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1 Rural Quotes The future lies with those companies who see the “poor” as their customers. CK Prahalad to Indian CEO's, Jan 2000. To get rich, sell to the “poor”. Pradeep Kashyap.
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2 Lecture Plan Course Plan Nature of Assignments Rural Marketing – Issues, Opportunities & Challenges
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3 RURAL MARKETING Course Plan
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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
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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
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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
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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
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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
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9 RURAL MARKETING Issues, Opportunities & Challenges
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10 Rural Market Has Arrived 7742 million people RRural consumption is bigger than urban FFMCG's53% DDurables59% Source: NCAER EEstimated annual size of the rural market FFMCGRs 65,000 Crore DDurablesRs 5,000 Crore AAgri-inputs (incl. tractors)Rs 45,000 Crore 22 / 4 wheelersRs 8,000 Crore TTotal 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
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11 Rural Market Has Arrived Some impressive facts about the rural sector. In the first 6 months of 2005-06, 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 11.05 crore rural phone subscribers For every Re.1/- per quintal increase in the Procurement Price for grains, Rs. 170 crores added to rural economy
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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. 11700 crore sales turnover is from rural markets
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13 0.8 1.6 26.8 54.7 25.0 20.9 2001 - 02 41.3 63.3 14.7 12.2 2006-7 Very Rich Consuming Class Climbers Aspirants Destitutes RURAL TARGET MARKETS - CLASSIFICATION
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14 Rural Income Dispersal Projection Consumer Class Annual Income 1995-962006-07 Very RichAbove Rs 215,0000.30.9 Consuming Class Rs 45,001- 215,000 13.525.0 ClimbersRs 22,001- 45,00031.649.0 AspirantsRs 16,001 - 22,00031.214.0 DestitutesRs 16,000 & Below23.411.1 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
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15 Issues In Rural Distribution Understanding the rural consumer Communication Poor infrastructure
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16 Distribution of Villages Source: Census 2001 PopulationNo of villages% of total villages Less than 20092,54115.6 200-500127,05421.4 501-1000144,81724.4 1001-2000129,66221.9 2001-500080,31313.5 5001-1000018,7583.2 Total no of villages593,154*100.0 17% 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
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17 Distribution of Towns in India Town ClassPopulationNo of towns% of total towns Class I1 lac and above423*8.2 Class II 50,000-99,9994989.6 Class III20,000- 49,999138626.9 Class IV10,000- 19,999156030.2 Class V 5,000- 9,999105720.5 Class VIless than 50002374.6 Total no of towns 5161100.0 Source: Census 2001 90 % of durables purchased by rural people are from these 1900 towns *10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354
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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.
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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
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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
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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 estimated @ 15% vs 10% in urban
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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
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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 1000+ pop is connected by STD.
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24 Media Reach Improving Rapidly 70% of R1,R2, R3 can be reached through mass media.
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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%
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26 Opportunity & Challenges
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27 Marketing Opportunities Low penetration rates in rural % of rural HH Durables UrbanRuralTotal CTV 30.4 4.8 12.1 Refrigerator 33.5 3.5 12.0 Mobile Phones 40.0 12.0 18.0 FMCGs UrbanRuralTotal Shampoo 66.335.2 44.2 Toothpaste 82.244.9 55.6 Source: NCAER
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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
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29 Challenges in the Future Reaching the product to remote rural locations and entering more rural homes (penetration) Increasing rural incomes (market growth)
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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
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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
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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)
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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
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