RURAL MARKETING

MBA II SEMESTER(JNTUH)
UNIT-1
Unit – I: Introduction: Meaning - Evolution – Nature and Characteristics of Rural
Market – Understanding the Indian Rural Economy –Rural Marketing Models – Rural
Marketing Vs Urban Marketing – Parameters differentiating Urban & Rural Market -
Differences in consumer behavior in Rural and Urban market.

REAL LIFE STORY: HOW COMPANY MARKETING PROGRAMMES CHANGE

EARNING CAPACITY OF RURAL WOMAN:
Before 2006, Sakamma, a 35-year- old lady in a village in Nalgonda district, used to stay in a small
house with her husband and three children. Her husband was the sole bread earner for the
family of five. His meagre income of INR 10,000 per year was barely sufficient for the family;
moreover, the situation worsened due to his alcoholism. With this money, it was a daunting task
for Sakamma to meet the needs of her growing children.
When the concept selling meeting of ‘Project Shakti’ was organized by Hindustan Unilever in
the same year in her village, Sakamma was excited, and decided to take up the challenge of
becoming a Shakti entrepreneur.
Today, she earns an additional yearly income of INR 10,000 through Shakti. The programme
has given her the desired financial independence that has enabled her to plan for the future of her

children. ‘I want my daughter to become an engineer,’ she proudly says. Sakamma today has
independent access to a bank and decides what investments to make. She recently invested in
gold jewellery as she has started preparing for her daughter’s marriage. Sakamma was recently
also chosen to work with the government to help educate the rural population on health issues.
Such initiatives like Project Shakti have not only opened up earning opportunities for rural
people like Sakamma, but have also led to rural development in such a way that rural masses
are now getting exposed to the right quality products and services, which in turn is adding to their
quality of life. Rural markets are no longer a mass of illiterate, poverty-stricken people who are
reluctant to change and spend. Instead, they are to- day becoming the most lucrative markets
that every marketer is eyeing.

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THE EVOLUTION OF RURAL MARKETING

The rural environment in India is undergoing a massive change. There has been a
significant growth in purchasing power, change in lifestyle, increase in brand
conscious- ness, change in consumption patterns, improvement in infrastructural
facilities, and spread of the communication network. These changes have
resulted in shifting the marketing battlefields from cities to villages. ‘Go Rural’
seems to be the latest slogan. The rural market has grown in the following phases
from a dark economy to a vibrant economy.
Phase I (Prior to the 1960s)
Prior to the 1960s, the term rural marketing referred to the marketing of rural
products in rural and urban areas, and agricultural inputs in rural markets. It
was considered synonymous with agricultural marketing.
Agricultural produce such as food grains and industrial inputs like cotton,
oilseeds, and sugarcane were the primary products marketed during this period.
The rural economy was in a primitive stage, with traditional farming methods
being used in agriculture. There was limited scope for agricultural marketing. The
marketing of earthen and metallic utensils, agricultural tools (ploughs, bamboo
baskets, etc.), ropes and wooden products (bullock carts, window and door
frames) by skilled workers in rural areas (blacksmiths, carpenters, potters) was
not given much importance. This was a totally unorganized market.
Phase II (1960s–1980s)
The Green Revolution changed the face of rural India, ushering in scientific
farming practices. Better irrigation facilities, use of fertilizers, pesticides, and
high-yield variety seeds, coupled with the application of implements like tractors,
power tillers, harvest- ers, pump sets, and sprinklers resulted in an exponential
growth in agricultural production, changing the very content of rural markets.
The White Revolution was initiated by the government with the aim of achieving
self- sufficiency in the area of milk production. The cornerstone of the
government dairy development policy was producing milk in rural areas through
producer cooperatives and moving processed milk to urban demand centres.
The formation of producers’ cooperatives has played a significant role in

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institutionalizing milk production and processing.

A new area marketing of agricultural inputs emerged. This period saw the
emergence of companies such as Mahindra & Mahindra, Escorts, Eicher, Shriram
Fertilisers (now DCM Shriram Consolidated Ltd), and Indian Farmers Fertilizer
Cooperative Limited (IFFCO).
Phase III (1990s–2000)
During the first two phases, the marketing of consumables & durables to rural
markets was not considered seriously.
The prime reasons for this were:
 The growth of urban markets during this period kept marketers busy.

 The potential of rural markets was not visible.

 The existing rural markets for these products were not sizeable enough to
attract the attention of urban marketers. Rural markets were not very
accessible. The poor infrastructure of widely scattered villages made them
unreachable and expensive in terms of logistics.

Consequently, rural markets were conveniently ignored, as they were seen as

extensions of the urban markets.
However, from the 1990s, India’s industrial sector gained in strength and
maturity. A new service sector emerged, signifying the transition of an
agricultural society into an industrial one. Meanwhile, the increased Plan outlay
of central and state governments for rural development and for strengthening
local governance accelarated socio-economic progress. In addition, economic
reforms further accelerated the process by introducing competition into the
markets. All these factors resulted in the growth of rural markets for household
consumables and durables.
Phase IV (After 2000)
After the proven success of marketing models like Project Shakti and e-
Choupal, rural marketing has become an agenda for most global and Indian
corporations. Rural marketing has taken the centre stage, as companies that had
been serving the urban markets for long have now begun planning to enter the
rural market.

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 Several fast-moving consumer goods (FMCG) companies such as Hindustan
Unilever, Godrej Consumer Products, Dabur, Marico, and ITC have planned for
increased visibility, and have also hired people in rural areas and small towns to
establish local connections. Durables companies like LG and Samsung have
employed a rural thrust. Automobile companies like Maruti, Hero Honda, and
Bajaj are planning a major initiative in rural India by launching more models in
a fordable price range. Other companies like GE, Intel, Honeywell, Shell
Foundation, Microsoft, and HPCL are planning to come out with new products
for rural areas, using low-cost technologies. Reliance has entered the rural
market with mobile connections. Private insurance companies are also
interested in the market.
The government is taking serious steps to develop the rural market.
Government initiatives like farm loan waivers, and employment and rural
infrastructure development programmes received a major thrust after 2000.
These initiatives attempt to bridge the gap between the rich and the poor.

Definations
Rural Market

The Census of India (2001) defines any habitation with a population density of less than 400
per sq. km, where at least 75 per cent of the male working population is engaged in
agriculture and where there exists no municipality or board, as a rural habitation. Thus, the
rural population consists of 800 million inhabitants, accounting for 70 per cent of India’s
population.

Village:
Basic unit for rural areas is the revenue village, which might comprise several hamlets
demarcated(determined) by physical boundaries.
Town:
Towns are actually urban areas that satisfy the following criteria:
• Minimum population ≥ 5,000
• Population density ≥ 400/ sq. km
• 75% of the male population engaged in non-agricultural activities

Characteristics of Rural Marketing

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1.More Prospective:
With the initiation of various rural development programmes, there has been an upsurge(rise)
of employment opportunities for the rural poor. One of the biggest cause behind the steady
growth of rural market is that it is not exploited and also yet to be explored.

2. Size:
The rural market in India is vast and scattered, and offers a plethora(surplus) of opportunities
in comparison to the urban sector. It covers the maximum population and regions, and
thereby, the maximum number of consumers. Rural market is account for about 74% of total
Indian population.
3.Nature:
The social status of the rural regions is precarious (uncertain) as the income level and literacy
is extremely low along with the range of traditional values and superstitious(irrational) beliefs
that have always been a major impediment (obstacle) in the progression of this sector.
4. Response to Products:
i. Rural markets (buyers) believe in product utility rather than status and prestige. However,
they like novel products with distinctive features.
ii. Most village customers consider tastes rather than usefulness in long run.
iii. They like simple and long-life products. They are interested in immediate results.
Products must offer immediate benefits.
iv. They respond to those products that suit their religious faith, and social norms and
customs.
v. They ask for such products which can assists in their traditional occupations and life style.
vi. They have minimum urge(need) for individuality. They prefer family-used products than
personal- used products.
vii. They strongly prefer such products that can change and improve their life-style.
5.Response to Price
i. Rural customers are price-sensitive and highly influenced by level of pricing. Price is the
strongest factor that affects their buying decision.
ii. They buy those products which are low in price and medium in quality.
iii. They are easily attracted by price discounts and rebates.
iv. They prefer credit facility. They normally have strong desire to postpone payment for
certain period.
v. Some middle-class rural customers are attracted by installment and loan facility.
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6.Response to Promotion
i. Rural customers are highly attracted by local and regional promotional efforts.
ii. Their reference groups consist of educated and non-educated family members and
relatives living in urban areas and foreign countries as well.
iii. Personal selling seems more influential to convince rural mass.
iv. They are attracted by such sales promotional tools or articles which are useful in their
routine life such as knife, gas lighter, rings, key-chains, caps, photos of local actors,
calendars and cards with religious impression, etc.
v. They can be appealed by visual or pictorial advertisements published in local and
regional languages.
7. Response to Distribution
i. Normally, they buy from familiar retailers and salesmen. They are hesitant to buy from
big shopping malls or departmental stores. However, situation is changing gradually.
ii. Rural customers strongly favour relations. They continue buying from known and
established retailers who maintain close family relations with them.
iii. Mostly they buy from retail outlets situated in rural or sub-urban areas. However, some
rural customers like to buy products from nearby cities also.
iv. Normally they place frequent orders of small in size. They lack storage facilities.
v. They are not interested in home-delivery. They want immediate possession. They lack
patience. They are found eager to possess and use the products immediately.
vi. Caste, religion, political party, relations, etc., play important role in selecting the
retailers.
8. Predictability
Unlike urban markets, the rural markets are difficult to predict, and possess special
characteristics. The featured population is predominantly illiterate, have low and irregular
income, lack of monthly income, and flow of income fluctuating with the monsoon winds.
They don’t have a stable pattern of reacting due to income factors.
9. Role of Government:
Demand of products depends on availability of basic facilities like electricity, transportation,
schools, hospitals, etc. The steps taken by the Government of India to initiate proper
irrigation, infrastructural developments, prevention of flood, grants for fertilizers, and
various schemes to cut down the poverty line have improved the condition of the rural
masses. Rural market depends on government’s contribution to the rural sector.
10. Rigidity:
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 Most rural customers are illiterate, backward, and orthodox(conventional). It is very difficult
to convince them to buy the products. They believe in the present and lack ambitions.
11. High Level of Heterogeneity:
We find different types of buyers in rural areas. Some are simple, while some are
sophisticated; some are extreme rich, while some are extreme poor; some are highly
educated, while some are complete illiterate; some are dynamic and modern, while some are
very rigid and orthodox; some believe in quality and status, while some believe in
availability and price.
Example for Growth of Rural Economy
Puttanna, aged 40, lives in Harnahalli village, located 25 km from the Shimoga district centre
in Karnataka. Earlier he used to grow groundnuts and vegetables on his small farm (less than
one acre) and sell the produce in a mandi to commission agents at very low prices. The low
income from his farm forced Puttanna to look for other sources of income. He noticed that
the existing transport link between his village and the district centre was insufficient. Due to
the increase in economic activity within the village, more people were travelling to Shimoga
on a regular basis. Puttanna decided to start a taxi service to improve the connectivity of the
village with the district centre, for which he had to sell his farm. Since the proceeds from the
land sale were not enough to buy a taxi, he took a loan from an MFI with the help of his wife,
who was a member of a self-help group.
The business plan worked, and he is now generating a revenue of INR 1,500 per day. After
accounting for diesel, taxi maintenance, and the salary of the driver, he earns INR 400 in a
day. He has also opened a grocery shop to supplement his income, which helps him to pay
the EMI regularly. The increased, regular income has significantly improved the lives of
Puttanna and his family. He now sends his children to a better school. A number of Puttannas
in different parts of rural India are shifting from the farm to the non-farm sector in search of
higher incomes and better lives.

Understanding Rural Economy

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The Rural Economy:
The rural economy has changed from a slow-growth, subsistence agriculture
economy to a fast-growth economy. Economic liberalization and government-led
infrastructure development have opened up the rural economy. Better access to
goods, markets, and funds has kickstarted the more resilient non-farm sector.
This, combined with better farm earnings due to a sharp minimum support price
(MSP) increase for crops and crop diversification, has led to more money for
rural pockets, which transformed the rural economy into a vibrant and growing
economy with rapidly rising incomes.
The Transition of The Rural Economy
The transition at all three levels were linked to the high opportunity for value
addition, resulting in high rural incomes. The farm sector now contributes only
40 per cent of the rural income, whereas the non-farm sector contributes 60 per
cent of the total rural income. This transition has important positive
implications for employment and productivity, both within the farm and non-
farm sectors, which have grown substantially.

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The Farm Sector:
Indian agriculture has graduated rapidly from a food grain-scarce economy to a food grain-
surplus economy. Today, India is the largest producer of coconuts, mangoes, bananas, milk
and dairy products, cashew nuts, pulses, ginger, turmeric, and black pepper. It is also the
second largest producer of rice, wheat, sugar, cotton, fruits, and vegetables.
The agri–allied sector has also grown significantly, particularly dairy, poultry, fish and meat
products. India has become the largest milk producer in the world. India is also the second
largest producer of inland fish and the sixth largest in the overall production of fish in the
world.
The Non-farm Sector and Rural Industries:
The non-farm sector comprises all secondary and tertiary activities not included in
agriculture. The composition of the non–farm sector includes:
■ Secondary sector: cotton textiles, wood, pottery, food, metal products, handicrafts; new
areas: electrical equipment, paper, chemicals, and power looms
■ Tertiary sector: trade, transport, food business, education, personal services; the majority
of these jobs are informal (60 per cent of all non-farm rural jobs)

Percentage Share of Different Sectors in GDP:

Year Primary (Agri and Allied) Secondary Tertiary Total

(Manufacturing) (Services)
1990–91 32.0 24.3 43.7 100.0
2001–02 23.9 26.6 49.5 100.0
2009–10* 15.7 28.1 57.2 100.0
2013–14 14.0 26.1 59.9 100.0

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Rural Marketing Model

1. Research

2.Segmentation

3. Lifestyle Analysis

4.Profile study

5.Defining needs

6.Target market

7. Marketing mix

8.Implementation and control.

1.Research
Research is a scientific and systematic search for pertinent information on a specific topic
Or
A careful investigation or inquiry specially through search for new facts in any branch of
knowledge. A Research should be conducted before launching the business. The research
may be primary or secondary one. If it is primary then it sounds good, as there will be more
clarity about the business and opportunities. This is about studying the market before
entering.
2. Segmentation
Segmentation means to divide the marketplace into parts, or segments, which are definable,
accessible, actionable, and profitable and have a growth potential. In other words, a company
would find it impossible to target the entire market, because of time, cost and effort
restrictions. It needs to have a 'definable' segment - a mass of people who can be identified
and targeted with reasonable effort, cost and time.
Companies can segment markets in several ways:
• Geographically by region or area
• Demographically by age, gender, family size, income, or life cycle
Depending upon the product and business the company should keep some parameters

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 to make the segmentation.
The parameters should be selected in such a way that its effects the demand of the
product.
3. Lifestyle Analysis
The analysis of a person's day-today pattern of living as expressed in that person's Activities,
Interests and Opinions
The lifestyle analysis pulls together all considerations and provides a visual of income and
expenses over the remaining life expectancy. Through illustration of the aggregate sources of
income(s) and expenses over time, one can differentiate what funds are actually required to
maintain standard of living, i.e., to fund expenses.
4. Profile study
Profile study is the recording and analysis of a person’s psychological and behavioural
characteristics, so as to assess or predict their capabilities or to assist in identifying a
particular subgroup of people.
 The Company should develop a profile for the rural consumers.
 The profile helps the company while designing the marketing mix.
 The profile should be in a proper manner which impacts the designing and marketing
of the product.
 For developing such profiles local organizations can help out.
5.Defining needs

 The main theme of the company should look for the needs of the consumer.
 As from the above factors the marketer can be able to identify the needs which are
suitable to their lifestyles.
 After that they should define the exact need of the customer.
 In general terms they should define the needs so as to work out on the target market.
6. Target market
A target market is the segment of consumers most likely to want or need a business's
products or services. This group of people is a subset of the business's total market. It
involves a specified series of customer qualities that the business believes its products or
services will appeal to. 
For example, 1. a children's toy may have boys ages 9–11 as the target market 
2. a target customer could be female athletes in the specific age range of 13 to 16.

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7. Marketing mix
Marketing mix of the company is the main component to reach the customers.
As there is heterogeneous lifestyles and geographically diverted market so the company
should design or modify the mix depending upon the customer needs.
There should be a proper work out of 4A’s (Affordability, awareness, acceptability,
availability) of Marketing Mix.
From the above steps the company can easily identify and can design their marketing mix to
reach the market.
8.Implementation and control
Most of the companies feel that implementation is the major problem in rural market., due to
the factors influences the market.
 Company-Dealer/Distributor-Wholesaler-Retailer
 They reached the last mile of rural market.
 The planning and working should be in parallel, by which the implementation cannot
be a failure.
 There should be systematic process for the up-to-date communications. So that they
cannot miss the feedback from the customers and work on those things.
 The timing for the analysis and action is very important.
 The regional and local players can easily move in the market and modify their
strategies.
 Companies need to be with their channel partners to work their strategies.
Difference Between Rural and Urban Market
The difference between rural and urban market shows that, to market to rural consumers,
companies need to adopt micro strategies by understanding consumers in each region. Many
companies make the mistake of having one campaign for cities and rural areas. But not only
are cities and villages different, but they also vary from region to region. The differences
across regions are quite huge.
Differences in consumer behavior in Rural and Urban market
Rural Consumer Behaviour
1. Bound by tradition, social norms and religion; consumers tend to be close minded.
2. Buy in bulk quantity.
3. Marked preference for fresh food items; food-grains purchased in bulk.

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 4. Mostly cash economy; local traders provide credit.
5. Erratic supply of electricity makes stocking of ice creams and chocolates difficult.
6. Trips to nearby towns are a source of enjoyment, where several products are bought
together.
7. Largely a value buyer, is turned off by gimmicks.
8. Likes direct communication in local language, rejects the modern idiom and unable to
respond to bizarre humour appeals.
9. Male-oriented products likely to do well as females are not given importance.
10. Buys products that are easily available. Exhibits brand loyal behaviour; easy bait for
imitation products.
11. Purchases are highly influenced by families or opinion leaders like elders or local
shopkeepers.
12. Buying power depends on good monsoons and harvests.

Urban Consumer behaviour

1. Modernity pulling at tradition; consumers appear outwardly modern but are traditional
at heart.
2. Though families buy on a monthly basis, trips to nearby stores and supermarkets are
more common. Impulse buying and consumption of fast foods is high.
3. Preference for fresh vegetables, but processed foods also bought. Only large families
buy in bulk.
4. Credit and debit cards becoming popular.
5. Larger per capita consumption of ice creams and chocolates.
6. Shopping for daily items is seen as a chore.
7. Willing to try premium products; gets influenced by advertising.
8. Communication in a mix of languages, likes quirky communications and influenced
by hype.
9. Working women and higher education for girls make female-oriented products
successful.
10. Mostly brand loyal but willing to experiment, discerning about brands; lower income
segments buy imitation products.

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Parameters Differentiating Urban and Rural Markets

1. Infrastructure availability
2. Income Streams
3. Lifestyle
4. Context
5. Socio-cultural background
6. Accessibility
7. Media reach and habits
8. Nature of competition

1.Infrastructure availability: Electricity supply, availability of finance facility,

education level, roads, connectivity, and presence of organized markets: In
these infrastructural aspects, the rural market varies widely from the urban
market.
2.Income Streams: The pattern of income generation in rural areas based on
agriculture is seasonal and highly unreliable unlike the fixed monthly income in
the urban areas. This created a consumption pattern that is quite different from
the urban one.
 3.Lifestyle: The lifestyle and daily routine of consumers in two markets is
markedly different. This creates significantly different profile of urban and rural
consumers for the same product.
 4.Context: Because of variation in infrastructure, lifestyle and the income
aspects, the context in which an individual exists in rural areas is very different
from the one urban areas. This creates difference in nature and priorities of
needs in two markets.
5.Socio-cultural background: Value system and thus perception towards
goods/services and consumption in general is quite different in the two markets.
 6.Accessibility: The cost and logistics of accessing consumers in a highly
widespread and heterogeneous rural market are very different from those
involved in reaching urban consumers concentrated in good number in a single
location. It demands two distinct marketing approaches.

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 7.Media reach and habits: The reach of media vehicles and the media habits,
varying widely in rural and urban markets, requires different type of
promotional strategy in these two markets.
 8.Nature of competition: The nature and intensity of competition amongst the
brands is very different in the two markets.

Urban  Rural
Urban areas usually refer to cities, suburbs Rural areas usually refer to villages
and towns. 
Urban areas have more development in Rural areas usually don’t have much
terms of access to infrastructure and development in terms of infrastructure. 
connectivity like airports, ports, railways,
housing, roads etc.

Land in urban areas is used for development Rural areas usually have a lot of vacant
activities. There is usually not much land lands without much development.
available which has not been used for
developmental activities
Urban areas are densely populated Rural areas are sparsely populated

As of 2018, approximately 34% of India’s More than 65% of India’s population lives
population lives in urban areas in rural areas as per 2018 figures. From
2008 to 2018 there has been a steady decline
in the percentage of the population living in
rural areas of India, due to migration.
Urban areas have a scarcity of land Rural areas do not have land scarcity.
There is not much greenery in urban areas There is more greenery in rural areas of
of India, since most of the land is occupied India
by buildings and roads
Jobs are concentrated in the services Jobs are concentrated in agricultural

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industry, manufacturing industry, trade and activities.
commerce
In urban areas, the problem of social In rural areas of India, there is always a lot
barriers is minimal, there are equal of difference in social status in rural areas
opportunities for jobs, education etc.  due to gender, religion, caste, culture etc. 

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