Introduction to Rural Markets:

Rural markets represent large numbers of underserved people. Both in terms of

numbers of people and volumes, rural markets are enticing for companies that
face stagnant growth in saturated urban markets. It is believed that rural
markets represent the ‘blue ocean’ or vast unlimited opportunities for managers
and are considered as virgin territories.

But the opportunity is not easy to crack. Rural markets are complex and
scattered and they require huge investments and innovative approaches. A
marketing manager has to operate in areas which have suffered decades of
neglect and lack even the basic infrastructure, such as transport, electricity,
education, purchasing power and financial institutions, which are taken for
granted in urban markets. That is why, cracking rural markets is a difficult task
and companies have to understand all aspects of doing business there.

Rural marketing does not mean simply selling goods in rural areas. It is much
more than that; companies have to try to remove market separations so as to be
successful in such areas. This article takes a 360-degree view of rural markets
and describes its characteristics that impact rural marketing strategies. It
describes the size of the rural market and its demographic and economic profile.
First, we look at a BoP portrait by Hammond et al. (2007), which uses household
survey data to measure the empirical size and scope of BoP markets.

A BOP Portrait:

The World Resources Institute report explains that a large segment of the low-
income population—the 4 billion people of the BoP—is not integrated into the
global market economy and do not benefit from it. It further says that BoP
markets are often rural and very poorly served, dominated by the informal
economy, and, therefore, relatively inefficient and uncompetitive.

Yet these markets represent a substantial share of the world’s population. Data
from 110 countries show that the BoP makes up 72 percent of the population,
with an overwhelming majority in Africa, Asia, Eastern Europe, Latin America and
the Caribbean.

They also share other characteristics:

1. Significant Unmet Needs:

Most people in the BoP have no bank account and no access to modern financial
services. Most do not own a phone. Many live in informal settlements with no
formal proof of residence. And, many lack access to water and sanitation
services, electricity and basic health care.

2. Dependence on Informal Livelihoods:

Most people in the BoP lack access to markets to sell their labour, handicrafts or
crops and have no choice but to sell to local middlemen who exploit them. As
small-scale farmers and fishermen, they are vulnerable to destruction of the
natural resources they depend on but are powerless to protect. In effect,
informality and subsistence are poverty traps.

3. Impact of a Poverty Tax:

Many in the BoP pay higher prices for basic goods and services than wealthier
consumers. This is in the form of extra payment or effort required to obtain the
goods and services. But, they often receive lower quality as well. For example,
the poor often pay more for transportation to reach a distant hospital for their
treatment, or have to take loans from moneylenders at very high interest rates,
or buy sachets or small quantities of goods in which the per unit cost is much
higher than if purchased in bulk.

Any rural marketing strategy has to reduce difficulties faced by people in remote
areas. So, while companies look for potential in such markets, they must try to
solve local problems. The opening case of Pidilite shows how companies must
be active in rural areas and do activities much beyond the scope of marketing in
order to realize its true potential.