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Rural and Urban consumer of India

Conference Paper · February 2017

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 Rural and Urban consumer of India
ABSTRACT:

The concept of rural market in India is still evolving and it posses numerous challenges like
understanding rural consumer, reaching and providing services to remote locations and
communicating with heterogeneous audience. Though there are several difficulties in
targeting the rural market but still almost all companies are rushing towards this market. This
is mainly because of saturated urban market and favourable changes in rural market like
improving lifestyle, habits, taste, increasing literacy level, increase in income, increase in
expectations and aspirations, improving infrastructure, government support via various
schemes etc. Now day’s rural consumers are also using branded products and almost all
major brands are available in rural market of India. Though the gap between Indian rural and
urban consumer is decreasing still there is considerable difference between them in terms
geographic, demographic and psychographic aspects. These differences are resulting in
distinction in rural and urban consumers’ behaviour, hence requiring different marketing
strategies for these regions. This paper is an attempt to explore differences between Indian
rural and urban consumer.

Keywords: Rural marketing, rural consumer, urban consumer

INTRODUCTION:

India is classified into 450 districts and approximately 6,30,000 villages, which can be further
segmented on different parameters such as literacy levels, accessibility, distribution networks,
income levels, market penetration, distances from nearest towns, etc. The Indian rural market
comprises of around 840 million people which generates around 50 per cent of the country’s
Gross Domestic Product (GDP). This population is always ignored by private sector due to its
low -income level, low literacy rate and high cost because of improper infrastructure
facilities. The rural market was never looked upon as a profit centre due to unavailability of
proper distribution channels and media, low awareness and high competition from
unorganized players. However, as the growth of urban market started stagnating, the need for
exploring new market became essential. There has been improvement in living standards of
rural population since last few decades. Rural poverty has declined by eight percentage points
from 41.8 per cent to 33.8 per cent, and urban poverty by 4.8 per cent from 25.7 per cent to
20.9 per cent over the period 2004-05 to 2009-10 (Bhalchandra,K., Rural Poverty,2011 ).
Rural Indian households are spending more on consumer goods like durables, beverages and
services than five years ago. In fact, when the global recession hit urban demand few years
ago, it was strong rural demand that rescued the economy (Economic Times, 2011). It has
become a powerful economic engine due to rising income levels, changing lifestyle, habits,

1
taste, increasing literacy level and increasing expectations of rural consumers. As a result, the
consumption habits of rural consumer are gradually mirroring those of their urban
counterparts. However, still the composition of the Indian rural market is different from
urban market on number of aspects such as the physical environment, marketing
environment, the consumer profile, etc. Today almost all leading FMCG brands are available
in rural parts of India and rural consumers are using it regularly. Therefore, there is a need to
study the factors contributing to the gap between rural and urban consumers such as socio-
economic environment, marketing environment etc.

OBJECTIVES :

 To study rural and urban consumers’ social environment

 To discuss difference in marketing of rural an urban marketing environment

METHODOLOGY :

Exploratory research design is used for this study. The objective of this study is to provide
brief overview of differences between rural and urban social and marketing environment. The
study is based on secondary data which is collected from thesis, reports, books, journals,
periodicals and news papers.

PART A) RURAL AND URBAN SOCIAL ENVIRONMENT

The rural consumer is quite different from his urban counterpart on a good number of
demographic, psychographic and behavioural variables. Rural consumer is different from
urban consumer on the basis of following parameters:
Table No. 1 Factors contributing to rural and urban differences
Factor Contributing factor (%)
Infrastructure 42
Income 31
Lifestyle 19
Interaction 8
(Source: Dogra B, Rural Marketing Concepts and Practices, Tata McGraw-Hill Publishing Company Ltd. )
(1) Rural & Urban Society
According to Sorokin and Zimmerman rural and urban Society is different due toi:

(a) Environment
Rural world has predominance of nature over anthropo-social environment and it has direct
relationship with nature. Whereas urban world is more isolated from nature and it has
predominance of manmade environment.

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 (b) Size of the community
The size of rural community is small; “agriculturism” and size of community are negatively
correlated. The size of urban community is much larger than rural community. In other
words, urbanity and size of the community are positively correlated.
(c) Heterogeneity and Homogeneity of the population
Compared with urban, rural communities are more homogeneous in racial and psychological
traits where as urban community is more heterogeneous.
(d) Social differentiation and stratification
Rural community’s social differentiation and stratification is less than urban one.

(e) System of interaction

More prominent part of interaction is occupied by primary contacts. There is predominance
of personal and relatively durable relations, comparatively simplicity and sincerity of
relations. The system of interaction in urban world is wide with more numerous contacts
.There is predominance of impersonal, causal and short lived relations. Greater complexity,
manifoldness, superficiality, and standardized formality of relations observed in urban world.

(2) Culture
Rural culture is rigid in approach and custom bound. Society is guided by age old customs
and has less scientific outlook. Urban society is free from traditional outlook and has more
scientific and progressive approach to the issues.

(3) Social perceptions

In rural area family controls the society where as in urban region economy and economic
institution controls the society.

(4) Mobility in society

Social mobility is nil in rural regions; people do not change their occupation, place, religion
or political ideas .Urban society is flexible for changes, there is high social mobility.

(5) Social Uniformity

In rural society occupations are fixed, many times preferring same occupation from
generations. Job uniformity is more due to limited job opportunities. In urban society job
availability is more and people choose their jobs irrespective of castes.

(6) Social tolerance

Rural society is rigid and changes take place slowly. Family is dominant and joint family is a
norm. Individuals are economically depended on family. In urban society social changes take
place frequently; Individual outlook is dominant and single family is a norm.

3
(7) Social disorganization
The agencies to control rural society are strong. Society is traditional and hence no
disorganization. New social problems are not generally expected. Urban society doesn’t have
strong controlling agencies. Traditional values have no place, hence changes occur. More
new problems occur and make social life difficult.

PART B) RURAL & URBAN MARKETING ENVIRONMENT

The difference in rural and urban region is not only in social environment but also in
marketing environment.

(a) Population
The rural market in India is much larger than the urban market in terms of population and
number of households. The rural market consists of approximately 179.5 million households.

Table No. 2 Population of rural and urban India

2001 2011 Difference
India (in Crore ) 102.9 121 18.1
Rural (in Crore ) 74.3 (72.19%) 83.3 (68.84%) 9
Urban (in Crore ) 28.6 (27.81 %) 37.7 (31.16%) 9.1
Towns 5,161 7,935 2,774
Villages 6,38,588 6,40,867 2,279
(Source: www.census.gov.in/2011 results)

For the first time since independence, the absolute increase in population is more in urban
region. The urban population grew by about 32%, almost two-and-a-half times the rise of
rural population (13%).The proportion of rural population has declined from 72.19% to
68.84% where as urbanization has increased from 27.81% to 31.16 % between 2001 to
2011.It is mainly because of increase in migration (rural to urban) of population from 20 to
24%. Approximately, 30 million rural people added to urban area in last decade.

Graph no. 1 Rural and Urban Population percentage change

(Source: Rural Marketing, Dr.Badi and www.census.gov.in)

4
 (b) Settlement pattern
Urban: The city settlement pattern is compact but it is spread over a larger area. Land use is
for residential, commercial , roads and streets, institutional and community facilities. The
Structure of house is permanent and mostly more than one story. Housing on rental is highly
prevalent. Clustering pattern is more on the basis of social class. According to census data,
there are 53 urban agglomerations in India with a population of 1 million or more as of 2011
against 35 in 2001. About 43 percent of the urban population lives in these cities.
Rural: Villagers use land for human settlement and cultivation purpose. The settlements are
predominantly clustered, but in some areas households settle on respective cultivable
landholdings. Houses earlier were largely semi-pucca or Kachha, but now there are more
pucca houses and they are owner occupied. Houses in villages are clustered according to
kinship, caste or religious groups. ICE 360 study (2014) findings reveal that a significant
majority (36%) rural people live in medium-sized villages (with populations of 2,000-
5,000), 27% live in village sizes of population 1,000-2,000 and only about 8% live in large
villages with a population of over 10,000. Households that are located in the largest villages
have an annual surplus income (income minus expenditure) of Rs 62,425, which is more than
twice that of households living in medium-sized villages (Rs 25,408) and a little more than
three times that of family units in the smallest villages (Rs 20,489)ii.

(c) Education
Awareness is the key aspect in marketing which is highly dependent on educational level.
There is significant difference between rural and urban consumers’ literacy.
Table No. 3 Rural and Urban Literacy rate
2001 2011 Difference
India 64.8% 74% 9.2%
Rural 58.7% 68.9% 10.2%
Urban 79.9% 85% 5.1%
(Source: www.census.gov.in/2011 results)
The literacy rate in urban region is more than rural but at the same time the improvement in
literacy rate in rural area is two times that in urban areas. The rural urban literacy gap is
reducing; it was 28.02% in 1961 which has come down to 16.1 % in 2011. Also, the gap
between urban and non urban population attending classes has reduced from 4.59 % to 0.7%
from 2001 to 2011iii .These growing rural aspirations resulted in increase in private
expenditure on school education in the countryside by threefold in the last seven years but
still the at primary level expenditure per student in urban areas (Rs. 10,083) is more than
four times that in rural areas (Rs 2,811)iv.

5
 (d) Occupation
There is much difference in occupation pattern in rural and urban region. In urban region,
occupation is diverse, and ranging from professionals, skilled, semi-skilled to unskilled
workers. Specialization is achieved through higher education, training and skill development.
Table No.4 Distribution of Households in Rural &Urban area by Occupation 2004-05
Source Rural households (%) Urban households (%)
Regular salary/wages 10.5 36.9
Self- employment in non-agricultural fields 11.5 32.5
Labour 34.6 22.9
Self- employment in agricultural fields 41.3 3.1
Others 2.1 4.96
(The MAX-NCAER India Financial Protection Survey, 2008)

In rural region, predominant occupation is agriculture but now people are shifting to non-
traditional occupations like shop/trade, skilled work, and salaried job. Skill up gradation in
rural region is gradually improving with exposure to new technology. The agricultural sector
is gradually contracting both in terms of its output and employment shares. The big
expansion has occurred in the service sector. The industrial sector has also expanded but at a
far lower pace. The expansion in blue-collar occupations jobs (primarily production and
service workers) in rural areas is at a significantly faster rate than the corresponding
expansion of blue-collar occupations in urban areasv. According to NSSO data the percentage
of rural men employed in construction went up from 6.8% to 13% and the percentage of rural
women working in the sector from 1.5% to 6.6% between 2004-05 to 2011-12. At the same
time the percentage of rural population engaged in rural sector has came down significantly.
Female work participation rate is growing faster in urban area ( 5.6% annually ) compared to
rural region (2%)vi .
(e) Income
Rural India’s share of national income and expenditure is above the half mark. The ICE 360
survey (2014) reveals that rural India contributes over half of India’s income (55.4%) and has
a share of 56.1% of consumption expenditure. The per capita income of rural households is
about half of the urban households. According to Hasana research, 80% of population’s
Monthly Household income is less than Rs. 3,000 in rural area whereas it is double in urban
areavii. The average value of assets among rural households is about Rs 10 lakh while in
urban areas it is nearly Rs 23 lakh. In recent time the growth in MPCE in rural area is more
than urban. According to Dabur annual report 2012-13 percentage increase in annual per
capita income is more in rural region than urban in last few years. For the rural region it was
13.2 % for 2004-10 and 19.2% for 2009-12 where as it was 13.9% and 17.25% for urban

6
region for the period. But still there is huge gap between rural and urban poverty. Positive
thing is that the living standard of rural consumer is improving. As per NSSO data Annual
average decline in percentage of poor is more in rural region (2.32) than urban (1.69) for the
period 2004-05 to 2011-12 . The gap between the rich and the poor is widening in both rural
and urban areas; it is growing faster in rural area. Agriculture is the main source of income in
rural area whereas in urban area it is diverse. In rural area the pattern changing from agriculture to non
agriculture sources. The share of agriculture in rural net domestic is consistently decreasing from last
50 years it was 70.50% in 1970-71 which is reduced to 29.90% in 2012-13viii.
Also there is difference between rural and urban consumers approach for loan. In urban areas,
82% of debt is incurred to finance housing, education, marriages etc and only 18% is for
business purposes, showing that the urban housing boom has been driven by debt. In rural
areas, the picture is different, with 40% of loans taken for businessix.

(f) Expenditure
Rural per capita spending is almost half of urban consumer; it was Rs 1,281.45 a month
compared to Rs 2,401.68 in urban areas during July 2011 to June 2012 periodx. As per
PURNIMA,80% of the rural population spends less than Rs. 45 per day while 50% of the
urban population spends less than Rs 50 per day.The share of rural spending in total
consumer expenditure is gradually decreasing since last few decades; it was 52 % in 2014
and it is further expected to reduce to 43% by 2025xi. In recent times the annual increase in
per capita expenditure of rural consumer is more than urban .According to Dabur annual
report it was 19.2% for rural consumer against 17.25% of that of urban consumer for the
period 2009-12. Rural urban consumer monthly capita expenditure proportion had increased
from 52.4% to 54.37% from 2005 to 2012.
Indian spending can broadly be divided into two distinct categories: Necessities and
Discretionary Spending. While necessities include food and clothing, discretionary spending
includes all other expenses. Trends in share of consumption on these two broad categories
have followed opposite directions; with discretionary spending gradually getting more
prominence in the consumption basket. The rural consumption basket is also changing and is
slowly converging towards the urban consumption basket. According to NSSO data, the
expenditure of rural consumer on non food items has increased by 14.6% against 16%
increase of urban consumer for the period 1993-94 to 2011-12. Rural consumers are buying
more premium health, hygiene, personal grooming, packaged foods and convenience
consumer packaged products, reflecting aspirations towards changes in lifestylexii.

7
The proportion of cereals in food category of rural consumer is decreasing drastically at the
cost of increase in milk products, beverages, vegetables and edible oil. Expenditure on cereals
as a percentage of food expenses has decreased from 50.10 to 33.8 for the period 1993-94 to
2011-12. Highest growth is in beverages (8.69% to 16.33%) followed by milk products
(19.66% to 25.63%) for the same period. Marginal increase is observed in consumption of
vegetables and edible oil for rural consumer. For the period 1993-94 to 2011-12 similar
change in expenditure pattern is observed for urban consumer. Cereals consumption as a
percentage of total food expenses decreased from 35.08 to 25.7 and vegetable consumption
decreased from 13.78 to 11.97. Consumption of other categories has increased such as milk
products (24.56% to 27.46%), beverages (18.04% to 25%) and edible oil ( 8.52% to 9.85%).
Both in rural and region for bottom 10% (poor) consumers expenditure on necessities is
more than that of discretionary items and uniform expenditure pattern observed for this
group. Reverse trend is seen for top 10% (rich) rural and urban consumers where expenditure
on discretionary items is more than necessities and differences in expenditure pattern seen for
this group. The NSSO data reveals that both in rural and urban area the highest expenditure
in consumer durable category is on vehicles (in rural area 83.05% for business purpose and
44.71% for domestic purpose whereas in urban area 76.13% for business purpose and 45.72%
for domestic purpose). Second highest share of expenditure is on jewellery followed by
cooling and heating devices. Rural and urban households enterprises spent 83.05% and
76.13% of the consumer durable spends on purchase of vehicles.

Graph no. 2 Expenditure pattern of Urban and Rural consumer

60
48.6
50
40 38.5
30
20 9.2
6.5 4.5 7.6 6.7 6.3 7 7.5 5.7 6.9
10 6.4 5.3 4.8 0.9 0.3 3.1 5.5 4.4 4.6 1.8 2.4
0.5 1.1 1.4 1.2 1.3
0

Urban Rural

( Source : NSSO 2011-12)

8
FINDINGS AND DISCUSSION :
The size of rural community is smaller, homogeneous and has less differentiation which
results in the system of interaction as personal and long term. The decision making is mostly
collective and depends upon opinion of influencers such as retailers, village leaders, teachers,
experts,etc. Rural society is rigid and culture bound therefore care should be taken while
designing marketing communication programs and other marketing strategies . Literacy level
is one of the major hurdle in rural region .This results in presence of mee too products in rural
market. In rural region 4 A’s are more important i.e. affordability, acceptability, availability
and awareness .On the other hand Urban community is larger in size , heterogeneous and has
more social differentiation resulting in impersonal, causal and short lived relations. The
decision making is mostly individual and independent. Urban population is dense and
concentrated, also infrastructure facility is excellent in urban area . Rural population is
scattered and most of them living in medium and small sized villages with poor infrastructure
facility whereas majority of urban population lives in large size cities. As a result the of all
these aspects the cost of serving consumer is higher in rural than urban region.
Migration is resulting in increase in urban population but at the same time this migrated rural
population is sending money to their relatives living in rural region thus increasing the
purchasing power of rural consumer .It is also adopting urban lifestyle and exposing their
relatives in rural region for this lifestyle.
As a result of these differences in socio economic environment of rural and urban region ,a
significant difference was observed in rural and urban consumers’ mindset alsoxiii
 Need based buyer behavior
Low purchasing power and seasonal income compels rural consumer to be cost conscious and
thrifty in his spending habits compared to urban consumer. Thus making rural buyer behavior
a need based.
 Rational decision making
Rural consumers are more rational in decision making than urban. Rural consumer is more
cautious buyer than the urban consumer, decision-making is conscious and deliberate among
the rural community especially for the consumer durablesxiv. The type of product which a
rural consumer intends to buy depends upon his needs, purchasing capacity and his attitude
towards the product category. Since the availability of information is less, the involvement
and efforts taken by of rural consumer is more.
 Value for Money
A rural consumer is always looking for a value for money brand. The purchasing power of

9
rural consumer is less than urban. Therefore rural consumers are very cost conscious. The
view that rural people doesn’t use quality brand is based on wrong understanding of rural
mindset. In fact, people have readily accepted several brands when they are offered in small
package sizes and low price pointsxv.
 Consensus decision making
The urban consumer’s buying behavior is individual or at most family driven, whereas in
rural areas the decision making is collective process. The rural buyer has to ensure social
acceptance of his decision and the product he is purchasing. Parties involved in influencing or
decision making can be opinion leaders, family members, friends, users of the product and
retailers. The rural customer generally goes to the same retailer (many times forcefully as
there is no option) to buy goods, which creates a very strong bonding between themxvi.
 Innate resistance to change
Rural consumers are reluctant for change. The perceived risk associated with the change is
more among rural consumers where as urban consumers have a high desire to try a new
product. A rural consumer does not easily switch brands due to the fear associated with trying
a new brandxvii.
 Different Perception with regard to marketing stimuli
There is difference among rural and urban consumer on the basis of demographic factors
(age, education, income, occupation etc), psychological factors (Needs, beliefs and attitude,
motives, and interest etc.) and external factors (marketing environment and socio cultural
environment), thus, developing difference in rural and urban consumer’s perception for the
marketing stimulixviii. Behaviorally, if urban consumer prefer for light colors, rural consumer
goes for bright and bold colors.
 Brand consciousness
One of the myths associated with rural market is that rural consumers are not brand
conscious. Actually, rural consumers are rational and looking for a value for money brand.
More precisely, urban consumers’ are brand conscious whereas rural consumers are brand as
well as value conscious. Now a day’s villagers are becoming more brand savvy with the
increasing penetration of mass mediaxix.
 Brand loyalty
According to Dogra, rural consumers are more brand loyal than urban. Whereas according to
Krishnamacharyulu, the brand loyalty found in rural area is not commitment; it can be
referred as brand stickiness which is because of first impression by pioneers, lack of
alternatives, perceived risk and collective decision.

10
 CONCLUSION:
The changing environment is reducing gap between Indian rural an urban consumers ,still a
noticeable difference exists between socio-economic and cultural environment of both
regions resulting in change in rural and urban consumers’ behaviour. A care should be taken
by policy makers while designing marketing strategies for these regions.

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