Transcript RURAL INDIA Facing the 21st Century

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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Lecture Plan
• Course Plan
• Nature of Assignments
• Rural Marketing – Issues, Opportunities
& Challenges
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RURAL MARKETING
Course Plan
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Rural Marketing – Course Plan Details
 Issues, Opportunities & Challenges
 Rural Marketing Environment
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Defining Rural India
Evolution of Rural Marketing
Rural Market Structure
Size of Rural market
 The Rural Economic Scenario
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Rural Economic Structure
Incomes & Consumption
Physical Infrastructure
Marketing Infrastructure
Commercial Infrastructure and Govt. policies
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Rural Marketing – Course Plan Details
 Consumer Behaviour
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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
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concept
Rural Marketing – Course Plan Details
 Product Strategy
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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
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Coverage challenges & dilemma
Channels of Distribution
Existing Distribution Models
Emerging Distribution Models
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Rural Marketing – Course Plan Details
 Communication Strategy
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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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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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RURAL MARKETING
Issues, Opportunities & Challenges
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Rural Market Has Arrived
 742 million people
 Rural consumption is bigger than urban
 FMCG's
 Durables
53%
59%
Source: NCAER
 Estimated annual size of the rural market
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FMCG
Durables
Agri-inputs (incl. tractors)
2 / 4 wheelers
 Total
Rs
Rs
Rs
Rs
65,000 Crore
5,000 Crore
45,000 Crore
8,000 Crore
Rs 1,23,000 Crore
Source: Francis Kanoi
Latest McKinsey Report estimates that by 2020, Rural Consumer Market
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Will be worth Rs. 250,000 crores
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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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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RURAL TARGET MARKETS - CLASSIFICATION
0.8
26.8
54.7
Very Rich
1.6
Consuming
Class
41.3
Climbers
63.3
25.0
14.7
Aspirants
Destitutes
20.9
2001 - 02
12.2
2006-7
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Rural Income Dispersal
Projection
All figures in %
Consumer
Class
Annual
Income
1995-96
2006-07
Very Rich
Above Rs 215,000
0.3
0.9
Consuming
Class
Rs 45,001215,000
13.5
25.0
Climbers
Rs 22,001- 45,000
31.6
49.0
Aspirants
Rs 16,001 - 22,000
31.2
14.0
Destitutes
Rs 16,000 & Below
23.4
11.1
100.0
100.0
Total
> 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
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Source : NCAER Indian Market Demographics Repor
Issues In Rural
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Distribution
Understanding the rural consumer
Communication
Poor infrastructure
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Distribution of Villages
Population
Less than 200
No of villages
% of total
villages
92,541
15.6
200-500
127,054
21.4
501-1000
144,817
24.4
1001-2000
129,662
21.9
2001-5000
80,313
13.5
5001-10000
18,758
3.2
Total no of villages
593,154*
*Inhabited villages, total number of villages is 638, 691
100.0
Hardly any shops
in these 2.2 lac
villages
17% of villages
account for 50%
of rural
population &
60% rural
wealth
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Source: Census 2001
Distribution of Towns in India
Town Class
Population
No of towns
% of total
towns
Class I
1 lac and above
423*
8.2
Class II
50,000-99,999
498
9.6
Class III
20,000- 49,999
1386
26.9
Class IV
10,000- 19,999
1560
30.2
Class V
5,000- 9,999
1057
20.5
Class VI
less than 5000
237
4.6
5161
100.0
Total no of
towns
*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354
90 % of
durables
purchased by
rural people
are from
these 1900
towns
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Source: Census 2001
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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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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MYTH 1: Rural Market Is a
Homogeneous Mass
REALITY
 Heterogeneous population
Big
Landlords
Traders,Small Farmers
Marginal Farmers
Laborers, Artisans
 16 languages, 800+ dialects
 State wise variations in rural demographics
 Literacy (Kerala 90%, Bihar 44%)
 Population below poverty line (Orissa 48%, Punjab
6%)
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Source: Planning Commission, GoI
MYTH 2: Disposable Income Is Low
REALITY
 Number of middle class HHs (annual income Rs
45,000- 2,15,000)
Rural
Urban
27.4 million
29.5 million
 Per Capita Annual Income (not Purchasing Power)
Rural
Urban
Rs 9,481
Rs 19,407
Total
Rs 12,128
Source: NCAER
 Rural incomes CAGR now estimated @ 15% vs
10% in urban
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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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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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Media Reach Improving Rapidly
 70% of R1,R2, R3 can be reached
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through mass media.
53
41
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21
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Satellite
TV
Radio
Press
Cinema
TV
All Media
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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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Opportunity & Challenges
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Marketing Opportunities
 Low penetration rates in rural
% of rural HH
Durables
 CTV
 Refrigerator
 Mobile Phones
FMCGs
 Shampoo
 Toothpaste
Urban
30.4
33.5
40.0
Urban
66.3
82.2
Rural
4.8
3.5
12.0
Rural
35.2
44.9
Total
12.1
12.0
18.0
Total
44.2
55.6
Source: NCAER
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Marketing Opportunities
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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%
 Toothpowder
79%
 Shampoo
88%
So this half of
the population
consumes over
75% of FMCG
volumes28
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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Challenges in the Future
 Making effective use of the large
available infrastructure
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Post offices
Haats (periodic markets)
Melas (exhibitions)
Mandis (agri markets)
Public distribution shops
Bank branches
1,38,000
42,000
25,000
7,000
3,80,000
32,000
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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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Challenges in the Future
 Proliferation of large format rural retail
stores
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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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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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