective Communication  Rural Media  Role of Innovative Media  Innovation in Rural Markets  Role of Innovation in Rural India  IT Interventions  Emergence of Organised Retailing  Financial Services in Rural India  Need for Credit  Sources of Credit  Other Financial Products  Future of Rural Marketing

8 Rural Marketing – Nature of Assignments  Case Studies from Indian experiences  Visits to different rural markets, haats & melas  Interviewing Rural Practitioners  Conducting Rural Market Research  Attachments with strong rural marketing organisations

9 RURAL MARKETING Issues, Opportunities & Challenges

10 Rural Market Has Arrived 7742 million people RRural consumption is bigger than urban FFMCG's53% DDurables59% Source: NCAER EEstimated annual size of the rural market FFMCGRs 65,000 Crore DDurablesRs 5,000 Crore AAgri-inputs (incl. tractors)Rs 45,000 Crore 22 / 4 wheelersRs 8,000 Crore TTotal Rs 1,23,000 Crore Source: Francis Kanoi Latest McKinsey Report estimates that by 2020, Rural Consumer Market Will be worth Rs. 250,000 crores

11 Rural Market Has Arrived  Some impressive facts about the rural sector.  In the first 6 months of , rural India bought 30 lakh Life Insurance policies  Of two million BSNL mobile connections, 50% in small towns/villages.  Of the six lakh villages, 5.40 lakh have a Village Public Telephone (VPT). Additionally there are 2 lakh PCOs – 90% of villages covered.  By end 2007, there are likely to be crore rural phone subscribers  For every Re.1/- per quintal increase in the Procurement Price for grains, Rs. 170 crores added to rural economy

12 Rural Market Has Arrived  55.6 million Kisan Credit Cards issued (against 60 million credit-plus-debit cards in urban) resulting in tremendous liquidity.  Of HHs earning Rs. 20 lakh + per year, 34% in rural India. Also 15% of India’s crorepatis  42 million rural HHs availing banking services in comparison to 27 million urban HHs.  Investment in formal savings instruments: 6.6 million HHs in rural and and 6.7 million in urban  Over 50% of HLL’s Rs crore sales turnover is from rural markets

Very Rich Consuming Class Climbers Aspirants Destitutes RURAL TARGET MARKETS - CLASSIFICATION

14 Rural Income Dispersal Projection Consumer Class Annual Income Very RichAbove Rs 215, Consuming Class Rs 45, , ClimbersRs 22, , AspirantsRs 16, , DestitutesRs 16,000 & Below Total100.0 > Projections Based on 7.2% GDP Growth  Consuming class households in rural nearly equal to urban.  Rural Purchasing Power higher due to lower expenses on food, shelter, education & health All figures in % Source : NCAER Indian Market Demographics Report

15 Issues In Rural  Distribution  Understanding the rural consumer  Communication  Poor infrastructure

16 Distribution of Villages Source: Census 2001 PopulationNo of villages% of total villages Less than 20092, , , , , , Total no of villages593,154* % of villages account for 50% of rural population & 60% rural wealth Hardly any shops in these 2.2 lac villages *Inhabited villages, total number of villages is 638, 691

17 Distribution of Towns in India Town ClassPopulationNo of towns% of total towns Class I1 lac and above423*8.2 Class II 50,000-99, Class III20, , Class IV10, , Class V 5,000- 9, Class VIless than Total no of towns Source: Census % of durables purchased by rural people are from these 1900 towns *10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354

18 Rural Consumer Insights  Rural India buys  Products more often (mostly weekly).  Buys small packs, low unit price more important than economy.  Distribution and pricing are the mantras to success in rural India. Even expensive brands like Close up, Marie biscuits, Clinic shampoo are doing well because of deep distribution.

19 Rural Consumer Insights  In rural India, brands rarely fight with each other, they just have to be present at the right place.  Many brands are building strong rural base without much advertising support.  Chik shampoo, second largest shampoo brand.  Ghadi detergent, second largest brand.  Fewer brand choices in rural : number of FMCG brands in rural are half that of urban.  Buy “value for money”, not “cheap” products

20 MYTH 1: Rural Market Is a Homogeneous Mass REALITY  Heterogeneous population  16 languages, 800+ dialects  State wise variations in rural demographics  Literacy (Kerala 90%, Bihar 44%)  Population below poverty line (Orissa 48%, Punjab 6%) Big Landlords Traders,Small Farmers Marginal Farmers Laborers, Artisans Source: Planning Commission, GoI

21 MYTH 2: Disposable Income Is Low REALITY  Number of middle class HHs (annual income Rs 45,000- 2,15,000) Rural 27.4 million Urban 29.5 million  Per Capita Annual Income (not Purchasing Power) Rural Rs 9,481 Urban Rs 19,407 TotalRs 12,128 Source: NCAER  Rural incomes CAGR now 15% vs 10% in urban

22 MYTH 3: Individuals Decide About Purchases REALITY  Decision making process is collective  Purchase process- influencer, decider, buyer, one who pays can all be different. So marketers must address brand message at several levels  Rural youth brings brand knowledge to HH

23 Infrastructure Improving Rapidly  In 50 years only 40% villages connected by road, in next 10 years another 30%.  More than 90 % villages electrified, though only 44% rural homes have electric connections.  Rural telephone density has gone up by 300% in the last 10 years, every pop is connected by STD.

24 Media Reach Improving Rapidly  70% of R1,R2, R3 can be reached through mass media.

25 Climbing Social Indicators Between 1981 to 2001  Number of pucca houses doubled from 22% to 41% and kuccha houses halved (41% to 23%)  Percentage of Below the Poverty Line families declined from 46% to 27%  Rural Literacy level improved from 36% to 59%

26 Opportunity & Challenges

27 Marketing Opportunities  Low penetration rates in rural % of rural HH Durables UrbanRuralTotal  CTV  Refrigerator  Mobile Phones FMCGs UrbanRuralTotal  Shampoo  Toothpaste Source: NCAER

28 Marketing Opportunities  R1 - 4%  R2 - 11%  R3 - 37%  R4 - 48%  Low rural consumption in FMCGs (rich HHs) urban rural  Annual consumption Rs 13,000 Rs 9,400  Rural consumption volumes (R1+R2+R3)  Toothpaste 88%  Toothpowder79%  Shampoo88% So this half of the population consumes over 75% of FMCG volumes

29 Challenges in the Future  Reaching the product to remote rural locations and entering more rural homes (penetration)  Increasing rural incomes (market growth)

30 Challenges in the Future  Making effective use of the large available infrastructure  Post offices1,38,000  Haats (periodic markets) 42,000  Melas (exhibitions) 25,000  Mandis (agri markets) 7,000  Public distribution shops3,80,000  Bank branches 32,000

31 Challenges in the Future  Using IT to transform markets  ITCs e-choupal and other IT initiatives (EID Parry, Amul dairy information system kiosk)  STD revolution/ mobile connectivity

32 Challenges in the Future  Proliferation of large format rural retail stores  DSCL Haryali stores  M & M Shubh Labh stores  TATA/Rallis Kisan Kendras  Escorts rural stores  Warnabazaar, Maharashtra (annual sale Rs 120 crore)

33 An interesting Option - RURBAN  Describes the clusters of migrants from rural to urban geographies  Rural psychography living in an Urban demography  Strong purchasing power because despite lower incomes, low “wasteful” expenditures  Become carriers and promoters of brands into rural geographies on their annual trip back home