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DBB2206 Rural Marketing
DBB2206 Rural Marketing
DBB2206 Rural Marketing
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 1
Rural Economy
Table of Contents
1. INTRODUCTION
Rural Economy: Rural - Urban disparities, policy interventions required, Rural face to
Reforms. The Development exercises in the last few decades to boost rural economy.
India is a highly populated nation. Most of the Indian population resides in the rural areas. It
is also called as an agricultural nation because majority of the rural population depends on
agriculture for their livelihood. Hence, agriculture forms the backbone of the economy of the
nation. The contribution of the agricultural sector is highest in the overall economic
development of the nation. Earlier the rural economy was regarded as a slow growing,
subsistence agriculture economy that depended on traditional technology. However, this
perception started to change because of green revolution, the white revolution, and the blue
revolution. Finally, due to economic liberalization, the rural economy has transformed into
a growing and vibrant economy with fast growing incomes.
The rural economy changed due to changes in the areas like agriculture, land reforms,
supplies and marketing, animal husbandry, rural leadership, village industries, village
administration etc. Various rural development programs have allowed cultivators to
capitalize on the advanced technological facilities in agricultural operations. Moreover, other
welfare services like opening up of health care services and schools, expansion of mass media
services and improvement in the communication and transport means, etc. have contributed
to improvement in rural life.
Let’s begin this unit by discussing the meaning and features of the rural economy. Let’s then
delve into rural and urban disparities. We shall then familiarize ourselves with government
policies and rural reforms. Finally, we will discuss development activities that were
implemented to boost rural economy.
Occupation Pattern
In the rural economy, agriculture is the main occupation. Traditionally, agricultural activities
are conducted in villages and its associated activities are also mostly carried out by rural
people. Usually, both men and women are engaged in agricultural activities.
Income Generation
In the rural economy, people largely depend on agriculture and its associated activities for
their income. However, agricultural income is seasonal and rural people get more income
during the harvest season. They spend this income to buy different items. During the non-
harvest seasons, rural people need to restrict their purchases and they even have to borrow
money from banks and lenders to meet their basic needs. Currently, a huge number of rural
people are migrating to the urban areas because of lack of assured income in agriculture.
Family System
In the rural areas, most of the families have adopted a joint family system. There is a strong
family bond between the family members and behavior of individuals is controlled by the
family. Usually, father is the head of the family and manages all affairs of the family.
Village as an Institution
In the rural economy, the village serves as the main institution and fulfils almost every need
of the rural community. Rural people possess a sense of unity and feeling of belongingness
towards one another.
Literacy Level
The literacy rate in the rural areas is low, particularly among women. Due to the low literacy
levels, various fake companies easily sell their products in the rural market. Also, different
kinds of exploitations take place in the rural areas and awareness needs to be created for the
same.
Status of Women
The status of women in rural areas in poor compared to that of men. Women are provided
with less freedom and men dominate them in almost all family affairs. Women are not
allowed to take decisions without discussing with
their life partners. However, there has been a STUDY NOTE
significant improvement in the status of women in the
In 2019-20, around two-third of
past few years.
India’s population took part in the
unskilled and skilled, etc. All such characteristics can Pradesh and Rajasthan.
Activity 1
Study what changes took place in the rural economy due to Green Revolution.
SELF-ASSESSMENT QUESTIONS – 1
1. In India, rural economy generates around half of the national income. (True/
False)
2. ______________is the main occupation in the rural economy.
3. In the rural economy, the __________serves as the main institution and fulfils
almost every need of the rural community.
4. Which of the following statements is not true with respect to the life of the rural
people?
a) Rural people have simple lifestyle
b) Rural people have high living standards
c) Rural people have weak social organization
d) Rural people have limited or no access to public services
Let us understand major disparities between rural and urban areas with the help of the
following points.
Population Density
Population density of the rural areas is low, while population density of the urban areas is
high. These days many rural people are migrating to urban areas, which in turn is constantly
increasing the population density of the urban areas.
Educational Disparities
Undoubtedly, urban areas have better infrastructure and education system compared to
rural areas. The educational institutions in the urban areas are too advanced both at the
elementary as well as high school levels. Also, the urban education system is created in such
a manner that students can have a better learning experience. However, advanced
educational services and infrastructure are absent in the rural areas. There are hardly any
private schools or colleges in rural areas and the condition of the government educational
institutions is poor.
Healthcare Disparities
Health and medical systems in the urban areas are far better than the ones in rural areas.
The health sector in the urban areas is more advanced and developed compared to the rural
health sector, where there is lack of availability of proper medical facilities and
infrastructure. It is the reason that many rural people prefer to go to urban areas for better
medical facilities.
Lifestyle Disparities
Basically, rural people have a very simple lifestyle. There are no malls, multiplexes, hotels
and restaurants in the rural areas. However, the lifestyle of urban people is more improved
and developed as they have more earnings due to more employment opportunities. Also, in
urban areas, there are a large number of malls, multiplexes, hotels, and restaurants.
Architectural Disparities
People of the rural areas usually live in small houses, which are made up of thatched roofs,
mud etc. Also, these houses are mainly simple and temporary, which means that such houses
get affected due to natural disasters such as tsunamis, heavy rains, floods etc. However,
urban areas mostly have big houses and flats, which are built using cement, modern-day
equipment and advanced technologies.
SELF-ASSESSMENT QUESTIONS – 2
Activity 2
Suggest ways in which disparities between rural and urban areas can be either be
reduced or eliminated completely.
Employment Opportunities
The government developed programs like the Integrated Rural Development Project and
Pradhan Mantri Rojgar Yojana (PMRY) to promote self-employment among the unemployed
educated rural youth. At the grassroots level, such programs were implemented under the
system of Panchayati Raj Institutions and aimed at providing skill-based training and linking
access to bank credit.
SGSY has been in force since 1999 and it is an ongoing program for providing self-
employment opportunities to the rural poor. It was formed after restructuring of previous
self-employment programs such as Integrated Rural Development Program, Development of
Women and Children in Rural Areas, Training of Rural Youth for Self-Employment, etc.
Rural Housing
The 1991 census unveiled that 1.4 crore households are without shelter, and people reside
in unserviceable kuccha houses. In 1998, the Central Government declared a National
Housing and Habitat Policy that aimed to offer “Housing for All” by enabling the construction
of around 20 lakhs extra housing units (7 lakh in urban areas and 13 lakhs in rural areas)
every year. Also, the government was devoted to end every type of shelterlessness by ending
of the Tenth Plan Period.
Under the Indira Awas Yojana (IAY), overall, 93 lakh houses had been constructed at the
expense of INR 16,000 crore by the year 2002-03. The beneficiaries of the IAY are selected
by the Gram Sabha. Additionally, the allotment of the dwelling unit must be in name of female
member of the selected beneficiary household. Also, the allotment of the dwelling unit can
be made jointly in the name of both wife and husband.
Land Reforms
The objective of land reforms is to redistribute ownership holding and reorganize
operational holdings for optimizing land utilization. Some of the reform measures include:
Distribution of land among the landless people by acquiring possession of additional land
from big landholders
SELF-ASSESSMENT QUESTIONS – 3
India has a large rural ecosystem, which has been growing steadily. The contribution of the
rural economy is about half in the overall Gross Domestic Product (GDP) of the nation in
2019-20. In the past five years, the rural economy has witnessed growth at 10% per annum
and is still capable of growing. In the last decade, the rural economy has developed
tremendously due to multiple private sector and government initiatives. Additionally, there
have been continuous improvements in connectivity and physical infrastructure. Rural
internet and smartphone penetration has increased 30% per annum during the past five
years.
Government policies like the Model Contract Farming Act, 2018 and other initiatives led by
non-profit and private institutions have also enhanced the creation as well as development
of Farmer Producer Organizations (FPOs). These organizations are becoming important
access points to farmers and can help in generating awareness and supporting new
initiatives.
For improving the quality of life in the rural areas, the government has substantially
increased allocations for agriculture and rural development in the consecutive Five-Year
Plans.
From the above table, we can infer that there has been a fivefold increase in allocations for
agriculture between the 7th and 10th Five-Year Plans and thirteen times increase in
allocations for the rural development during the same period.
The Indian Government has categorized economic activity into three main sectors, from a
planning standpoint:
Primary sector: This sector includes agriculture and associated activities like
fishing, forestry, and livestock rearing.
Secondary sector: This sector includes manufacturing and mining activities.
Tertiary sector: This sector includes all services like communication, transport,
financial services, community services and trade.
The share of the primary sector in GDP has reduced, while the share of secondary and
tertiary sectors has increased significantly in the last few years. The rural economy has
witnessed a structural shift, principally from a farm-based economy to a mix of farm, non-
farm and services economy. This change has been reflected in the reduced share of the
primary sector in GDP.
SELF-ASSESSMENT QUESTIONS – 4
16. Rural internet and smartphone penetration has increased 50% per annum during
the past five years. (True/ False)
17. The sector including manufacturing and mining activities is called tertiary sector.
(True/ False)
6. CONCEPT MAP
Concept and
Features Rural Development
Economy Exercises to
Boost Rural
Economy: Five
Year Plans
Rural and
Urban
Disparities Government
Policies and
Rural Reforms
7. SUMMARY
The contribution of rural economy in the growth of the Indian economy is significant.
The main occupation of rural economy is agriculture and also the main source of income
generation.
People in rural areas have low literacy levels and usually live in a joint family system.
The lifestyle of the rural people is totally different from that of the urban people as the rural
people are exposed to very limited number of services and resources compared to the urban
people.
Disparities between rural and urban areas can be observed with respect to population
density, educational disparities, disparities in employment opportunities, healthcare
disparities. etc.
The Indian government has designed and implemented multiple issue-based programs
focused on rural development.
The reforms made in rural areas by the Indian government include change in rural
infrastructure, opening up of more employment opportunities, Sampoorna Grameen Rojgar
Yojana, Swarnajayanti Gram Swarozgar Yojana, land reforms, etc.
For improving the quality of life in the rural areas, the government has substantially
increased allocations for agriculture and rural development in the consecutive Five-Year
Plans.
8. GLOSSARY
Blue Revolution: It refers to the period of strong growth of the global aquaculture industry
from the middle of 1960s to the current day.
Disparities: It generally refers to a difference which is unfair.
Economy: It refers to a system of inter-related consumption and production activities that
finally ascertain allocation of resource in a group.
Five Year Plan: It is a national economic program that is integrated and controlled.
• Green Revolution: It refers to a dramatic increase in the crop production in the
developing nations due to use of artificial pesticides, fertilizers, and high-yield crop
varieties.
Gross Domestic Product: It refers to the standard measure of total value added created in
any economy.
Population Density: It refers to the concentration of individuals in a particular geographic
location.
Rural Area: It refers to an open swath of land that consists of fewer houses or other buildings
and not many people.
Urban Area: It refers to a region surrounding a city.
• White Revolution: It was the Indian government’s one of the largest dairy development
movements in 1970, which helped to increase milk productivity.
9. TERMINAL QUESTIONS
Short Answer Questions
1. Write a short note on the life of rural people.
2. Enumerate some of the land reforms made by the Indian government in the rural
sector.
3. Explain in brief different development exercises to boost rural economy.
Similar to Raju Srinivasan, other villagers have also benefited due to this new technology in
their village. Around 50% of people in the village are using the services of the mobile
network provider. As most of the villagers do not know how to download e-mails or type
messages, they make voice calls for their queries. The villagers are very delighted because of
their newfound connectivity with the rest of the world. Now, they are aware of the events
and people affecting India as well as the world.
It is one of the examples of how some technological changes in the rural environment has
affected the lives of the rural people. However, each change is associated with an opportunity
as well as a challenge. It depends on us how we deal with it.
Questions:
1. Discuss how introduction of mobile technology has affected the lives of rural people.
2. Discuss how the introduction of new technologies, particularly mobile phones in rural
areas, have helped in boosting the rural economy.
11. ANSWERS
Self-Assessment Questions
1. True
2. Agriculture
3. Village
4. b
5. False
6. True
7. Employment opportunities
8. Closed, monetized
9. c
10. Ministry of Rural development
11. Indira Awas Yojana
12. NABARD
13. a
14. True
15. True
16. False
17. False
Answer 1: People in villages have a very simple lifestyle. Public services such as housing,
education, health and sanitation, banking, transport and communication, markets and roads
are either unavailable or limited.
For more details, refer section 2.
Answer 3: India has a large rural ecosystem, which has been growing steadily. The
contribution of the rural economy is about half in the overall GDP of the nation in 2019-20.
In the past five years, the rural economy has witnessed growth at 10% per annum and is still
capable of growing. In the last decade, the rural economy has developed tremendously due
to multiple private sector and government initiatives.
For more details, refer section 5.
Answer 2: Majority of the urban people live a secure, comfortable and an efficient life. A
rural society can be characterized by agricultural practices, less human population, spatial
mobility, less social differentiation etc. The lifestyle of the rural people is totally different
from that of the urban people as the rural people are exposed to a very limited number of
services and resources compared to the urban people.
Disparities between rural and urban areas can be observed with respect to population
density, educational disparities, disparities in employment opportunities, healthcare
Answer 3: Some of the reforms undertaken by the Indian government in the rural areas are:
Changing Rural Infrastructure: As per the Pradhan Mantri Gramodaya Yojana announced in
the budget of 2001-02, a fund of INR 5,000 crore was passed for developing infrastructure
in villages, especially half of the funds were reserved for village roads.
Employment Opportunities: The government developed programs like the Integrated Rural
Development Project and Pradhan Mantri Rojgar Yojana (PMRY) to promote self-
employment among the unemployed educated rural youth.
Sampoorna Grameen Rojgar Yojana: The two schemes under this program are the Jawahar
Gram Samridhi Yojana (JGSY) and the Employment Assurance Scheme (EAS).
For more details, refer section 4.
E-References
• Features of Rural Economy. (n.d.). BrainKart. Retrieved November 17, 2022, from
https://www.brainkart.com/article/Features-of-Rural-Economy_33418/
• Jain, P. (2022) Innovation in India's Rural Economy, Bain. Available at:
https://www.bain.com/insights/innovation-in-indias-rural-economy/ (Accessed:
November 17, 2022).
• https://villageinfo.in/
• https://www.thestatesman.com/opinion/rural-urban-divide-1502996952.html
(Accessed: November 24, 2022).
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 2
Overview of Rural Marketing
Table of Contents
1. INTRODUCTION
India is a diverse land, with the majority of its population belonging to the rural areas. These
rural areas contribute significantly towards the country’s economic development by
producing food grains, fruits, vegetables etc. Also, exports of these agricultural produce
generate earnings and capital from the foreign exchange. As per the rural market
researchers, there are more than 6 lakh small and big villages in India that account for
approximately 70% of the Indian population, thereby offering huge potential for marketers.
Let’s begin this unit by discussing the meaning of rural marketing. We shall then familiarize
ourselves with the nature of rural markets and the scope of rural marketing. Let’s then delve
into the significance of rural marketing. Finally, we will discuss different factors that
contribute towards the growth of rural markets.
In the words of Thompson, “The study of rural marketing comprises all the operations and
the agencies conducting them, involved in the movement of farm produced food, raw
materials and their derivatives, such as textiles from the farms to the final consumers and
the effects of such operations on producers, middlemen and consumers.”
The above two definitions display a very narrow concept of rural marketing as they focus on
just the movement of goods from the rural to urban areas and completely overlook the
movement of goods such as consumer durables, consumables and agricultural implements
and inputs from the urban to rural markets.
Therefore, we can infer that rural marketing is the same as marketing and the only difference
between the two is in terms of buyers or consumers. In the context of rural marketing, the
target market encompasses consumers living in the rural areas. Hence, we can say that rural
marketing is an application of marketing fundamentals to rural areas. In the Indian economy,
rural marketing can be categorized mainly as:
• Markets for consumer durables that include durable as well as non-durable goods
• Markets for agricultural products that consist of pesticides, fertilizers, seeds etc.
Let us now learn about some of the features of the rural markets due to which companies are
eyeing on the rural markets and formulating effective marketing strategies to capitalize on
the huge potential of the rural markets.
• Market growth
There has been a steady growth in the rural markets over the past few years. Also, demand
for traditional products like Fast Moving Consumer Goods (FMCG) products, agricultural
inputs, etc. have increased over the years. It was the result of the new sources of income and
new employment opportunities made available by the government through various rural
development programs.
• Dependency on agriculture
Rural prosperity is mainly linked with the agriculture prosperity. It means that major portion
of the income of the rural people comes from different agricultural activities. Nevertheless,
this sole dependency on agriculture is witnessing a gradual decrease because other sectors
like manufacturing have begun to gain importance in the rural economy.
• Traditional outlook
People in villages mostly have a traditional outlook. They value old traditions and customs
and resist changes. However, traditional outlook is changing gradually because of literacy
particularly in the youth.
• Infrastructural facilities
One of the most important factors that differentiate a rural market from an urban market is
the inadequacy of infrastructural facilities such as warehouses, cemented roads, financial
facilities, and communication system in rural areas. Due to inadequate infrastructural
facilities, physical distribution and promotion become too difficult in rural areas.
• Low literacy
The literacy rate of rural areas is lower than urban areas, thereby creating problems related
to communication to the promotion of different products and services. Also, low literacy
rates make print media inefficient as well as irrelevant in rural areas because of its poor
reach. Therefore, marketers have to depend upon electronic media like radio, television and
cinema for promoting different products and services. However, the literacy rate is
improving in rural areas as students from these areas are moving to urban areas for their
higher education.
• Growth in consumption
According to a report published by Statista Research Department as of December 2020,
about 50% of Indian urban households spent more than INR 2,400 per month, whereas 37%
of Indian rural households spent at most INR 1,600 per month. The purchasing power of
rural consumers has witnessed growth in the last few years. Despite this increase, the
average per capita household expenditure of rural consumers is still less compared to urban
consumers.
• Decision-making units
Rural women have started to make fast purchasing decisions. Additionally, with the help of
mass media and education, role of children in purchasing decisions is also changing.
Activity 1
Pick any company who has been successful in its rural marketing approach and list the
benefits that the company gained by entering rural markets.
STUDY NOTE
SELF-ASSESSMENT QUESTIONS – 1
• Employment generation
Rural marketing can help in generating more employment opportunities for rural as well as
urban people. More employment opportunities are generated due to increased professional
activities. business operations and services related to rural marketing.
• Price stability
Growth in rural marketing leads to better warehouses, communication, and transportation
facilities. Thus, agricultural products can be marketed systematically across the year. It can
help in avoiding huge gap between supply and demand, thereby maintaining stability in the
prices of most of the commodities.
STUDY NOTE
HDFC Bank, a well-known private bank, has introduced a financial services campaign
known as “Festive Treats”, which is a part of the bank’s rural marketing strategy for
providing incentives to its rural consumers. It also launched a rural marketing
campaign, “Har Gaon Hamara”. The aim of this campaign was to raise the
understanding of rural people about financial goods, social welfare activities and
digital services.
SELF-ASSESSMENT QUESTIONS – 2
• Government Initiatives
The Indian government has introduced various initiatives for economic development of the
rural areas. Through Five Year Plans, the government has made major investments for
developing agriculture, irrigation facilities, animal husbandry, khadi, village and dairy
industries, and other infrastructural facilities. These programs have improved the income
levels of the rural people and enabled them to improve their lifestyle as well as living
standards. Some of the effective government programs under the Five-Year Plans include:
• Intensive Agricultural Area Program (IAAP)
• Intensive Agricultural District Program (IADP)
• High Yielding Varieties Program (HYVP)
• Small Farmers Development Agency (SFDA)
• Fisheries Development
• Operation Flood I, II and III
• Integrated Rural Development Program (IRDP)
Most of the above programs are associated with agriculture and its allied activities, while
there are some programs that are particularly meant for improving education, health,
sanitation conditions, etc. of the rural people. The other initiatives of the Indian government
for rural development include:
• Rural Infrastructure Development Program, ‘Bharat Niram’
• Rural Electrification Program (REP) to provide electric supply to rural areas
• Training Rural Youth for Self-Employment (TRYSEM)
• Cooperative banks and Public Sector Units (PSUs) lend farmers, for instance, facility of
‘Kisaan’ credit card by Andhra and Canara banks
Due to all these initiatives, infrastructure facilities have improved, and economic
liberalization has taken place. Additionally, they have also changed different political,
psychological, and socio-cultural aspects of the rural life. All this has helped in growth of
rural markets and opened new prospects for rural marketing.
• Agricultural development
We know that agriculture has a major contribution in GDP of India and more than 65% of
the rural population depends upon agriculture for their livelihood. During the Five-Year
Plans, considerable attention has been given to agriculture, which has helped to increase
agricultural productivity. Selective mechanization, adoption of improved agronomic
practices, multiple cropping and development of allied activities such as fisheries, dairy, etc.
have enabled to increase disposable income of rural people. Additionally, a shift in cropping
pattern from the food crops to cash crops such as vegetables, fruits, cotton, etc. have allowed
cultivators to improve their income. This increase in disposable income of rural people have
further led to the growth of the rural areas.
Mobile phones and the Internet have helped rural people in different ways such as searching
for jobs, learning new skills, and connecting with people outside villages. Also, due to
improved mass media, rural people now know about various government schemes that can
be beneficial for farming as well as other activities. Therefore, improved rural
communication is one of the major factors responsible for the growth of the rural markets.
• Urban influence
Communication channels such as social media have helped in bridging the gap between rural
people and urban people. The influence of urban people on rural people can be seen in the
changing lifestyle and purchasing behavior of rural people. It has resulted in an increase in
demand for consumer goods in the rural markets. Due to increased demand, many
multinational corporations and industries have either entered or are now planning to enter
the rural markets, thereby making their contribution in the growth of the rural markets.
• Private initiatives
Private agencies have also contributed to the growth of the rural markets through various
village-level programs such as:
• Companies such as Colgate and HUL have highlighted the importance of hygiene and
health among villagers through village meetings, film shows, and school teachers.
• Parry Corner, an internet access center developed by Murugappa Group in Tamil Nadu,
offer information on bank loans, farming techniques, government schemes, availability
of agricultural inputs, insurance, etc.
Activity 2
Collect information about different newly launched government initiatives that
particularly aim at development of the rural markets.
SELF-ASSESSMENT QUESTIONS – 3
10. Which of the following companies are already focusing on rural marketing?
a) ITC
b) Parley Foods
c) Hindustan Unilever Ltd.
d) All the above
11. Which of the following are the two initiatives for offline education?
a) eVIDYA, SWAYAM
b) SWAYAM, Sarva Shiksha Abhiyan
c) Sarva Shiksha Abhiyan, Rahstriya Madhyamik Shiksha Abhiyan
d) Rahstriya Madhyamik Shiksha Abhiyan, eVIDYA
12. The program in which companies provide farmers with high-yielding seeds to
cultivate crops so that farmers can grow crops for them is known as ___________.
13. e-Choupal is an internet-based program launched by _____________.
5. CONCEPT Map
Overview of
Rural Marketing
of Rural
Concept and
Marketing Factors Contributing to
Meaning
Nature of Rural Growth of Rural Markets
Market Government initiatives
Scope of Rural Agricultural development
Marketing Development of rural
communication
Urban influence
Increasing literacy levels
Private initiatives
Significance
Rapid economic growth
Less burden on urban areas
Employment generation
Development of agro-based industries
Improved living standard
Optimum utilization of untapped rural
resources
Easy marketability of agricultural products
Price Stability
6. SUMMARY
• Rural marketing is the process that involves the development, pricing, promotion and
distribution of rural-specific products and services resulting in an exchange between
urban and rural markets that fulfils consumer demand along with attaining
organizational objectives.
• Some of the features of rural markets include huge and scattered population, diverse
and heterogenous population, dependency on agriculture, low standard of living, etc.
• Scope of rural marketing is increasing because of growing rural population, growth in
consumption in rural areas, rising rural prosperity, higher market growth rate, etc.
• Rural marketing helps in rapid economic growth, reduces burden in urban areas,
generates employment opportunities, helps in development of agro-based industries,
improves living standard of rural people, etc.
• Factors that have contributed to growth of the rural markets include government
initiatives, agricultural development, development of rural communication, urban
influence, increasing literacy levels, and private initiatives.
7. GLOSSARY
• Agronomic practices: They refer to agricultural practices that are usually related to
field crop production such as soil management.
• Consumer durables: They refer to a group of consumer goods that are not required to
be purchased frequently as they last for a long period of time.
• Disposable income: It refers to income left after deduction of taxes and is available to
be saved or spent as one wishes.
• FMCG products: They refer to products that are sold quickly and at low cost.
• Non-durable goods: They refer to all those consumer products that are consumed
either in single use or over a short period of time and that is why they are needed to be
purchased frequently.
8. TERMINAL QUESTIONS
Short Answer Questions
1. Explain the concept of rural marketing.
2. Discuss the nature of rural markets in brief.
9. CASE STUDY
Rajiv Sharma works for the post of Marketing Manager in the Cosmetic Division of a well-
known FMCG company. The company is performing well and has a reputation for selling
good quality products for people of almost every age group. The Managing Director of the
company instructed Rajiv to recognize the target market and devise a marketing plan to sell
their cosmetic products in the rural market that has a minimum population of 5000 persons.
The company decided to do so because they have reached a saturation level in the urban
market and there are no further prospects of growth. So, now they want to capitalize on the
growth opportunities available in the rural market.
Before formulating marketing strategies for entering the rural market, Rajiv conducted a
pre-market survey, so that he can have a better understanding of the rural market in which
his company wants to venture. Some of the facts obtained through the survey include:
• A color television set is present in one in every ten households.
• 25 out of every 100 households have an electric iron
• 65% of the sales of portable and table radios, cigarettes and bicycles is accounted by
the rural markets
• Rural consumers are more loyal to brands compared to urban consumers
• Rural people are too particular about value and quality compared to their urban
counterparts
As the survey showed that there is great potential in the rural markets and it is still untapped,
so the company decided to venture in rural markets by launching a new brand of their
cosmetic products that are customized as per the requirements of the rural markets.
Additionally, the company decided to market their products to ensure that rural people
know about their brand. Their marketing program was supported by various sales
promotion programs such as television and radio advertisements, wall posters and offers of
some freebies.
Since social sanction also plays a vital role in behavior of the rural consumer, Rajiv identified
the reference group such as the panchayat head or village mukhia, or manager of a local bank,
whose opinions are valuable for the rural public. Facts and views expressed by these persons
can help the company in a positive word-of-mouth advertising.
Questions:
1. Why did Rajiv conduc a pre-market survey before entering rural markets?
2. Evaluate the marketing strategies that the company adopted for entering rural markets.
10. ANSWERS
Self-Assessment Questions
1. a
2. True
3. False
4. True
5. Agricultural
6. Income level
7. Rural prosperity
8. True
9. b
10. d
11. c
12. Contract farming
13. ITC
Answer 1: Scope of rural marketing can be understood with the help of the following points:
• Population
• Growth in consumption
• Increasing rural prosperity
• Change in demands and lifestyle
• Life cycle advantage
• Higher market growth rate
• Decision-making units
For more details, refer section 2.2.
Few other points that rural marketing contributes to, are listed below:
• Employment generation
• Development of agro-based industries
• Improved living standard
• Optimum utilization of untapped rural resources
• Easy marketability of agricultural products
For more details, refer section 3.
Answer 3: One of the major factors that is responsible for the growth of rural markets is:
• Government Initiatives: The Indian government has introduced various initiatives for
economic development of the rural areas. Through Five Year Plans, the government has
invested heavily for developing agriculture, irrigation facilities, animal husbandry,
khadi, village and dairy industries, and other infrastructural facilities.
• The other factors that have contributed to growth of rural markets are:
• Agricultural development
• Development of Rural communication
Urban influence
• Increasing literacy levels
• Some Private initiatives
For more details, refer section 4.
E-References
• What is rural marketing? - definitions, meaning, features, need, importance (2019)
Economics Discussion. Available at: https://www.economicsdiscussion.net/marketing-
2/what-is-rural-marketing/31880 (Accessed: November 26, 2022).
• Rural Marketing: Introduction, concept and definitions (2015) Your Article Library.
Available at: https://www.yourarticlelibrary.com/marketing/rural-marketing/rural-
marketing-introduction-concept-and-definitions/48725 (Accessed: November 26,
2022).
• Hihoriya, H. (2020) 7 factors that affect the rural development, LinkedIn. Available at:
https://www.linkedin.com/pulse/7-factors-affect-rural-development-hardik-
hihoriya (Accessed: November 26, 2022).
• TRADING ECONOMICS. (n.d.). India - Rural Population - 2023 Data 2024 Forecast
1960-2021 Historical. Retrieved January 6, 2023, from
https://tradingeconomics.com/india/rural-population-percent-of-total-population-
wb-data.html
• Rural Marketing & Advertising: Introduction, Nature, Innovative Use and Growth –
StudiousGuy. (n.d.). Retrieved January 6, 2023, from https://studiousguy.com/rural-
advertising/
• Statista. (2022, September 6). Gender literacy rate India 2019-2021, by area. Retrieved
January 6, 2023, from https://www.statista.com/statistics/1303303/india-gender-
literacy-rate-by-area/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 3
Classification of Rural Markets
Table of Contents
1. INTRODUCTION
For a long period, marketing in rural sector was limited to the promotion of agriculture
related products/services. This was majorly due to the larger stake of rural sector in
agriculture and the greater interest of the government bodies and private organization in
farming activities. Lately, rural sector are attracting lot of businesses and is opening up
lucrative markets for both fast moving consumers goods (FMCG) and consumer products.
As majority of Indian population resides in villages, there exists huge potential in rural
markets that is yet to be exploited. Over the last two decades, government has taken several
measures to make rural markets more organized and lot of businesses have shown interest
in fulfilling the needs of rural customers. Marketers have realized the difference between
urban customers and rural customers and started to adopt ways to grab the attention of rural
people. You will learn more about rural markets in the unit.
The unit begins with the discussion on components and classification of rural markets. Then,
you will learn about the difference between rural market and urban market. In the end, you
will be familiarized with the importance of IT in rural marketing.
There are certain components that must be present for the existence of any market, urban
or rural. Following are the main components of rural market:
• Presence of goods for conducting transactions
• Presence of buyers and sellers
• Development of business relationships between buyers and sellers
• Clear division of areas, like region, country, etc.
Like any market, rural markets also provide a place for both buyers and sellers to meet.
There exist many classifications of rural markets based on several factors, like areas, goods
offered, etc. The most common classification of rural markets is shown in the Fig 3.1:
Mandi
Haat Mela
Classification
Trade
Local retailers of Rural
fairs/exhibitions
markets
Haat – It is a type of rural market which is organized for a specific period of time based on
the convenience of the people living in nearby villages. Such haats operate on a weekly or bi-
weekly basis and offer distinctive variety of goods, like agricultural products and tools,
cosmetics, edible items, etc.
Mandi – It is a market wherein agricultural products and limited durable goods are offered.
For each region comprising several villages, there exists one mandi. In these markets, people
engage in exchange of products/services through intermediaries. Mandis are also known as
agri-markets and is used to sell agricultural produce of farmers along with farm inputs and
consumer durables.
Mela – Also known as fair, mela offers entertainment in the form of games, plays, sports, etc.
along with the great deal of shopping. People buy agri-products and consumer durables in
these fairs.
Activity 1
Prepare a presentation on any mela/trade fair you have visited recently.
SELF-ASSESSMENT QUESTIONS – 1
1. Rural marketing aims to improve the standard of living of the people living in
urban areas. (True/False)
2. _________________are small shops in villages which are established through little
investments.
3. _________________operate on a weekly or bi-weekly basis.
4. Mandis are also known as __________________ .
Population
In rural markets, population density is always low as compared to that of urban markets.
People from rural areas keep migrating to urban areas for different reasons, like
employment, studies, etc. Consequently, urban markets witness constant rise in population.
Economy
By economy, we mean the earning capacity of people. In rural markets, earnings are not
stable as many people rely on seasons and agricultural activities. However, people living in
urban areas have fixed income due to growth in trade, services, and industries which
increase their cost of living.
Infrastructure
In rural areas, the infrastructure is generally poor. Various facilities, such as electricity, clean
water, roads, hospitals, and educational institutions lack advancements and consume lot of
time in implementation. On the other hand, urban areas, all these infrastructural facilities
are present in urban areas.
Family structure
People live in joint families in rural areas, whereas in urban areas, nuclear family system is
adopted by most of the people. The nuclear family systems have a severe impact on the joint
families of rural areas.
Attitude
The attitude and outlook of both the regions are highly different. People in rural areas tend
to be more fatalistic, whereas urban people have rational and scientific outlook.
Socio-cultural background
Various factors, like illiteracy, cultural adaptations in the rural areas are different from urban
areas. The beliefs, superstitions, and the way of looking at products and services are different
in rural and urban markets.
Mobility
In rural areas, people are engaged in traditional occupations, like agriculture. As a result,
their mobility is low. On the contrary, urban areas have high mobility as people keep
changing their jobs and companies.
Consumer behavior
The mindset of the people in rural areas and urban areas is different. For instance, if people
of urban markets have to buy an electronic item, they look for updated features and brand
name. On the other hand, while buying the same item, people living in rural areas have to
consider various factors, like durability, affordability, etc.
SELF-ASSESSMENT QUESTIONS – 2
5. In rural markets, population density is always higher than that of urban markets.
(True/False)
6. What type of family systems is present in rural areas?
7. People in rural areas have _____________ attitude.
8. Urban areas have high mobility as people keep changing their jobs and
companies. (True/False)
4. E- RURAL MARKETING
Rural marketing has gained much prominence lately. Both Indian business organizations and
MNCs are taking lot of interest in reaching out to consumers in rural markets. Apart from
this, emphasis is laid on the use of the advanced technologies and in rural sector for bringing
modernization in it. This has given rise to the concept of e-rural marketing.
e-rural marketing includes all the marketing activities to encourage rural people to engage
in buying and selling through electronic platforms and information technologies (IT) with
the aim of improving the standards of living of rural areas. Through e-rural marketing, rural
markets have experienced great expansion. Goods and services can be moved to different
villages easily and production cycles are reduced. The main advantages of e-rural marketing
in rural sector are:
• It removes the infrastructure restrictions, such as poor connections in rural areas.
• It facilitates ease of access to information and services.
• It promotes and upscales micro, crop & insurance related programs.
• It increases transparency in the sales transactions.
• It enables registering and storing of complaints and feedback and using them for
improvements.
• It supports monitoring and controlling of payments and repayments.
• It helps in providing individualized services.
• It helps in managing supply chain and controlling distribution costs.
The government of India has also realized the importance of IT in e-rural marketing.
Therefore, different projects have been launched in this direction. Few notable examples
are:
e-Swasthya (Health in Card)- Launched in 2001 in villages of North Bihar, it linked the
community Health cum Information Center with the latest wireless communication
technologies. Laminated cards were used for conducting instant diagnosis. Wi-fi connections
were established to provide connectivity to the internet and many doctors volunteered to
offer free counseling to patients over the net.
Rural Electric Power Distribution- It was launched with the help of Smart Grid
Technology. The grid was used to improve the reliability, efficiency, and security of power
delivery and usage through the adoption of distributed computers, latest sensors, and two-
way communications.
E-mitra – This program was launched by the Rajasthan government in 2004 to support the
people living in rural areas to implement IT technologies and utilize their benefits to the best.
Later, the government launched two more programs – Lok Mitra and Jan Mitra. Lok mitra
helps the citizens of Rajasthan to get the desired information about any government
department or function through nearby kiosks. Lok Mitra helps the people of the state to pay
their bills online.
The e-Choupal model has been specifically designed to tackle the challenges posed by the
unique features of Indian agriculture, characterized by fragmented farms, weak
infrastructure, and the involvement of numerous intermediaries, among others.
With a judicious blend of click & mortar capabilities, village internet kiosks managed by
farmers - called sanchalaks - themselves, enable the agricultural community access ready
information in their local language on the weather & market prices, disseminate knowledge
on scientific farm practices & risk management, facilitate the sale of farm inputs (now with
embedded knowledge) and purchase farm produce from the farmers' doorsteps (decision
making is now information-based).
'e-Choupal' ensures world-class quality in delivering all these goods & services through
several product / service specific partnerships with the leaders in the respective fields, in
addition to ITC's own expertise.
While the farmers benefit through enhanced farm productivity and higher farm gate prices,
ITC benefits from the lower net cost of procurement (despite offering better prices to the
farmer) having eliminated costs in the supply chain that do not add value.
The problems encountered while setting up and managing these 'e-Choupals' are primarily
of infrastructural inadequacies, including power supply, telecom connectivity and
bandwidth, apart from the challenge of imparting skills to the first time internet users in
remote and inaccessible areas of rural India.
Several alternative and innovative solutions - some of them expensive - are being deployed
to overcome these challenges e.g., Power back-up through batteries charged by Solar panels,
upgrading BSNL exchanges with RNS kits, installation of VSAT equipment, Mobile Choupals,
local caching of static content on website to stream in the dynamic content more efficiently,
24x7 helpdesk etc.
Going forward, the roadmap includes plans to integrate bulk storage, handling &
transportation facilities to improve logistics efficiencies.
As India's 'kissan' Company, ITC has taken care to involve farmers in the designing and
management of the entire 'e-Choupal' initiative. The active participation of farmers in this
rural initiative has created a sense of ownership in the project among the farmers. They see
the 'e-Choupal' as the new age cooperative for all practical purposes.
This enthusiastic response from farmers has encouraged ITC to plan for the extension of the
'e-Choupal' initiative to altogether 15 states across India over the next few years. On the anvil
are plans to channelize other services related to micro-credit, health and education through
the same 'e-Choupal' infrastructure.
Another path-breaking initiative - the 'Choupal Pradarshan Khet', brings the benefits of
agricultural best practices to small and marginal farmers. Backed by intensive research and
knowledge, this initiative provides Agri-extension services which are qualitatively superior
and involves pro-active handholding of farmers to ensure productivity gains. The services
are customized to meet local conditions, ensure timely availability of farm inputs including
credit, and provide a cluster of farmer schools for capturing indigenous knowledge. This
initiative, which has covered over 91,900 CPKs, has a multiplier impact and reaches out to
around 11 Lakh farmers.
Source: https://www.itcportal.com/businesses/agri-business/e-choupal.aspx
Activity 2
Find more information about E-mitra program and prepare a report on it.
SELF-ASSESSMENT QUESTIONS – 3
5. CONCEPT MAP
• Population
• Economy
• Infrastructure
• Family structure
• Attitude
• Socio-cultural
background
• Mobility
• Consumer behavior
6. SUMMARY
• Rural marketing involves activities performed by the marketers to motivate the people
living in rural areas to create demand for goods and services and facilitate the
availability of these products in the rural places.
• There are certain components that must be present for the existence of any market,
urban or rural. These include presence of goods for conducting transactions, presence
of buyers and sellers, development of business relationships between buyers and
sellers, and clear division of areas, like region, country, etc.
• Rural markets are classified into Local retailers, Haat, Mandi, Mela, and Trade
fairs/exhibitions.
• Business organizations must realize that rural markets and urban markets are
different. The difference between urban and rural market can be understood through
different parameters, like population, economy, infrastructure, etc.
• With the growth of computerization of production in India, rural markets have also
experienced great expansion.
• The government of India has realized the importance of IT in the development of rural
markets. Different projects have been launched, such as e-Swasthya, Rural Electric
Power Distribution, and E-mitra.
7. GLOSSARY
Consumer behavior: Study of the processes used by consumers to buy products
Haat: A market organized in a village or rural area on a regular basis
Rural market: A market which involves all the marketing activities to fulfil the needs of
people in rural areas
Trade fair: A huge event wherein many retailers and companies come to display and sell
their products and services
8. TERMINAL QUESTIONS
Short Answer Questions
1. What is Mandi?
2. How is the consumer behavior of rural markets is different from urban behavior?
3. Explain e-mitra.
HUL’s team of Rural Sales Promoters (RSPs) train the Shakti micro-entrepreneurs with
management skills to look after their businesses in a better way. The Shakti Ammas are also
taught the basics and troubleshooting, and emphasis is laid upon improving their negotiation
and communication skills.
The company is now working towards creating a major social impact by conducting sessions
on nutrition awareness, waste recycling, women empowerment and more to make Shakti
Ammas to agents of positive change in their villages.
Overall impact
At present, HUL possess more than 1,60,000 Shakti entrepreneurs across 18 states. Project
Shakti has tremendously impacted the livelihoods, confidence, and self-esteem of women in
villages and boosted their skills and entrepreneurial mindsets.
Source:https://www.hul.co.in/planet-and-society/case-studies/enhancing-livelihoods-
through-project-shakti/
Questions
1. Who were RSPs? How did they help HUL in achieving their goal of empowering women
in villages?
2. What measures were taken by HUL during Covid to support Shakti Ammas? Can you
suggest some more measures that the company can take to help rural women?
10. ANSWERS
Self-Assessment Questions
1. False
2. Local retailers
3. Haats
4. agri-markets
5. False
6. Joint family system
7. fatalistic
8. True
9. True
10. True
11. 2001
12. Lok Mitra
Answer 2: The mindset of the people in rural areas and urban areas is different. For instance,
if people of urban markets have to buy an electronic item, they look for updated features and
brand name.
For more details, refer section 3.
Answer 3: E-mitra was launched by the Rajasthan government in 2004 to support the people
living in rural areas to implement IT technologies and utilize their benefits to the best.
For more details, refer section 4.
Answer 2: The attitude and outlook of both the regions are highly different. People in rural
areas tend to be more fatalistic, whereas urban people have rational and scientific outlook.
For more details, refer section 3.
Answer 3: IT enables registering and storing of complaints and feedback and using them for
improvements.
For more details, refer section 4.
E-References
• Concepts and components of rural markets. BrainKart. (n.d.). Retrieved November 30,
2022, from https://www.brainkart.com/article/Concepts-and-Components-of-rural-
markets_6064/
• Rural Marketing in India: Definition and features of rural marketing. Your Article
Library. (2014, April 2). Retrieved November 30, 2022, from
https://www.yourarticlelibrary.com/essay/rural-marketing-in-india-definition-and-
features-of-rural-marketing/32335
• Voice ai: Rural India gaining pace in technology adoption. Rural Marketing. (2021,
March 15). Retrieved November 30, 2022, from
https://ruralmarketing.in/stories/voice-ai-rural-india-gaining-pace-in-technology-
adoption/
• ITC e-choupal - rural India's largest internet-based intervention. (n.d.). Retrieved
December 19, 2022, from https://www.itcportal.com/businesses/agri-business/e-
choupal.aspx
• Unilever PLC. (2022, June 10). Enhancing livelihoods through Project Shakti. Unilever.
Retrieved December 19, 2022, from https://www.hul.co.in/planet-and-society/case-
studies/enhancing-livelihoods-through-project-shakti/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 4
Environmental Analysis
Table of Contents
1. INTRODUCTION
In our previous units, we have already discussed the meaning of rural marketing. Let us now
learn about the rural marketing environment. Before conducting rural marketing, companies
need to understand the environment in which they have to operate for delivering products
and services. We all know that successful marketing is customer-centric, and it begins by
gaining understanding about the consumers. To properly comprehend consumer actions and
decisions, it is necessary to understand the force field in which the consumers operate.
Therefore, it is necessary for marketers to study about environmental factors. Additionally,
it is important that marketers understand the trends and development instead of knowing
about just the static view of the environment.
Rural marketing is influenced by the uncertainty and dynamism of the environment in which
it operates. The huge rural market of India offers great potential for marketers who face
strong competition in the urban markets. As the rural marketing environment is completely
different from the known urban marketing environment, it is necessary to learn about the
elements of rural marketing environment in detail. It will help marketers in dealing with the
challenges and exploring opportunities offered by the rural markets.
Let us begin this unit by understanding the meaning of rural marketing environment. Let’s
then discuss the need to study rural marketing environment. We shall then familiarize
ourselves with mechanism of rural marketing. Let’s then delve into the SWOT analysis of
rural market. Finally, we will discuss recent trends in rural demand.
Rural marketing environment refers to all the factors such as political factors, economic
factors, social factors, etc. that influence rural marketing. It is essential to study all such
external factors with regard to rural markets as these factors vary in rural markets than
urban markets.
STEP model is one of the general ways to analyze rural marketing environment. Let us have
a look at various factors that are directly or indirectly relevant to rural marketers:
• Political environment: It includes administrative bodies and development initiatives.
• Economic environment: It includes land distribution, occupations, irrigation, land use
pattern, asset holding, consumption, income, savings, rural credit institutions,
disposable incomes, rural retail outlets, etc.
• Social environment: It includes households and population, social groups, arts and
entertainment, melas and festivals, literacy levels and education.
• Technological environment: It includes energy and power sources,
telecommunications, postal services, information and communication technology,
innovations, etc.
Now, let us look at different decision areas in rural marketing and the environmental factors
considered for that particular decision area.
• For dealing with competition and obtaining information related to new problems
and challenges
It is necessary to study the marketing environment so that products and services of the
organization can be kept in existence for a longer period. Thus, the marketing manager needs
to study products, marketing strategies, etc. of competitors. Rural marketing environment
allows the marketer to acquire information about new problems and challenges.
STUDY NOTE
Crompton and Kirloskar are the top rural marketers in the field of agricultural
machinery and diesel engines. While in the service sector of the rural market, Canara
Bank and the Central Bank are the leading banks.
SELF-ASSESSMENT QUESTIONS – 1
• Place mix
Distribution is difficult in rural markets, so both distribution channels and physical
distribution must be decided carefully to ensure easy accessibility of products to all rural
consumers. Some of the important decisions about rural distribution include establishing
warehouses at strategic locations, selecting the right mode of transportation, maintaining
sufficient inventory, deploying a trained sales force, adequate number of retail outlets at
various locations, etc.
• Price mix
Price is the major element of any marketing mix, especially for the rural markets. Pricing
strategies and policies must be formulated with utmost caution and care as rural consumers
are too price sensitive and it plays a decisive role in their buying decisions. Some important
considerations during setting prices of products meant for rural markets include price level,
rebates and discounts, and instalment and credit facilities. Usually, rural consumers are
always attracted by the low price of the products. However, they are rarely status or quality
conscious.
• Promotion mix
In rural marketing, distribution and promotion strategies are formulated in such a manner
that the advantages of media reach and improved infrastructure can be leveraged. Many
companies in rural markets, advertise their products and services through television as they
know that through this medium, they can reach the target audience because majority of
people in rural India watch television. Additionally, other marketing techniques that have
proved effective in rural areas include edutainment films, colorful wall posters, vehicle
campaigns, word-of-mouth publicity via opinion leaders, etc. Village festivals and fairs are
suitable for running marketing programs. In specific cases, meetings with Mukhiya and
Sarpanch too can be utilized for rural promotion.
Activity 1
Pick any company that has a presence in rural markets. Collect information about its
rural marketing mix.
STUDY NOTE
Philips developed a different type of radio known as ‘Free Power Radio’ for rural
markets in 2002. This radio does not need a battery or power. It just runs on the simple
winding of the level available in the set itself. Also, it was priced just at INR 995.
SELF-ASSESSMENT QUESTIONS – 2
5. Rural marketing mix consists of different elements such as product, place, price
and promotion. (True/ False)
6. Price is the major element of any marketing mix, especially for the rural
markets. (True/ False)
7. The ________component of Marketing Mix serves as a powerful tool for the
organization that wants to achieve success in the rural markets.
8. Name any marketing technique that is suitable for rural areas- _____________
9. Which of the following is among the important decisions that must be taken for
rural distribution?
a) Establishing warehouses at strategic locations
b) Selecting right mode of transportation
c) Deploying a trained sales force
d) All the above
Strengths
• Increase in rural population: In the past few years, the rural population has grown at
a much faster pace compared to the urban population. Also, the proportion of rural
population in the overall Indian population is more than the urban population.
• Rise in spending capacity of rural consumers: Two-thirds of Indian consumers
reside in rural areas, where about 26% of the national income is generated. This along
with increased returns from agriculture has led to a rise in the spending capacity of
rural consumers.
• Various socio-economic changes: The rural landscape is witnessing a dramatic but
steady change. There is also a change in saving, consumption and earning patterns of
rural people.
• Rise in expectations of rural consumers: Now the expectations of rural consumers
are changing, and they are going for better products and high-end services.
Weaknesses
• Less developed infrastructure: There is a problem of communication, distribution
and transportation in rural areas.
• Lower income levels: The income levels of rural people are comparatively lower than
those of urban people. Also, the ratio of poverty in rural areas is much greater than that
present in urban areas.
• Heterogenous rural population: In rural areas, people are divided into different
groups based on caste, income, religion, age, and education. Hence, there is a need to
comprehend the rural markets with regard to attitudes, aspirations, buying behavior,
and beliefs of rural people.
• Difficulty in sale of consumer durables: Marketers face difficulty in selling consumer
durables in rural markets due to the following reasons:
o There is a need of more investment for buying durables
o Transportation problems because of bulkiness of products
o Separate retailers are required for consumer durables
Opportunities
• Huge investments in rural development, especially rural infrastructure by the
government as well as other agencies can create a large number of opportunities for
marketers.
• Huge and scattered rural market of India presents a range of opportunities to
marketers. It covers the maximum regions and population and thus, the maximum
number of consumers.
• Increase in income levels of the rural people, along with increase in production and
consumption presents opportunities to marketers to market their products.
• Due to rising literacy levels and quality consciousness, rural people are going for better
products and services.
• Growth in rural areas can be triggered by the provision of finance at low rates. It will
enable the rural people to afford costly products.
• Rural people are becoming aware of technological developments and different
developmental activities. Also, now they have access to updated market information.
Threats
• The rural marketing environment is complicated and changes continuously. Thus,
marketing organizations must predict these changes and formulate their marketing
strategies accordingly. Organizations that are not able cope with these changes do not
survive in the rural market.
• As the behavior of rural consumers is quite unique, marketers face difficulties in
evolving a perfect marketing mix.
• Rural marketing includes providing knowledge about products, their benefits, their
usage and maintenance, and disposal. However, because of low awareness and low
literacy levels, it becomes a tedious task for marketers to educate rural consumers
through rural-specific methods and media.
If any company can strike a balance in all these factors, then its chances of success in the
rural markets become very bright.
SELF-ASSESSMENT QUESTIONS – 3
12. Which of the following is one of the strengths of the rural market?
a) High income levels
b) Rise in expectations of rural consumers
c) Homogenous population
d) Easy selling of consumer durables
13. Huge and scattered rural market of India restrict the number of opportunities
available to marketers. (True/ False)
14. Which of the following is NOT a weakness of rural markets?
a) Less developed infrastructure
b) Lower income levels
c) Homogenous rural population
d) Difficulty in sale of consumer durables
The increase in requirements of rural areas is encouraging more and more companies to
enter the rural areas. Many companies are eyeing towards the rural markets because of high
growth potential, which if offered due to increase in needs of the rural people. It is offering
great opportunities to companies to market their products in the rural markets and achieve
a competitive edge. These increasing rural requirements has largely enhanced the scope of
the rural marketing.
Let us look at the reasons responsible for change in demand pattern of the rural markets:
• Marketing efforts
Efficient and effective marketing efforts by companies such as Bajaj Auto, Hindustan
Unilever Ltd., Godrej Soaps, Brooke Bond, etc. have resulted in increased penetration of the
rural markets. This increased market penetration has led to an increase in demand for
various products by rural consumers.
• Reach of media
The improved reach of different media such as radio, television, newspapers, etc. has led to
an increase in demand for new products and services. Additionally, Cable TV has played a
vital role in changing the consumption patterns and lifestyle of rural people.
According to a report from Morgan Stanley, rural demand is expected to increase because of
combination of factors such as better terms of trade, and improved labor market in the rural
areas. The report also states that overall economic activity in rural areas has been getting
normal over the last few months. The reasons for this improvement include a decrease in
unemployment rates in rural areas, rise in growth of credit to the agricultural sector,
recovering sales of two-wheelers, etc. Additionally, policymakers in India are adopting
measures to improve access to basic amenities, increase productivity throughout the
agricultural sector, and diversify the livelihoods of people in rural areas.
However, the report also suggests the possible risks that can hamper the growth of rural
demand. Some of these are:
• Less job creation than expected, particularly in the semi-skilled sector
• High prices of commodities that will increase non-food inflation and deteriorate terms
of trade for the rural sector
Activity 2
Find out which are the top ten consumer durable products whose demand is highest in
a village that you live in, or the one that’s the closest to your place.
SELF-ASSESSMENT QUESTIONS – 4
15. Which of the following is not among the products/services that have demand in
rural markets?
a) Television sets
b) Readymade garments
c) Spas
d) Washing machines
16. ______________has played a vital role in changing the consumption patterns and
lifestyle of rural people.
Rural Area
Requirement
Mechanism SWOT Analysis of Rural Market
of Rural
Marketing Increase in rural population,
Product
Rise in spending capacity
Price
Socio-economic changes
Place
Rise in expectations of rural
Promotion
consumers
7. SUMMARY
• Rural marketing environment refers to all the factors such as political factors, economic
factors, social factors, etc. that influence rural marketing.
• STEP model for environmental analysis includes analysis of social, technological,
economic and political factors.
• The study of rural marketing environment is necessary to study complexities and
developments of the rural environment, to formulate company policy, to take different
marketing decisions, to understand rural market conditions, to identify new market
opportunities, etc.
• Rural marketing mix consists of different elements such as product, place, price and
promotion.
• SWOT analysis is conducted to understand and interpret prospects as well as problems
of the rural markets.
• Strengths of rural markets include increase in rural population, rise in spending
capacity of rural consumers, various socio-economic changes, and rise in expectations
of rural consumers.
• Weaknesses of rural markets include less developed infrastructure, lower income
levels, heterogenous rural population, and difficulty in sale of consumer durables.
• Change in the rural demand patterns is due to various reasons like new employment
opportunities, improved credit facilities, marketing efforts, better reach of media, etc.
8. GLOSSARY
• Consumer durables: They refer to a group of consumer goods that are not required to
be purchased frequently as they last for a long period of time.
• Demographics: It refers to the statistics describing populations as well as their
characteristics.
• Edutainment films: It refers to films meant for both entertainment and educational
purposes.
• Environment: It refers to external surroundings or conditions in which people work or
live. It includes factors, elements and conditions which influence the development and
growth of that particular area.
• Marketing mix: It is the set of tactics or actions used by the company for promoting its
product or brand in the market.
9. TERMINAL QUESTIONS
Short Answer Questions
1. Define rural marketing environment.
2. State different environmental factors that are relevant to rural marketers.
3. List the strengths of the rural market.
LG India made suitable changes in its distribution and marketing structure according to rural
consumers and adopted a structure that was unique to rural markets. The company
fragmented its current distribution structure into regional area office (RAO) and regional
sales office (RSO).
Till 2005, there were already 51 branch offices and 78 RAOs. Moreover, regional sales
officers employed in RAO were from the same area in which they were working; so they had
better knowledge related to that specific area such as its language, culture, etc. The remote
area officers were provided with independent decision-making powers, which enabled them
to develop their own promotional and marketing strategies in their respective territories.
For instance, in a cricket season, the company provided families with plasma TVs for a trial
period of 15 days in return of a specific price. It was natural that after using the TV, some
consumers would get interested in buying TV and would ultimately end up buying it. The
company’s sales representatives offered customized finance schemes to different consumers
to improve their revenues.
Results: The above stated strategies enabled the company to penetrate deep into India’s
rural markets and increase its sales. It also helped the company in developing better
relations with the rural dealers, who were previously not included in their distribution
network.
Questions:
1. State the changes made by LG India in their marketing strategies for sale of televisions
according to the rural marketing environment?
2. What was the role of Regional Area Officer in establishing the presence of the company
in rural markets?
Source: https://casereads.com/case-study-of-lg-india-overcoming-the-rural-hurdles/
11. ANSWERS
Self-Assessment Questions
1. Rural marketing environment
2. STEP
3. c
4. b
5. True
6. False
7. True
8. True
9. Product
10. Edutainment films
11. d
12. b
13. False
14. Homogenous rural population
15. C. Spas
16. Cable TV
Answer 2: Rural marketing mix consists of different elements such as product, place, price
and promotion. Success of any company in the rural market depends upon the rural
marketing mix. The elements of marketing mix are:
• Product mix: The product serves as a powerful tool for the organization that want to
achieve success in the rural markets. The organization must design and produce its
products as per the future demands and needs of rural consumers.
• Place mix: Distribution is difficult in rural markets, so both distribution channels and
physical distribution must be decided carefully to ensure easy accessibility of products
to all rural consumers.
For more details, refer section 3.
Answer 3: The reasons responsible for change in demand pattern of the rural areas are:
E-References
• Bhargava, V. (2019, December 21). Rural Marketing Environment: Meaning, Definitions,
Features and Factors. Essays, Research Papers and Articles on Business Management.
Retrieved December 3, 2022, from
https://www.businessmanagementideas.com/india/rural-marketing/rural-
marketing-environment/20965
• An Emerging Indian Rural Market A Swot Analysis - Current Issue - IJSR. (n.d.). Retrieved
December 3, 2022, from https://www.worldwidejournals.com/international-journal-
of-scientific-research-(IJSR)/fileview.php?val=November_2013_1493276201__104.pdf
• Changing Patterns of Rural Demand – Reasons. (2013, March 31). Relivingmbadays.
Retrieved December 3, 2022, from
https://relivingmbadays.wordpress.com/2013/03/31/changing-patterns-of-rural-
demand-reasons/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 5
Rural Market & Decision
Table of Contents
1. INTRODUCTION
The rural market's decision patterns are considerably more difficult to understand since
there is lack of consistency among groups that are otherwise demographically comparable
in terms of age, employment, education, and income. The bulk of marketers recognize that
India is about to undergo significant upheaval. This phenomenon, however, is particularly
noticeable in India's rural areas. As a consequence, there is a growing interest in learning
about rural marketing. To be successful, rural marketers must overcome three obstacles. The
first difficulty is that local markets in rural India are often tiny and dispersed, making them
difficult to reach and either untrustworthy or unavailable. The second obstacle is ensuring
that customers are familiar with, and interested in the brand. According to an ancient adage,
the client is king since his decisions have the greatest influence on the demand for any
particular product or service.
1.1 Objectives:
After studying this unit, you should be able to:
Consumer behaviour models allow to better understand the specific customer base, which
enables businesses to attract, engage, and keep customers more successfully. These models
may either be classified as traditional or as modern.
This hierarchy begins with primary requirements and then moves on to secondary desires
that will make the consumer feel that their needs have been met. According to the Learning
Model, buyers will first purchase the essential requirements, and then they will understand
what their desires are. A customer who is hungry will prioritise purchasing food above
clothing. This strategy is suitable for multifaceted organisations that stock things to fulfil the
requirements of all customers. After the goods have been produced, customers purchase
items such as their favourite baked goods, clothing, and cosmetics. To provide a better
experience for the consumer and to address the way they make purchases, a retailer that
carries a wide variety of products should point customers in the direction of those items that
best satisfy their needs. After they have achieved a level of comfort, they will prioritise their
desires above their requirements.
Source - The Consumer Buying Behaviour Model, Rural Marketing, Pradeep Kashyap
Understanding the fundamental model that is relevant to all customers is the first step in
unravelling the mysteries of consumer behaviour. Although this model is able to describe
consumer behaviour in rural India, which is not a homogeneous mass due to characteristics
such as culture, caste, and social groupings, it is difficult to classify the behavioural patterns
of rural customers into modules that are uniformly defined. The rural areas of India each
have their own set of norms, practises, and beliefs, all of which factor into the decision-
making process. The full force of this influence had not been experienced until the last twenty
years; this is largely because of expenditures made in transportation, communications, and
the media. Marketers also need to have an understanding of the changes that have occurred
in rural India's opinion leaders.
According to the Black Box paradigm, consumers are independent thinkers who take into
account both internal and external stimuli while making purchasing choices. Businesses that
offer items that are meant to complement a certain way of life may profit from using this
strategy. Various manufacturers cater to distinct groups of customers while selling the
automobiles they produce. Those who partake in outdoor pursuits and want a solid and
dependable car are the ideal customers for Jeeps and Subarus. Those who are looking for
premium experiences behind the wheel are the target market for Mercedes-Benz and Lexus
vehicles.
Source: John A Howard, Jagdish Sheth. The Theory of Buyer Behaviour, John Wiley, 1969
According to the Howard Sheth model of consumer behaviour, buyers make sensible and
deliberate decisions. Customers wear a "problem-solving" hat throughout this paradigm,
with factors affecting the process.
• Extensive Problem-Solving: At this point in the purchase process, the shopper knows
nothing about the specific product they want or the available options in terms of
brands. They are now actively problem-solving to identify a suitable product.
• Limited Problem-Solving: Now that consumers have access to more information, they
are more likely to take their time and compare the many options available to them.
• Consumers are well informed about their purchasing power and the products that best
meet their tastes and requirements. This means they are familiar with the location and
can quickly make a purchase if necessary.
• Perceptual and Learning Constructs: This stimulus is the customer's psychographic and
psychological composition. Needs, preferences, and objectives are learning notions.
• Outputs: Mixing inputs, perceptual, and learning structures yield output. The
customer's response to marketing, social, and psychological factors is the output. It may
make customers choose one brand over another.
• External variables, like weather or religion, may influence the customer's choice.
v. Model of Nicosia
The Nicosia model breaks down the decision-making process into four distinct parts, which
are as follows:
• Attitudes of Consumers: The news and data acquired from the market are the primary
contributors to the formation of consumer attitudes. Here, information travels from the
place where it was first formed to the person who receives it.
• In the realm of research and assessment, customers anticipate receiving information
on specific items that add value to their lives. When doing an assessment, the customer
places the appropriate amount of focus on each piece of news.
• Act of purchase: When a buyer is pleased with a product, after evaluating and analysing
that product, they are driven to acquire that thing, and then they buy the product and
utilise it.
• After using a product, customers are able to provide their feedback in the form of a
response known as feedback. It might be one of the two good or negative examples
given.
i. Cultural Factors
The term "cultural factors" really refers to a larger category that may be further subdivided
into three distinct subclasses: culture, subculture, and social class.
a. Culture
Culture is the most essential aspect in how people behave in rural India. The extent to which
culture influences behavior is determined by how isolated a culture is, or how it interacts
with other cultures. Marketers must keep an eye out for cultural shifts in rural India. The
trend toward basic education and the dissolution of the joint family structure must be
considered.
Social customs are long-standing traditions. Rural India, separated from modern traditions,
follows ancient ones. Urban marketers may struggle to relate to these rituals and appreciate
their importance.
In many regions of India, touching someone with one's feet, even accidently, is prohibited.
He apologises by touching his head. Most people do this ritually because they believe God is
in everyone. Some urban Indians follow this ritual, although it is diminishing. Many young
individuals feel embarrassed following this social ritual, believing others would find it odd
and outdated.
Traditions are long-held ideas that are accepted as true and practised without question.
Traditions influence human behaviour and may influence behaviour acceptance or rejection
(and, therefore, the product associated with it). Rural Indians cherish tradition and object to
its violation. Guests are considered gods in India. Receiving visitors is therefore a special
event. In a polite, traditional welcome, the guest is garlanded and given a drink.
b. Sub-culture
Subcultures are groupings of individuals within a culture that share ideals due to similar life
experiences. Group behaviour depends on caste. Caste is still significant in rural India. Caste
households vary in rural India. The village's upper-caste and lower-caste residents will live
on opposite sides. Even natural resources like drinking water and animal grazing would be
clearly demarcated.
In the urban setting, social classes are often differentiated according to the occupations
people have, and the levels of education they have obtained. It is challenging to achieve this
goal (social class differentiation) in rural India owing to the many and ever-shifting jobs that
are directly tied to the possibilities that are available throughout the various seasons.
a. Reference groups
An opinion leader is someone whose words and actions influence what other people do or
how they feel in an indirect way. This kind of leadership is based on a person's social
standing, power, or public achievement. A customer is also influenced by the changing social
elements in the area in which he lives and works. Teachers were always seen to be the
custodians and providers of information in rural India, but this job is increasingly being
taken over by young people from rural regions. The ordinary rural adolescent is a "second
breadwinner" with a large influence in household choices. This gives them a lot of clout when
it comes to suggesting and purchasing high-stakes items like televisions and motorcycles.
b. Sociability
People in rural India put a greater emphasis on the relationships they have with their
families and friends, seeing these relationships as the most important aspect of their
existence. In rural places, it's common practice for families to drop by the houses of one
another's family merely to say ‘hi’ and strike up a conversation. A neighbour is not the
friendly stranger who lives next door. They are more like an extension of the family and may
participate in decision-making with the rest of the family.
c. Family
The conventional nuclear family is disintegrating as a direct result of people's increased
educational attainment as well as their increased awareness of alternative career paths and
options. The younger generation in rural regions is being turned off from farming as a result
of this. The member of the nuclear family who is responsible for the greatest financial
responsibility is elevated to the position of head of the home. However, the elderly members
of the "parent" family are still the ones responsible for making social judgments.
An individual's work and level of income have a significant impact on the kind of products
and services that person will purchase in the rural market, above and beyond the most
fundamental items. Farmers often invest in tractors and pump sets, while fishermen typically
purchase boats and enormous nets. It is not unreasonable to anticipate that a planter, wage
earner, and small shopkeeper would all engage in the same purchasing behaviour and choose
the same things.
c. Economic Situation
The amount of discretionary income a person has, the amount they have saved and the
amount they owe, their credit worthiness, and their attitude toward spending and
conserving money all play a role in determining their economic situation. A person who
makes a living by earning a daily pay sees their buying power shift on a daily basis. Because
agriculture is the primary industry in rural regions, the spending power of rural consumers
is notoriously uncertain, which may result in significant shifts in the distribution of demand
patterns.
d. Lifestyle
The concept of "lifestyle" refers to the day-to-day activities and observable behaviours of
customers, in addition to their beliefs, emotions, perspectives, passions, and interests. It
exemplifies the patterns that manifest themselves as a result of the interactions that occur
when one is living in a society. Activities, interests, goals, and attitudes toward events and
concerns are the usual components that make up a person's lifestyle.
The psychological elements that influence consumer behaviour are broken down into four
categories: motivation, perception, learning, and beliefs and attitudes.
a. Motivation
Typical customers in rural areas are content so long as their fundamental requirements,
which are determined by their surroundings, are met. It takes a lot of persuasion on the part
of an influencer whose work he appreciates, in order to convince him to test out new things.
An average urban consumer would, during the course of his lifetime, experience at least four
of the five levels described by Maslow in his motivational pyramid.
b. Perception
When it comes to things that provide the impression of making life more comfortable or
increasing the overall quality of day-to-day activities, the price is not questioned or
compared. When it comes to high-involvement items, a retail location that is not situated in
a rural area and that is strongly associated with the brand serves as a powerful
reinforcement for that brand. For instance, Aircel's advertising campaign included a number
of up-coming cricketers, like as Suresh Raina, Praveen Kumar, and M. S. Dhoni, all of whom
are from small towns and hence naturally build a connection with the local or rural audience.
c. Learning
Learning is a process that develops over time as a consequence of new information being
gained and behavioural alterations brought about by exposure to different settings. Learning
on the part of consumers is a process that develops as a result of new information being
obtained. The term "stimulus" refers to an influential mental stimulation that causes an
individual to feel compelled to do some kind of action. Cues are defined as little stimuli that
have the ability to impact when, and how a person responds.
SELF-ASSESSMENT QUESTIONS – 1
things that were initially regarded as essential, has now shifted to include products that are
regarded as luxury goods.
x. Essential Infrastructures
Roads, warehouses, and communication are all lacking in rural areas. Physical distribution
is expensive. Not every community is electrified. Lietracy in rural areas are slowly increasing.
Female literacy is increasing faster than male literacy in both rural and urban areas.
Regardless of infrastructure, wireless telephony has reached distant locations.
The underlying values and beliefs of a brand are reflected in the brand's exhibition of its
passion, knowledge, and touch, as well as the energy and excitement of the client segments
that are being targeted. The brand describes the treatment that a customer may often expect
to get as a recipient of the product or service. A brand's personality may be seen as the
"voice" that lies underneath a company's brand values, functional qualities, and competitive
positioning.
life for their children. The rural customer goes to great lengths to "find" the brand to buy
based on word-of-mouth. Brands must first think of creative methods to reach out to rural
customers. Brands may also consider communicating with rural customers on career
prospects, adult education, health-related information, currency transfer services, credit
information, and entertainment news. With various socioeconomic shifts sweeping the rural
people in recent years, companies have an appealing window of opportunity to establish
themselves in the thoughts of the rural customer.
v. Focused brands
Rural branding is similar to location branding, although it is a much newer concept. Branding
a whole country, a cross-border region, a city, a rural area, and so on all fall under the
umbrella of "place branding." Branding in rural areas, as the name indicates, is directed
towards less densely inhabited areas that experience significant demographic, social, and
economic shifts.
and more highly educated individuals. These demographic shifts obscure the advantages of
living in rural areas, such as having a freer lifestyle and being closer to nature.
SELF-ASSESSMENT QUESTIONS – 2
7. SUMMARY
• The bulk of marketers recognize that India is about to undergo significant upheaval.
This phenomenon is particularly noticeable in India's rural areas. As a consequence,
there is a growing interest in learning about rural marketing. To be successful, rural
marketers must overcome three obstacles: access, familiarity and trust. According to
the Learning Model, buyers will first purchase the essential requirements, and then
they will understand what their desires are.
• A customer who is hungry will prioritize purchasing food above clothing. This strategy
is suitable for multifaceted organizations that stock things to fulfil the requirements of
all customers. The hardest part of doing business in rural India is trying to figure out
why people purchase things. Marketers are needed to do frequent research on how
consumers react to various marketing stimuli. Understanding the fundamental model
that is relevant to all customers is the first step in unravelling the mysteries of
consumer behavior.
• The Engel-Kollat-Blackwell model of consumer behavior describes a five-step buying
process. According to the Black Box paradigm, consumers are independent thinkers
who take into account both internal and external stimuli. Businesses that offer items
that are meant to complement a certain way of life may profit from using this strategy.
The Nicosia model breaks down the decision-making process into four distinct parts,
which are as follows: Attitudes, Needs, Learning Constructs, mixing inputs, and
perceptual, and learning structures yields output.
• Many variables impact consumer behavior, many of which may be traced back to the
various architecture of rural India. Marketers should be on the lookout for cultural
developments in rural India, as well as the breakdown of the joint family structure.
Rural Indians value tradition and are outraged when it is violated. An opinion leader is
someone whose words and actions indirectly affect what other people do or how they
feel. In rural India, the average teenager is a "second breadwinner" with considerable
influence when it comes to recommending and acquiring high-stakes products such as
TVs and motorbikes.
• Caste is a very important component that is considered when defining one's social and
economic position in rural communities. A person from a higher caste will continue to
have a higher status than someone from a lower caste in rural areas. Rural marketers
are becoming more concerned with giving their products a distinct image and
personality. This is done in order to boost sales and market share. Motivation,
perception, learning, and beliefs and attitudes are the four psychological aspects that
impact consumer behavior.
• Digital advertising may attract more clients and help the firm grow. Internet platforms
let marketers quickly reach a varied clientele. Digital advertising reduces conventional
advertising costs. Rural youth typically lack digital abilities.
• Technology development, not expansion, has transformed people's need. These include
access to water, electricity, transit, banking, post offices, and other amenities and their
types. FMCG firms generate nearly one third of their income from rural India. Rural
India has more bank accounts than urban.
• The brand personality of a firm is the company's personification, which is the process
of endowing the brand with human traits. A brand's personality may be seen as the
"voice" that lies underneath a company's brand values, functional qualities, and
competitive positioning. It describes the treatment a customer may often expect to get
as a recipient of the product or service.
• The FMCG industry's ability to capitalize on the spike in rural consumption will be
critical to India's economic narrative in the coming years. Dabur manufactured
religious calendars and disseminated the Hanuman Chalisa with their wares because of
the great degree of religiosity prevalent among rural clientele.
8. GLOSSARY
• Consumer Buying Behavior Model - The aggregate of individual decision-making on
purchases, consumption, and disposal of products, services, time, and ideas.
• Psychoanalytical theory - Human behavior is based on the notion that everyone has
deep, unconscious beliefs, thoughts, memories, and desires.
• Economic Model - People are supposed to be logical beings who will analyze all
alternatives in terms of cost and value acquired and select the product or service that
will bring the greatest happiness.
• Limited Problem Solving - Limited problem solving is applied for products purchased
on an irregular basis or when customers require knowledge about a new brand in a
known product category.
• Extensive Problem Solving - It is the process through which a consumer attempts to
get all of the information required to make a decision among various brands of a goods
that they wish to purchase.
• Cultural Factors - Cultural factors are the beliefs and ideals of a certain society or
group of people.
• Reference groups - A reference group is one that compares itself to another group or
an individual. Sociologists define a reference group as any group that a person uses as
a standard for assessing oneself and their own behavior.
• Lifestyle - The lifestyle is a person's preferred method of managing their time and
resources. Self-concept - A person's "self-concept" refers to their internal mental
representation of oneself. One must form a mental image of oneself in order to be self-
aware. It is a person's own conception of himself or herself, including all of his or her
attributes and characteristics.
• Brand Personality - The "personality" of a brand is the aggregate of human
characteristics that consumers identify with that brand.
9. TERMINAL QUESTIONS
1. What is the significance of consumer behavior models?
2. What are the components of Engel-Kollat-Blackwell (EKB) Model?
3. Discuss the relevance of black box model in consumer behavior.
4. Why is Nicosia model of consumer decision making known as conflict model?
5. What is the effect of culture on consumer behavior?
6. How do role and status influence the rural consumers?
7. How does learning impact consumer behavior?
8. How does attitude affect consumer behavior?
9. Explain the impact of economic factors on rural consumer behavior.
10. How does rural consumer’s lifestyle differ from urban lifestyle?
10. ANSWERS
Answers for Self-Assessment questions
1. c. tiny and dispersed
2. c. consumer behavior models
3. d. culture, caste, and social groupings
4. d. awareness
5. a. psychographic and psychological composition
6. a. expansion
7. c. several languages
8. a. low-priced items
9. b. festivals
10. d. price-performance paradigm
because everyone has equal opportunities for employment, education, and other
opportunities.
Books Recommended:
1. Kashyap Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications. 3rd
Edition, 2016
2. Mishra and Puri- Development Issues of Indian Economy Himalaya Publishing House,
39th Edition, 2021
Websites referred
PTI. (2019, March 6). India's internet users to reach 627 million this year: Report. Business
Today. https://www.businesstoday.in/latest/economy-politics/story/india-internet-users-
to-reach-627-million-this-year-report-174728-2019-03-06
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 6
Consumer Buying Decisions
Table of Contents
1. INTRODUCTION
Marketers may find great success in rural areas since their consumers have a distinct profile
than those in urban areas, as well as a larger and more dispersed population and better
spending power. The buying decisions of consumers in rural areas are affected by all of these
factors. There has been a dramatic shift over the last decade in the sales of recognisable
brands of consumer goods in the rural market. Spending by rural consumers has increased,
albeit at a slower rate than by urban consumers, notwithstanding the difficulties experienced
by farmers and the stagnation of earnings. A new bar has been established for rural
marketing thanks to the proliferation of cell-phones and the ready availability of
communications and media. Marketers in India are heartened by the fact that consumption
in rural areas is now higher than average. Therefore, in order to improve people's standard
of living, marketers need to not only be familiar with the buying process in rural markets,
but also to encourage people to buy in rural areas through effective communication and price
tactics.
1.1 Objectives:
After studying this unit, you should be able to:
i. Information Search
The rural consumer receives the majority of his information from personal sources, such as
family, friends, and relatives who reside outside the village, in addition to informed
individuals who dwell in the village. This is because the rural consumer is exposed to less
information overall. He depends less and less on commercial sources, such as
advertisements in the mass media and salesmen. Because the majority of people in the
community do not know very much about new items and brands, the village merchant is also
a significant and dependable source of information, particularly for those individuals.
Learning about a product through touch-and-feel experiences, demonstrations, and trials are
equally important to the rural consumer. Road shows and exhibitions are helpful because
they allow clients in remote locations to get their hands on the product and learn about it at
their own speed. Customers are able to access and exchange information more easily in
haats, mandis, and melas since it is simple for them to converse with one another in a casual
setting. When it comes to purchasing high-involvement items, it is essential that this
information search be accompanied by a journey "out of the village" to a business shop,
where one may speak with salesmen or corporate representatives in person. Evaluating each
component of the product to see how well it fits in with the whole becomes a crucial step as
well.
Marketers should focus on making it easier for people to find information by getting them to
try new products and getting in touch with them through the ways they like to get
information.
The great majority of persons who reside in more remote locations have at least one member
of their family who finds employment in a metropolitan region. It's likely that a significant
number of people who now commute is experiencing the element of autonomy that comes
with working from home for the first time.
As a direct result of the pandemic, a significant number of individuals living in more remote
parts of the country have started or expanded their use of online shopping for groceries and
other household good (E-commerce in the Time of COVID-19, n.d.). Because the download
and upload rates of the internet in rural areas are not adequate to support broad usage,
extending their interest will need the creation of new internet infrastructure.
Low-involvement items are often affordable and carry little danger to the customer if he or
she purchases them incorrectly.
If high-involvement items fail, are difficult, or have large price tags, the consumer faces a
considerable risk.
Marketers need to be familiar with the process of evaluating a product, which includes doing
primary research and drawing up a map depicting how their brand travels from the
"consideration set" to the "choice set." This improves the product's standing in comparison
to the other options available and increases the likelihood that it will be selected after being
put to the test.
Consumers in rural regions evaluate the numerous brands and products accessible to them
based on the various product attributes that are at their disposal and whether or not the
things in question may give the benefits that the consumers are seeking.
Because "attitude puts one in a frame of mind: loving or hating an item, moving towards or
away from it," as stated in the definition of attitude, attitude has a significant impact on this
stage. This is because attitude "puts one in a frame of mind: loving or hating an item, moving
towards or away from it." The extent to which people are engaged in the process is yet
another factor that has an effect on the evaluation procedure. For instance, if the consumer
involvement is high, then he or she will look at a variety of various brands; on the other hand,
if it is low, then only one brand will be considered for the assessment. This is because a strong
engagement from the consumer leads to a more in-depth analysis.
When it comes to the promotion of a brand, it is essential to have a solid grasp of where and
when demand for the product or service in question first emerges. The end goal is to ignite
the attention of clients as they continue to go through following phases of the purchase
journey. Consumers are actively participating in the consumer purchasing process when
they seek for more information about a product.
Rural businesses that promote justice and equality are more likely to prosper. Villagers are
satisfied with their pricing, only pay for the items and services they consume, and believe
everyone has equal opportunity to participate. Rural buyers' startling savvy necessitates
price equity. Despite lesser literacy, rural households know about their goods and services.
In order to find solutions to the majority of their agricultural and other challenges, rural
farmers depend on their own personal experiences, as well as those of their families, friends,
neighbours, and other relatives, as well as those who work in agricultural offices. The
majority of the techniques in which people get knowledge are antiquated and do not include
the use of libraries.
Customers in rural areas value the opinions of their peers. The number of people who have
daily impact has expanded as a result of word-of-mouth marketing. There are a number of
methods that may be used to boost word of mouth and referrals, but the most effective tactic
is to focus on the satisfaction of the consumer.
The assessment technique is dependent on the nature of the acquired product, the character
of the consumer, and the situation in which the purchase is done. Consumers in the rural
market base their purchase choices on a number of factors, the most important of which are
price and quality. After the evaluation is completed, the buyer's genuine intentions become
obvious. Consumer durables are evaluated in a more methodical and complete manner. The
procedure takes longer since the quality of a product is assessed using many factors. The
evaluation time for consumables such as food is fairly short. As a consequence, some of these
purchases are made on the fly. The buyer forms an emotional connection with the goods, and
the purchase is made fast and without much thought. Items with a high level of complexity,
such as tractors and two-wheelers, as well as mobile phones, personal computers, and DTH
connections, which are relatively new to rural markets, need more time and effort to analyse.
This is because it is difficult to gather and evaluate data about things and brands when there
are no other customers around.
Marketers must be able to evaluate items in a number of methods, such as doing primary
research and drawing a diagram of the consumer's thinking process as they examine and
eventually choose their brand. This fixes the product's shortcomings in relation to its
competitors, increasing the possibility that it will be chosen following evaluation.
The many distinct demographic variables, in addition to the many various types of products,
each have an impact on the role that each member of the family performs in the household's
daily activities. Although the male head of the family takes the final decision about the
procurement of home goods, the female member of the household is consulted on these
topics as well. Marketers have a responsibility to alleviate the perceived risk associated with
rural consumers by drawing attention to the experiences of other users and ensuring that
service delivery is carried out as close as it can be to the front door of the customer. The
study with the working title "Rural Marketing Snapshot: Key Opinion Leaders" investigates
the ways in which the profiles of the important decision makers have changed over the
course of time.
In many instances, this results in the company not only losing the trust of its existing
customers but also putting the future purchase decisions of potential consumers in peril.
This is because the customers' perception of the company's reliability is negatively impacted.
Making sure that the customer is pleased with the service that is being provided is the most
important step in building a successful and long-lasting relationship with the customer. A
consumer who is unhappy with their purchase will never let the company know that there
is a problem with their order, but a consumer who is pleased with their purchase will
develop trust in the brand and talk favourably about it to others. For additional information
on the factors that are vital to the satisfaction of consumers who use mobile phone services
in more rural places, be sure to read the article that is titled "Rural Marketing Insight: Aircel."
As a consequence of this, it is crucial for a company to evaluate the degree of satisfaction
experienced by its consumers on a regular basis in order to monitor the performance of its
goods and make modifications as required. It is vital that rural marketers make a larger focus
on the retention of existing clients by continually meeting their expectations, in a manner
similar to how multinational firms approach the markets for tractors and consumer
durables.
SELF-ASSESSMENT QUESTIONS – 1
1. Who does the rural consumer receive most of his information from outside
of the village?
a) newspaper
b) television
c) radio
d) family, friends, and relatives
2. What is a significant and dependable source of information for rural
consumers?
a) radio advertisements
b) village merchant
c) online shopping
d) television advertisements
3. What are the most important criteria buyers use to evaluate a brand?
a) brand recognition
b) advertising campaigns
c) price and quality of the product
d) customer service
4. What are two examples of high-involvement items?
a) toys and games
b) clothing and shoes
c) tractors and two-wheelers
d) furniture and appliances
5. The number of people who have daily impact has expanded as a result of
what?
a) radio broadcasting
b) word-of-mouth marketing
c) social media
d) television advertising
In the rural market, innovators and early adopters are typically very picky because they have
a great deal of confidence in themselves and don't trust product claims unless they've tried
the product themselves. This is because they don't trust product claims unless they've tried
the product themselves. Therefore, providing customers with product demonstrations and
trials is very necessary in order to make a sale. But if they are certain that the product will
accomplish what it promises it will do, they may be educated to become brand ambassadors
to influence other groups and teach marketers in the hinterland the route to success. This
training can be provided.
b. Compatibility
Compatibility refers to the product's match with the values and experiences of potential
consumers. Customers found switching to Gillette Sensor's disposable blade head and
permanent handle razor difficult. From blade replacement to razor head replacement.
Disposable razors are becoming often used. Male shavers are unlikely to convert to a facial
hair removal cream. This goes against the majority of men's shaving routines.
d. Trialability
The term "trialability" refers to the extent to which a product may be evaluated and
improved via testing before it is put into widespread usage. In most cases, there is not a lot
of opportunity for trialability when it comes to changes that are discontinuous.
e. Observability
"Observation" refers to the simplicity with which a product may be examined and conveyed
to clients or potential buyers. Products that are very visible in the social circle may spread
more swiftly across the society. Fashion items are one illustration of this. Goods used in
private, on the other hand, such as a toothbrush, soap, or other comparable items, do not
spread as rapidly. When attempting to raise product awareness, marketers may use
strategies such as encouraging celebrities to utilise the product in question.
utilise it on a regular basis. Before proceeding to the next phase, it is vital to complete the
mental process that comes with agreeing to use a new product on a regular basis.
If a potential consumer goes through the adoption process, they may finally wind up
becoming a consistent product user. As a result, marketers must comprehend rural
hierarchies and establish contact with local opinion leaders in order to aid in the
proliferation and acceptance of a brand in a rural context. In order to infiltrate rural regions,
it is critical to have the backing of significant key opinion leaders. For example, doctors have
the ability to be opinion leaders for different health care items, and progressive farmers have
the potential to be opinion leaders for various agricultural inputs. Colgate's "Bright Smile.
Bright Future" marketing targets children, who are generally the first buyers of more
expensive toothpaste. The programme is aimed at school teachers. Rural customers are
slower to adopt new brands and categories than their urban counterparts since they live in
more secluded regions. It is becoming more difficult to persuade people to try something
new than it is to persuade them to remain faithful.
As a result, marketers are required to invest the majority of their capital at the outset and
should definitely prepare for a lengthier period of time before seeing a return on their
investment. However, the fact that customers in rural areas are less likely to stop using a
brand after they have begun doing so helps to compensate for the early investment in the
brand.
Many multinational corporation (MNC) brands that have disappeared from India's
metropolitan marketplaces may still be found in the country's more remote regions. This
demonstrates how long brands remain popular once they have been accepted. More effort
has to be put in on the ground to convince consumers in rural regions to try new brands, and
this effort needs to be significantly increased. People are seldom convinced to try new things
based only on what they see in the mass media.
A villager who is older or more experienced is generally sought out for advice. The villagers
place their confidence in this person's opinion or suggestions since he has experience with
the product and the market for it. This kind of person could be very knowledgeable about a
certain topic. Therefore, people can always count on him to provide the right answer, no
matter what subject they bring up. As a counterpoint, advertisers will only highlight the
benefits of their products. The Pradhan, Mukhiya, or Sarpanch is often the most powerful
figure in rural parts of India.
It's not unexpected that leaders in a field are often regarded as specialists in their field's main
product. They may also alter their opinions about a favourite product. Users are unlikely to
seek advise from the milkman on where to get computer software. When individuals are
unsure about anything, they often seek a second, and even a third, opinion before making a
final choice. Those who enter a discussion with preconceived notions are more prone to
disregard the other viewpoint when confronted with an argument that supports their own.
Subjective judgements like these might be deceiving and lead to unwise decisions. Product
endorsers who are also thought leaders may be able to spread the concept of opinion
leadership to a broader audience inside the advertising business.
comprehension of how individuals in this demographic communicate with one another and
how they make purchases.
The effect of opinion leaders may be seen across the majority of product categories as well
as among social and cultural groups; however, it is most prevalent in rural regions. As a result
of this, it is an even more significant promotional tool in rural areas than the more
conventional forms of advertising and promotion.
i. Brand name
It has been found that consumers are more likely to remember the advertised benefits of a
product if they are associated with a well-known brand name. Consumers are more likely to
stick with a brand they associate with quality and prestige, and are less likely to switch
brands based on price. This is especially relevant for brands with subtle physical distinctions
that are consumed in public, where the brand's impact on the consumer's reputation can be
readily observed.
term "perfectionist" or "quality conscious" refers to a person who is aware of, and seeks out,
high-quality items and feels compelled to make the best possible decision.
iii. Price
The consumers who have a high level of brand loyalty are prepared to pay a higher price for
their preferred brand; as a result, the price does not influence their desire to make a buy.
Price has a tremendous impact on the consumer's ability to choose and the frequency of their
purchases. Households are more likely to switch brands and purchase things early than
necessary when discounts are offered. Customers that have a history of long-term
relationships based on service loyalty tend to be more price tolerant.
iv. Style
The outer appearance of an object, including its line, shape, and other factors that impact
how people feel about a particular brand, is referred to as its style. Customers who are
fashion-forward and loyal to their brands are attracted to stores that provide trendy
sportswear. Clothing regarded to be at the cutting edge of fashion is virtually always sold,
and continues to be sold, in shops considered to be at the cutting edge of fashion. Customers
buying for sports gear are becoming more fashion conscious, and as a consequence, they
choose items with more flare.
activities. A company's marketing strategy should almost likely involve some kind of
promotion.
SELF-ASSESSMENT QUESTIONS – 2
7. SUMMARY
• Marketers in India are heartened by the fact that consumption in rural areas is now
higher than average. Spending by rural consumers has increased, albeit at a slower rate
than by urban consumers.
• Marketers need to not only be familiar with the buying process in rural markets, but
also to encourage people to buy in these areas. Data collection was place in order to
establish the different information sources used by rural agriculturists.
• After making a purchase, a customer is said to have "post-purchase behaviour," which
includes what they do, how they respond, and what they think about the goods.
Marketers have a responsibility to alleviate the perceived risk associated with rural
consumers.
• In the rural market, innovators and early adopters are typically very picky because they
have a great deal of confidence in themselves. This is because they don't trust product
claims unless they've tried the product themselves.
• Providing customers with product demonstrations and trials is very necessary in order
to make a sale. But if they are certain that the product will accomplish what it promises
it will do, they may be educated to become brand ambassadors. The term "product
adoption" refers to the process through which potential consumers get acquainted with
a new offering and decide whether or not to utilize it on a regular basis.
• The four kinds of "technology dread" that act as barriers to the adoption of new goods
are fear of technical complexity, speedy obsolescence, fear of physical damage, and
social rejection. In order to infiltrate rural regions, it is critical to have the backing of
significant key opinion leaders. More effort has to be put in on the ground to convince
consumers in rural regions to try new brands.
• The Pradhan, Mukhiya, or Sarpanch is often the most powerful figure in rural parts of
India. This kind of person could be very knowledgeable about a certain topic. Users are
unlikely to seek advice from the milkman on where to get computer software. Product
endorsers who are also thought leaders may be able to spread the concept of opinion
leadership.
• A person's level of opinion leadership may be defined as "the degree to which they are
able to influence the views or behaviour of other individuals in a favored manner on a
regular basis". In most cases, it manifests itself in persons in the following ways:
knowledgeable about the subject matter, having actively sought it out, and keeping
their expertise current by reading a great deal of written and digital media.
• "Brand loyalty" may be defined as the degree to which an individual favors one brand
over another. This is often determined by assessing the customer's tendency to make
repeat purchases and their sensitivity to price. Consumers are more likely to stick with
a brand they associate with quality and prestige, and are less likely to switch brands
based on price.
• The ambiance of the shop is the single most important component in the efficacy of
retail marketing and the life of a company. Customers who are fashion-forward and
loyal to their brands are attracted to stores that provide trendy sportswear. Customers
that have a history of long-term relationships based on service loyalty tend to be more
price tolerant.
8. GLOSSARY
• Haat - A haat, often written haat bazaar, is a kind of open-air market that may be found
in both rural and urban areas of the Indian subcontinent, mainly in the countries of India,
Nepal, Bangladesh, and Bhutan. The term "haat" can also be used interchangeably with
the word "bazaar." It is a venue where individuals from the surrounding area may do
business.
• Mandis - The mandi is simply a market place where sellers Auction off their items to
anyone who may be interested in purchasing them. At the mandi, the adithis, who are
also known as commission agents or middlemen, serve as facilitators for the auction.
These people have been awarded a licence, and the market has provided each of them
with their own private stall.
• Pre-purchase evaluation - The pre-purchase alternative evaluation stage is a term used
by certain consumer behaviour theorists to describe the stage of the process in which a
customer decides whether or not to acquire a product or service. This stage happens
before the customer really takes the option to acquire the goods or service.
• Opinion leader - Opinion leaders serve as a bridge between marketers and the
audiences they are attempting to reach. They collect information about a product,
synthesise its merits and downsides, and deliver this knowledge to clients in an
intelligible way. Thought leaders keep consumers up to date on the newest product news
and provide advice on how to use the product.
• Product evaluation - Product evaluation is the method of establishing whether or not a
consumer item is suitable and risk-free for use by end consumers. User experience
processes and techniques, in addition to performance measurements, are used to
quantify the degree of effectiveness, learnability, and simplicity of use in order to offer a
full review of the items.
• Post-purchase behaviour - Post-purchase behaviour refers to how a person thinks,
feels, and acts after making a purchase and is defined as the following: Although we are
concentrating our emphasis on influencing actions such as repeat purchases, this does
not mean that we may neglect the thoughts and feelings of our consumers.
• Diffusion of Innovation - The diffusion of innovation notion may explain the rate at
which people adopt a new product or service. As a consequence, the theory may aid
marketers in understanding how trends arise and companies in assessing if their new
product or service will be a success or a failure.
• Innovation - Anything may be modernised and brought up to date by introducing new
procedures, introducing new methods, or developing helpful ideas in order to create new
value. This may be done with a subject, a product, or a service. This is the process through
which innovation is carried out. The development of new value is one of the most
prominent features linked with innovation.
• Brand Loyalty - Loyalty to a brand is defined as recurrent purchases of one brand
because of an individual's or group's conviction that the brand in question offers better
quality and service relative to competitors.
9. TERMINAL QUESTIONS
1. How rural consumers are changed?
2. Why pre-purchase stage is important?
3. How opinion leadership affecting rural consumer behaviour?
4. Why product evaluation is important in rural marketing?
5. How to assess the Post-purchase behaviour of a consumer?
6. How diffusion of innovation influence consumer behaviour?
7. Explain the characteristics of opinion leaders?
8. What factors influence brand loyalty in rural marketing?
9. Explain the influence of price on rural consumers
10. How brand plays a role in the rural marketing?
10. ANSWERS
Answers for Self-assessment questions
1. d. family, friends, and relatives
2. b. village merchant
3. c. price and quality of the product
4. c. tractors and two-wheelers
5. b. word-of-mouth marketing
6. d. low levels of literacy
7. a. become brand ambassadors
8. d. observability
9. b. product acceptance process
10. a. significant key opinion leaders
growth strategy, Tata Chemicals is improving the quality of the agricultural services it
provides and is expanding into Bihar and West Bengal.
Books Recommended:
1. Kashyp Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications.
2. Mishra and Puri Development Issues of Indian Economy Himalaya Publishing House
Website referred
E-commerce in the time of COVID-19. (n.d.). OECD.
https://www.oecd.org/coronavirus/policy-responses/e-commerce-in-the-time-of-covid-
19-3a2b78e8/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 7
Rural Marketing Strategies
Table of Contents
1. INTRODUCTION
The STP marketing model is a well-known way for constructing a marketing strategy in the
21st century. This model, which stands for segmentation, targeting, and positioning, is one
of the most well-known marketing strategies. It is one of the marketing models that is used
the most often, and people in charge of marketing feel that it makes communication more
effective and streamlines it. Additionally, it is one of the marketing models that is used the
most frequently. The success of a company's financial operations is the primary emphasis of
STP marketing. It achieves this objective by first assessing which market segments are the
most relevant to the organisation. Next, it develops a marketing mix and product positioning
strategy that is suited to each of those market segments. Finally, it implements these
elements in order to achieve the goal. The way that customers in rural regions are
categorised has also evolved over the last several years in response to the changes that have
taken place in rural marketplaces. Marketers are moving away from the traditional
descriptive geographic and demographic traits, which were mostly used to divide up new
markets, and toward more advanced methods such as behaviour, psychographics, and
multiple attributes. These methods provide marketers with a deeper understanding of their
customers and are directly related to what their customers purchase. One will need to make
three significant decisions in order to successfully separate markets and attract clients.
These decisions are segmenting, targeting, and positioning.
1.1 Objectives:
After studying this unit, you should be able to:
They include socio-cultural disparities across areas, variations in total population as well as
population density of different settlements, disparities in infrastructure development levels,
media exposure levels, differing degrees of literacy, and variations in both income amounts
and income flow patterns and family structure. When individuals travel to rural
marketplaces in search of goods, these factors have a significant impact on the manner in
which they behave. Not only is there diversity across the many regions of the nation, but
there is also diversity within each area, within each state, and even occasionally inside a
hamlet. Therefore, it is essential for a marketer to properly split his market into different
categories in order for the product to be able to match the requirements of the target client
as effectively as possible.
b. Accessible
Accessibility is needed to get to segments. Because rural markets were hard to get to,
marketers used to focus on urban markets. Rural customers were reached by vans and
village merchants who went to town to see distributors and stores. Marketers need to make
sure that people in rural areas can easily move things. As village connections get better and
businesses use traditional weekly markets and other ways to get their products to
customers, rural markets are becoming easier to get to.
c. Differentiable
Differentiable Segments should only be considered by marketers if they stand apart. Certain
products may elicit distinct reactions in rural individuals than in city ones. When buying a
motorcycle, rural people are more concerned with its durability, range, and capacity,
whereas city dwellers are more concerned with style, power, and look.
d. Substantial
Only lucrative market sectors are appealing. It should include people who share your beliefs.
It will be easy to cover them. Marketing may assist a company whether it has a large number
of individuals who do not use it or a small number of people who do. As shown, rural places
differ. Regional differences in language, beliefs, and behaviours exist. However, each client
group may not have enough customers to warrant several marketing campaigns.
3. SEGMENTATION LEVELS
i. Mass Marketing
Since most firms have used mass marketing in rural regions, it is possible that they have not
sought to divide their clientele into various groups and have instead interacted with all of
them in the same way. This method enables a corporation to connect with the biggest
amount of prospective customers possible. This is the first stage of the marketing process
when the marketer doesn't know much about what they're selling. Initially, the bulk of
enterprises who entered the rural market saw it as a component of the metropolitan market.
Using the "trickle-down" economic theory, they aimed to sell things originating in cities in
rural marketplaces. For many years, for example, individuals in both urban and rural areas
could purchase the same brand of Colgate toothpaste from Colgate-Palmolive. However, this
practise was discontinued not long ago. Colgate created Cibaca in response to increasing
customer preferences and the changing character of the rural market.
Indian market by using the various properties of the country's water. Because the quality of
water differs around the globe, Ghari has adapted various versions of its product to match
the needs of certain locales. Nokia's "Jeevan Sadhan" service, launched in 2009, is aimed at
those living in rural India. It is an ambitious endeavour that links the phone with services
such as farmer advice, market pricing, weather forecasts, and job information, as well as
leisure services like as ringtones, news, astrology, and more.
a. Local Marketing
Making brands and conducting promotions that cater to the needs and tastes of local groups
of customers is an important aspect of local marketing. Because individuals who live in rural
areas do not travel as often, it is occasionally necessary to market locally. As a result,
marketing may be effective despite the fact that people in different areas have different
histories and ways of life. Regional and local businesses excel at local marketing since they
exclusively sell inside a certain geographic area. As a result, they can better grasp the needs
of local clientele. Vegetarian bathing soap is available for purchase in India's Bundelkhand
region (also known as the Jhansi belt). Marketers are concerned with the look of the product.
b. Individual Marketing
Individuals in a more rural setting have more options to market themselves by participating
in industries such as tailoring, forging, and carpentry. Using this method, a person may get a
product that meets his or her specific needs. Marketers have experimented with a range of
techniques to market segmentation in order to better connect with clients in rural areas who
may differ substantially from one another. Some of the themes we've explored so far may
help marketers determine how to categorise distinct kinds of clientele that reside in rural
locations.
SELF-ASSESSMENT QUESTIONS – 1
i. Geographic Segmentation
If marketers in rural India wish to be successful in persuading rural residents to buy goods
and services, they need to have a solid understanding of the rural customer. Customers in
rural areas may be divided into subgroups based on characteristics such as geography, state,
district, village, and weather. On the basis of their total population, India's Census Bureau
has divided the country's villages into a number of distinct strata. The village markets need
to be segmented by the marketers based on the development indicators that are relevant to
the product category, and then they need to be targeted appropriately.
Examples: South India, North India, East India, West India
People are encouraged to give the Ghari detergent a shot by hearing the slogan "First try it,
then believe in it," which is marketed by the firm Ghari. People in rural areas of India are
more likely to remain faithful to a single brand than those living in the city. Because of this,
there are communities known as Nirma villages and Wheel villages, as well as Escort villages
and Mahindra & Mahindra villages. People tend to purchase the majority of their goods from
a single retailer or even just one supermarket when they shop in urban marketplaces.
Examples: Highly loyal customers, loyal customers, brand shifting cusotmers etc.
Those that are good at targeting reach this degree of success because they can keep their
customers even after increasing their prices. Targeted marketing makes it far easier to
comprehend the issues of the customers you're attempting to reach. As a result, marketing
professionals must recognise that varied consumer profiles need a range of marketing
tactics.
c. Concentrated targeting
Since there is a small number of people in each part, marketing efforts aimed specifically at
that group will be distributed throughout a large territory. Companies should employ a
multi-segment method rather than a single-segment plan to penetrate rural regions since
they devote a substantial amount of time and money in doing so (RoI). Customers' choices
may vary when there is just one market sector. This potential is less likely in rural markets
since consumer tastes tend to evolve more slowly there. This is known as "niche marketing."
For example, Hindustan Unilever has a number of specialised brands that each appeal to a
certain segment of clients, and these brands enable them to dominate the rural mass market.
The firm targets different subgroups of the rural consumer market with brands such as
Breeze, Lux, Liril, and Ayush, among others.
peasant, it makes a significant impact in how people see the product and contributes
to the product's increased sales.
• Image differentiation - Even though the product offered by one brand or business
is quite comparable to that of a rival, the customer may still purchase the item
simply because they like the appearance of the brand or company. An organization's
advertisements, symbols, signs, colours, and logos, as well as the way it appears and
operates, all contribute to its image.
ii. Choosing a Positioning Concept
Since there are numerous different methods to position a product, the marketer is
responsible for selecting those that are the best and most successful. A marketer has to
decide on a positioning notion that establishes a connection between the product and the
audience they are trying to reach. When it comes to the positioning of a brand, some of the
most significant aspects to keep in mind are as follows:
• Attractive. -Does it give the customer something of value?
• Distinctive: Is it different from what its competitors are selling?
• Pre-emptive: Is it hard for other people to copy it?
• Priced right - Can people pay for it?
• Can the difference between the two be made clear? Is it visible? Is it understandable?
iii. Generating the Concept
After deciding on the positioning approach, the marketer is tasked with conceiving up a
sound plan for communicating with the target demographic in order to effectively convey
the message. After that, he is tasked with deciding how best to communicate with the target
demographic via the various forms of media. In order for the positioning platform to be
appealing to the target consumer, marketers should work to make it more relevant to the
client they are trying to attract.
There is a commercial distinction between rural and urban areas. Pressure cookers with
handles on one side are suitable for use over an open fire or a 'chulha', but not for rural
customers. Perhaps a wide-bodied stove with handles on opposing sides might be
appropriate for rural needs. The needs of rural customers must be addressed while creating
and developing goods.
Shampoo sales increased dramatically in the late 1980s once it was released in sachet form,
which appealed to low-income customers. Hindustan Motors introduced the RTV, a utility
vehicle targeted towards the rural market. Though marketers are still experimenting with
techniques to effectively enter the rural market, the following are a few product tactics that
have been extensively implemented.
a. Product strategies
i. Small unit packing
This approach has been used in the production of a wide variety of items, including tooth
paste, pickles, tooth shampoo, biscuits, and single-tablet versions of Vicks cough drops.
Smaller packaging has a good chance of becoming popular in rural regions. Because of the
product's low price, rural customers may afford it more easily, which is an advantage. One
additional illustration of this is the Red Label tea pack, which retails for Rs. 3.00, is more
popular with customers, and comes in a smaller size than the larger pack. This is because it
is highly competitively priced for individuals with lower means and has the largest market
reach, allowing for easy access to and satisfaction of the end user. Customers living in rural
regions will almost probably be drawn in by the tiny unit packaging.
discovered that consumers in rural regions chose heavier dry battery cells over lighter ones.
They thought that a bigger bulk meant the thing was more stable and long-lasting. Customers
in rural regions put a high priority on a product's durability or appearance.
A company's product mix is comprised of all of the distinct product lines and individual
goods that it sells. In most cases, just one of a certain company's products will be stocked on
the shelves of a rural store. Consumers have a limited amount of input over the selection of
brands and even the pack sizes in certain cases. HUL offers a diverse range of products,
including those for personal hygiene, home cleaning, oral and hair care, as well as food and
beverage products. The over-the-counter treatments Pudin Hara and Hajmola and hair oil
that Dabur produces have helped to establish the company's reputation.
Companies may make product-mix choices depending on their strategy, such as introducing
new product lines to improve variety, adding new goods to satisfy various customer groups,
lowering the number of items to update the product portfolio, or adding additional products
to a line.
i. Launch of a New Product: In rural regions, consumers get a lump sum payment twice a
year, in line with the agricultural cycle. As a result, the product may only be released
during two harvesting seasons, rabi and kharif.
ii. If the new product was intended for the urban market, it may not function as well in the
rural market as it does in the urban market. As a consequence, before selling the
product to individuals living in rural regions, the company must first create a solid
prototype of the product.
iii. Brand Name: As people in rural regions grow more educated and aware, brands are
becoming more important in their local markets. Brands are readily recognisable in
these markets due to the simplicity of their names, the look of their logos, the flavour,
and the colour of the commodities.
iv. Small, Low-Price Packaging: Because individuals who earn daily wages frequently have
a lesser amount of money that they can spend freely, the product should be packed in
tiny units at a low price to fulfil the demands of rural clients.
SELF-ASSESSMENT QUESTIONS – 2
6. What type of strategy looks at how market segments differ from one
another and tries to adjust the market offer to the preferences and needs of
each market group?
a) differentiated market strategy
b) undifferentiated market strategy
c) concentrated market strategy
d) aggressive market strategy
7. What makes it easier to understand the issues of the customers you are
attempting to reach?
a) advertising
b) social media campaigns
c) mass marketing
d) targeted marketing
8. What is important to determine when a product is being positioned?
a) distinguishing characteristics
b) brand
c) price
d) quality
9. What differentiation does a customer buy because they like the appearance
of a brand or company?
a) price
b) quality
c) image
d) quantity
10. What is a marketer tasked with deciding how best to communicate with the
target demographic?
a) various forms of media
b) financial planning
c) product design
d) human resources
9. SUMMARY
• The practice of differentiating a market into groups of consumers who have
characteristics in common with one another is known as market segmentation. People
who work in agriculture may be large farmers, medium farmers, small farmers, or
farmers who barely make enough money to get by. Access to mass media is also
significantly different in rural areas, causing people's buying habits to change as a
consequence.
• Companies are unable to reach out to rural areas due to a lack of market and customer
data. It is essential for a marketer to properly split his market into different categories
in order for the product to be able to match the requirements of the target client as
effectively as possible.
• Marketers in rural India need to have a solid understanding of the rural customer.
Customers in rural areas may be divided into subgroups based on characteristics such
as geography, state, district, village, and weather. On the basis of their total population,
India's Census Bureau has divided the country's villages into a number of distinct
strata.
• The concept of behavioural segmentation takes into account a wide range of criteria,
including when consumers make purchases and the benefits they get from those
purchases. Consumers in more remote locations place a higher priority on a product's
functionality than on its appearance or level of sophistication. People in rural areas of
India are more likely to remain faithful to a single brand than those living in the city.
• Positioning is the process of structuring a company's image and product in such a
manner that it takes up a distinct mental space in the minds of the demographic that is
being targeted. This mental space is referred to as a "position" in the positioning
process. When a product is being positioned, it is important to determine both its
distinguishing characteristics and the ways in which they vary from those of their
competitors. Products and services may acquire a one-of-a-kind identity by associating
themselves with well-respected and admired individuals or personalities, such as
actors and athletes. Even though the product offered by one brand or business is quite
comparable to that of a rival, the customer may still purchase the item simply because
they like the appearance of the brand or company.
10. GLOSSARY
• Segmentation - The process of splitting a market into subparts that can be defined, are
readily accessible, can be acted upon, are profitable, and have the potential to grow is
referred to as segmentation. To put it another way, a firm would be unable to properly
target the whole market due to constraints imposed by elements such as time, money,
and effort.
• Heterogeneity in Marketing - A market's components are varied and not all of the
same kind or kind. Markets are described as diverse. Nonetheless, by using a variety of
various qualities, the diversified market may be divided into a big number of separate
consumer subgroups. Market segmentation is the practise of breaking a large market
into submarkets that are comparable in size.
• Mass Marketing - A strategy known as mass marketing is one in which a company
decides to ignore the disparities between different market segments in order to appeal
to the whole market with a single offer or strategy. This kind of marketing encourages
the concept of communicating with the greatest possible number of people in order to
broaden the reach of a message.
• Niche Marketing - Niche marketing is the practice of focusing all of a company's
marketing efforts on a specific, clearly defined segment of the general population. It is
critical to understand that the idea of a "niche" does not exist; rather, it is created
through the use of intelligent marketing tactics and the identification of what the target
market requires.
• Geographic Segmentation - Geographic segmentation targets products and services
to local residents and shoppers. Targeting demographics can achieve this. It assumes
locals have similar needs, tastes, and cultural concerns. Knowing what customers want
in a location helps brands provide more relevant marketing messages and products.
Customers are more informed of their alternatives and more likely to buy.
• Undifferentiated marketing - Undifferentiated marketing is a strategy that a
company may use if market segmentation has not shown to be helpful and has not
produced categories that are relevant and significantly diverse from one another. In
this case, the strategy that should be followed is to focus on the similarities rather than
the differences.
11. ANSWERS
Answers for Self-assessment questions
1. a. makes communication more effective and streamlines it
2. d. segmenting, targeting, and positioning
3. b. segmentation data
4. d. mass marketing
5. b. niche marketing
6. a. differentiated market strategy
7. d. targeted marketing
8. a. distinguishing characteristics
9. c. image
10. a. various forms of media
Books Recommended:
1. Kashyp Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications.
2. Mishra and Puri Development Issues of Indian Economy Himalaya Publishing House
Website referred
MNCs looking at rural India as easy and ready mkt need to rethink. (2010, December 15).
The Economic Times. https://economictimes.indiatimes.com/mncs-looking-at-rural-india-
as-easy-and-ready-mkt-need-to-rethink/articleshow/7101470.cms?from=mdr
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 8
Product pricing
Table of Contents
1. INTRODUCTION
The appropriate pricing has an effect on the quantity of each product or service that a client
will purchase, which, in turn, has an effect on the overall amount of revenue that the
company generates and, by extension, its profit. The pricing of a product is a significant
strategic issue since it influences both its position in the market and the manner in which it
is marketed.
1.1 Objectives:
After studying this unit, you should be able to:
2. PRICING STRATEGY
Value for money is a top priority for consumers at rural markets. As a result, in order to
generate profits and meet the expectations of their consumers, companies must determine
the pricing of their items. Businesses in the rural market are increasingly using target
pricing. The practise of defining a target price for a product prior to the manufacturing of the
product is referred to as "target pricing." Companies will often choose a price that is ideal
and fair for clients in rural regions, and then ensure that price is maintained. The Tata Nano
is an excellent example since it is the car that can be bought for the least amount of money
on Indian roads. The Tata family is well-known for setting the price of the car and modifying
its features and capabilities to put the final product in line with the price point they had
previously fixed.
There is a higher price tag attached to advertising in rural areas because of the limited reach
of television and print media. Rural residents, like those in urban areas, need to "touch and
feel" an expensive durable item before making a purchase. Businesses use events like haats,
melas, and mandis, where thousands of people congregate, to save money on advertising.
Marketers must consider both variable and fixed expenses, as well as how they impact the
choice on how much to charge. For example, HUL has worked hard to reach rural markets by
investing in a novel method of product distribution (Project Shakti) and a customised
method of promoting and communicating with clients (Operation Bharat). Local media is
more prominent, and its prices help to keep total costs low.
When entering the rural market, businesses should not have short-term profits as their
primary goal. To begin, they need to nurture the market by introducing the product at a low
price with a minimal profit through the use of pricing tactics known as penetration pricing.
In other words, they need to price the product such that they make as little money as
possible.
Rural markets provide a challenging environment for quickly turning a profit. Therefore, a
firm that is considering expanding its operations into rural areas should begin by
formulating its price goals in such a manner that it is able to recoup the expenses associated
with distribution, manufacturing, and dealer margins.
Companies confront significant levels of competition from both regional and local brands
while operating in rural markets. Products such as Ghari detergent, Wagh Bakri tea, Anchor
toothpaste, and Priya-gold cookies are all adjusting the cost of their products to be
competitive with the market leader in their respective areas. The ability of regional firms to
provide cheaper pricing enables them to grab a major portion of the market away from the
national competitors.
Marketers may count on economies of scale when dealing with vast rural markets. Other
aims include social and ethical issues, status quo objectives, and image goals. Prestige pricing
aims create a comparatively high price in order to generate and sustain an impression of
excellence and exclusivity. Pricing is used by non-profit organisations and government
agencies to pay their expenditures and collect funds for their operations.
b. External factors
i. Price sensitivity
The price sensitivity of the clients who make up the target demographic for the items that
marketers are attempting to sell is something that they absolutely must be aware of.
Customers in rural regions are more hesitant to test new brands and goods, since they are
focused on finding the best "value for money." The marketing plan has to take into account
not only the capacity of the customers to pay, but also the methods of payment and the time
of payments that are preferred by rural consumers.
iv. Environment
The primary determinants of pricing include things like the surrounding environment, the
policies of the government, the state of the economy, and the introduction of new
technologies. The failure of the monsoon to provide enough rainfall results in the destruction
of crops, which in turn reduces the spending power of rural customers. Because of this,
businesses are required to reduce the prices at which they sell their wares in rural
marketplaces.
3. PRICING POLICIES
Pricing policies help businesses maintain profitability by allowing them to sell various items
differently. The organisation may appreciate having a well-defined pricing strategy so that
price modifications may be made swiftly. A company's approach to determining what the
going rate should be for a product or service is referred to as its pricing policy.
general public. This may be a secondary worry in terms of price strategy, depending on
the sector in which you operate.
• Price adjustment method: Companies that sell huge volumes of products are
increasingly adopting specialised software to automate pricing. Pricing strategies
consider how your company intends to change pricing.
• Pricing restrictions may differ whether your company sells the same product through
wholesale, retail, or other outlets.
Plans for pricing based on value aim to concentrate their attention as intently as they can on
the relevant part of the market. When a company can create a major and direct contrast
between their product and one that already exists on the market, they have achieved success.
Value judgements made by customers are greatly impacted by the products and services
offered by your rivals. As a result of basing price decisions on value rather than cost, the
company offers a crystal clear explanation of what sets the product apart from its most direct
competitor.
Inelastic demand indicates that people desire the same quantity of a thing regardless of price.
Companies may utilise automated pricing to take advantage of increased demand and swiftly
get rid of surpluses. This practise, known as price skimming, optimises early earnings before
rivals join the market.
an appealing, high-quality container. Asian Paints has also introduced reusable bucket packs
of 10 and 20 litres of emulsion.
v. Coin pricing
Coin pricing is used by FMCG companies in more remote locations. This kind of pricing is
used by businesses in order to avoid problems with change for both merchants and
consumers. The prices are determined by the coin. The cost of coinage is directly influenced
by package size. These convenient tiny packets may be used for a single application, a single
day, or a single week.
SELF-ASSESSMENT QUESTIONS – 1
1. What is the practice of determining a target price for a product prior to its
manufacture?
a) target pricing
b) market research
c) pricing
d) costing
2. What media has a lower price tag in rural areas?
a) radio
b) outdoor advertising
c) internet
d) television and print media
3. Marketers may count on what when dealing with vast rural markets?
a) economies of speed
b) economies of efficiency
c) economies of scope
d) economies of scale
4. What aims create a comparatively high price in order to generate and
sustain an impression of excellence and exclusivity?
a) premium pricing
b) penetration pricing
c) discount pricing
d) prestige pricing
5. What is something that marketers must be aware of?
a) product quality
b) advertising effectiveness
c) brand loyalty
d) price sensitivity
5. PROMOTION STRATEGY
Promotion is a kind of communication that combines persuasion in order to persuade others
to adopt ideas, goods, and services. The third element of the marketing mix is promotion,
and an essential part of promotion is persuasive communication. Promotion is an essential
component of our marketing mix and one of the most important marketing strategies. People
need to be aware of where they may get the greatest products at the lowest possible prices.
People claim that nothing can be sold without advertising in a competitive market.
Customers, users, and resellers get marketing information. Communicating ideas isn't
enough. Promotion influences customer behaviour. Promotional activities provide a
company a marketing edge. Promotion is "organised self-initiated endeavours to build
channels of information and persuasion to facilitate or promote the sale of items or services
or the acceptance of ideas or points of view." Price competition is different.
Promotion involves persuading potential consumers that a product meets their needs. To
meet their economic, psychological, and social requirements, consumers buy utility
packages, which are expectations. Marketing educates customers of product advantages.
ii. Publicity
Marketing that does not involve direct interaction between the sponsor and the consumer,
such as the placement of commercially significant news about a product or service in a
magazine or the acquisition of a positive portrayal of that product or service on radio,
television, or the stage, is known as "passive" marketing. The purpose of this is to increase
interest in the company's offering.
progressive farmer acts as a social conduit for agriculture and related commodities
such as seeds, pesticides, tractors, and so on.
Personal communication channels are more successful in rural regions because they give a
forum for first-hand experience and commentary from the end user.
i. Advertising
Publics are constantly exposed to advertisements, making them an effective means of mass
communication. Its accessibility to the general public lends credence to the product and
gives the impression that the service is uniformly high quality. Long-term, positive brand
associations may be fostered and strengthened by strategic advertising campaigns. Aimed at
presenting ITC as a properly Indianized firm concerned with the uplift of rural people and
the development of rapid sales, the "Putting India First" campaign deftly blended the
company's rural initiatives of e-choupals with large-format rural retail outlets. ITC was able
to depict itself as a company concerned with the betterment of rural people while also
achieving rapid sales thanks to this strategy.
direct marketing used in rural regions include mobile advertising, vending machines, and
mailers. Any rural direct marketing effort must understand and connect with the audience.
v. Personal Selling
Sales are most cost-effective in the last phases of the buying process, especially in creating
buyer preferences, emotions, and habits. Personal marketing demands the presence of a
dynamic, direct, and participatory relationship between at least two persons. The buyer feels
a greater urge to pay attention to the vendor and respond to them, even if the response is as
basic as "thank you."
7. PROMOTIONAL CAMPAIGNS
Coupons, discounts, buy one get one free deals, sweepstakes, loyalty programmes, and point-
of-purchase displays are all examples of promotions used in marketing efforts. Another kind
is sales where you buy one thing and get another one for free. Loyalty programmes are made
to thank consumers for their purchases of goods and services over the course of a
relationship. Advertising and other marketing techniques are often used by small businesses
to spread the word about their goods. However, the two categories of marketing tactics vary
greatly from one another. More often, promotions are used to refer to advertising campaigns.
By offering rebates, discounted prices, and other promotions, company owners may utilise
them to persuade clients to buy products and services. Ads often concentrate more on the
advantages that consumers would experience after completing a purchase. The many further
distinctions between advertising and promotion should be noted.
It is a tactic used by marketers for a short period to drive sales of a certain product or service
in a specified territory for a limited time. Sales promotion involves personal selling,
advertising, and coordination, according to marketing experts. Shows, exhibits, and
demonstrations are all part of this procedure since they are critical to the commercials'
success.
• Materials for storing - Shop owners are given storage supplies such as racks, shelves,
and freezers, among other things, to help with both the visual merchandising and
storage of their goods.
• Push-Up Sales Promotion - Makes Use of Demonstrations Free demos at dealer
locations are a significant way of push-up sales promotion since they educate clients on
how to use the device.
• Dealer incentives - Dealers get incentives depending on end-customer sales during the
push-up sales campaign.
• Winners are chosen at random in contests - Dealers compete in randomized drawing
contests to stock the company's items and boost sales.
• Free gifts - It is a typical technique that firms will use, and free gifts are often supplied
to dealers throughout the Christmas season in order to increase client base.
• Pull-up sales promotion - Pull-up sales promotion, as the name implies, is a process in
which the marketer attracts customers toward their product via a range of promotional
strategies and advertising. It is also known as "pull marketing."
ii. Sample distribution at free of cost
The provision of free samples to people living in rural regions not only serves to publicise
the product, but it also helps to gain a high level of acceptance among those people. Free
sample distribution boosts sales for companies entering new markets and launching new
products. This happens when the corporation introduces a new product. Rural customers
have less faith in new things, therefore they are less likely to test new items than urban
consumers. This is one of the reasons why rural customers are less likely to test new items.
Customers are more willing to test new items if they can get free samples.
residents rely on them as both a source of information and a gathering spot for friends and
family. There is evidence that haats have been there since ancient times, namely during the
reign of Chandragupta Maurya. Marketers get the chance to showcase their wares during
haats, which are also known as bazaars. After overcoming their inhibitions, consumers are
willing to try the product and touch and feel it. Since most haat visitors shop, this will
improve sales.
x. Melas
Melas are a vital part of India's culture and are responsible for drawing in large crowds. A
trade mela is the place you go to discover a wide selection of goods. Melas are often hosted
during holiday celebrations like as Dussehra, Diwali, Holi, and Eid, amongst others.
Marketers have the opportunity to connect with a large number of potential customers and
persuade them to make test purchases at melas. The advertisers are able to target a big
audience thanks to these melas.
xi. Mandis
The agricultural goods and inputs that farmers need may be found in mandis. Mandis might
benefit durable and non-durable agricultural input producers. Long-lasting agricultural
equipment includes tractor, pump, and thresher sets. Seeds and fertiliser are non-durable.
SELF-ASSESSMENT QUESTIONS – 2
8. SUMMARY
• Rural India's marketplaces are boosted by money. Thus, rural company owners must
anticipate client needs. Quality, economical items must satisfy consumers. Rural
markets need packaging, SKUs, promotion, and delivery. HUL's Project Shakti
distribution method and customised marketing and communication strategy target
rural customers (Operation Bharat).
• Prestige price conveys quality and exclusivity. Goals include social, ethical, status quo,
and image. Rural customers distrust new brands and goods because they demand
"value for money." Pricing is part of marketing. To attract budget-conscious buyers, a
product's highest original price may be decreased. Marketers use several pricing
strategies throughout the product lifetime.
• Rural India likes free gifts with purchases. Godrej No. 1 soap is inexpensive. Ajanta
marketed inexpensive "vegetarian" toothpaste. Good packaging lowers rural India
product pricing. Instead of one huge pack, open many little ones to avoid wasting food.
HUL offers most shampoo and hair oil in sachets. Fertilizers are in plastic bags.
• Pricing policies help businesses maintain profitability by allowing them to sell various
items differently. A company's pricing strategy determines market price. The
organization may appreciate having a well-defined pricing strategy so that price
modifications may be made swiftly. Businesses often weigh the competitive
consequences of each price point against the potential profit. The average cost to
produce a product or provide a service is the starting point for a cost-based pricing
strategy, followed by consideration of the desired profit margin.
• Some companies must follow customers' pricing points. Value-based pricing strategies
target the appropriate market segment as closely as feasible. Your rivalry substantially
influences consumer value perceptions. Inelastic demand indicates that people desire
the same quantity of a thing regardless of price. Companies may utilise automated
pricing to take advantage of increased demand and swiftly get rid of surpluses.
• Persuasive communication is crucial to promotion, the third component of the
marketing mix. Promoting business product or service involves educating, convincing,
reminding, and influencing consumers. Advertising is the dissemination of information
about a product, service, or concept in exchange for monetary compensation. Sales
promotion comprises all marketing tactics that promote consumer purchase and dealer
effectiveness.
• Expert communication channels have more trust in rural markets because they are
viewed as insiders with the appropriate technical skills. Neighbours, family members
who interact with prospective buyers are examples of social channels. In the rural area,
potential buyers go to the social channel first before obtaining information and views
from the outside world. Personal communication channels are more successful in rural
regions because they give a forum for first-hand experience and commentary from the
end user. Mass media comprise the paid media (billboards, signs, posters) The bulk of
non-personal messages are given via paid media. An "atmosphere" is a "packaged
environment" that keeps a buyer's interest in a product.
• Communication has pros and cons and costs. Marketers must understand these aspects
to pick the best technology. ITC's "Putting India First" campaign successfully combined
e-choupals with large-format rural retail stores. Sales are most cost-effective in the last
phases of the buying process, especially in creating consumer preferences, attitudes,
and behaviours. LG invited rural women to cook to advertise its new microwaves for
rural kitchens.
• TVS employed a female scooter trainer for young ladies. Push-up sales is a marketing
strategy in which marketers urge intermediaries, such as dealers, retailers, and others,
to stock and sell the business's products. Marketers provide dealers monetary
incentives, advertising materials, and other things to sell goods to end customers. Rural
clients are more inclined to try new items since they are less likely to trust them. Free
samples might be complimentary things or money.
• Exchange premiums provide buyers a new product for proof of purchase. Rural folks
buy clothes, farm supplies, and other necessities during weekly haats. Haats—
bazaars—allow vendors to display their goods. Melas are important to Indian culture
and attract enormous audiences. Melas help advertisements reach large audiences.
9. GLOSSARY
• Pricing Strategy - Businesses' methods for determining the costs of goods and services
are known as pricing strategies. What you charge for your goods is your price, and your
pricing strategy is the method through which you arrive at that cost.
• Price sensitivity - Price sensitivity refers to the degree to which customer demand
adjusts in reaction to changes in the price of a product or service. Price elasticity of
demand is often used to analyse price sensitivity, which means that some consumers will
not pay more if a lower-priced alternative is offered. This is a common way for
determining price sensitivity.
• Penetrating pricing - This pricing strategy refers to the concept of offering a new
product or service at a low initial price. The purpose of this method is to pique the
interest of prospective customers. The goal is to aggressively gain customers by offering
reduced prices in order to expand market share.
• Skimmed pricing - Skim pricing is a pricing strategy that entails first charging high
prices for newly released items and then progressively dropping those costs as additional
competitors enter the market. Skim pricing is the inverse of penetration pricing, in which
newly issued things are priced low to attract a big customer base at the start of the
company.
• Price adjustments - A price adjustment is a change made to the overall price of a
contract to account for fair and reasonable changes in the expenditures connected with
executing the contract. Pricing should be seen as the foundation of your whole
monetization approach. Changes to your pricing may enhance all aspects of your
business, and as other aspects of your business develop, so should your prices.
• Cost based pricing - Cost-based pricing refers to pricing a product using a method that
considers the money spent on its production, manufacturing, and distribution. Simply
said, a product's pricing is determined by taking its selling price and raising it by a given
percentage in order to attain the necessary amount of profit.
• Value based pricing - A company uses value-based pricing to determine its product's
relative worth to rivals' products for a certain customer segment. This price strategy
helps companies compete.
11. ANSWERS
Answers for Self-assessment questions
1. a. target pricing
2. d. television and print media
3. d. economies of scale
4. d. prestige pricing
5. d. price sensitivity
6. b. persuasion
7. a. influence
8. b. personal and non-personal
9. a. neighbours, family members, and co-workers
10. a. strategic advertising campaigns
customer bases. This indicates that businesses are able to recoup their expenditures
while at the same time maintaining a slim profit margin.
5. Rural pricing must incorporate these factors. Rural India is poor. High Selling and
Distribution Expenditures: Companies must recover these costs. Difficulty
Communicating Value: High pricing show the organisation can provide value.
Innovative methods are required to lower rural market prices. Segmentation works
when a company understands consumer motivations. Rural consumers want
metropolitan lifestyles. Banking and lending limitations limit spending power.
6. To begin, it may assist business raise their margins in combination with the increasing
demand that are experiencing. Second, it may assist business in providing a better
service to the consumers by improving the possibility that specific things in the fixed
inventory, such as airline tickets, will still be available as their trip's departure date
approaches. This will allow one to deliver better service to company consumers.
7. Competition-based pricing, as the name suggests, modifies prices in light of how they
stack up against those of other firms operating in the same market. The product's price
has nothing to do with whether or not customers are willing to pay for it or the
product's intrinsic value.
8. Personal communication channels are related with two or more persons who contact
face-to-face, person-to-person, or by telephone, email, or fax. Interpersonal
communication channels are another name for personal communication channels.
Personal conversations extend beyond text messages and phone calls to encompass
social media platforms.
9. Advertising is any non-personal sponsorship of ideas, goods, or services by a
recognized sponsor. Businesses, non-profits, and people who are recognized in the
advertising message use various channels to distribute non-personal advertising.
10. Promotional campaigns promote brand awareness, revenue, and ROI. Customers
remember these advertisements and purchase from particular companies.
Books Recommended:
1. Kashyp Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications.
2. Mishra and Puri Development Issues of Indian Economy Himalaya Publishing House
Website Referred
Srinivasa, B. (2022, November 12). CavinKare – Shampoo sachet that was the true pioneer
of Middle India market. ThePrint. https://theprint.in/pageturner/excerpt/cavinkare-
shampoo-sachet-that-was-the-true-pioneer-of-middle-india-market/1209049/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 9
Product Distribution
Table of Contents
1. INTRODUCTION
The conventional "4 Ps" of the marketing mix, which are product, price, location, and
promotion, and the "evaluative rural marketing mix," which includes acceptability,
affordability, availability, and awareness, should both be used by marketers while doing
business in rural regions. The term "the marketing mix" refers to both of these conceptual
frameworks. The selection of the product is the first and most important part of the
marketing mix strategy, and it should be evaluated in light of the acceptance criteria to
ensure that the right plan is developed for rural markets. Making sure that their proposals
are accepted is one of the challenges that rural marketers have while developing goods and
services to meet the needs of people who live in rural regions. One of the difficulties rural
marketers' encounters is this. It might be difficult to ascertain what activities rural residents'
favour and dislike, and then to create items that meet their needs.
1.1 Objectives:
After studying this unit, you should be able to:
2. CLASSIFICATION OF PRODUCTS
2.1 Product Concept
When developing a marketing mix, the first step is to create a product that satisfies the
requirements and preferences of the target consumer. The majority of businesses see rural
markets as an extension of their plan to reach low-income urban consumers and view them
as potential customers. In order to break into the rural market, businesses need to develop
novel items that are tailored to the area.
Adoption of a product in rural markets is influenced not only by customer needs and
preferences, but also by the social and physical environment, such as the availability of
electricity and infrastructure. When providing commodities to rural markets, a marketer
must keep the following factors in mind: the products must be appropriate for the rural
region, clearly identifiable visually, inexpensive, and give excellent value for money.
Levels of product
Based on the value proposition, marketers must examine five stages of product offering.
These tiers are as follows: core benefit, basic product, expected product, upgraded product,
and projected product.
For instance, the cell phone is the most essential tool for the main benefit of connection, the
sensation of constantly being in touch. On the third tier, the marketer develops the expected
product, which includes all the features and specifications a customer must have before
making a purchase. At this stage, it becomes possible to differentiate between the various
goods. A mobile phone buyer in rural India prioritises clear audio, lengthy talk time, ease of
use, and durability. They are also concerned about the longevity of their phone. The fourth
tier of marketing is when the product the marketer creates not only meets the customer's
stated wants, but also their latent needs.
New product launches are where competition is at its highest in the rural market right now.
This means that when trying to predict how a client will use a product or what kind of
product they will buy, marketers must take into account factors like the customer's location
and socioeconomic status. Similarly, it is the duty of rural marketers to prevent excessive
price increases caused by amplification.
The fifth level is a hypothetical product that already includes all conceivable future
improvements and changes. This tier is indicative of a potentially viable end result. To keep
their customers satisfied, businesses look for novel approaches like creating a solar-powered
phone that can be recharged using light rather than plugging it into an outlet. Items in the
third, fourth, and fifth tiers, therefore, demonstrate the variety of customer desires and
needs that must be met for goods to succeed in rural markets.
infiltrating rural markets, while being among the costliest and long-lasting consumer items.
In the previous decade, the number of individuals living in rural India who have access to
colour televisions has climbed by a factor of five.
iii. Services
Other critical services in rural India, in addition to education and healthcare, include
banking, insurance, telephones, and information and communication technology provision
(ICT). Some of the most notable firms in this industry are the Life Insurance Corporation, the
State Bank of India, and Bharat Sanchar Nigam Ltd. Some of the newer businesses that have
joined the market and are contending for the top spot include Airtel, Reliance
Communications, ICICI, and ITC's e-Choupal.
• To advance the product innovation agenda and produce new product ideas, one must
first explore rural markets and then completely immerse oneself in those locations.
• In light of this, after an idea has been formed, it must be reviewed and assessed in the
market. Testing an idea in rural markets must be done in a range of areas since,
depending on the characteristics of each area, the needs of separate regions may differ
greatly from one another.
• Following the idea testing, the final product's construction is a crucial phase. Because
the rural market is poised to become the next big thing, some organizations have begun
to cater to it by employing a new product development method. This new method is
known as reverse innovation or inexpensive engineering.
• The testing of a new product's market viability is the single most important phase, since
it decides whether or not the product will be successful. It becomes much more
important in rural areas, where the chance of failure is often high. The great majority
of firms opt to ignore the fact that the cost of doing market research is low when
compared to the overall cost of the project. Furthermore, product testing must be
conducted in a number of geographic regions since consumer responses may differ
from one place to another based on the socioeconomic and physical factors of the
specific locality.
Because rural markets are on the verge of becoming the next big thing, several corporations
have begun targeting them with a new product development method known as "reverse
innovation" or "economical engineering." The process of lowering expenses while
maintaining or enhancing quality is referred to by these phrases. Every decision made with
frugal engineering should be founded on the premise of improving the value supplied to the
customer while minimising the expenditures of non-essential components. It is a
fundamental notion that allows product development in emerging markets to begin with a
true "clean sheet."
4. DISTRIBUTION STRATEGY
A distribution strategy refers to the process of providing products or services to end users,
or customers. If you want to increase revenue and sustain client loyalty, you must choose the
most lucrative way of distribution for your company. Some businesses opt to employ several
distribution techniques in order to better serve their varied customer groups.
Because of its capacity to carry cargo, delivery vans are capable of doing both of these
tasks.
• Participation in the Distribution - A collaboration between a number of organisations,
some of which have a distribution reach that is somewhat less broad than that of others
and others which have already reached large penetration levels in rural areas is
something that may take place. For instance, Procter & Gamble has previously
established business relationships with Godrej and Marico Industries, and it is now in
the process of establishing a business relationship with Nirma for the purpose of selling
Camay soaps.
v. Shandies, Haats, Jathras, and Melas – They are recurring markets that occur on a
weekly basis. They are consistent, moderately priced, and appropriate, and they have
an established distribution network. Distributing, demonstrating, and offering free
samples of everyday necessities are all possible applications for haats. Melas are most
successful when utilised to introduce new firms and grow established brands via the
organisation of events at the venue.
SELF-ASSESSMENT QUESTIONS – 1
5. PDS NETWORK
The Public Distribution System (PDS) was first envisioned as a means of dealing with food
shortages by distributing grains to the general public at more reasonable rates. The Central
Government is currently responsible for purchasing, storing, transporting, and distributing
food grains in bulk to the individual State Governments. Several states and unorganised
territories (UTs) also distribute several commonly used items via the Public Distribution
System (PDS), such as pulses, cooking oils, iodized salt, spices, and so on.
i. Functions of PDS
• The distribution of food grains to those identified as beneficiaries is a joint duty of
the Central Government and the State Governments.
• The federal government buys food grains from farmers at a minimum support price
(MSP), and then resells them to states at rates specified by the federal government.
• The organisation is in charge of transporting grain to storage facilities in each state.
• The states are responsible for the expense of shipping food grains from these
godowns to each fair price store (ration shop), where the beneficiary purchases the
food grains at the lowered central issue price.
• Several governments give extra price subsidies for food grains before they are
distributed to beneficiaries.
ii. Significance of PDS
• It contributes to the preservation of the nation's food supply and nutritional
stability.
• It has contributed to the stabilisation of food costs and has made it possible for the
poor to purchase food at prices that are within their means.
• It does this by keeping a buffer stock of food grains in the warehouse so that the
flow of food may continue to operate normally even during times when agricultural
food output is lower.
• It has assisted in the redistributing of grains by delivering food from sections of the
nation that have an abundance of it to others that are lacking in food.
• The growth in food grain output may be attributed, in part, to the implementation
of minimum support price and procurement systems.
i. Distribution Model 1
This method emphasises rural distribution by distinguishing it from urban distribution.
Rural distributors (RDs) cover specific geographic regions. To reach rural communities, the
firm engages a sub-distributor (SD) under the RD. The RD covers a large area with
insufficient roadways and little outlet flow, making small sites unprofitable. Wholesalers are
served by the local RD. The wholesaler is important because of his variety, volume, and
satellite market customers. The generalised model has more points since rural areas are
many and scattered. This allows for maximum rural product dissemination.
i. SHG Model
A self-help group (SHG) is a group of 10-15 women organised by government agencies or
non-governmental organisations (NGOs) to construct a mutual thrift organisation in order
to encourage savings and self-esteem. SHGs get matching loans from rural banks in order to
launch enterprises. Following the success of SHGs in Bangladesh, they were designed to
enhance rural poverty-relief programmes. Marketers may create a new distribution strategy
in response to the fast expansion of SHGs in India. Over seven million SHGs in India may
develop a low-cost distribution scheme to assist rural communities in distant places.
iii. Vans
Mobile vans are used to distribute and market things in villages. Vans are used by Eveready
and other rural distributors. In this strategy, the salesman loads the van with items from a
nearby stockist or company stock point and works neighbouring markets. After visiting all
such markets, they cover the villages around the next stock point. They go from one stock
site to another before returning to the first to complete their journey. The vehicle may be
used to advertise and sell. This technique is effective yet pricey if the firm purchases all of
the cars. Eveready has the only countrywide fleet of 1,000 or more cars.
v. Syndicated distribution
A new company selling to rural clients has distribution difficulties. Rural distribution routes
are expensive and need an excessive number of tiers. Coca-Cola India paid INR 5.5 billion for
Parle's brands like Thums Up, Limca, in 1993 in order to use Parle's distribution network.
Small businesses cannot afford the distribution network that Coca-Cola has. Syndicated
distribution is a novel approach of entering rural markets. Two or more businesses are
involved in syndicated trading. They then divide the cost of carrying household goods to
rural markets. Small businesses should collaborate with a major rural market participant to
offer their products via its distribution network. Small firms should not offer the same things
as big enterprises, according to the golden rule. Joint cooperation may help reduce
distribution costs and make losing businesses profitable.
Traditional distributor vans, sub-distributors, direct access through two- and three-
wheelers, and parallel sales and marketing platforms are the four methods of distribution
ITC use to reach the final mile. The eBay India Census found that about 1,270 rural hubs
participate in online commerce, accounting for one out of every ten purchases and one out
of every twenty sales. It's possible that in the future, the internet will be a game-changer for
businesses that want to break into the rural market (https://pib.gov.in).
SELF-ASSESSMENT QUESTIONS – 2
6. What are some commonly used items distributed through the public
distribution system?
a) furniture
b) electronics
c) toys
d) pulses, cooking oils, iodized salt, spices, and so on
7. What does MSP stand for?
a) maximum support price
b) minimum support price
c) minimum sale price
d) maximum sale price
8. What makes small sites unprofitable?
a) low quality products
b) poor customer service
c) lack of advertising
d) insufficient roadways and little outlet flow
9. What are the weekly marketplaces known as?
a) fairs
b) bazaars
c) haats
d) flea markets
10. Some rural masters establish what type of connections with the individuals
that work with them as channel partners?
a) familial
b) legal
c) professional
d) financial
9. SUMMARY
• Most companies use rural marketplaces to target low-income urban clients. Businesses
must create unique products for rural markets to succeed. In rural India, client
preferences and the social and physical context, such as power and infrastructure,
impact product adoption. Consumables include food, drinks, personal care, and
cosmetics. Rural India consumes almost half of India's FMCG.
• While expensive and durable, televisions have penetrated rural markets well. Products
for rural markets must fit the rural lifestyle and surroundings. Explore rural markets
and immerse yourself in them to promote product innovation. Since rural markets have
different demands, a concept must be tested in many places. Market research is cheap
relative to project costs. Since customer reactions vary, product testing must be done
in many locations. It permits product development in developing areas to start from
scratch.
• Choose the best distribution method for your organisation to boost sales and retain
customers. Some companies use multiple distribution methods to better serve their
diverse customers. Distribution strategies provide goods and services to clients. India's
public distribution is well-organized. Feilizer dealers are estimated at
2,620,000(http://agricoop.nic.in/)
• Rural PDS shops may sell disposable and low-value durable items. Weekly markets
include Shandies, Haats, Jathras, and Melas. The Public Distribution System (PDS) was
created to address food shortages by distributing grains at affordable prices. The
Central Government buys, stores, transports, and distributes bulk food grains to State
Governments. Several states and unorganised territories provide pulses, cooking oils,
iodized salt, spices, etc. Retail and fair-priced public distribution firms make up the
rural market. Instead of the weekly market, rural traders and cooperatives should
establish themselves.
• Ghari detergent depends on a smaller network of channel members in rural
distribution than HUL does. The generalised model has more points since rural areas
are many and scattered. Wholesaler locations act as feeder markets, where the
company meets the needs of neighbouring towns that are not supplied by the
distributor.
• Distributors and other channel partners may also make a good living by selling a big
number of things. This is the model used by Ghari detergent, Priyagold cookies, and
other significant regional enterprises. A select group of businesses have made the
decision to implement this approach by establishing separate sales and service
channels geared specifically for rural areas.
• A self-help group (SHG) is a group of 10-15 women organised by government agencies
or non-governmental organisations. Mobile vans are used to distribute and market
things in villages. MART pioneered the "young entrepreneurship" distribution
approach in rural regions. Colgate, Heinz, and Novartis have used this technique to
reach inaccessible rural markets. Some corporations are utilizing new methods to grab
large portions of the rural market "pie" and make spectacular profits.
• Experts call them rural masters because they excel at three key techniques for engaging
rural customers in India. They use a variety of channel tactics, blend hub-and-spoke
management with decentralized support from local business owners. About 1,270 rural
hubs participate in online commerce, accounting for one of every ten purchases and
one out of every twenty sales (http://agricoop.nic.in/) Traditional distributor vans,
sub-distributors, direct access through two- and three-wheelers, and parallel sales and
marketing platforms are the four methods of distribution ITC use to reach the final mile.
10. GLOSSARY
• Augmented Product - An augmented product is one that has been upgraded by its
seller by adding new features or services to distinguish it from other vendors' versions
of the same product. When we speak about supplementing a product, it simply adding
intangible benefits or add-ons that go beyond the boundaries of the offering.
• Core Benefit - The core product or core benefit of a product is the fundamental reason
or aim for why a consumer acquires it. The basic product varies based on the person
who purchases it. The main product or primary benefit may result from either the
performance of the underlying physical item or service or the larger dimensions of the
primary product.
• Agricultural goods - Products derived from the cultivation of land and/or the keeping
of animals Some agricultural goods, such as maize and beef, are direct earth products,
whereas others, such as high fructose corn syrup, are derived from agricultural
products. The buying and selling of diverse agricultural goods powered the early
commerce in the Middle Ages. Even now, agricultural goods are constantly placed
among the market's most important commodities and futures contracts.
• Product testing - Product testing, also known as consumer testing or comparative
testing, is the process of determining how various things will perform in the hands of a
certain population. It assists you in locating the greatest things for clients by analysing
and comparing numerous aspects, such as purchase intent and value.
• Distribution strategy - The technique utilised to offer goods, commodities, and
services to end-users or customers is referred to as distribution strategy. Depending on
the nature of the product and the distribution needs, if one make it simple and easy for
people to get the goods and utilise business services, business will most likely gain their
loyalty.
• Cooperative societies - Cooperative societies are formed with the goal of assisting its
individual members. The economically challenged elements of society are the ones
who, for the most part, start the development of this kind of business organisation.
Their principal goal is to avoid being exploited by the more powerful parts of society.
• Public distribution system - The People Delivery System (PDS) was established as a
technique of managing shortages via the distribution of foodgrains at reasonable costs
to the general public. PDS has grown into an important component of the government's
national food economy management policy over the course of many years.
• SHG - Self-Help Groups, sometimes abbreviated as SHGs, are comprised of persons who
are currently living in lower socioeconomic status. Each individual who makes up a SHG
faces a similar range of difficulties. They work together to discover answers to the
problems that they are now confronting. SHGs urge its members to make savings of a
more modest kind whenever and wherever they can. For the purpose of maintaining
their security, the monies are kept in a bank.
12. ANSWERS
Answers for Self-assessment questions
1. d. longevity
2. a. excessive price increases
3. a. cooking oil, laundry detergent, tea, and biscuits
4. a. televisions
5. d. market viability
6. d. pulses, cooking oils, iodized salt, spices, and so on
7. b. minimum support price
8. d. insufficient roadways and little outlet flow
9. c. haats
10. a. familial
to the states and UTs. Some states and unorganised territories (UTs) use the Public
Distribution System (PDS) outlets to distribute additional commodities of mass
consumption. These include things like pulses, edible oils, iodized salt, spices, and so
on.
6. Shopkeepers, wholesalers, mobile merchants, vans, and weekly haats have all
historically been essential components of the rural distribution system. Retailers in the
feeder markets act as wholesalers and vice versa so that they may sell to the smaller
merchants who come from the villages in the surrounding region. These smaller
merchants come to the market to buy goods.
7. The phrase "market concentration" refers to a scenario in which a few number of
businesses control a significant percentage of the entire market. It measures the extent
to which one or more businesses control the sales of a certain product or service in a
given market. Market concentration is an important aspect in determining company
market power when defining pricing and volumes. The amount of market
concentration may be impacted by a variety of factors, including entry barriers and
existing competition.
8. The utilisation of channel partners provides a way to improve corporate outcomes
without having to hire a larger sales team. Establishing new distribution channel
agreements is akin to hiring a sales force. Instead of paying them a salary, you will just
have to pay a commission on the sales they produce via your website.
9. Even though there are many various types of bazaars, their primary role is to offer a
location for local communities to purchase and sell things. Historically, the HAAT was
a temporary market that let people to purchase items that were not easily available;
but, permanent businesses and markets are cropping up in many rural locations these
days.
10. The disparity between urban and rural earnings is about double. Even though the urban
cost of living narrows the gap, this explains why Indians are migrating from rural
regions to the city. People migrate to cities in search of economic opportunities.
Customer purchase behaviour differs as well. Metropolitan populations can afford
higher-priced products and services, but rural dwellers can only afford lower-priced
goods and services. As a result, rural marketing methods fail.
Books Recommended:
1. Kashyp Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications.
2. Mishra and Puri Development Issues of Indian Economy Himalaya Publishing House
Website Referred
• https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1740687
• http://www.agrimanipur.gov.in/statewiselist-of-dealers/
• Meryl M. (2021, May 3). HUL Project Shakti is Empowering Women of New India. IndBiz
| Economic Diplomacy Division. https://indbiz.gov.in/hul-project-shakti-is-
empowering-women-of-new-india-2/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 10
Agricultural Marketing
Table of Contents
Fig No /
SL SAQ /
Topic Table / Page No
No Activity
Graph
1 Introduction - -
3
1.1 Objectives - -
Concept, Nature and Types of Agriculture
2 - -
Produce
2.1 Nature of Agriculture Produce - - 4-7
6 Summary - - 20-21
7 Glossary - - 22
8 Terminal Questions - - 23
9 Answers - - 23-25
1. INTRODUCTION
A process known as agricultural marketing is one that involves the collection, storage,
preparation, shipment, and distribution of various farmed commodities to various locations
around the nation. Several variables, including current market demand, influence whether
or not an agricultural product is successfully marketed, the availability of storage, and other
similar considerations. In the years leading up to the independence of their nation, farmers
often fell victim to faulty weighing and accounting practises.
Through the production of food, agriculture satisfies one of humanity's most fundamental
need. Around the turn of the century, farmers produced food commodities primarily for their
own use or for trade with other people (in cash or in kind). Nowadays, the production
environment has shifted significantly away from self-reliance and toward
commercialization. Because it brings together farmers and consumers in a coordinated
effort, agricultural marketing has emerged as an important component of today's global
economy.
1.1 Objectives:
After studying this unit, you should be able to:
The word "agricultural produce" refers to any items obtained from agriculture, horticulture,
apiculture, sericulture, cattle and animal products, forest produce, and so on, whether
processed or unprocessed.
Agriculture is the art and science combined practise of preparing land for agricultural and
animal production via the use of the land. Agriculture is a practise. It includes both the
process of preparing plant and animal products for consumption by humans as well as the
process of transporting those products to different markets around the world.
Most agricultural products spoil quickly, although the length of time until they spoil may vary
greatly, from just a few hours to many months. The perishability of many agricultural
products makes it difficult for farmers to set a fair price for their wares. Due to the urgency
with which perishable goods must be handled and to the typically specialised refrigeration
requirements for these goods, more marketing expenses are incurred.
As with any agricultural endeavour, there are peak seasons for the harvesting of certain
crops. This prevents their production throughout the year. This explains why prices change
throughout the year according to the seasons. It is common for agricultural product prices
to decrease as harvest approaches. In contrast, it is possible to adjust production such that
there is a steady supply of goods throughout the year.
The bulkiness of most agricultural items makes shipping and storing them more difficult and
expensive than it would otherwise be. Therefore, there is a restriction placed on the
closeness of the manufacture to the point of consumption or processing. Because of the
increased effort necessary to transport, handle, and store voluminous commodities, there is
a larger price disparity between them and less labor-intensive items.
Grading and standardising agricultural products may be difficult due to the large quality gap
that exists between individual products. Items that have been manufactured, on the other
hand, do not have this problem since they can be created in vast quantities while maintaining
a uniform quality.
The supply of agricultural items is inconsistent and subject to fluctuations due to their
dependence on the weather and other elements of the natural environment. In contrast to
manufactured products, where demand tends to be steady despite supply shifts, agricultural
commodity prices tend to rise and fall more wildly than those of manufactured commodities.
As a result, agricultural products are produced all throughout the country, despite the fact
that the vast majority of farmers are run on a small scale. This creates issues in both supply-
side planning and marketing.
In addition to the difficulty in gauging total supply, a small-scale farmer must deal with a
standard marketing dilemma. Due to his little impact on the market supply, prices are
unaffected by his actions. And since most agricultural items have inelastic demand, the
market price for his commodity is set regardless of his supply. The market is likely to be
favourable to buyers rather than sellers for a single farmer in this scenario. As a result of
their larger market share, however, most manufacturing businesses may set both the supply
and the price of their goods.
vii. Sorting
Most agricultural products need further processing before they can be safely ingested by
humans. The processing function adds even more variation to the already vast price range
of agricultural goods. Businesses in the processing sector may thrive in a variety of market
structures, including monopoly, oligopoly, and duopoly. When this happens, it may
discourage production.
On the basis of the following criteria, agricultural goods may be divided up into a
variety of categories:
The terms "Rabi," "Kharif," and "Zaid" may be used to categorise agricultural goods according
to the seasons.
a. The Rabi planting season is from October to December, while the harvesting season is
from March to May. Rabi crops that may be produced include barley, peas, potatoes,
wheat, and gramme.
b. During the Kharif season, crops are planted between the months of April and July, and
harvested between the months of September and December. Rice, sugarcane, jowar, jute,
bajra, maize, cotton, and peanuts are just few of the crops that thrive during the Kharif
season.
c. Zaid: april-may; july-august Fruits such as watermelon, cucumber, muskmelon,
sunflower, sugarcane, and bitter gourd are examples.
Crops grown for human use and those grown primarily for monetary gain are the two main
divisions in the agricultural sector. The majority of cases fall into these two broad classes.
Rice, wheat, barley, and corn are all examples of crops grown for human use. Cash crops
include products like tobacco, tea, coffee, oil seeds, rubber, and rubber trees.
The two categories that are available to choose from when classifying agricultural products
are those that are either perishable agricultural goods or non-perishable agricultural
products. Because they may be safely preserved for no more than a few days at a time,
While there are certain things that have to be prepared before they can be used, there are
also other things that may be used directly from the packaging without any kind of
preparation. Processing is required for a variety of crops, including sugarcane, cotton, jute,
wheat, and rice; however, processing is not required for foods like vegetables, milk, fish, or
other meals, since they do not need any kind of preparation.
Agriculture and business are the two key components that contribute to the concept of
"agricultural marketing." Agriculture, in its widest definition, refers to activities aimed at
making use of natural resources for the benefit of human wellbeing; in other words,
agriculture includes all primary production activities. Farming, forestry, fishing, and hunting
are examples of these activities. The great majority of the time, however, it refers to the
action of cultivating food and/or rearing animals. The term "marketing" refers to a broad
variety of operations that are carried out to convey things from where they are made to
where they are consumed by people. It takes into account all that must be done in terms of
time, place, form, and possession in order to make something meaningful. Agricultural
marketing research, according to Thomsen, includes all acts and organisations engaged in
the transportation of farm-produced commodities, raw materials, and derivatives of those
items. This is due to the fact that agricultural marketing encompasses the whole process of
delivering farm-produced foods, raw resources, and derivatives thereof.
The agricultural marketing system is very important for gaining a knowledge of the
intricacies that are involved and detecting bottlenecks so that efficient services may be
offered in the transfer of farm commodities and inputs from farmers to consumers. A
strategy to marketing that is both cost-effective and beneficial to society as a whole may
concurrently help bring down overall costs.
• Village Markets: A market that is considered to be a village market is one that is situated
in a tiny hamlet and is the site of significant business activity amongst the residents of
the village.
• The primary wholesale markets: These marketplaces are often found in big cities that are
close to producing areas for agricultural commodities. A significant amount of the
merchandise that is sold at these markets is brought there by the producer-farmers
themselves. Farmers and traders are the kind of participants that are most often seen at
these marketplaces.
• Markets for secondary wholesale goods: These marketplaces are often located close to
railroad intersections, administrative district headquarters, or important commercial
hubs. The bulk of commodity transactions are undertaken between individual local
merchants and wholesalers. The majority of visitors to these marketplaces come from
foreign countries. The bulk of visitors come from other countries. These marketplaces
deal with quite large volumes of fruit and vegetables.
• Markets Located in Terminals: A terminal market is a market in which the product is
either sold to clients, processed for export, or assembled for export. All of these activities
take place in the same market. Retailers have excellent organizational skills and make
use of cutting-edge marketing strategies. These markets feature commodity exchanges
that provide options for trading in particular commodities on a forwarding basis. The
cities of Bombay, Madras, Calcutta, and Delhi are some examples of the kind of urban
areas and seaports that are likely to have markets similar to these.
• Markets that are Local or Found in Villages: A market in which purchases and sales are
restricted to customers and sellers from the same village or localities in the surrounding
region. The majority of the commodities sold in village markets are perishable and sold
in very modest amounts. Examples include local milk and vegetables.
• Regional markets: A market for a product that attracts buyers and sellers from a larger
region than do marketplaces that are more local in scope.
• Markets with a Short Time Horizon: The marketplaces known as short-period markets
only endure for a few hours at a time. These markets deal in perishable goods such as
seafood, fresh vegetables, and liquid milk among other products. The degree of demand
for the product, as opposed to the supply of the commodity in these markets, is the
primary factor that determines the price of the commodity.
• Long-period Markets: These markets are held for much longer periods of time in
comparison to short-term markets. Because they deteriorate at a slower rate and can be
kept for longer periods of time, food grains and oilseeds are some of the commodities
that are traded in these types of markets. Prices are affected by a number of variables,
including supply and demand.
• Sustainable Markets: These are the types of marketplaces that are available at any time.
These are long-lasting commodities that can be stored for an extended period of time,
and they are traded in these marketplaces. Two instances of this would be the markets
for manufactured products and equipment.
• Wholesale Markets: On a wholesale market, commodities are often purchased and sold
in large lots or in bulk quantities. The vast bulk of the deals that take place in these
marketplaces are conducted between different dealers.
• Markets for Retail Goods: A retail market is one in which individuals purchase and sell
things according to their own need. Retailers and customers engage in monetary
exchange with one another while using these market spaces. Wholesalers sell in large
quantities to retailers, who then sell smaller quantities to individual clients. These stores
are situated within easy walking distance of the patrons.
• There are several markets, each specializing in the sale of a certain category of
commodities. There may be specific markets that just deal in certain commodities, while
others could offer a wide variety of different sorts of goods. There are many different
sorts of marketplaces, each of which may be named by the items that are sold there. Grain
markets, cotton markets, fruit and vegetable markets, and so on are examples of these
sorts of marketplaces. In both towns, the terms "gur-mandi, noon-mandi, etc." are used
to refer to Ludhiana and Amritsar. Even if they conduct trade with a number of different
items at the moment, the only commodity they deal in is the one that corresponds to their
area of expertise.
SELF-ASSESSMENT QUESTIONS – 1
Only until a product is in the hands of those who need it — the customers — can its
production be considered complete. Due to the broad diversity of meteorological and
agricultural conditions, it is not feasible to grow all items in all places. As a consequence, they
will need to convert from producers to consumers.
The movement of agricultural goods from their producers to their customers takes place
through a variety of marketing channels. The lenght of the network varies by commodity,
depending on the volume to be moved, the kind of client demand, and the degree to which
various areas specialise in the manufacture of that specific item.
When it comes to selling agricultural goods, the distribution strategies used may differ based
not only on the kind of food being sold, but also on the nation, the quantity being sold, and
the period of time that has gone. For example, the distribution tactics used to promote fruits
are distinct from those used to sell food grains. Packagers are an extremely important
component in generating a profit from fruit sales. Customers' expectations regarding the
final form that a product or service may be supplied in are impacted by a society's or
country's degree of development. This is true independent of market circumstances at the
time.
In developing nations such as India, customers buy the vast majority of their food-grains
uncooked. This indicates that processing takes place at the customer level. Routes or
channels taken by lots that originate from small farms differ from routes or channels taken
by lots that originate from big farms. Again, this is due to the fact that the routes or channels
used by many that start from tiny farms are smaller. For example, the typical clients of the
things produced by small farms like this one are local merchants; the commodities may or
may not make it to the main market.
Large farms, on the other hand, often sell their products at the central market, followed by
wholesale distribution of the items. Food sold in later months frequently goes through a
lengthier distribution procedure than food sold shortly after harvest since it must travel a
longer distance. The channels of distribution for agricultural goods in India have changed
dramatically, both in length and quality, as a result of the growth of transportation and
communication networks, changes in demand structure, and the emergence of new markets.
This has resulted in a large degree of change in terms of both the length and quality of the
channels.
There is a long line of different functionaries that may be discovered, starting with the
farmers and ending with the final consumer.
i. Large Cultivators
Wealthy farmers with considerable holdings and a large surplus that may be sold are
the first kind of market functionaries active at the village level. They may also employ
carts, tractors, and other modes of transportation. They have a plenty of marketable
excess because of both the large-scale farming they have done themselves and the
seasonal purchases made at the village level. In fact, they generate buffer stock by
acquiring grain during the harvesting season and then selling it in surrounding
"Mandis" after the season is done. They acquire surplus grain produced by smaller
producers directly or indirectly through them.
ii. Rural Merchants
In different regions of India, people would refer to them as 'Beopari,' 'Baniya,'
'Sahukar,' 'Paikars,' 'Farias,' and other names along those lines. They are one of the
most important organisations in the community for acquiring information. Even if
they use their own money in certain circumstances, the bulk of the time enormous
wholesale merchants in assembly and distribution centres, known as "Arhatias" or
"Arhatdars," provide the financial backing necessary for them to function. Village The
responsibility for transporting a village's excess to the wholesale mandis or other
cities falls on the shoulders of merchants. The local business owners are responsible
for this. Marketable excess is dispersed to the secondary and final markets in this
manner, with the distribution agencies in charge of the process.
iii. Traders or merchants who move from one location to another
They are mobile merchants that go from village to village bringing farmers the
essential materials. They use carts or animals, such as ponies, to transport products
to the local market. As a result of factoring in shipping expenses, market fees, and
their own profit margin, they may offer a price that is lower than the norm in the local
market. The farmers are typically compensated three to four days after the food has
been sold in the market and the money has been collected from 'Arhatia.
enterprise, unlike the Arhatias. They take a cut of the transaction from both the buyer
and the vendor.
iii. Cooperative Marketing Organizations
These were made possible by the Integrated Rural Credit and Marketing Scheme,
which was implemented in the midst of the Second Five-Year Plan. The primary goal
of such groups is to act as distribution hubs for the services and products provided
by its participants. They buy crops entirely, manage storage and grading, and prevent
merchants from taking advantage of farmers. They help farmers get a good price for
their goods, too.
The buyer, his broker, and the commission agents all hold hands while concealing behind a
piece of fabric, which might be a towel, a dhoti, or the front half of a kurta or shirt. Squeezing
one's fingers together yields the price. The conversations will continue in this hidden manner
until either they are discontinued due to an inability to agree on a price or a price is reached.
The commission agency will next notify the seller and request authorization to sell the
property. On the other hand, he is not provided any information about the prices offered by
other buyers. The middlemen's group promotes the "under cover" selling strategy as
advantageous. Because sellers must keep their discussions secret, this technique provides a
lot of possibilities for unethical behaviour that works against sellers' interests.
Businesspeople nowadays are more inclined to participate in private discussions rather than
use this method.
In this arrangement, the prospective buyers of the grains cluster around the numerous heaps
of grain and shout out their bids to one another. After all bids have been placed, the
auctioneer, who is usually a commission agent, will negotiate with the seller and ultimately
sell the item to the highest bidder. There's no denying that this makes the auction system
superior than the stealthy approach. This occurs because the buyers must compete with one
another. If there is a relatively big demand for the product, it is quite probable that the prices
will grow as a direct consequence of the increasing competition in the market. In addition,
there is a relatively low possibility that unethical behaviour would be carried out, which is a
positive development.
When trying to sell anything, this is the method most likely to be employed. In this system,
prospective buyers or their representatives visit the warehouses of commission agents,
inspect the grain for quality, and place bids at prices they deem fair. After that, the two sides
will participate in a discussion over the prices, and if they are able to reach a consensus, the
contract will be finalised.
Contract farming has grown in popularity in recent years. Farmers are unable to make major
agricultural investments due to the shrinking amount of their land holdings, and they are
unwilling to risk diversifying their crop output to include other kinds of plants. As a
consequence of this situation, business entities are making their appearance. They make a
deal with the farmers and, much like a mortgage, acquire possession of a piece of the farmers'
land. They provide the farmer with all of the essential inputs, such as seeds and fertiliser.
The farmer is responsible for providing all crop care, including planting, watering, and other
chores. After the crop has reached its full potential, the whole harvest is gathered by the firm
corporation at a predetermined price. There are several benefits to using this method. The
farmer is compensated fairly, and the manufacturer is certain of a year-round supply of high-
quality goods at a competitive price. Sales of agricultural products via contract farming will
increase in importance and have a lasting effect on the present market structure.
The functions involved in agricultural marketing are extensive and diverse. When it comes
to the particular products and services, the roles that each function plays might vary
significantly. In addition, it should be pointed out that these functions are necessary
independently of the institution or agency that is responsible for carrying them out or the
product that is associated with the carrying out of these tasks. These functions are
inextricably linked to one another and cannot exist independently of one another due to their
interdependence. This allows us to classify the roles of agricultural marketing into the
following three broad classes:
i. Exchange Functions
It is generally agreed that the exchange functions are the most crucial part of agricultural
marketing. Functions associated with the exchange of goods and services fall under this
category. To put it simply, trading goods and services is a two-way street that benefits all
parties involved. The buying role primarily consists of locating new sources of supply,
assembling commodities, and doing other duties related to the procurement of goods, raw
materials, and so on. The act of selling is the process of generating interest or demand,
locating a buyer, educating the buyer, and finally negotiating a change of ownership with the
buyer.
These tasks include the hands-on management of agricultural products, such as transporting
food from one location to another or storing it for an extended period of time. Produce from
farms is not eaten near where it is grown, thus it must be transported from aggregating
points to final destinations. Food production cannot be done anytime one wants since it is
reliant on the weather and seasons. This is something that can only be done during a given
time of year and under specified conditions. Agricultural goods, on the other hand, have a
continuous demand throughout the year. As a consequence, some kind of system must exist
to enable the crop from one year to be used for successive harvests. As a result, a substantial
quantity of transportation and storage space is necessary. However, storage may be
undertaken at any point in the supply chain, from manufacturing to final sale or
consumption, by anybody from the manufacturer to the wholesaler to the consumer.
The title of these function imply that they do not involve the transfer of title to commodities
or product handling; rather, they contribute to the effective execution of the actions that
came before them. Classification and grading are functions that help in sorting items based
on size, quality, colour, weight, and other characteristics. This reduces complexity in pricing
and, as a result, guarantees a reasonable profit for the manufacturer while satisfying the
needs of the buyer for high-quality goods.
SELF-ASSESSMENT QUESTIONS – 2
6. SUMMARY
• Agriculture is the art and science combined practice of preparing land for agricultural
and animal production via the use of the land. The perishability of many agricultural
products makes it difficult for farmers to set a fair price for their wares.
• Bulkiness of most agricultural items makes shipping and storing them more difficult
and expensive than it would otherwise be. Agricultural commodity prices are more
volatile than those of manufactured goods because the holding is not very large, and
output is dispersed. The vast majority of farmers in India are run on a small scale, which
makes it difficult to gauge total supply and thus make efficient decisions about prices.
• During the Kharif season, planting of crops takes place from April to July, and
harvesting from September to December. Food crops are broken down into two basic
categories: food crops and cash crops. Processing is required for a variety of crops,
including sugarcane, cotton, jute, wheat, and rice.
• The term "agricultural marketing" refers to a broad variety of operations that are
carried out to convey things from where they are made to where people consume them.
According to Thomsen, agricultural marketing research encompasses all actions and
organizations involved in the transportation of farm-produced commodities, raw
materials, and derivatives of those goods.
• A terminal market is a market in which the product is either sold to clients, processed
for export, or assembled for export. These markets feature commodity exchanges that
provide options for trading in particular commodities on a forwarding basis. Long-
period markets are available at any time and deal in commodities that can be stored for
an extended period of time.
• There are many different sorts of marketplaces, each of which may be named by the
items that are sold there. Wholesalers sell in large quantities to retailers, who then sell
smaller quantities to individual clients. Some examples of these types of markets are
grain markets, cotton markets, fruit and vegetable markets, and so on.
• Farming produces very little food that is sold directly to clients by the producers. The
bulk of agricultural items are delivered to end consumers through a variety of
organizations, institutions, and distribution networks. Marketing agencies and
institutions are critical components of the marketing system since they are in charge of
a wide range of key marketing responsibilities. The marketing channels for agricultural
commodities in India have experienced tremendous change, both in terms of length and
quality. Food sold in later months frequently goes through a longer procedure than food
sold shortly after harvest since it must travel a longer distance.
• Large farms, on the other hand, often sell their products at the central market, followed
by wholesale distribution of the items. Mobile merchants are mobile merchants that go
from village to village bringing farmers the essential materials. They consider all
relevant factors, such as shipping costs, market fees, and their own profit margin, and
may provide a price that is lower than the usual in the surrounding market. 'Arhatias'
are the most significant of all the functionaries that are located in bid mandis.
• • The middlemen's group recommends "under cover" selling since sellers must keep
their conversations private. Businesspeople nowadays want private talks. Auctions are
superior than covert methods since buyers and sellers compete. Contract farming will
transform the agriculture market. Farmers lease a portion of their land to businesses.
They provide farmers seeds and fertilizer. The business company collects the crop's
complete yield at a fixed price.
• Seasonal weather limits food production. Storage activities may occur everywhere in
the distribution chain, from production to consumption. Classification and grading
assist categories objects by size, quality, color, weight, etc. This simplifies pricing and
implies fair returns for producers and high-quality products for customers.
7. GLOSSARY
• Agriculture produce - All processed and unprocessed goods resulting from
agriculture, horticulture, apiculture, sericulture, livestock, livestock products, forests,
etc. are included.
• Sorting - Different from grading, which is a quality classification based on commercial
value, end use, and regulatory requirements, sorting is a physical separation of raw
materials based on weight, size, shape, density, photometric property, and so on.
• Rabi, Kharif and Zaid crops - Winter crops are often referred to as rabi crops.
Monsoon crops are often referred to as Kharif crops. Zaid crops are grown throughout
the summer months.
• Perishability - Perishability is the attribute of a food, beverage, or other product that
causes it to expire or deteriorate quickly. Perishable foods must be consumed fresh in
order to be safe.
• Wholesale markets - Wholesale is the practice of selling goods to retailers in greater
numbers than are purchased by manufacturers but in smaller amounts than are sold
directly to consumers.
• Mandi - The mandi is essentially a market area where farmers sell their goods to
purchasers via the system of auction.
• Arhatia - The term "arhatia" refers to a person who does trade on behalf of other
individuals.
• Contract Farming - Contract farming is the practise of growing crops and raising
livestock for market under the conditions of a written agreement between a buyer and
a group of farmers.
8. TERMINAL QUESTIONS
1. What is the advantage of sorting in agriculture?
2. Distinguish between perishable and non-perishable good?
3. What do you mean by agricultural market?
4. What is the difference between retailer and wholesaler?
5. Explain the importance of marketing channels?
6. What is the role of Mandis?
7. What are the characteristics of an auction market?
8. Explain the benefits of contract farming.
9. What is the exchange functions of agricultural marketing?
10. What is storage function in agricultural marketing?
9. ANSWERS
Answers for Self-assessment questions
1. a. high rate of deterioration
2. b. inelastic demand
3. d. all mentioned products
4. d. farming, forestry, fishing, and hunting
5. c. supply and demand
6. c. lengthier distribution
7. a. large-scale farming
8. a. buyers who acquire items either on their own behalf or on commission from the seller
9. d. auctioneer
10. c. classification and grading
2. Non-perishable commodities have longer shelf life and may be stored at room
temperature, but perishable goods rapidly deteriorate or "go bad" if they are not kept
at certain temperatures.
3. Agricultural marketing is the process of assembling, storing, processing, transporting,
packing, grading, and distributing various agricultural goods across the nation. The
agricultural marketing system connects the farm and non-farm industries.
4. A wholesaler purchases the product in large quantities directly from the producer and
then sells it to a retailer, who in turn sells it to the end-users. The primary objective of
a wholesaler is to sell products to corporations or retailers, who then resell those
products to end customers.
5. Marketing channels are important for determine the best way to contact a demographic
and ensure that items are delivered to their intended receivers. Outsourcing to a
channel may result in time and cost savings.
6. The Mandi is essentially a marketplace where buyers and sellers interact via the use of
auctions. Farmers bring their goods there to sell. The commission agents and
middlemen at the mandi, who are required to have licences and are each assigned a
shop inside the market, act as facilitators for the auction.
7. A market that is called an auction market is one in which buyers and sellers put
competitive bids at the same time. A share of stock's trading price is the average of the
highest price a buyer is willing to pay and the lowest price a seller is prepared to accept
for that share of stock.
8. Contract farming aims to benefit both farmers and agro-processing firms. It ensures
higher-quality produce, financial aid in cash or kind, and technical training for farmers.
It also ensures a consistent supply of high-quality agricultural goods at a reasonable
price.
9. Buying and selling are mutually beneficial behaviour that cannot exist in isolation. The
process of creating interest or demand, discovering a buyer, educating the buyer, and
lastly negotiating a change of ownership with the buyer is known as selling. The
purchasing position include identifying new sources of supply, assembling
commodities, and performing other responsibilities linked to the purchase of products,
raw materials, and so on.
10. The stage of the post-harvest system known as "storage" is the one in which the items
are stored in such a way as to provide food security even during periods when
agricultural production is not taking place. This phase is referred to by the name
"storage." During this stage, the goods are kept so that they do not go bad as a result of
the process.
Questions
Books Recommended:
1. Kashyap Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications. 3rd
Edition, 2016
2. Mishra and Puri- Development Issues of Indian Economy Himalaya Publishing House,
39th Edition, 2021
Website Referred
• https://www.indianretailer.com/article/retail-business/retail-trends/how-fmcg-
companies-are-strengthening-rural-distribution-network-to-combat-low-consumer-
sentiments.a7091
• https://www.nabard.org/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 11
Agricultural Marketing Risks
Table of Contents
Fig No /
SL SAQ /
Topic Table / Page No
No Activity
Graph
1 Introduction - -
3
1.1 Objectives - -
2 Marketing Agencies - -
4-9
2.1 Agricultural Marketing Agencies - -
6 Summary - - 22-23
7 Glossary - - 24
8 Terminal Questions - - 25
9 Answers - - 25-27
1. INTRODUCTION
There are a number of problems with the way that agriculture in India is marketed.
Therefore, the Indian farmer does not get a reasonable price for his produce. Warehouse
space that is up to par is hard to come by in rural areas. Farmers are forced to keep their
goods in pits and mud-vessels. These illogical storage techniques result in significant waste.
Agricultural output of many types is not adequately assessed. Farmers that produce higher-
quality crops are not guaranteed a higher price. Only a few villages are linked to mandies by
railroads and good roads. Even though the price achieved in these marketplaces is far lower,
the farmer is forced to discard his goods. The country has a significant number of
uncontrolled marketplaces. Middlemen and brokers employ unscrupulous tactics to defraud
farmers, taking advantage of their ignorance and illiteracy. In certain uncontrolled
marketplaces, incorrect weights are still utilised. Farmers are often unable to gather
information on specific market pricing in various marketplaces.
1.1 Objectives:
After studying this unit, you should be able to:
2. MARKETING AGENCIES
2.1 Agricultural Marketing Agencies
The term "agricultural marketing" refers to the process of gathering, storing, processing,
shipping, and distributing different cultivated items throughout the country. The marketing
of agricultural goods depends on a number of elements, including supply and demand,
market conditions, and market demand. Farmers were subjected to widespread inaccurate
weighing and account manipulation prior to independence.
While progress has been made, much more work has to be done before India's rural markets
can reach their full potential. Step one was establishing a firm grip on the market and
developing an uncomplicated strategy for spreading the word. The second step included the
logistics of the supply chain: transport, storage, refrigeration, and processing facilities. The
final group includes initiatives like the Public Distribution System (PDS) and Minimum
Support Prices (MSP) for agricultural products.
In business, a marketing agency is a company that works to help other businesses find
customers via various advertising channels. These experts in public relations, sometimes
known as ad agencies or marketing companies, may focus on just one kind of promotion or
use a combination of tactics.
The Food Corporation Act of 1964 was the legislation that led to the establishment of the
Food Corporation of India (FCI). The FCI is responsible for the procurement of food grains
and the efficient distribution of those grains across the country at prices that are affordable
through the Public Distribution System.
Objectives of FCI
• Keeping enough grain on hand for both immediate use and as a safety net so that the
country never goes hungry.
Functions of FCI
The Ministry of Agriculture and Farmers' Welfare established the Directorate of Marketing
and Inspection (DMI) as an attached Office of the Department of Agriculture, Cooperation,
and Farmers' Welfare to carry out agricultural marketing policies and programmes for the
country's integrated development of marketing agricultural and other allied products. This
action was taken to safeguard the interests of buyers and sellers alike. Department of
Agriculture, Cooperation, and Farmers' Welfare is home to the DMI. It keeps the federal
government in constant contact with the individual states.
Functions of DMI
Grading - Grading is a post-harvest technique that involves categorising crops into levels or
groups based on their quality. Promotion of grading and standardisation of agricultural and
related commodities. As an example, AGMARK
Agmark Laboratories - DMI has established Regional Agmark Laboratories around the
nation for the purpose of providing quality certification for various agricultural goods
(https://dmi.gov.in/Default.aspx)
Cold Storage - DMI is highly active in supplying consultation services relating to the building
and management of cold storages. This includes both the design of cold storages as well as
their management. Plans events such as workshops, conferences, seminars, and lectures,
among other things, with the express purpose of addressing concerns pertaining to cold
storages
Meat Food Products - The Department of Agriculture and Markets (DMI) is responsible for
putting into effect the Meat Food Products Order in order to guarantee that the necessary
sanitary and hygienic standards are met with regard to the production, import, and export
of meat food in the nation.
Research - DMI performs a broad variety of surveys for a variety of agricultural product
categories. Grains, oil seeds, vegetables and fruits, essential oils, edible nuts, spices, and
fibres are all examples of things that fall under this category.
The CCI is an organisation that is wholly owned by the Indian government. Cotton that
conforms to international standards that is being marketed. It offers the essential assistance
that is required by each state in the nation that grows cotton. The CCI provides the Indian
Textile Industry with assistance in the acquisition of raw material of an exceptional quality.
Cotton producers get the necessary marketing help that is provided by CCI as part of its
function. Help the farmers by paying them a fair price for their products so they can stay in
business. Cotton is purchased in order to meet obligations related to exports.
JCI was created in 1971 by the Government of India in order to offer the Minimum Support
Price (MSP) to jute farmers in India. JCI was established in order to provide the MSP to jute
growers in India. By offering the farmers a variety of financial incentives and other forms of
aid, it hopes to stimulate growth in the raw jute industry. Assam, West Bengal, Bihar, Orissa,
Orissa, Andhra Pradesh, Pradesh, Tripura, Tripura, and Meghalaya and Meghalaya are the
seven largest jute-growing states, and JCI is functioning there with great success
(https://www.jutecorp.in/)
The JCI safeguards the farmers' interests and prevents them from being exploited. One of its
functions is to provide minimum support prices (MSP). Provides assistance to jute growers,
allowing for improved production in terms of both quantity and quality. Keeping a database
that records information pertinent to the jute business that is being maintained. In the nation
as a whole, it plays a significant part in maintaining stable pricing for raw jute.
In the past, this organisation was known as the Agricultural Prices Commission but has since
changed its name to the Commission on Agricultural Costs and Prices. In January 1965, it was
founded to advise the government on agricultural commodity pricing. It makes
recommendations to the government for MSP for important agricultural products based on
considerations such as the cost of production, market trends, variations in input costs,
demand and supply, international pricing, and other such considerations. On-site surveys
are carried out, and data pertinent to the issue is gathered from the farmers.
The Central Warehousing Corporation is one of India's most prominent and biggest public
storage organisations. The year 1957 commemorates the start of its existence. It has a
storage capacity of about 10.4 million tonnes and a strong network of 482 warehouses
spread throughout the country. Offers a variety of storage alternatives, such as food grain
warehouses, custom-bonded warehouses, and industrial warehouses. This firm offers
clearing and forwarding, transportation, distribution, and other associated services.
Provides consulting services to other organisations in order for them to construct their own
storage facilities.
It is an organisation that operates on a national level and was founded in the year 1988. In
order to facilitate the development of a robust distribution network, it serves as a body that
coordinates the activities of each of the state agricultural marketing boards.
It is cooperating with the Central Government and the State Governments in order to protect
the interests of the merchants, the consumers, and the producers. fostering the interchange
of information at both the national and international levels providing a central meeting place
for all of the parties involved in the matter Putting on a variety of workshops and
conventions specifically for its members.
It was officially established on the joyous occasion of Gandhi Jayanti, which happened on
October 2nd, 1958. The Multi State Co-operative Societies Act allows Nafed to be registered
as a cooperative. The goal of establishing Nafed was to promote cooperative marketing of
agricultural goods for the benefit of farmers. The bulk of Nafed's members are agricultural
producers, and as such, they have a say in how the organisation operates via their
participation in the General Body.
In India, a major national organisation dedicated to the agricultural and cooperative sectors
is the National Cooperative Development Corporation (NCDC). The NCDC was created under
the National Cooperative Development Corporation Act of 1962.
Functions of NCDC
The National Cooperative Development Corporation (NCDC) Act has expanded the
corporation's financial basis as well as the scope of its operations, allowing it to provide
assistance to a wider variety of cooperatives. Now, the Corporation may now go in for direct
financing of projects under its different aid programmes, provided that the necessary
requirements are met. This option was previously unavailable. The cooperative societies at
the elementary and secondary levels, as well as those at the national level and other
organisations with objectives that extend beyond a single state, are eligible for loans and
grants that are provided by the federal government to the state governments.
NCCF was founded in 1965 to serve as the country's apex organisation for consumer
cooperatives. It is governed by the Multi-State Cooperative Societies Act of 2002. It works
via a network of 24 branch offices spread around the nation. The NCCF headquarters are in
New Delhi. NCCF's management is vested in the Board of Directors. The General Body has
the ultimate power in the NCCF. Except for those reserved for the General Body, the Board
of Directors executes all of NCCF's functions. The Board of Directors currently has a
sanctioned strength of 21 members (https://nccf-india.com/)
In addition to providing consumer cooperatives with technical guidance and assistance, the
primary mission of the National Cooperative Business Foundation (NCCF) is to provide
supply support to consumer cooperatives as well as other distributing agencies so that
consumer goods can be distributed at prices that are both reasonable and affordable.
The discipline of scientific marketing may be better understood with the assistance of data
mining. It's possible to get information like a customer's income level, their internet activity
habits, and other things like that. It is possible to develop specialised reports, such as those
that determine an organization's major target market for a product. Individuals who are
more likely to make a purchase may be targeted specifically by marketing campaigns.
• Marketing activities that use a scientific approach are repeatable, predictable, consistent,
and institutional. These characteristics may not be "attractive," but they are critical to a
company's bottom line.
• Marketers may replicate the success of a new product launch, price plan, or campaign by
using a repeatable technique. Furthermore, with institutional programmes, businesses
become less reliant on a single individual and may harness a high degree of institutional
knowledge with both old and new personnel at any time.
• Marketing as a science requires knowledge of data analysis and interpretation errors. It
involves critically assessing data, its source, quality, context, and different
interpretations. It's about minimising biases to make wise judgements with incomplete
information in an uncertain environment.
• Finding market and customer behaviour patterns is fundamental to marketing as a
science. Here, data science is put to use in order to probe the depths of the marketing
database. The key is to distil these patterns into testable models and hypotheses.
However, knowing the likelihood and constraints of the patterns is also crucial.
• • Incorporating ideas from other scientific and technological fields including psychology,
economics, computer science, neurology, biology, industrial engineering, anthropology,
sociology, and so on is essential to marketing's status as a science. It requires an attitude
of openness to new ideas while critically assessing their accuracy and utility, and the
incorporation of the findings of other scientists and engineers into the marketing
environment.
• Marketing as a science entails conducting well-controlled experiments to evaluate
theories. It is about creating excellent experiments that is at the core of the scientific
process applied to any field. It is all about selecting valid hypotheses to test and reducing
confounding factors in such tests. Uncontrolled effects are unavoidable in real-world
marketing trials.
• The bulk of agricultural products are produced during certain seasons yet must be used
all year. Warehouse management should be enhanced to guarantee that such items are
delivered consistently. To mitigate price volatility and minimise losses, many pricing
schemes might be implemented. Retailers may save money by avoiding middlemen and
purchasing directly from farmers. Farmers will benefit from agricultural product
classification based on rational principles.
• Agricultural marketing's essential characteristics include the purchasing and selling of
perishable goods, continuous demand, fluctuating pricing, the employment of
intermediaries, an elastic supply, and so on. Farmers may earn a big profit by
scientifically storing supplies and distributing commodities in times of need.
SELF-ASSESSMENT QUESTIONS – 1
The following are some of the risk management tactics that, if implemented, might reduce
the likelihood of adverse events happening:
a. Reduction in Physical Loss:
• Use of materials that are fire resistant in the storage buildings to reduce the risk of
accidents caused by fire;
The purpose of the specialised refinancing package that NABARD designed for use with
contract farming agreements was to encourage an increase in the production of commercial
crops and to facilitate the development of marketing channels for the farmers. The following
is a list of the numerous measures that NABARD has launched in this direction:
• Financial Interventions
• Special Refinance package for funding farmers for contract farming
• Facility for repayments throughout the term of the loan
• Establishment of a more expensive scale of financing for crops grown under contract.
• In addition to covering medicinal and aromatic plants, the refinancing programme
should be expanded so that it may fund farmers engaged in contract farming outside
of agricultural enterprise zones
• Under the umbrella of the Automatic Refinance Facility, the Refinance programme
will now also include contract farming.
6. DISTRESS SALES
Since there is no infrastructure for agricultural marketing, farmers are frequently forced to
sell their crops at low prices out of fear that they may spoil or to pay off a looming debt. This
is referred to as a "distress sale." Farmers sometimes suffer greatly as a consequence of these
transactions since they not only get a low price for their products, but they are also duped
by the use of forged weights and charged a high fee. In addition to this, farmers are often
charged a large fee.
vii. The need for Technology has the potential to lead to an increase in production. Drip
irrigation is one example of a technology that might be used more effectively to achieve
considerable improvements in water consumption efficiency.
viii. There are many small farmers who cannot leave farming since there are not enough
opportunities in other businesses. As a consequence, supporting businesses such as
horticulture, food processing, poultry, and so on must be promoted.
ix. In order for farmers to obtain economies of scale, they have the option of voluntarily
teaming together and pooling land. Farmers that band together to combine their
businesses may be able to realise economies of scale in the buying of supplies as well as
the selling of their products.
x. In agricultural policy, millet, pulses, fruits, vegetables, livestock, and fish should be
prioritised above rice and wheat, which have historically been the principal crops in
developing nations. Better pricing for farmers is contingent on the creation of a national
market that is competitive, stable, and unified at the same time.
SELF-ASSESSMENT QUESTIONS – 2
7. SUMMARY
• Indian agriculture marketing has improved but still requires better management.
Before independence, farmers were misweighed and cheated. The FCI procures and
distributes food grains nationwide. DMI examines several agricultural product
categories. Plans cold storage-related workshops, conferences, seminars, and lectures.
• The 1965 Commission on Agricultural Costs and Prices (CACP) advised the government
on important agricultural product pricing. The Central Warehousing Corporation has
482 warehouses nationwide and a 10.4 million-tonne storage capacity. The National
Cooperative Development Corporation (NCDC) is a major Indian agricultural and
cooperative organization.
• NafED's General Body is dominated by agricultural farmers. The National Cooperative
Development Corporation (NCDC) Act extended the corporation's finances and
activities. Consumer cooperatives' national apex organization, NCCF, was created in
1965. It has 24 branch offices nationwide.
• The difference between a farmer's total production and the quantity of that commodity
consumed by the farmer for his personal needs is referred to as marketable surplus.
The quantity of accessible excess that may be sold has a direct relationship to the
degree of consumption that individuals have. There is both a positive and negative
element to the link between the two, and it depends on which time frame one is
considering. The term "scientific marketing" refers to the study and implementation of
marketing activities and the influence such efforts have on the behaviours of customers.
Marketing as a science is concerned with identifying trends in the market and in
consumer behaviour. It entails learning from the past, breaking down marketing
successes and failures into their constituent elements, and using the information
gained as a consequence.
• Inbound marketing may connect with marketers and deliver measurable results in
ways that traditional marketing cannot. Marketing as a science involves incorporating
concepts from various scientific and technical disciplines, such as psychology,
economics, computer science, neurology, biology, industrial engineering, anthropology,
sociology, and so on. It is all about selecting valid hypotheses to test and reducing
8. GLOSSARY
• Marketing Agency - In business, a marketing agency is a company that works to help
other businesses find customers via various advertising channels. These experts in
public relations, sometimes known as ad agencies or marketing companies, may focus
on just one kind of promotion or use a combination of tactics.
• Grading - Grading is a post-harvest technique that involves categorising crops into
levels or groups based on their quality.
• Cooperative society - Cooperative societies are created with the intention of assisting
its members. This sort of business organisation is founded mostly by the economically
weaker sectors of society in order to avoid oppression from the economically stronger
segments of society.
• Marketable surplus - The term "marketable surplus" refers to the quantity of a
commodity produced by a farmer that is not used by the farmer himself. To put it
another way, it refers to the proportion of the overall crop that the farmer sells at the
market.
• Scientific Marketing - The word "scientific marketing" refers to the systematic
analysis and execution of marketing operations, as well as the impact such efforts have
on consumer behaviour.
• Contract Marketing - Contract marketing is agricultural production that is carried out
in accordance with the provisions of a written agreement between a buyer and farmers
outlining the procedures to be followed in producing and selling a certain crop or crops.
• Distress sales - A sale staged to fund raise for emergency costs, generally giving items
at a significant discount in exchange for cash payment.
9. TERMINAL QUESTIONS
1. What is the importance of agriculture marketing?
2. What are the significant Functions of FCI?
3. Explain the significance of Marketable surplus?
4. What are the types of risks in agriculture marketing?
5. How to reduce the price risk of agricultural products?
6. Explain the advantages of contract farming?
7. What is the role of NABARD in contract farming?
8. What is the cause for distress sales by farmers?
9. Explain the NAFED Roles and Responsibilities in agricultural marketing.
10. Summarize the functions of Directorate of Marketing and Inspection.
10. ANSWERS
Answers for Self-assessment questions
1. d. minimum support prices
2. b. procurement of food grains
3. c. market intervention
4. b. paying them a fair price
5. c. MSP - Minimum support price
6. d. risk
7. c. physical risk
8. d. financial risk
9. a. large-scale monoculture farming
10. a. political disagreements between the center and the states
2. The Food Corporation of India (FCI) is responsible for implementing the food policy set
out by the government of India, as well as buying foodgrain from farmers at the
minimum support price and distributing it to consumers.
3. Surplus agricultural goods often give birth to alternative industries and opportunities
for farmers to increase their income and enjoy a better life. In certain circumstances,
having excess farm goods leads to higher wages for agriculturists and the dependability
of purchasers on the farmers
4. Agricultural marketing is subject to three categories of risks: physical risk, price risk,
and institutional risk. The physical risk is the loss of product quantity and quality
during storage and transportation. In reaction to market circumstances, prices may
increase or decrease. Tax laws, chemical use restrictions, and waste disposal
regulations are examples of governmental actions that may have a big influence on
agriculture.
5. Contract farming, trading on forward and future markets, speculating, and hedging may
all help farmers hedge against price fluctuations. If a farmer or dealer wants better
outcomes in agricultural marketing, they need to learn about risk management and use
the principles they've learned.
6. Contract farming contributes to our country's economic worth in comparison to other
nations. Contract farming decreases rural unemployment since more farmers are being
paid and enjoying a comfortable lifestyle. Farmers have an assured market because to
Contract Farming, which boosts their capacity to produce. For optimal output, the firm
supplies farmers with high-quality items such as breeds and consultants that supply
farmers with effective counsel.
7. NABARD has created a specific refinancing package for contract farming with the goal
of increasing commercial crop output and providing farmers with marketing
opportunities. The package comprises 100% refinancing of disbursements, the
establishment of a greater scale of funding for commodities grown under contract
farming, and the inclusion of medicinal and aromatic plants.
8. A distressed sale occurs when the seller faces a difficult position. Due to a lack of
agricultural marketing infrastructure, farmers frequently sell their crops at low prices
to avoid spoilage or pay off debts. Farmers lose a lot because they receive a low price,
are cheated by bogus weights, and pay a high charge.
9. NAFED help partners, cooperative institutions, and affiliates sell and trade
agricultural/other commodities, articles, and products. It builds and own godowns and
cold storages as a Warehousing Act warehouseman. It promotes its member
institutions, government, interstate, and international trade. NAFED has broad powers
like build storage facilities for Indian and foreign products. Establish processing
operations for horticultural, agricultural, forest, wool, and associated goods. encourage
market information and research.
10. DMI work includes grading crops after harvest divides them by quality. Agricultural
commodity grading and standardization. Cold storage consulting is DMI's specialty.
Cold storage design and management are included. organizes workshops, conferences,
seminars, and lectures to solve cold storage issues. To ensure that meat food
manufacturing, import, and export meet sanitary and hygienic requirements, the
Department of Agriculture and Markets (DMI) implements the Meat Food Products
Order. DMI conducts several agricultural product surveys. Grains, oil seeds, vegetables
and fruits, essential oils, edible nuts, spices, and fibers are examples.
(https://duniakagyan.com/top-contract-farming-companies-in-india/)
Questions
i. In what way, the contract farming help Dabur?
ii. ii. How contract farming will support the farmers in long-run?
Books Recommended:
1. Kashyap Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications. 3rd
Edition, 2016
2. Mishra and Puri- Development Issues of Indian Economy Himalaya Publishing House,
39th Edition, 2021
Website Referred
• https://fci.gov.in/index.php
• https://dmi.gov.in/Default.aspx
• https://cotcorp.org.in/?AspxAutoDetectCookieSupport=1
• https://www.jutecorp.in/
• https://cacp.dacnet.nic.in/
• https://cewacor.nic.in/
• http://www.cosamb.org/
• https://www.nafed-india.com/origin-nafed
• https://duniakagyan.com/top-contract-farming-companies-in-india/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 12
Rural Consumer Behaviour in Marketing
Research
Table of Contents
Fig No /
SL SAQ /
Topic Table / Page No
No Activity
Graph
1 Introduction - -
3
1.1 Objectives - -
10 Glossary - - 34 – 35
11 Terminal Questions - - 35
Answers for Self-assessment questions, Terminal
12 - - 36 - 37
Questions
13 Case Study - - 38 - 39
1. INTRODUCTION
Research in rural marketing examines the whole scope of issues involved in bringing a
product to market in less-populated areas, including the development of the product itself,
the state of the market, and the efficacy of various channels of distribution and sale. Given
the relative youth of India's rural market compared to its more established urban
counterpart, there is an urgent need to learn about and respect the country's rural
population's values and customs. A better understanding of the demographics,
psychographics, and behaviours of the rural market might help businesses succeed.
Generalizations about rural India's culture, language, and way of life are unattainable.
1.1 Objectives:
After studying this unit, you should be able to:
There is a widespread notion that rural residents do not buy brands. The notion that rural
buyers buy low-priced items. In reality, consumers want excellent value for their money. The
rural market is assumed to be a homogenous mass. In truth, it is quite diversified. Rural
customers vary fundamentally from their urban counterparts, and diverse rural geographies
exhibit significant variety, necessitating rural-specific and region-specific strategies.
When buying in the city, a person has the freedom to make their own decisions. Decisions
are often taken jointly in villages due to the strong social structure that takes caste into
consideration and the low literacy rate. Many barriers lie in the path of enterprises
attempting to enter the rural market. Knowing your customer is the foundation of marketing.
Most rural businesses fail as a consequence of failing to recognise this key notion.
i. Customers in rural regions are more concerned with the usefulness of the goods than
with the brand's reputation. The market prefers one-of-a-kind things that are both
inventive and helpful. Customers in the neighbourhood are more concerned with
appearance than utility. They choose things that do not have a lot of frills and focuses
on durability. It is all about achieving the greatest potential result straight quickly for
them.
ii. People in rural areas are more likely to respond to products that align with their
religious values and cultural standards. They are on the lookout for things that may
improve their standard of living and work. They do not care to stand out from the
crowd. They value family possessions more than individual ones. Products that may
significantly improve their way of life are a top priority for them.
iii. Customers in rural regions are price sensitive and are heavily influenced by the prices
at which products and services are supplied. The most important factor influencing
their buying decision is the price. They buy goods that are in the middle between being
affordable and of ordinary quality. They are easily convinced to purchase by promising
price cuts and incentives. They emphasize the availability of money. In most situations,
they exhibit a strong desire to postpone payment for an extended period of time. The
possibility to pay in instalments and get loans attracts some rural middle-class
customers.
iv. Promotional efforts conducted locally and regionally are quite efficient in attracting
consumers from rural regions. Their reference groups include both educated and
uneducated members of their families, as well as relatives who reside in urban areas
and countries other than the United States. Personal marketing seems to be more
successful in persuading rural populations. They are attracted in by sales promotional
tools or commodities that are useful in their daily life, such as a knife, a gas lighter, rings,
keychains, caps, photos of local performers, calendars and cards with religious
impressions, and so on.
v. Buyers in rural regions have a high level of trust in their local religious and spiritual
authority. These leaders belong to some of the most important reference groups. They
are influenced by public relations campaigns promoting local vocational and
agricultural activities. Local and regional language visual or graphic advertising has the
ability to attract their attention.
vi. Rural customers often buy from well-known firms and salespeople. They are hesitant
to shop at huge shopping malls or department stores. However, things are gradually
getting better. Relationships are crucial to rural customers. They continue to purchase
at well-known and established retailers with whom they have strong family
relationships. They mostly shop at retail establishments in rural or suburban areas.
However, some rural customers choose to shop in nearby cities as well. They often
place small-size orders. They don't have enough storage space. They are not interested
in home delivery. They need instant possession. They are irritable. They are said to be
eager to get and use the items as quickly as feasible. Store selection is influenced by
caste, religion, political party, connections, and other variables. Online and direct
marketing are not extensively employed in rural areas. A few of them are sometimes
involved in network marketing.
vii. Rural markets, in contrast to urban markets, are more difficult to anticipate and reflect
a diverse set of features. The majority of the inhabitants in this community are semi-
skilled, and they suffer from a lack of consistent revenue, a lack of consistent monthly
income, and a flow of money that varies with the monsoon winds. They do not have a
consistent pattern of reaction as a result of the elements related with their income.
viii. The availability of essential infrastructure such as power, transportation, schools, and
hospitals influences product demand. The majority of rural customers are unskilled or
semi-skilled, conservative, and orthodox. They are content with the present and lack
desire. Customers from rural areas are progressively becoming urban consumers.
elements that influence rural consumer behaviour is critical for marketers since these
factors dictate decisions on product offering, pricing, distribution, media, and message;
in essence, these aspects comprise the "rural marketing strategy." To develop an
effective marketing strategy, it is vital to understand the social and cultural elements
that influence behaviour. The rural markets' traditions were preserved because to the
distant settlements and limited connectivity. Increasing access to metropolitan regions
and disseminating knowledge may lessen the importance of traditions. Consumer
preferences for product features, size, form, and colour demonstrate the effect of
culture.
v. Perspective on Price and Quality
People who are well-versed in rural marketing hold the misperception that a villager
want the same products that his city-dwelling relative gets but simply cannot afford
them. As a result, most organisations will try to save costs by lowering the quantity of
their items or the degree of quality they deliver. This method works in certain
circumstances and with specific types of commodities. People in low-income
neighbourhoods can only afford to pay modest prices, hence small pack sizes sell well
in these regions. There is a chance that a landless labourer will be paid on a daily basis.
He does not have a lot of extra money since he needs to buy meals on a regular basis.
As a consequence, he will buy an item with a low cost per unit. Shampoo sales, for
example, surged once the sachet pack was introduced.
Taking the challenges listed above into account, a rural marketer must meet the
following three requirements: in order to evaluate which medium is most suited to
provide the most geographical reach throughout the country. to generate consumer
profiles that are particular to an area in order to acquire a grasp of the attributes of the
target market. The purpose of this project is to create communication and marketing
strategies that will be most effective and compelling in convincing the target audience
to buy the product.
The Attention, Interest, Desire, and Action (or AIDA) Model is a marketing impact model that
describes the steps a consumer takes before making a purchase.
• Attention: The primary goal of any advertising effort should be to attract the focus of
prospective buyers, thus this should be the first consideration. One of the most
successful methods of attracting customers' attention is known as "disruption," and
it entails causing people to deviate from their usual patterns of behaviour via the
dissemination of a highly imaginative message.
• Interest: Now that the customer is aware of the product or service's existence, the
business must endeavour to increase the consumer's level of interest in the product
or service. The advertisement should be easier to read by using enticing subheadings,
graphics, and a split up body of text.
• Desire: Customers need to be compelled to want a product or service once they have
already shown an interest in it. Changing a customer's opinion requires making them
want the product rather than just like it. Interest in a product or service may be stoked
by effective communication, and it's crucial to help consumers see the "need" for the
product or service in issue.
• Action: The ultimate goal of every advertising effort is to get the target demographic
to do something, like buy the promoted goods. Finally, the advertisement should close
with a comment designed to elicit an immediate response from the target audience.
A "call to action," in other words.
iii. Designing the message
The communicator is able to proceed to the next stage in the process of creating an
effective message after first determining the appropriate response from the audience.
The formulation of the message needs the resolution of five problems: deciding what
to say, how to express it logically and symbolically, determining when to say it, and
deciding who should say it.
a. Message content - The responsibility is on the communicator to choose the
appropriate words to use with the intended audience in order to elicit the desired
response. This approach may be referred to as the USP, theme, concept, or appeal,
depending on who one asks.
Moral appeal - Messages that respect people's evaluative views about fundamental rights
and wrongs may be defined as making moral arguments. Because morals are seen as self-
evident facts, appealing to morality may elicit sentiments of obligation and responsibility.
b. Message Format
A message's efficacy is determined by both its form and substance. The message format
must be basic, brief, and self-explanatory for the rural population. Messages that relate
advantages to product qualities are preferred by rural customers. To advertise their
goods, several rural marketers have created rural, story-based ads using rural mascots.
c. Contextual Relationship
People in rural locations are affected by the communication setup. Rural customers
dislike communications that take place in cities or other locations that are very
different from their daily lives because they are incomprehensible to them. Ads
depicting a distinct or weird world have little impact on rural customers because they
cannot connect to it. In order to engage with rural consumers, marketers must pay
special attention to the rural landscape, how people dress, what they eat, and other
cultural preferences.
d. Message source
The credibility of the message's sender should be taken into account while formulating
a communication plan. It's more likely to be read if it comes from someone the
individual like. Many effective campaigns have used well-known personalities.
Recommendations from locals are crucial in small town stores. Residents of the village
put their faith in the word of their neighbours, friends, and family. High-involvement
items, such as those that last a long time, are discussed with influential people in the
market.
communication. It's up to them how they want to get in touch with one another; it might
be in person, through phone, or through the mail. To avoid the necessity for human
interaction, some people choose to use non-personal communication methods. The
media, the environment, and current events all fall within this category.
v. Preparing a budget for rural communication
A rural marketer's next step is to set a budget for the different forms of communication
after deciding how the message will be spread. The many planned media formats, such
as but not limited to advertising, sales promotion, campaigns at haats and melas, road
shows, wall murals, and so forth, each have a specific budget allotted for them. To
decide how much money needs to be spent and how it should be spent, an objective
analysis of the goals and duties related to communication should be conducted. The
majority of the time, an estimate is made in light of the many activities that a person
plans to partake in as well as the results that person predicts in terms of the levels of
exposure, trails, and usage.
vi. Designing the marketing communication mix strategy
Businesses must decide how to spend their communication budget on advertising, sales
promotion, direct marketing, publicity and image-building tools, personal selling, etc.
They usually combine tools to communicate. Each communication method has benefits
and downsides and prices. These elements are important for marketers to pick the
finest tool.
vii. Measuring the results and impact
The marketer must assess how the communication action affected the audience once
it has been put into practise. The effectiveness and impact of the communication
strategy in rural areas, where most communication takes place through non-
traditional channels, are assessed by contrasting controlled and uncontrolled
situations and locations. The controlled area comprises regions where long-term
rural activation or communication programmes have been carried out. Non-
controlled zones are those where there has been no activation by the marketer. The
number of people that visited retail shops or haats, the number of questions
answered, and the number of transactions done are used to measure the effects of
both areas. The effectiveness of rural non-traditional communication methods is then
evaluated by comparison of these results.
Self-Assessment Questions – 1
1. What is a growing demand for the development of in rural India?
a. rural marketing skills b. agricultural skills67
c. urban marketing skills d. financial skills
their interest in daily sports articles and special supplements, rural youth are
developing as an important cohort of news readers.
iv. Cinema/Theatres - In various sections of the nation, people use cinema to communicate
with one another. Many people in rural regions attend movies in theatres, and short
commercial films and cinema slides may be utilised to distribute product information.
To boost awareness about life insurance, Life Insurance Corporation and other private
insurance firms have begun screening short films in rural theatres.
b. Outdoor media (wall paintings)
Brand names, logos, and the core brand promise may be prominently displayed in rural
areas via the usage of wall murals. They are also a reflection of the thriving local
economy and culture. Lafarge Cement India has used this format in a unique way by
painting its brand logo on the gate arches in rural villages.
Source: https://www.foursquareoutdoor.com/digital-wall-painting
Wall paintings are less expensive than other conventional media types since the human and
infrastructural needs are lower. They are readily adaptable to regional linguistic variances
without compromising their creative essence. The company receives no exclusive wall
rights. There is a scarcity of usable wall space in prominent areas. Painters of bad quality are
also accessible. Hiring local painters is less expensive than hiring painters from outside.
While it may seem that the project has been done on paper, this is not always the case.
Point of Purchase displays and demonstrations are part of consumer sales marketing
and occur at the point of purchase or transaction. Danglers, display signs and boards,
tin plates, display racks, and dispensers are just a few examples. Retailers in remote
locations struggle to keep up with the hundreds of displays, signs, and posters that
corporations send them. This is due to the fact that their storefronts are tiny and offer
a broad variety of items, which makes things congested. Furthermore, many stores
avoid putting up POP displays for regular company items or brands because they want
to promote local or unique products on which they earn more money.
Source: https://www.myhoardings.com/Non-Traditional/Rural-areas-of-Punjab-14376
One of the most efficient techniques of disseminating information in more rural areas
has been the employment of video vans. The bulk of mobile video rental companies
employ sound and video technology, as well as huge LCD displays to broadcast movies.
The vehicle is intended to hold marketing materials such as banners and posters, as
well as product samples and completed products for sale. The vehicle is driven by
experienced persons.
Source: http://arnonmedia.com/mobile-van-advertising-ooh-outdoor-advertising-kochi-
bangalore-chennai-coimbatore/
Retail merchandising and door-to-door canvassing are both activities that may be carried
out by van promoters. People tend to congregate in large numbers close to the van because
it serves as a point of attraction or focal point of attention. This is especially helpful in regions
that may otherwise be inaccessible via more traditional forms of communication, such as
television and radio. The weekly market, fairs, and festivals all have the potential to benefit
from the use of vans.
When the head of the family, who not only has decision-making authority but also controls
the purse strings, is out in his fields, the van usually comes in the morning for promotions.
The cost per individual interaction is rather significant. In comparison to the amount of
people who would be considered the film's intended audience, the number of children who
attend screenings is astronomical.
b. Haats
The best venue to deliver huge messages that are directed toward those living in rural
regions is in a haat. People go to haats in the hopes of finding bargains and discounts,
and as a result, this should be a consideration in how organisations organise their haat
campaigns. Haats often provide tear-off coupons, which may be used to save money on
consumer durables and other things that have a lot of moving components. Live demos
or product samples are essential for selling items since buyers want to try things out
for themselves before making a purchase.
Source: https://www.downtoearth.org.in/blog/economy/reclaiming-retail-democracy-
36133
c. Melas
Melas, or fairs, are a regular element of Indian rural life, organised to celebrate
significant events or to honour a god. Micro melas, which are less cluttered than their
bigger counterparts, cater to a homogeneous clientele, allowing for the creation of
specialised marketing activities. The emphasis should be on melas that continue for a
longer period of time; otherwise, resources would be distributed too thinly.
The haat is where customers are in the purchasing mindset, and where business-like
interactions may be readily recorded. To have any effect at a mela, the same kind of
message must be more grandiose and intermingled with entertainment. In contrast to
a haat, which is mostly visited by men, a Mela may focus marketing messaging to the
whole family. Women have social permission to attend the haat, which marketers may
use to develop face-to-face engagement with females.
d. Mandis
Mandis, like haats and melas, may be an excellent venue for marketers to spread their
message. Where there are no haat marketplaces, such as in Punjab and Haryana, the
network of mandis is particularly strong. People that sell tractors, fertiliser, and other
long-lasting items utilise this site.
This channel allows marketers to reach out to customers who have cash on hand and
are ready to spend.
Source: https://www.thehindubusinessline.com/portfolio/commodity-analysis/apmc-
reforms-will-remain-on-paper-unless-states-extend-support-to-private-
mandis/article31716284.ece
e. Folk Media
The performance art forms of puppetry, street theatre, and magic shows are all
examples of folk media. Other types of folk media include folk music and folk dances.
Interactivity, a strong emphasis on storytelling, and narrative flow are three of the most
distinguishing features of folk media. The requirements and expectations of an ever-
evolving society may be met by the folk media's ability to deliver messages regarding
modern problems, subjects, and concerns.
Source: https://medium.com/@moniskmmj/traditional-folk-media-cba9438c6968
Folk media may be used to promote/promote general concerns that can be readily weaved
into the storyline. People are intelligent enough to see that it is only a commercial promotion;
they do not mind as long as they are entertained. The screenplay and the artists, both male
and female, should be carefully chosen so that no community's feelings are injured. As a
result, the medium used must also be appropriate for the product type. The media selected
should also be compatible with the region's culture.
7. MARKET RESEARCH
The study of the target market is known as market research. It is the act of obtaining
information on the market and its participants. It is used in the determination and analysis
of market structure, size, current trends, important players, customer wants, taste,
preferences, and buying behaviour.
The purpose of market research is to serve as a guide that helps business learn about their
consumers, rivals, demands, goods, and marketplaces, among other things. The research
contributes to the process of assessing whether or not the new product can be successful in
the target market. Product testing is one of the many methods that may be used to determine
the likelihood of a venture's success. It may be carried out either by the organisation itself or
by a third party entity.
• The study of a complete market as well as the behaviour of consumers inside that
market is what is meant by the term "market research."
• Due to the fact that market research focuses only on consumer behaviour and market
characteristics, the scope of this kind of study is restricted.
• The purpose of market research is to get a knowledge of a particular market, which
cannot be extrapolated to other markets since the study is exclusive to that market.
• The feasibility of the product in the intended market is investigated via the process of
market research.
• Research on the market include studying the marketplace as well as the actions of
buyers operating inside that market.
When a company has the desire to learn about the actions and purchasing patterns of
customers in their target market, they will engage researchers to carry out a variety of
research and make use of a variety of instruments in order to get the desired data.
i. Primary research
The researcher maintains direct and continuing contact with the population of interest
while doing primary research. In most circumstances, firms will hire other companies
to do primary market research on their behalf. The researcher's plan and questions
before commencing primary research decide whether the data obtained from that
study will be quantitative or qualitative.
ii. Secondary research
The association of industry, the government, the media, and other organisations are all
examples of secondary research sources. Information gathered from such sources is
often distributed through different media venues such as websites, newspapers,
journals, television channels, radio stations, and so on. It classified them as commercial
sources, academic institutions, and public sources.
iii. Quantitative research
Surveys, focus groups, observation, interviews, poles, online questioners, and phone
surveys are only few of the research kinds and processes that make up quantitative
market research, which is a broad category of research that encompasses a wide range
of research methodologies. The phrase "quantitative research" gives the impression
that the findings of this kind of study are communicated to the audience in the form of
numerical and pictorial data.
iv. Qualitative research
Within a particular market, the study of the elements that impact people's behaviour is
known as qualitative market research. The use of relatively small sample sizes in
qualitative research often enables more in-depth examinations of the topics being
studied. In a market that is run for profit, the goal of such research may be to get an
understanding of the reasons why customers make purchases.
v. Descriptive research
The goal of descriptive research is to accurately and systematically characterise the
population, situation, or event that is being studied. Questions about who, what, where,
and when as well as how may be answered, but inquiries regarding why cannot.
Investigating one or more variables may be done using a descriptive research design,
which enables the use of a wide variety of research approaches. This kind of research
design can be used to investigate one or more variables.
i. Problem definition
The research problem is a knowledge gap that the organization wishes to fill. If it is not
well known, a preliminary exploratory investigation must be conducted. Despite the
fact that certain research questions can only be answered by conducting a new study,
there are instances in which an answer already exists. In such circumstances, it is not
required to do market research since the procedure is expensive.
ii. Establish a Research Strategy
Companies have several market research choices depending on many factors. The topic
of research, financial resources, and most importantly, the problem being examined are
these factors. Research strategies describe a project's approach. Market research
stages, methodology, instruments, objectives, money, and time allocation may be
included in this strategy. To properly construct a strategy, bear in mind the different
market research approaches. Primary or secondary market research uses data from the
first or second source. These two groups may be studied quantitatively or qualitatively.
Quantitative research collects data in numbers, quantities, and percentages. Qualitative
research focuses on intangible facts like emotions, opinions, and behaviours. Organized
and unstructured data are best for analysis nowadays. Depending on the strategy, the
research plan may use a range of methods and materials. Multimodal market research
has grown popular with many firms. In order to maximise the advantages of each
research technique, this approach uses a range of methodologies in sequence.
iii. Data collection
When doing market research, data is essential. This highlights the significance of data
collecting as the first stage of market research. Therefore, the success or failure of the
procedure depends on the accuracy of the information obtained. The characteristics of
high-quality data include its precision, reliability, applicability, exhaustiveness, and
timeliness. Data corruption occurs without any of these safeguards. Collecting relevant
data is essential to running an efficient firm, and this process must be properly
managed. When completed properly, the preceding phases in market research assist
guarantee this. The research issue informs the research strategy, which in turn informs
the sources of data, and the third phase is the selection of the appropriate instruments.
iv. Data analysis
After the data have been acquired, it is necessary to do an analysis on the raw data in
order to get information, which can then be used to gain insights. The investigation of
the data has to be carried out by specialists using specialised equipment. Using
sophisticated technologies like Statistical tools, one can swiftly and automatically
process massive amounts of data.
v. Report preparation
After the research is done, the results need to be compiled and communicated to the
right people so they may be put to good use. Salespeople, managers, marketers, and
support staff all fall within this category. The analysis of the data suggests that the
findings in the study are valid. To avoid confusion, it is crucial to include all important
facts and appropriate comments. It's also important to visualise it so that the relevant
parties can pay closer attention, learn more, and retain more of the information.
India's rural population and economy are vital to the country's success, yet rural residents
continue to have difficulties gaining access to banking services. Financial institutions need
to increase their clientele and capital allocation, and governments should ensure the market
remains competitive in the long run. The term "financial services" is broadly defined to
encompass not only credit goods but also banking, money transfer, and insurance services.
Before independence, moneylenders took advantage of peasants and landless labourers by
lending money at exorbitant interest rates. As a result of the Green Revolution, agricultural
productivity, employment, and income all saw significant increases.
i. Revolving credit
A revolving credit agreement is a kind of credit arrangement in which the credit is
granted by the lender on an ongoing basis. The customer has the right to make use of
credit up to the amount that has been approved as the credit limit.
ii. Fixed credit
It is comparable to a term loan in that the financier makes loans for a certain
amount of time. The amount of the credit must be returned within the allotted time
frame, such as with a monthly instalment loan, hire purchase, or EMIs.
iii. Cash Loan
Banks and other financial organisations make available, through this category of
credit, money that may be used by rural producers to purchase various sorts of
equipment for their own personal or agricultural use. When it comes to cash
advances, the lender and the seller are two separate entities, and the lender has no
responsibility for the actions of the sale.
iv. Secured Finance
The term "secured finance" refers to a situation in which the credit extended by
financial institutions is backed by some kind of collateral. In the case that the loan is
not paid back when it is due, the borrower's collateral might take the form of land
documents, actual property, or any other asset, etc.
v. Unsecured Finance
It is referred to as "unsecured financing" when the customer does not provide any
kind of collateral or security in exchange for the money that is issued by financial
institutions. It is a kind of funding that is fraught with danger.
agricultural sector. Direct finance is given for short- and medium-term investments,
whilst indirect financing is offered for the purchase of items such as grains and
fertilisers. Furthermore, commercial banks provided funding to government
organisations such as the Food Corporation of India and state food agencies for
activities such as food procurement. The State Bank of India created the 'village
adoption project' in order to determine the farmers' credit requirements.
iv. Regional Rural Banks
The Indian government developed regional rural banks to explore the specific needs of
landless labourers, small and marginal farmers, and rural poor people. The regional
rural banks were only concerned with the financial needs of the country's rural
population.
v. Non-Banking Financial Companies
The non-bank financial companies (NBFCs) are another significant source of credit
financing. The Non-Banking Financial Companies (NBFCs) are favoured by rural
producers despite the fact that the interest rates they charge are much higher than the
market rates.
vi. MicrofinanceThe fundamental reason for providing microfinance services is
participation in entrepreneurial activity with the objective of improving the economic
conditions of the poor. The existence of microfinance institutions has a substantial
influence on a country's economic progress. Microfinance, often known as microcredit,
is a kind of banking service provided to persons with low incomes or no other access
to financial services. These persons are thought to be financially disadvantaged.
Microfinance is a strong tool with the ability to drastically reduce poverty while also
providing disadvantaged persons with the resources to attain economic independence.
Microfinance is the practise of providing credit, insurance, financial, non-financial, and
networking services, as well as deposit services, to the poor and low-income persons
who are unable to access traditional financial services owing to a lack of collateral.
Microfinance organisations provide an important contribution to the process of
empowering low-income people.
Self-Assessment Questions - 2
8. People in low-income neighbourhoods can only afford to pay what kind of
prices?
10. Storyboards, role plays, and flip charts are examples of what?
a. self-explanatory visuals b. written reports c. group discussions d. oral
presentations
11. What does the marketer do once the target market and its qualities have
been defined?
a. establishing a pricing strategy
b. developing a product
c. identifying a distribution channel
d. determining communication objectives
12. What is the end result of a marketing campaign to motivate the action
audience to take some kind of action?
a. money b. knowledge c. awareness d. action
9. SUMMARY
• Rural market entry is difficult for businesses. Knowing your consumer is the core of
marketing, and most rural companies fail because they don't realise this. Rural
customers are price sensitive and significantly impacted by product and service costs.
Price is their biggest purchase consideration. Buyers in rural areas trust their local
religious and spiritual authorities.
• They are inspired by local vocational and agricultural PR initiatives. Visual and graphic
advertising in local and regional languages might catch their attention. Online and
direct marketing are seldom used in rural regions. Rural clients are traditional,
conventional, and unskilled. Customers from rural regions are moving to cities.
• In rural regions, urban products may not work. Many rural locations, particularly those
with inadequate energy, suffer regular electrical issues. The rural consumer's
requirements and preferences are influenced by their location. Understanding social
and cultural factors that affect behaviour is essential to creating a successful marketing
plan. Small pack sizes sell well in low-income neighborhoods since people can only
afford modest pricing.
• Rural market shoppers may be difficult to approach. These include low literacy,
inadequate media exposure, and a vast, diversified, and heterogeneous rural audience.
Rural customers are scattered across, making it difficult to contact them. Developing a
rural consumer communication programme involves seven steps: identifying and
profiling the target audience, setting objectives, designing the message, selecting the
communication channels, preparing a rural communication budget, designing the
marketing communication mix strategy, integrating the communication process, and
measuring results and impact.
• Communication should stimulate interest in a product or service and help clients
comprehend why they "need" it. Advertising should be easier to read, with enticing
subheadings, graphics, and split up body text. Understanding rural clients' demands
helps companies succeed. Rural consumers find city communications unintelligible.
Rural consumers cannot relate to ads showing a strange world.
• Analyze communication objectives and roles objectively. Next, rural marketers must
budget for communication. Advertising, sales promotion, haat and mela campaigns,
road shows, wall paintings, and others have budgets.
• Traditional mass media and non-traditional rural-centric media are rural media.
Traditional mass media comprises radio, TV, newspapers, movies, outdoor media like
wall paintings and hoardings, and customised media like point of purchase materials,
direct mailers, etc. Wall murals remind rural people of the business name and emblems
and emphasise the marketing promise. Due to lesser human and infrastructure
requirements, they are cheaper than traditional media. Lafarge Cement India painted
their emblem on remote village gate arches in this fashion.
• Video vans, haats, melas, mandi campaigns, and folk media are some of the best ways
to reach out to people living in rural India through advertising and promotional
materials. The bulk of mobile video rental companies employ sound and video
technology, as well as huge LCD displays to broadcast movies. Haats often provide tear-
off coupons, which may be used to save money on consumer durables.
• Market research studies a specific market and cannot be applied to others. Research
helps determine the new product's commercial potential. Quantitative market research
uses surveys, focus groups, observation, interviews, poles, online questioners, and
phone surveys. Descriptive research describes a population, scenario, or event.
Exploratory research examines undefined issues.
• Information accuracy determines process success. Market research employs primary
or secondary data. Quantitative research gathers numbers, quantities, and percentages.
Qualitative research examines emotions, attitudes, and behaviours. India's rural
population and economy are important to its prosperity, yet rural populations still have
trouble accessing financial services.
• Before independence, moneylenders exploited peasants and landless labourers with
high interest rates. The Green Revolution increased agricultural output, employment,
and revenue. Rural farmers originally received short-term loans from cooperative
credit institutions. Moneylenders dominated rural economic marketplaces like District
cooperative Banks. Despite the public's ignorance about land development banks,
they've made progress.
• Rural producers choose NBFCs even though their interest rates are substantially higher
than market rates. Microfinance organisations empower low-income individuals. India
continues to borrow from local landowners despite bank programmes.
10. GLOSSARY
Buyer behaviour - The term "buyer behaviour" is used to describe the choices and actions
consumers make while making purchases for themselves or others. Any and all marketing
activities are motivated by buyer behaviour.
Social Impact - Social impact is any major or good change that addresses social inequality
and problems. Businesses attain these aims by purposeful and deliberate operations and
administrations
Media exposure - It is possible to describe media exposure as "the degree to which audience
members have come into touch with certain messages or categories of communications and
media content." This is one alternative way to phrase the definition.
Target Audience - The term "target audience" refers to a certain set of people who may be
defined based on their demographics as well as the behaviours that they engage in. When
establishing user personas, businesses often depend on the information they have obtained
about the individuals they want to sell to in order to guide their decisions.
AIDA model - The Attention, Interest, Desire, and Action model is a kind of advertising effect
model that describes the stages that a person goes through on their way to making a
purchase of a product or service. These stages are: Attention, Interest, Desire, and Action.
Mass media - The methods of communication that are capable of reaching vast numbers of
people in a relatively short amount of time, such as radio, television, newspapers, and
magazines.
Outdoor media - Outdoor media refers to any kind of advertising that directly touches
customers when those consumers are outside of their homes. Designed to attract people's
notice when they are out and about.
Folk Media - The term "Folk Media" refers to older forms of communication such as sound,
picture, and sign language. It manifests itself through the use of traditional forms of music,
theatre, dance, and puppetry.
1. Customers in more remote locations are more price-conscious and react differently to
different product and service price points. When making a purchasing decision, the
price is the single most important factor. What they buy is somewhere in the between
of being dirt cheap and being average quality. Offering discounts and rebates is an easy
way to get them to make a purchase.
2. Marketers who want to reach the largely media-dark or media-grey areas, which are
found in rural markets, face a number of obstacles, including low literacy rates,
insufficient media reach and exposure, and vast, heterogeneous and diversely spread
rural audiences characterized by variations in language, culture, and lifestyle.
3. The AIDA model is often used in advertising and promotion to explain the actions taken
by consumers from the time they are initially exposed to a product or brand to the time
they actually make a purchase. A customer's journey from the point at which they
become aware of a product or brand until they make a purchase falls under this
category.
When it comes to FMCG in India, Dabur is a major player. In rural regions, Dabur markets its
goods using a broad number of channels, including as television and radio ads, point-of-
purchase exhibitions, wall murals, melas, haats, video vans, and many other types of sales
activities. The company has divided its offerings between those aimed at metropolitan
consumers, which need specialised sales teams, and those aimed at more rural or niche
areas, which can be served by a single team. Dabur's sales in rural India have been boosted
with the use of ASTRA (Advanced Sales Training for Retail Ascend). Dabur's sales and
distribution system is highly refined, with distinct subsets catering to important grocers,
wholesalers, pharmacists, contemporary retailers, and so on. Training in audio, video,
regional languages, and communication skills will be provided to the sales staff as part of this
initiative, with the intention of enhancing the quality of field implementation. At the
Nauchandi Mela, Dabur presented an innovative branding and tasting approach that was a
first of its type. Sanifresh, the company's brand of toilet cleaning products, was the subject
of a number of different community outreach initiatives. The most prominent of them was
"700 se 7 Kadam," which intended to improve sanitary facilities in rural regions, particularly
for women (Dokhale, 2017).
Questions
1. Philip Kotler - Marketing Management, Prentice - Hall India Ltd. 15th Edition, 2015
2. Agarwal A.N -Indian Economy-Vikas Publication, 40th Edition, 2014
3. Ruddar Dutt Sundaram - Indian Economy- Tata McGraw Hill. Publishers
4. CSG Krishnamacharyulu & Lalitha Ramakrishna - Rural Marketing Pearson Edu Asia.
2nd Edition, 2010.
Books Recommended:
1. Kashyap Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications. 3rd
Edition, 2016
2. Mishra and Puri- Development Issues of Indian Economy Himalaya Publishing House, 39th
Edition, 2021
Website referred
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 13
Trends in Rural Marketing
Table of Contents
Fig No /
SL SAQ /
Topic Table / Page No
No Activity
Graph
1 Introduction - -
3
1.1 Objectives - -
8 Glossary - - 34-35
9 Terminal Questions - - 36
10 Answers - - 36-38
1. INTRODUCTION
In today's competitive economy, every firm is attempting to expand and maximise profits.
Every company has its unique marketing strategy. Marketing tactics fluctuate depending on
the market. Rural marketing methods vary greatly from city marketing strategies. To
continue in business, one must sell to both urban people and rural communities. Rural
marketing is the process of determining what products and services people in rural regions
desire and making them accessible to them in order to fulfil their requirements, enhance
their quality of life, and assist an organisation in meeting its objectives. Rural marketing is a
two-way street in which products and services enter and exit urban and rural markets. It
also encompasses the delivery of products and services to rural regions.
1.1 Objectives:
After studying this unit, you should be able to:
2. E-RURAL MARKETING
The most of India's population resides in the rural parts and villages of the country, which
gives the country its reputation as one of the countries with the most diverse cultural
traditions in the world. People who live in rural regions often rely on sales of agricultural
goods and the standard crops that are grown in their own communities as their major means
of financial support. The rural Indian market offers unrealized potential for most e-
commerce company enthusiasts and aspiring entrepreneurs to take the lead in their own
markets.
i. Present situation
As online shopping has grown more popular over the last several years, there has been a
corresponding increase in rural India in the use of e-commerce. A significant number of
people who can use the internet and have mobile devices are located in India's rural regions.
The Indian government's goal is to provide the conveniences of the internet to those who
live in more remote areas of the country, such as villages and rural communities.
Because having an online presence is essential to the success of a company, every shop
should investigate the possibility of selling their items through various online channels. In
recent years, the nation has seen a significant shift that may be characterised by big e-
commerce behemoths like Flipkart, Amazon, and others pulling back significantly on their
expansion efforts in rural areas or villages. It was now possible for those living in rural areas
of India to undergo the lifestyle change that they had longed for so long. They will be able to
get all brands that are stocked at a single location with no effort on their part.
• Another reason people may be dissuaded from purchasing using online platforms is
because of worries about the safety of making online payments.
• Customers in such region can feel uneasy since there isn't a physical presence there
to reassure them.
• Language is a big barrier since the great majority of e-commerce websites use English
as their main language. Businesses that want to attract customers should consider
designing their websites to accommodate vernacular languages so that they may
communicate with their target audience in their local language.
• Access and transportation infrastructure are especially crucial since they have a
substantial influence on supply chain operations.
• Being available through mobile is equally important, considering that some
individuals living in distant places may not have access to conventional computing
equipment such as PCs and laptops. Even if they do, they may discover that shopping
on their mobile devices is more convenient.
E-commerce operations in rural parts of India are hampered by the widespread availability
of slow and unreliable internet access. Overall, fewer individuals in rural regions have
internet access, which is a huge barrier for the e-commerce industry and threatens its
continued existence there. It's difficult to cope with the aforementioned proportion now, and
we know it will grow in the future.
b. Not trusting
It is well known that a considerable proportion of individuals living in India's rural regions
find it difficult to put their confidence in things offered online. This is because they are
anxious that the things may be stolen or damaged in transportation, that they will have
trouble returning the merchandise, and that they will encounter additional issues. Before
establishing themselves in India's rural regions or villages, any firm must first develop a
foundation of trust.
The absence of suitable transportation infrastructure in the majority of the country's rural
regions is not just another significant but also a more challenging barrier. Products that may
be delivered in a couple of days to an urban area might take several weeks to reach a rural
site. Despite this, one bright light is that internet merchants are developing a better
understanding of India's rural demography. They collaborate with the Indian government
and local communities to capture this very attractive yet untapped market-share in India.
d. Mode of payment
Because the form of payment known as cash on delivery is not accessible in all villages,
business need to raise knowledge of online transactions. This is important because there are
trust issues associated with doing financial dealings online.
e. Poor awareness
A considerable proportion of people in rural India are inexperienced with the processes
needed in making an internet purchase, which provides another challenge for the
organisation. As a result, there must be a mechanism for increasing information regarding
purchasing items via the internet.
Customization is the practise of making goods and services that are uniquely suited to the
needs of each particular buyer, whether via targeted advertising, targeted packaging,
targeted cosmetics, or the development of things that adapt to their environment on their
own.
When it comes to the country's e-commerce industry and its severe competition with
conventional retail locations, this is without a doubt one of the most pressing issues that
suppliers are now experiencing. Many people in developing nations, such as India, prefer to
buy from conventional retail establishments since they can view the items in person before
committing to buy them. Traditional brick-and-mortar retail operations, on the other hand,
provide a distinct experience that cannot be duplicated through online sales owing to a
variety of issues.
• E-commerce in rural India assists merchants and other small-scale industries such as
handicrafts by giving them new ways to sell their products online and a successful
path to build their enterprises.
• Due to the proliferation of internet access throughout rural India, city dwellers no
longer have a monopoly on convenience when it comes to purchasing products and
services. It has created several openings for rural consumers to upgrade their
lifestyles and for online retailers to expand rapidly by meeting the needs of those
living in India's outlying regions.
• India's postal system is well-equipped to establish connections throughout the
country. Building it up has been a joyful experience. It has made itself felt all
throughout India, even remote regions. It's an exciting plan, with e-commerce
companies pledging to help our country become digital through the logistics channel.
For the last two years, Indian e-commerce platforms have coordinated with the
country's postal services to ensure smooth and efficient shipping and delivery.
• E-commerce has caused a social revolution in society, especially in more rural regions
of the globe. Internet users in rural regions are often young, which implies that there
is a new potential among young people to receive more useful items based on their
demands. This not only changes their way of life, but also gives them hope for their
future and opens up new doors.
Amazon Easy is a service that allows e-commerce enterprises to assist its rural customers
with their online purchases by giving them with assistance. The goal of this programme is to
support customers as they begin on their journey into the world of internet purchasing.
Following the adoption of the Amazon Easy brand, store owners could anticipate an increase
in their customer base. Customers may use the Amazon Easy Store service to have things
delivered straight to their homes. Rural customers in India may utilise this facilitated online
shopping platform to purchase a broad range of products from a number of categories, such
as electronics, fashion items, and daily necessities, from any of the Amazon Easy Stores
situated around the nation. Customers who have not yet completely jumped on the digital
bandwagon like in rural India may get the guidance and direction they need from the
employees working in these shops in order to make purchases on the online marketplace
that Amazon operates (Amazon Staff, 2021).
The Amazon Easy shop is a method to reach customers in diverse demographics, particularly
those who do not have access to internet platforms. Additionally, it will reduce the anxiety
associated with making purchases online.
The use of current digital technology is essential for the "rural digitization" process, which
attempts to enhance the economic and social situations of people living in rural regions by
using modern digital tools. It supports the creation of a connected lifestyle for them that is
both convenient and enjoyable. India is one of the biggest marketplaces for digital consumers
and one of the nations with the quickest growth rates. The bulk of this enormous rise in the
digital economy may be ascribed to urban consumer purchasing patterns. Despite this, rural
India has started to participate in the digital economy as the government attempts to
enhance financial inclusion. It is a well-known fact that the introduction of digital technology
in rural India has resulted in a significant increase in the number of technical discoveries and
breakthroughs. People's lives and society as a whole will benefit from this in a variety of
ways, and it will have a positive overall impact.
A large portion of India's GDP comes from rural areas. Despite increased urbanisation, rural
India is expected to continue accounting for a significant share of India's population during
the next decade, with an estimated one-third of the country's population residing there.
Regional variations emerge. While agriculture still accounts for a large portion of rural
income, other industries are rapidly expanding their presence. People in rural India are also
less cut off from their urban counterparts because of the rise of internet access. A sizable
portion of the population in India's rural areas were born and raised with mobile phones,
bringing with them decades' worth of technological advancements.
People's buying power in rural India has improved significantly as a result of increasing
engagement in development activities and better understanding of fundamental demands.
Rural customers, on the other hand, have a strong emphasis on value for money, a deep
affection for local culture, and a more conservative financial approach than urban ones. Their
shopping preferences are often disappointed by the quantity of alternatives readily
accessible. The expanding desires of India's underserved and unreached rural regions may
be satisfied by enhanced accessibility and availability of an increasing number of services
and commodities, which may be made available via the use of digitalization and technology.
The Digital India project is putting enormous pressure on the government in this area.
It is predicted that rural India will have passed up urban India in terms of internet use, and
that rural India will now account for more than half of all Indian internet users. With the
assistance of digitization, some of rural India's most urgent requirements, such as e-
governance, banking and financial services, academic and medical care, mobile and DTH
recharge, e-ticketing services, shopping online, and so on, may be able to be met.
The "brick and click" centers are "one-stop digital stores" for those living in outlying
locations, providing both in-person and online services. In order to meet the ever-changing
demands of people who live in remote areas, these centres have been progressively
expanding their range of services to include banking, financial services, mobile top-ups,
electricity payments, train tickets, online learning, and online shopping. To that end, the
government prioritizes providing access to banking services for all citizens.
The widespread use of financial services is being significantly aided by the vital
contributions made by common service centres. Villagers may simply pay their bills or add
money to their accounts by using the alternatives that are conveniently located just outside
their homes. The Aadhaar-enabled Payment System, also known as AePS, was recently put
into operation to facilitate even more bulk transactions.
providing digital services to their fellow villagers, facilitating speedier uptake of these
technologies.
i. PMGDisha implements the Pradhan Mantri Gramin Digital Saksharta Abhiyan. Digital
literacy for 6 crore rural families is the goal of this Rs 2,351.38 crore project. PMGDisha is
part of the Digital India programme approved by Prime Minister Narendra Modi's Union
Cabinet. The Pradhan Mantri Gramin Digital Saksharta Abhiyan aims to deliver digital
education to 6 crore rural Indians. Because it will cover one eligible individual per rural
family, the initiative will serve 40% of rural families (Overview of PMGDISHA – Pradhan
Mantri Gramin Digital Saksharta Abhiyan, n.d.)
ii. "Digital India" aims to connect rural India to high-speed internet networks. Prime Minister
Narendra Modi launched the Digital India Mission on July 1, 2015, with support from other
government programmes. These include Bharatmala, Sagarmala, Startup India, BharatNet,
and Standup India. The Digital India Mission aspires to deliver digital infrastructure as a
utility to everyone, administer and supply on-demand services, and empower citizens
digitally. The purpose is to equip residents with meaningful digital infrastructure. Digital
India promotes inclusive development in services, commodities, manufacturing, and jobs in
the electronics sector.
Despite significant progress in digitising rural India, government and corporate efforts reach
just a small percentage of the rural population. Governments, regulators, financial service
providers, and fin-tech businesses must work together to realise rural India's digital
potential. Rural India is using smartphones and mobile data more. Big data analytics,
machine learning, blockchain, cloud computing, and artificial intelligence will become more
popular in the next years (AI). These technologies will offer goods beyond cities and towns.
SELF-ASSESSMENT QUESTIONS – 1
1. What do people who live in rural areas often rely on sales of?
a. agricultural goods b. automobiles c. technology d. clothing
2. What have people living in rural areas of India longed for so long?
a. more money b. lifestyle change c. better education d. more technology
3. Businesses that want to attract rural customers should consider designing their
websites to accommodate what?
a. weather patterns b. vernacular languages
c. musical instruments d. currency exchange rates
4. What is a huge barrier for the e-commerce industry?
a. internet access b. lack of product variety c. lack of customer service d. lack
of trust
5. What still accounts for a large portion of rural income?
a. tourism b. mining c. agriculture d. manufacturing
• In spite of the fact that there is a consistent demand coming from rural India, there is still
a gap that prevents rural customers from making the most of the opportunities presented
by online platforms. Rural consumers are price-sensitive and have a relatively limited
income that they may spend freely, which makes them suspicious of the possible failures
that might occur when they purchase things online.
• People are more cautious to buy high-priced things online because they want to view,
touch, and try them out first. Another barrier to the rural populace joining the digital
revolution is the difficulty in obtaining the items. This is because the rural Indian populace
must travel vast distances to have the devices serviced or repaired, which is not only
inconvenient but also very costly.
• Customers in rural locations behave differently than urban people. Rural consumers'
value schemes vary from those of urban customers for a variety of factors, including
disposable income levels, ambitions, demands, education, social set-up, location, and so
on. People in rural regions are also price cautious and have limited spending power. As a
result, having the correct balance of branded and unstructured items is critical.
• Lack of trust in online buying. Customers in rural regions continue to face challenges in
obtaining the products and services they want, despite the fact that their needs are getting
more sophisticated. Customers in rural regions are skeptical about the security of internet
purchases. Another issue that emerges while looking for employment in remote locations
is a lack of awareness of how to utilize the mobile app.
• The construction of basic infrastructure is missing in rural areas. Furthermore, the
development of a link between urban and rural populations comes at a high expense. This
makes e-commerce more difficult to facilitate in rural areas. Weaknesses in the
infrastructure and network that facilitate electronic payment also pose a problem in this
regard.
• The customer's lack of faith in the item being shown to them in online. They have some
worries regarding the dependability of both the brand and the item in issue. As a
consequence, it is of the highest necessity to establish an unshakeable trust through the
execution of efficient marketing and advertising activities. Three dimensional pictures
may be included.
• When customers browse online, they are often not convinced to make a purchase based
just on an image of the item. Before making a purchase, it is common for people to want
to hold the object and examine it with their own eyes. They will not do an online
transaction unless the degree of reliability has significantly improved. E-commerce
enterprises have a duty to demonstrate their appreciation to rural customers; this will
help them create trust in the brand over time and encourage them to join in online trade.
• People are unfamiliar with the online purchasing procedure and hence lack exposure to
it. As a consequence, they believe that due of their lack of exposure, they will overpay or
make errors while making their purchases. User friendly and local language messages
may be included in the company online platform.
• Since there is no one available for consumers to connect with after the purchase, there is
always a question regarding potential complications. It adds to the confusion since the
return policies of various goods and platforms are inconsistent. Proper awareness should
be created for after purchase complications.
• The number of internet users in rural India has risen considerably in recent years.
Individuals living in rural locations may now access E-Commerce brands thanks to lower
smartphone and data plan pricing. However, the titans have yet to capitalize on this sector,
paving the way for small to mid-level E-commerce businesses. Those that get a head start
are more likely to succeed in the long term.
• Another important barrier that first-time customers confront on e-commerce websites is
a lack of knowledge with a certain brand. People have difficulty deciding which alternative
to choose because they lack the knowledge required to grasp the many firms that sell
items in the marketplace. When it comes to purchasing a product, buyers seek information
in order to make the best choice for themselves. Good educational and awareness videos
may be added along with the product pictures to overcome the customer’s hesitations.
Low cost packed products - One strategy to lower the price of a product is to choose
packaging materials that are not only affordable but also sturdy and visually beautiful.
Because people in rural areas may not be willing to pay more for something simply because
it looks nice on the outside, the packaging does not need to be especially sophisticated. They
may utilise minimal packaging because they are more concerned with how long the product
will survive and how helpful it will be. The Britannia Tiger cookie is an excellent example of
this approach. It is desperately needed in rural areas.
Re-usable packs - The availability of refill packs for products enables marketers to add
value price. Refill packs for consumable oils, health drinks, and coffee are offered. Reusable
packs are ones in which empty containers may be reused. The packaging of fertilisers is a
perfect example. Companies have begun packaging fertilisers in LDPE/HDPE bags, which are
not only reusable but also tamper-resistant. These may be transformed into durable
shopping bags by sewing on handles. For truck drivers who need 6.5 litres of engine oil at a
time, the Shell brand of lubricating oil has created a 10-litre pack in an aesthetically pleasing,
reusable container. Asian Paints has also launched 10- and 20-litre recyclable bucket packs
for emulsion.
Small units - This packaging strategy is not just popular in rural regions, but it is also
popular in cities, especially among middle- and lower-income customers. It is currently
widely used by every FMCG company and is successful not just in rural but also in urban
regions. Consumers in rural places have severely restricted access to money reserves,
making huge packs of things impractical to acquire. Individuals who live in rural regions
make extremely little purchases to meet their daily necessities. Many firms now sell their
products in bulk, and some of the items they sell include hair oil, biscuits, and fairness
treatments. These companies have joined the cheap unit pack competition not only to
enhance their chances of breaking into the rural market, but also to urge customers to test
the new brand.
Product Preservation - Because of the irregular nature of power supply in rural areas,
business owners have an additional challenge: ensuring enough storage facilities for
perishable commodities such as ice cream and drinks that must be maintained at a certain
temperature. Cold drinks, ice cream, and other frozen goods may now be stored in ice boxes
supplied by private enterprises by retailers in remote locations. These ice boxes are often
made of thick thermocoal, which not only keeps the things at a steady temperature but also
increases the products' shelf life.
ii. Labelling
A label is anything that offers information about the item that is being labelled in order for it
to be more readily identified. A tag, a mark, or a trademark are all examples of labels that
may be attached to a product or anything else. These labels may be informative, descriptive,
or pictorial. It provides information that is particular and relevant to the product, making it
simpler for customers to recognise and distinguish the product from comparable ones.
a. Labels for Brands - Brand labels are labels that solely feature the name of the product's
brand and nothing else. They contain information about the brand of the goods and may be
removed or left on permanently. The garment industry and soap manufacturing firms benefit
from having personalised labels made since it helps strengthen their brand and
communicates a particular message to their consumers.
b. Labels that provide information - These labels feature product information such as the
maker's name, the dates it was made and when it expires, the intermediaries, and any other
directions on how to utilise the items. Informative labels are more particular than
descriptive ones. It must be in the local language.
c. Labels that Explain - The majority of the information that's included on descriptive labels
pertains to how the product should be used, including its characteristics, handling, safety
precautions, and storage options, amongst other things. In addition, they are used for goods
including grades that are unable to be distinguished from one another. It must be
understandable by their rural customers in their language.
iii. Grading
Grading refers to a method that separates goods into categories that consist of units that
have attributes that are similar to one another. This approach classifies things into categories
that are called classes. It involves categorising things into classes, lots, or groups according
to predetermined levels of quality in accordance with the requirements of the product
specifications. Grading might be used as a tool to help in the process of determining and
maintaining prices that are profitable for the commodities.
The majority of the time, grading is only necessary for products that were not made in line
with certain requirements. When it comes to agricultural products like wheat, mangoes, and
other items of a similar kind, this is often the case. By verifying that objects belong to an
exacting feature and by ensuring that products belong to that feature, grading helps to realise
increased price for high-quality manufacturing.
Grading is the process of categorising individual units of a product into precisely defined
groups or quality ratings. It is the practise of categorising commodities into various groups
based on the number of units with equivalent features. It adds to the process of determining
varied prices for the various commodity categories. A range of characteristics, such as
quality, size, and others, are considered throughout the grading process. Particularly when
it comes to agricultural items that are not produced in accordance with a set of
predetermined norms. The act of splitting food into various lots, each with the same market
quality requirements, is known as "grading."
After a consumer has successfully made an order, the order processing procedure begins,
which includes identifying the things, sorting those items, choosing those items, packing
those items, and moving and delivering those packed items to a shipping carrier. In most
situations, this occurs at many distribution centres. The actions that must be completed
between the moment a customer places an order and the time that order is delivered to the
client are included in the "order processing" procedure.
When developing an order processing system, the following issues must be addressed: The
nature of the product, for example Shipping veggies and garments requires two unique
methods. Some orders are rather huge, while others are quite little. Shipping hundreds of
tonnes of merchandise is not the same as transporting a few kilogrammes of material.
Shipping cookie boxes and milk cans need different processes. The length of time required,
the weight of the products to be shipped, and other variables all contribute to the cost. The
availability of labour and work force also has an influence on the operations. When labour is
scarce, processes must be automated. The seasonal demand for certain commodities varies.
Order processing times vary depending on the season. It is vital to complete orders on time
in order to keep a business going. Maintaining quality is also critical in order to keep clients
pleased.
v. Transportation
Unorganized players dominate Indian logistics. Most freight carriers utilise three to four
trucks. Delivery to remote rural locations is difficult and expensive. Rural logistics has
garnered attention in the last two to three years. People have more money to spend, their
lifestyles are changing, the government is investing in rural infrastructure, and the private
sector is growing rural markets. Rural logistics is an excellent company, but several obstacles
make it hard to succeed. The government's rural growth strategy relies on cold chain and
warehousing facilities. Product, outlet number, and location affect logistics. Most FMCG firms
employ the "hub and spoke" logistics strategy. Some companies have syndicated distribution
to link the final mile cost-effectively.
• The Hub and Spoke System is a network of links built in the shape of a chariot wheel, with
all traffic moving via spokes connecting to the hub in the centre. This improves efficiency
by streamlining the route network. It is also known as the satellite distribution idea, and
it is quickly becoming a powerful and practical paradigm. Stockist locations are
established as a consequence of rising product demand as well as greater market
penetration. New retail points are developed, and some merchants are assigned to the
original stockist while others are assigned to new stockists based on geography, service
convenience, and other considerations. A fixed number of retail locations are always near
to a certain stockist at any one moment, which is why the system is known as the satellite
distribution system.
• If a new company wishes to market its wares to individuals who live in more rural areas,
distribution presents a significant challenge. In this scenario, syndicated distribution is a
novel approach that has shown to be very successful in penetrating rural areas. A
syndicated trade organisation is an organisation that is formed by at least two enterprises
working together. After that, they divide the expenses associated with delivering a set of
home commodities to rural marketplaces among themselves.
Simply defined, the rural sector is crucial to the nation's economic growth as a whole. Over
the last several years, it has been clear that many banking and IT firms are eager to extend
their operations into rural communities. Many companies in the mobile wallet and e-
commerce sectors, for instance, focus on rural areas and use a strategic approach in order to
capture a substantial share of the market. Significant changes in the way the market operates
have been brought about by recent events, such as the demonetization of money and its
effects. Before the demonetization, just a minority of rural customers and merchants used
non-cash means of payment. A large number of people have begun utilising electronic
payment methods once demonetization was instituted.
People are using digital payment interfaces and POS terminals in increasing numbers. The
timing of the rollout of payment terminals was perfect, making the adoption of mobile
wallets a breeze. Broadband expansion into underserved areas and financial incentives for
using the United Payment Interface are two indicators of a sea change toward the adoption
of digital payment systems (UPI). Another significant move is the decrease of the service tax
that applies to digital transactions for e-services provided by the government.
India's financial inclusion relies on digital financial services (DFS). Digital illiteracy impacts
tech adoption. Rural areas lack financial goods and services for the general public,
preventing digital financial inclusion. Bank and fintech products need local languages. For
those who rely on physical transactions, switching to digital may be tough. This population
needs financial institutions and fintech companies to educate them how to use digital
financial services. Correspondents may discuss digital payment advantages. Rural India's
cash-based economy must adopt digital payments for digital financial services to succeed.
Digital payments were popularised by the Prime Minister's Digital India initiative (Shams,
2022).
Since the consumption and production cycles often do not coincide, a storage function is
necessary. Although many agricultural products are produced seasonally, there is a constant
and continuous need for such products. More flexibility is possible with the storage option
in terms of both desired quantities and timing. When it comes to storage, the rural setting
presents particular difficulties. The largest level of public warehousing in our country, which
is comprised of the Central Warehousing Company and State Warehousing, has not yet
extended its network of warehouses into the more rural regions of the nation. It is almost
hard to carry out effective distribution in the interior retail locations due to a lack of storage
facilities. Towns are the only locations with appropriate and scientific storage facilities,
therefore stockpiles may only be held there.
Warehouses' most important and main function is to store products. Warehouses hold all
excess commodities created by businesses until demand for them emerges. It facilitates and
simplifies the tracking of all items, allowing the firm to manage any excess or shortfall of any
commodity on time. It keeps products secure and protects them from harm, fire, and theft,
among other things. Warehouses aid in the regulation of corporate activities. It continually
provides all raw materials necessary by storing and keeping them in vast numbers.
Warehouses strive to provide consumers with assured quick delivery, which makes them
satisfied. It streamlines the product distribution process and gives clients with quick delivery
service.
When printed materials are difficult to get in rural areas, the medium becomes ineffective
and, to some extent, irrelevant. Rural areas in India have substantially lower rates of literacy
than the country's urban districts. The marketers must inform consumers in remote regions
about the items' requirements and possible applications. This is only one of many challenges
they must face.
The advantages of printed materials are far more extensive than is often believed. Print
conveys an air of authority that digital media lacks. It enables the inclusion of visual elements
like as typeface, color, image, and texture, all of which contribute to the development of a
recognizable brand. But it is highly impossible in rural segment
Seasonal demand and low per capita income of the rural people
The average income in rural areas is much lower than in metropolitan areas. Because of
inequalities in land ownership, rural income is distributed unequally. Therefore, there is a
great deal of diversity among rural populations. Marketers in rural areas have difficulties
due to the fact that seasonality affects 75 percent of rural revenue. The increased purchasing
power of rural residents during harvest drives up demand for consumer products. The
income and spending habits of rural consumers set the pace for the market.
So, marketers found that it's harder to sell high-value products in rural areas. People's
income will be affected by a bad monsoon. People may have to deal with pain in their
everyday lives.
In the rural, people are slower to adapt new ways of doing things and are more impacted by
established customs. People in rural areas place a higher emphasis on actual knowledge and
expertise than on academic credentials, therefore salesmen who can provide concrete
solutions are highly sought after.
The customs and culture of people present a barrier to the process of adjusting them to new
ways of life and to the introduction of new goods and services. Still, opinion leadership has a
significant impact in the behaviour of individuals living in rural areas.
Consumers in rural regions are more prone to be cautious and to make slower decisions.
They like to try the product first, and only after they have concluded that it fits all of their
requirements do they make a purchase.
This type of slow decision will have a significant impact on any marketer's promotional plan
and costs. Even if they wait for a persuaded consumer, their seasonal income and purchasing
habits are likely to influence their decision.
In remote areas, neither the government nor private businesses have invested in storage
facilities. It is suggested that businesses using rural markets use cheaper packaging
materials. Distributors at the district level, stockists in the districts, and company-owned
depots at the state level are all necessary for an effective distribution system.
The warehousing issue may make it difficult to reach the rural population quickly. It will very
certainly incur additional costs in terms of logistics.
The first step for the company is to do a needs and expectations analysis for its rural
customers. Rural customers get a one-time payment in the form of a lump amount twice a
year while the agricultural cycle is in effect. There seems to be a possibility that a product
that does well in the urban market will not do as well in the rural market. To cater to the
requirements of customers in rural areas, the item in question had to be sold at an affordable
price and packaged in small numbers.
AMUl distributes dairy goods like as curd and ghee that come in either a half-litre or a one-
litre container to the markets that are considered to be urban and semi-urban respectively.
Customers in rural regions are more price sensitive than those in urban areas, which may
explain why there has been a considerable growth in demand for such things in pack sizes of
Rs 20 and Rs 10 in recent years.
In order to sustainably increase demand for their product in rural areas, the marketer must
maintain a constant flow of inventory to the markets there. Fares, farmers markets, Sunday
markets, and feeder markets are all examples of local markets that may be found in more
remote areas. Fair-priced government-run stores in rural areas provide basic requirements
and long-lasting items at affordable costs.
Common Service Centres (CSCs), an eGovernance programme run by the Indian government
in rural areas, has started a new programme to build a cash-and-carry distribution network
throughout the country. To satisfy the needs of virtual learning environments (VLEs), a CSC
cooperative society will be established in each district. These groups will establish a digital
infrastructure that links all of the area's rural communities, and they'll serve as hubs for the
distribution and collection of goods and the organization of related services and
infrastructure (https://csc.gov.in/)
"Khushiyon Ki Doli" is HUL's most recent brand-building campaign in rural India. The
campaign's major goal is to raise awareness via the use of technology and to engage the
general public. Four sets of dolis or palkis are being relocated about the hamlet. These LCDs
display advertising for a variety of HUL's goods (What Is Rural Marketing? Strategies of Rural
Marketing in India | Sales & Advertising, 2022)
videos, short films, posters, and artworks in various sites promote the company. Rural
customers love vivid colors and pictures, so wall paintings are great advertising. Rural folks
look up to TV stars and models. Thus, TV advertising must include famous individuals to
promote the company.
Initiative by HUL
Hindustan Unilever Limited (HUL) pioneered training rural women to market Unilever
products door-to-door through its Shakti programme. Rural sales representatives sell
Unilever items to locals. By 2015, 70,000 sales representatives serviced 165,000 Indian
communities. HUL gave these sales representatives smartphone apps for inventory and
other company management (How Unilever Reaches Rural Consumers in Emerging Markets,
2016).
Source: https://twitter.com/hul_news/status/1027170059372949504
Initiative by ITC
With e-Choupal, ITC has launched the biggest internet-based intervention to date in rural
India. Trained local farmers oversee the kiosks, ensuring that the agricultural community
may use them to get access to information in their own tongue. Farmers have been able to
increase production, enhance quality, mitigate risk, and increase earnings because to the
easy accessibility of relevant information and services (ITC e-Choupal - Empowering Indian
Farmers, n.d.)
To avoid falling into the trap of tokenism while engaging in multicultural marketing, it is best
practise to show respect for the many religions and cultures that make up the audience. In
order to accomplish this goal, one would need to become well-versed in the complexities of
the target demographic and adjust the message appropriately, just as one would if working
with any other kind of audience.
When it comes to the rural market, marketers need to implement a full-fledged plan in order
to compete. It is possible that it may not be lucrative during the early stages of the project,
but in the long term, it will provide a decent return for the organisation.
India has the potential to take the lead and capitalise on our one-of-a-kind advantages in the
areas of technology, data volume, diversity, and skill. While the Amazon Alexa virtual
assistant is only accessible in English and Hindi, Google Assistant is available in nine different
Indian languages. They will discover more supporters of their technology when they expand
into regional markets since more individuals will embrace it. Marketing in rural areas will
benefit from this more.
SELF-ASSESSMENT QUESTIONS – 2
7. SUMMARY
• The majority of India's population lives in the country's rural areas and villages. A
significant number of people who can use the internet and have mobile devices are
located in India's rural regions. Rural Indian market offers unrealized potential for
most e-commerce company enthusiasts and aspiring entrepreneurs to take the lead in
their own markets. E-commerce operations in rural parts of India are hampered by the
widespread availability of slow and unreliable internet access. Before establishing
themselves in India's rural regions or villages, any firm must first develop a foundation
of trust.
• Products that may be delivered in a couple of days to an urban area might take several
weeks to reach a rural site. E-commerce has caused a social revolution in society,
especially in more rural regions of the globe. Traditional brick-and-mortar retail
operations provide a distinct experience that cannot be duplicated through online sales
owing to a variety of issues. For the last two years, Indian e-commerce platforms have
coordinated with the country's postal services to ensure smooth and efficient shipping
and delivery.
• The introduction of digital technology in rural India has resulted in a significant
increase in the number of technical discoveries and breakthroughs. People's lives and
society as a whole will benefit from this in a variety of ways, and it will have a positive
overall impact. Rural India is expected to continue accounting for a significant share of
India's population during the next decade.
• Rural India is expected to have overtaken urban India in terms of internet usage,
accounting for more than half of all Indian internet users. Some of rural India's most
pressing needs may be satisfied with the help of digitization. Villagers may simply pay
their bills or add money to their accounts by using the alternatives that are
conveniently located just outside their homes.
• 70% of the population living in rural India and 70% of them are internet users. Products
that focus on aspiration, connection, and value-seeking are the ones that have
successfully captured the attention of rural populations. Rural consumers are price-
sensitive and have a relatively limited income that they may spend freely. They are
suspicious of the possible failures that might occur when they purchase things online.
• The construction of basic infrastructure is missing in rural India and the development
of link between urban and rural populations comes at a high expense. E-commerce
enterprises have a duty to demonstrate their appreciation to rural customers and help
them create trust in the brand over time and encourage them to join in online trade.
• Affordable, robust, and attractive packing materials may decrease a product's price.
Empty packets may be reused. Reusable and tamper-resistant LDPE/HDPE bags. Shell
lubricating oil comes in an attractive, reusable 10-litre box. Perishable goods like ice
cream and beverages require temperature-controlled storage in rural area.
• Remote businesses may now keep cold beverages, ice cream, and other frozen items in
individual ice boxes. Grading categorises product units into specific quality grades.
Grading considers quality, size, and other factors. "Grading" is dividing food into lots
that meet market quality standards. Rural logistics is great, but it faces many
challenges.
• Cold chain and warehousing support the government's rural development plan. Rural
delivery is costly. Syndicated distribution helps certain firms connect the last mile
cheaply. Rural economies drive national growth. After demonetization, many
individuals started using electronic payments.
• Digital financial inclusion is hindered by a lack of mass-market financial goods. Bank
and fintech products need local languages. Rural India's cash-based economy needs
digital payments to thrive. Our nation's biggest public storage network has not yet
reached rural areas. Lack of storage makes interior retail distribution difficult.
Stockpiles can only be kept in towns due to their scientific storage facilities.
8. GLOSSARY
• E-Rural Marketing - E-Rural Marketing is a subfield of marketing that focuses on
reaching goals in rural regions through the use of various forms of electronic
communication technologies found on the Internet.
• Customization - Customization is the practise of making goods and services that are
uniquely suited to the needs of each particular buyer, whether via targeted advertising,
targeted packaging, targeted cosmetics, or the development of things that adapt to their
environment on their own.
9. TERMINAL QUESTIONS
1. Why people in rural areas not trusting the e-marketing?
2. Explain the significance of E-Rural Marketing
3. Why is customization important in business?
4. Explain the role of Digitizing rural India?
5. What is the benefit of PMGDISHA?
6. What is the Digital India plan?
7. Discuss the problems and challenges of online marketing to reach rural market.
8. What are the new trends in packaging?
9. Explain the significance of warehousing in rural areas
10. Explain the relevance of electronic payments.
11. Why rural markets are not Glamorized?
12. What are the emerging areas in Marketing to make Rural marketing is more
Glamorized?
10. ANSWERS
Answers for Self-assessment questions
1. agricultural goods
2. lifestyle change
3. vernacular languages
4. internet access
5. agriculture
6. having an online presence
7. b. price-sensitive
8. view, touch, and try them out first
9. a. information
10. pictorial
growing requirements, rural consumers have difficulty obtaining goods and services.
Buyers in rural areas are sceptical about internet security.
8. Choosing packing materials that are not only economical but also robust and
aesthetically appealing is one approach for lowering the price of a product. Marketers
may add value to their goods by making refill packs available. Small unit packaging
technique is popular not just in rural areas, but also in cities, particularly among
middle- and lower-income clients.
9. Warehouses help to the price stability of a broad range of agricultural goods by
prohibiting farmers from participating in post-harvest trade. People that keep their
items in warehouses may also take use of another service offered by the warehouses:
market information.
10. The role of digital transactions is to reduce the costs and risks involved with money
handling, to improve the convenience of online transactions, and to increase the
transparency of monetary transactions between persons.
11. Rural marketing is not Glamorized due to
• Ineffective print medium due to low level of literacy
• Seasonal demand and low per capita income of the rural people
• Traditional and cultured life of rural people
• Slow decision making
• Problem with warehousing and distribution
12. Emerging areas in Marketing to make Rural marketing is more Glamorized
• Avoiding tokenism
• Application of AI (Artificial Intelligence) in Marketing
• Mobile phone marketing in rural areas
their purchases. In 2015, Amazon.in conducted a pilot programme for their assisted
shopping effort, which was known internally as Project Udaan. Since then, the programme
has expanded to more than 14,000 locations across 21 states.
The offline shops are stocked with training materials that cover topics such as searching,
browsing, and navigating on Amazon.in. Additionally, the employees are trained to assist
customers in setting up Amazon accounts, completing checkouts and payments, addressing
questions regarding order status and delivery, and, if necessary, processing refunds and
returns. Additionally, customers may get help with their orders and returns by contacting
the stores directly (Amazon, 2018)
Questions
i. Discuss the innovativeness of the Amazon Easy?
ii. ii. How far this Amazon Easy remove the rural consumers fear?
Books Recommended:
1. Kashyap Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications. 3rd
Edition, 2016
2. Mishra and Puri- Development Issues of Indian Economy Himalaya Publishing House,
39th Edition, 2021
Reference
1. How Unilever Reaches Rural Consumers in Emerging Markets. (2016, December 14).
Harvard Business Review. https://hbr.org/2016/12/how-unilever-reaches-rural-
consumers-in-emerging-markets
Website Referred
• https://www.indianretailer.com/article/technology/digital-trends/how-brick-and-
mortar-stores-in-rural-areas-can-benefit-from-using-digital-payment-app.a8227
• https://www.financialexpress.com/opinion/impact-of-digitisation-the-new-rural-
reality/1286816/
• Overview of PMGDISHA – Pradhan Mantri Gramin Digital Saksharta Abhiyan. (n.d.).
https://www.pmgdisha.in/about-pmgdisha/
• Padaki, M. (2022, June 17). eCommerce penetration in rural India – Challenges, barriers,
and solutions. Times of India Blog.
https://timesofindia.indiatimes.com/blogs/voices/ecommerce-penetration-in-rural-
india-challenges-barriers-and-solutions/
• Amazon (2018, May 29). Taking ecommerce to India’s heartland with Project Udaan, now
called Amazon Easy. About Amazon India.
https://www.aboutamazon.in/news/innovation/taking-ecommerce-to-indias-
heartland-with-project-udaan-now-called-amazon-easy
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 14
Issues in Rural Marketing
Table of Contents
Fig No /
SL SAQ /
Topic Table / Page No
No Activity
Graph
1 Introduction - -
3
1.1 Objectives - -
7 Summary - - 20-22
8 Glossary - - 22-23
9 Terminal Questions - - 24
10 Answers - - 24-26
1. INTRODUCTION
Despite the tendency toward urbanisation, the vast majority of Indians live in more rural
areas of the nation. The growth of rural markets is hampered by a lack of adequate banking
and credit services. Rural marketing creates challenges for firms since rural consumers have
lower per capita incomes than urban ones. The essential infrastructure, such as roads,
storage facilities, and power sources, is absent in distant places. Because the supply chain is
poorly handled, a large number of intermediaries are required, raising the cost and causing
administrative complications. The availability of a significant number of fake brands or items
that are almost comparable to the genuine thing provides shoppers in rural regions with a
less priced option.
1.1 Objectives:
After studying this unit, you should be able to:
When doing business in a rural location, a marketer has a whole new set of circumstances
and challenges in comparison to those faced when doing business in a metropolis.
Distribution is a significant challenge for the vast majority of organisations that have sales
goals in rural regions. Before rural markets can be explored, one of the most crucial things
that has to be in place first is the necessary infrastructure.
The absence of this sort of infrastructure in rural India makes the distribution issues that
already exist much more difficult to solve. Companies that deal in fast-moving consumer
goods (FMCG) also have to contend with the reality that rural markets are geographically
dispersed, have a low population density, are difficult to access, have weak connections, and
are quite distinct from one another.
Other significant issues include low literacy rates, an excessive number of languages and
dialects, a diversity of cultural practises, an absence of banking services, the sale of
counterfeit goods, low per capita disposable incomes, a high degree of reliance on the
monsoon season, and a lack of access to the media. Therefore, the true challenge for
marketers who are seeking to break into rural markets is to have a grasp of the many kinds
of clients who live in rural areas, to find ways to deliver items to remote locations, and to
communicate with individuals who do not have access to the media.
i. Transportation issues
In order to function properly, marketing efforts need access to the right transportation
infrastructure. Because there is a lack of suitable infrastructure for transportation, it is
difficult for farmers and merchants to move their goods to market. There is a significant
shortage of suitable transportation infrastructure in the majority of the rural regions of
India. It is believed that close to 80 percent of the nation's villages do not have roads that are
in excellent shape connecting them to one another.
Customers in the far locations are not offered this service since neither public nor private
storage facilities are available there. Merchants have a difficult problem when it comes to the
question of where to store their merchandise.
iii. Packaging
The packaging process is the first and most crucial step in making a product. When packing
costs, a lot of money, the total price of the product goes up. Product packaging slated for sale
in rural areas has been urged to make use of cheaper materials.
In more remote areas, there are a number of obstacles that the media must overcome.
Through the broadcast of information by television, it is possible to efficiently reach the
people living in rural areas. The great majority of people who live in rural regions, on the
other hand, do not have access to power or TVs, and as a result, they are unable to enjoy the
benefits that come with consuming a range of forms of media.
The seasonality of both rural income and rural demand is the primary challenge faced by
rural marketers. Seasonal demand in rural regions is directly correlated to seasonal income.
For instance, during the peak crop harvesting season, there will be a significant increase in
the amount of cash available to the people living in rural areas, which would lead to a rise in
the demand for consumer items. Rural marketing is dependent on the demand of individuals
living in rural areas, and that demand is in turn dependent on income and purchasing
patterns.
In most rural locations, the average person brings in a smaller income than they would in an
urban area. Again, the structure of land ownership, which is the fundamental asset, is
skewed, which contributes to the very uneven distribution of income in rural areas. As a
result, the rural population has an extremely diverse distribution among the communities.
The percentage of people who can read and write in rural regions is much lower than in
metropolitan ones. This gives rise to the issue of communication for the aim of promotion
once again. In rural locations, when access to printed materials is limited, the medium
becomes inefficient and, to some degree, irrelevant. However, this situation is slowly
changing.
viii. Distribution
Distributors and stockists at the mandal and taluka levels, wholesalers and favoured dealers
at the district level, and a company-owned depot or consignment distribution at the state
level are all essential parts of a well-functioning distribution system. An excessive number
of intermediaries in the distribution chain contributes significantly to the high distribution
costs.
Consumer behaviour may be affected by a culture's shared values, beliefs, and perceptions.
People in rural areas often respond differently depending on the social group they belong to,
whether it be based on religion, caste, occupation, socioeconomic status, level of education,
or political affiliation. There are several obstacles in the way of a comprehensive study of
rural markets. In order to meet the requirements of the rural population, it is important to
take into account the unique buying habits, tastes, and expectations of rural consumers
throughout the product development phase. There may be a national trend, but local
variations in social dynamics and attitudes must be taken into account if marketers are to
succeed.
Producers of fast-moving consumer goods (FMCG) choose a distribution channel that allows
them to maximise earnings and best compete with rivals. Distributors and brokers who work
with retail outlets are used, but manufacturers also rely on the channels and distributors that
are ideal for their goods. Convenience store distribution and sales need producers to
consider the product's final selling price.
During the first several years of operation, FMCG manufacturers are responsible for
distribution within local markets, which allows them to quickly gather client feedback. The
perishable nature of food needs the utilisation of a dedicated team of couriers to ensure
timely delivery and consumption. Shipping and distribution times may increase when
perishable goods like food and medicine are sent with non-perishables like cigarettes,
cosmetics, and other household necessities.
Before reaching the final customer, each channel of product distribution includes
manufacturers, retailers, distributors, and wholesalers. Every manufacturer may choose
from a variety of distribution channels to get their items in front of customers across state
and national borders. Manufacturers must maintain the product in demand and provide it to
customers at a competitive price.
Despite the reality that this distribution channel is the shortest and eliminates the need for
intermediaries completely, its use is often limited to high-value industrial commodities with
a limited customer and production base. Premium gourmet and confectionery item
manufacturers would often limit sales to requests submitted solely online in order to retain
their high-end reputation. Farmers markets and door-to-door delivery based on online
orders are two more channels via which a producer of items such as fruits and vegetables
may sell directly to end customers. This group of farmers often forms cooperatives in order
to sell their commodities to clients more directly via their own retail shops located in
significant market centres.
Recent years have seen a rise in the importance of this distribution route, which may be
attributed to the expansion of huge retail chains. Because the retailer is the sole intermediary
involved in this distribution process, the manufacturer is spared the responsibility of
distribution. This is because the retailer picks up the ready items from the manufacturer's
warehouse and then distributes them to their respective convenience store chains. This
system is perfect for smaller firms that have limited production capacities but produce high-
value and high-quality items that need specialised transportation facilities. Manufacturers
who fall into this category would benefit greatly from using this system.
This is the standard distribution chain, in which a product goes from the manufacturer
through the wholesaler to the retailer. Having more than two middlemen in the distribution
chain drives up the final cost since each puts on their own margin. Under the conventional
product distribution model, the producer is always concerned about getting the goods into
shops and locating reliable distributors to reach target merchants and consumers.
Intermediaries have the greatest influence in this model of product distribution since the
whole distribution chain is reliant on them. Grocery wholesalers and convenience store
brokers are essential cogs in the distribution wheel for the myriad of food products sold at
retail. These wholesalers split up the products they buy in bulk from manufacturers and
distributors into individual pallets before shipping them to retailers.
This sophisticated distribution system is relatively broad and involves numerous phases as
a consequence of the manufacturer's wish to be spared of the responsibility of selecting
distributors so that he or she may concentrate only on producing. Under this model of
product distribution, the agent gets ownership of the goods and is responsible for getting it
to wholesalers, who then distribute it to retailers in their jurisdiction. To avoid conflicts of
interest with other distributors, wholesalers are often authorised to sell the goods solely
inside the borders of a certain state. All of the intermediaries work closely together to deliver
commodities to a varied range of merchants, who subsequently sell the items to end users.
The many distribution stages that a produced product must go through before it can be
moved from the manufacturer's warehouse to a retailer all add to the overall cost that must
be passed on to the final consumer. This overall cost is made up of the expenditures spent by
each distributor. Managing production and distribution in a consistent way is challenging
unless there is a joint effort or the market for the manufacturer's goods is restricted. Even
though the producer would love to enjoy the results of his labour at times, it is difficult to
manage both production and distribution in a consistent way. Middlemen are critical to the
distribution cycle because of their broad industry knowledge and in-depth market
information, which allows them to distribute items to retailers profitably. A manufacturer
must pick the distribution channel that will enable them to offer their items at the lowest
feasible price while keeping the lowest possible overhead expenditures in order to operate
a profitable business.
An uptick in rural demand for fast-moving consumer goods (FMCG) has been heralded as
evidence of a "renaissance in rural consumption." An increase of almost 10% may be seen in
the daily essential consumption of some major brands in rural areas (Nair, 2023).
When the monsoons come through with their full force, it promises a bountiful harvest for
the land, which in turn implies more revenue for the farmers and people that live there. As a
result, there has been an increase in demand for FMCG items in rural India.
The productivity of farms and the money generated by them have a direct impact on
consumer goods demand, especially among those living in rural regions. Customers'
purchase choices are influenced by the agricultural produce. As a result, the seasonal
monsoon rains have a substantial impact on purchasing patterns in India, Asia's third-largest
economy. Bad monsoons, on the other hand, result in low harvests, which result in poor
income, which results in unchanging sales growth.
In order to stock up on consumables like biscuits, oils, and toothpastes, the inhabitants of
rural India rely heavily on wholesalers. These are supplied by manufacturers to the smaller
stores in outlying locations. Although GST has been implemented, many outlying stores
remain unconnected to the system. Another thing that might derail an otherwise upbeat
economic story is the combination of poor price for cash crops and interruptions in the
supply chain.
The increase in expenditure that has been seen in rural regions may be attributable to a
number of causes, including higher levels of ambition and growing earnings. Consumers in
India's more rural regions are shown a growing interest in buying branded items, which is a
positive trend overall. On the other hand, because the proportion of the unorganised market
in the FMCG sector is decreasing, the growth of the organised sector is predicted to expand
along with an increased level of brand awareness. This is due to the fact that the proportion
of the unorganised market in the FMCG sector is decreasing. This increase in brand
awareness is going to be bolstered by the growth of modern retail.
Another important factor that is contributing to the rise in demand for culinary services in
India is the growing number of young people who are settling there, especially in urban
areas. This phenomenon is particularly prevalent in metropolitan regions. There is a sizeable
number of young people in India, and the vast majority of those people are employed.
However, due to the limited amount of time these individuals have available, they almost
never have the chance to cook their own meals. It is projected that web portals would play a
crucial role for enterprises who are striving to access the rural areas. The Internet has made
a huge contribution by rendering it feasible for businesses to broaden their customer base
in a way that is not only more cost-effective but also more easily accessible.
The next considerable development potential for the consumer durables industry may be
found in the rural parts of India. This possibility is driven by the increasing market
penetration in these areas. The efforts of the government to electrify rural areas have
resulted in a better power supply over the course of the preceding few years in tier 3/4
towns and villages, therefore paving the way for the use of electrical products. This has
cleared the way for the use of electrical goods (FMCG Market, FMCG Industry in India - IBEF,
n.d.).
Fast-moving consumer goods (FMCG) are in high demand as a result of the massive adoption
of digital technology in rural India, and the ease and low cost of extending a business' client
base because to the broad availability of the internet. Online portals are quickly becoming as
one of the most significant entry points for companies seeking to penetrate rural markets.
Businesses today are using the internet's reach to reach new customers and overcome
geographical barriers.
SELF-ASSESSMENT QUESTIONS – 1
1. What is the market for fast-moving consumer goods in rural areas now?
a. unchanged b. non-existent c. bigger d. smaller
2. What is one of the most crucial things that has to be in place before rural
markets can be explored?
a. capital b. technology c. labour d. infrastructure
3. What has product packaging slated for sale in rural areas been urged to make
use of?
a. recycled materials b. organic materials c. cheaper materials d. expensive
materials
4. Through the broadcast of information by what is it possible to efficiently reach
the people living in rural areas?
a. internet b. newspaper c. radio d. television
5. What is seasonal demand in rural regions directly correlated to?
a. weather b. population c. availability of resources d. seasonal income
Durable goods are those that can be used repeatedly without showing signs of wear and tear.
They are valuable not only once but again throughout time. Consumer durables include
electronic equipment, photography equipment, recreational equipment and culinary
appliances. In addition, one may classify them as either white goods, which include things
like dishwashers, washing machines, and air conditioners; brown goods, which include
things like blenders, stoves, and microwaves; or consumer electronics, which include things
like televisions and music players.
i. Rise in discretionary income - The growing number of consumers who are part of
households with two incomes has contributed to an increase in the overall disposable
income of consumers, which in turn has led to a rise in the demand for consumer electronics.
The ever-expanding segment of the Indian population that falls into the middle class has
become an attractive target for businesses that operate in the region.
ii. The existence of more modern versions of a product - When it comes to picking out items,
customers have a wide variety of options available to them. Introducing newer iterations of
a product will assist a firm in attracting the attention of customers who are looking for
innovation in the things they purchase.
iii. Pricing of the product - The consumer durables business is very price sensitive, and as a
result, price is the element that determines whether or not volume increases, at least among
customers with lower incomes. Important factors for buyers in the medium and above
income brackets are the technology, product features, and the brand name of the product.
iv. Access to various forms of financing – The product's price point is directly related to the
amount of credit available, as well as the terms and conditions of the loan. The price of
providing customers with credit, in addition to the adaptability of the plan, is a major factor
in determining how well a product will sell.
v. Innovative forms of advertising and promotion of brands - A firm may differentiate itself
from its competitors with the use of sales promotion strategies such as price reductions,
freebies, and trade-in deals.
vi. Promotions during the holiday shopping season - The holiday season is often a time when
there is an increase in demand for colour televisions. As a direct consequence of this, the
majority of businesses decide to launch promotional initiatives around this time of year in
order to capitalise on the celebratory spirit. This time period will continue to be the primary
growth engine for enterprises that produce consumer durable goods.
metropolitan areas, has taken away a significant portion of the viewership that formerly
belonged to television. Radios have gradually replaced televisions ever since an
abundance of FM radio channels became available to listeners.
• The power of the customer in relation to the availability of options. Companies who are
active in the consumer durables sector face competition from other businesses since
there is a vast product line available. This is because most items are similar to one
another. Customers have the option of selecting items produced locally or those imported
from other countries, both of which have comparable characteristics.
i. Villages are known for their fondness of street entertainment. There are several instances
of successful street performances being used as a method of advertising a product.
ii. In order to advertise local goods, wall paintings are often employed in rural areas. It is a
common strategy that offers not one but two advantages. The owner does not have to pay
anything to have the wall painted, and the advertiser does not have to pay anything in
addition to what he already spends on paint either. As a result, there are benefits for both
parties.
iii. An audio message that is broadcast at bus stops has the potential to have a substantial
impact on the marketing of businesses and products in places that are less populous. Bus
stops have been used by a variety of companies throughout the course of history to advertise
their goods and services, therefore contributing to the expansion of their respective brands.
Companies have been successful and have capitalized on the situation by coming up with
spectacular ideas and smartly picking the things that they would sell. This has allowed them
to make the most of the circumstances.
Those who are already a member of the community have an advantage over those who are
not in terms of their chances of achieving success.
Despite the fact that most people in the world see rural India as being impoverished and full
of problems, rural India has the highest market potential. Rural India may be viewed as a
"catalyst culture" for those who aspire to a higher living standard. These individuals begin
from a low base and are unable to pay for consumer products that help to raise the standard
of living. As a result, rural India may be viewed as a "precursor society" for these individuals.
i. Income and buying power are particularly low in rural areas. Consumer durable products
like as transistor radios, bicycles, scooters, sewing machines, electric irons, refrigerators,
fans, and so on have a large potential customer base among the "poor affluent" in rural
regions. As rural areas continue to thrive, their ambitions are increasing at a fast rate. Worse
still, there is a severe lack of information on consumers' levels of education, level of
intelligence, and actual product usage. The huge pools of prospective customers have been
broken down into a plethora of niche markets, both nationally and by product kind.
Customers in rural areas will continue to be more concerned with pricing than with name
recognition. Neither growth in GDP nor increases in the per capita income will benefit
businesses in rural areas. Marketers in rural areas may be in a better position to make
educated guesses about electricity generation and the prevalence of radio and telephone.
ii. The fundamental marketing task of brand growth is hampered by insufficient resources
for rural marketers in India. There is reluctance to make a large investment in advertising
with the expectation of a return that is, at best, uncertain. Additionally, there is the risk of
excessive advertising in a region where the target audience represents such a tiny
percentage of the entire population. As a general rule, it's smart to use media in a way that
leaves as little of a footprint as possible, both financially and environmentally.
iii. One of the main aims of rural marketers is to introduce radical new ways of thinking or
practises to their target demographic. Examples include the development of the toothbrush
and toothpaste from the neem twig, the introduction of antibiotics and sulfa medications, the
replacement of soap cake with detergent powder, and the replacement of ploughs with
tractors. Marketing in rural areas should encourage high aspirations and usher in positive
change for the right reasons, drawing on preexisting cultural norms wherever feasible.
Inspiring a culture shift is a basic challenge that requires advertising concepts that allow the
marketer to comprehend the core of the issue and provide the appropriate cultural answer
rather than just money. Marketers in rural areas should investigate the factors that influence
consumer spending in order to better reach their target audience.
iv. One of the most significant impediments to efficient marketing in rural India is a lack of
comprehensive and up-to-date market data on rural customers. The varied makeup of rural
civilization, with eight main languages, hundreds of dialects, and cultural sub-groups,
exacerbates the problem and renders it almost intractable. Marketing involves a broad
variety of risks and opportunities for profit.
v. Many people believe that advertising is a waste of money that benefits only the wealthy
corporations at the expense of the general public. As a whole, the Indian government and
aristocracy are more concerned with manufacturing than with selling their goods. Many
people see advertising as a secondary economic activity since it is associated with the market
style of selling.
7. SUMMARY
• The fast-moving consumer goods (FMCG) industry is one of the most important parts
of the Indian economy. People in rural India are becoming more aware of what they
buy as more people in rural areas learn to read and see more media. FMCG companies
have to contend with the reality that rural markets are geographically dispersed, have
a low population density and are difficult to access. There is a significant shortage of
suitable transportation infrastructure in the majority of the rural regions of India. Rural
marketing is dependent on the demand of individuals living in rural areas, and that
demand is in turn dependent on income and purchasing patterns.
• The great majority of people who live in rural regions do not have access to power or
TVs, and as a result, they are unable to enjoy the benefits of media. Marketers need to
understand the unique social dynamics and attitudinal differences present inside each
hamlet. The high cost of distribution is directly correlated to the existence of an
excessive number of tiers in the distribution system. In order to meet the requirements
of the rural population it is important to take into account the unique buying habits,
tastes, and expectations of rural consumers.
• Consumer goods are items acquired with the goal of being utilized for personal
consumption. Clothing, food, and dishwashers are examples of common consumer
goods. Large-scale production is needed for two reasons: first, there are many buyers,
and most of these products, including soap, toothpaste, and hair oil, are rapidly
depleted. Wholesalers, retailers, and others sell consumer goods. Consumer goods
marketers may need many promotional techniques to maximize sales and profits.
• Consumer goods are categorised as Convenience products, Shopping products and
specialty products. The producers of convenience products are obligated to ensure that
their wares are sold in every nook and cranny of the village, town, and city. Before
making a final purchasing choice, the buyer checks out the competition. When it comes
to purchasing items, brand identity is not as significant as it is with convenience
products. The essence of most items found in stores is that they are only partly durable.
• To differentiate themselves from convenience goods, shopping goods have the option
of being made available in certain public locations. The value of specialty items is much
higher than the value of other commodities. Consideration should be given to the trade
name as well as the brand name.
• FMCG manufacturers pick a distribution channel to maximise profits and compete with
competitors. Since food must be delivered and consumed quickly, specialised
distributors are needed. Large retailers may buy in bulk and utilise their own
warehouses and shipping. The typical product distribution cycle goes from
manufacturer through wholesaler to distributor to customer. The manufacturer does
not distribute since the store is the only middleman.
• Rural consumption is reviving in the Fast-Moving Consumer Goods (FMCG) industry.
Farm production and revenue affect consumer goods demand. Rural Indians are
purchasing more brands. Because FMCG's unorganised market is shrinking. Rural India
has the consumer durables industry's future growth potential. The government's rural
electrification programmes have improved power supplies, making electrical items
possible. Rural India's growing adoption of digital technologies has increased demand
for FMCG.
• Consumer durables are long-lasting products. Businesses target the growing Indian
middle class. A company may attract innovative consumers by releasing fresh product
versions. Firms employ price cuts, gifts, and trade-ins to stand out from competition.
The ready availability of theatres and multiplexes has absorbed a major amount of
television's audience.
• Since FM radio channels proliferated, radios have supplanted TVs. Rural India relies on
word-of-mouth communication. Spiritual and religious leaders heavily affect rural
product promotion. Bus stop audio messages may boost company and product
promotion. Rural India is a "catalytic culture" for individuals seeking a better life.
• Rural income and purchasing power are minimal. Consumer education, intelligence,
and product utilisation are poorly documented. Rural marketers lack resources to build
brands. Rural Indians think advertising wastes money and helps mainly affluent
enterprises. Rural marketers must investigate how and who buys. Rural civilization's
eight primary languages, hundreds of dialects, and cultural subgroups compound the
issue.
• Businesses often "integrate" their marketing efforts by bringing previously separate
departments together to expand into new markets. The degree of integration effects
8. GLOSSARY
• FMCG – Fast moving consumer goods. Items are those that have a high demand yet a
low price point. In certain cases, these commodities are referred to as consumer
packaged goods. FMCGs have a short shelf life due to high client demand or because the
items themselves are perishable.
• Convenience products - Convenience goods are often purchased by consumers
because they require minimal effort or preparation on their behalf. Because clients'
purchasing behaviour varies for various items, marketers approach them quite
differently.
• Shopping products - Consumers are less likely to buy items available in stores. A
normal shopper compares the attributes of a product to those of rivals by assessing its
quality, pricing, and aesthetic appeal. As a consequence, customers devote much more
time to analyzing their alternatives and comparing different commodities than they do
to purchasing convenience items.
• Specialty products - Products with both high economic value and great practical
usefulness are known as "specialty products." These products stand out from the crowd
thanks to their many unique characteristics. Specialized shopping is required while
looking to get unique products.
• Retailer - The role of the retailer is to mediate between the wholesaler and the end
consumer. They purchase goods in bulk from distributors and then resell them to
consumers in smaller amounts. In order to produce and distribute more
environmentally friendly goods, retailers are in a unique position to have direct contact
with a vast supplier network and offer a wide variety of products.
• Wholesaler - A wholesaler is someone who acquiring large quantities of products and
then reselling them in smaller amounts to retail establishments
• Agents - An agent acts as a link between the manufacturer and the customer. The
company has little influence over the actions of its agents, yet it is frequently held liable
for them. It is critical to understand that the agent does not become the legal owner of
the objects.
• Consumer durables - Durable things are those that can be used repeatedly without
degradation. They are useful not just once, but many times over. Consumer durables
include electronics, photography equipment, recreational equipment, and kitchen
appliances.
• Discretionary income - After subtracting necessary outlays such as taxes and essential
living expenditures such as food, shelter, and clothing, what is left over is referred to as
a person's discretionary income, which may be spent on anything the individual
desires. The phrase "discretionary income" refers to the amount of money available for
spending on non-essentials.
9. TERMINAL QUESTIONS
1. What kinds of difficulties do FMCG companies in rural India face?
2. What is the significance of consumer goods?
3. Explain the features of convenience goods?
4. Discuss the characteristics of specialty items.
5. What is the role of distribution channels in rural marketing?
6. How far the rural market is significant to the FMCG producers?
7. Discuss the role of advertising in the rural areas.
8. What are the benefits of marketing efficiency?
9. What is the price spread?
10. How can one cut marketing costs?
10. ANSWERS
Answers for Self-assessment questions
1. c. bigger
2. d. infrastructure
3. c. cheaper materials
4. d. television
5. d. seasonal income
6. b. durable goods
7. b. price
8. b. rural regions
9. a. word of mouth
10. street entertainment
9. The price spread in commodity marketing is the difference between the consumer price
and the producer price. Depending on the channel, market, and time period, the absolute
amount of the marketing margin might change significantly.
10. By managing additional tasks, one may increase productivity and save marketing
expenditures. Pre-packaging perishables, quick delivery, cold storage facilities, and
efficient labor are some new handling techniques that may boost efficiency and save
costs. Efficiency is increased by using tried-and-true management techniques.
Monitoring costs and profits might improve marketing effectiveness. Marketing
strategies and technology increase productivity while lowering expenses.
Questions
Books Recommended:
1. Kashyap Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications. 3rd
Edition, 2016
2. Mishra and Puri- Development Issues of Indian Economy Himalaya Publishing House,
39th Edition, 2021
Website Referred
• Nair, A. (2023, July 22). Surge In Rural Consumption: Boon For FMCG Industry. BW
Businessworld. https://www.businessworld.in/article/Surge-In-Rural-Consumption-
Boon-For-FMCG-Industry-/22-07-2022-438287/
• FMCG Market, FMCG industry in India - IBEF. (n.d.). India Brand Equity Foundation.
https://www.ibef.org/industry/fmcg
• http://bwmarketingworld.businessworld.in/article/Marketing-Consumer-Durables-In-
India-A-Journey-Into-The-Minds-Of-Digital-Age-Consumer/10-12-2022-457449/
BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 4
DBB2206
RURAL MARKETING
Unit 15
Financial Assistance for Rural Marketing
Table of Contents
Fig No /
SL SAQ /
Topic Table / Page No
No Activity
Graph
1 Introduction - -
3
1.1 Objectives - -
7 Glossary - - 24
8 Terminal Questions - - 26
9 Answers - - 26-27
1. INTRODUCTION
When a nation develops economically, the rural sector plays a crucial role. India, like many
other emerging nations, relies heavily on its rural economy, however its rural residents
continue to face significant barriers when trying to get loans. Credit availability influences
economic productivity, household income, and poverty rates. The government must ensure
that the market remains competitive over the long term, and the financial sector must
expand in order to attract more customers and lend them more money. The phrases "rural
credit," "agricultural credit," and "microcredit" all have similar meanings and are often used
interchangeably in the same contexts. Agriculture credit, on the other hand, is often used for
things like farming, while rural credit refers to financing services in rural regions for
individuals of varying incomes. Lending institutions also support urban agriculture by
providing funding for the cultivation of plants and the keeping of livestock in urban areas.
Finally, microfinance refers to the provision of financial services to persons with little or no
income, with the aim of enabling them to engage in economic activity.
1.1 Objectives:
After studying this unit, you should be able to:
In order for them to be able to pull themselves and their families out of poverty, they need
the ability to take out loans, save money, make investments, and guard their family from
harm. People who are extremely impoverished may be able to move beyond a state of living
from "mouth to mouth" survival to one of future planning, the acquisition of physical and
financial assets, and investments in improved nutrition, health, and education if they have
direct access to financial services. This would be an improvement from the current situation,
in which they are unable to move beyond a state of living from "hand to mouth."
People who make their homes in rural areas and struggle to make ends meet need access to
a broader variety of financial services than credit alone can provide. They must have access
to a wide range of financial services, including credit, savings, facilities for moving money,
and insurance coverage. It is essential for anyone living in poverty, particularly those living
in extreme destitution, to establish a savings account. They want to be able to access their
money in a secure and uncomplicated manner, and they want convenient deposit services
that permit small balances and transactions of a comparable amount.
The act of placing money under the mattress, buying animals, engaging in village savings
circles, or passing money to neighbours for safekeeping are examples of traditional and
informal means of saving money that may include expenditures and risks that are not
immediately evident.
Many of the issues with implementing rural financial services may be traced back to a
misunderstanding of the nature of effective demand for these services. The misconception
was based on the falsehood that agricultural products are the primary reason rural
inhabitants require access to loans. In actuality, there are a number of circumstances in
which an efficient demand for credit along with a desire and capacity to pay may exist to help
smooth out the streams of income and expenditure.
It's likely that applications other than agriculture deserve recognition just as much as
agriculture itself. In truth, the fundamental motive for many individuals living in rural
regions is the need for credit as a consumption loan. Cooking stoves, water purifiers, and
solar power systems are examples of high-value, high-quality items that may not always be
accessible or cheap to individuals living in rural regions.
It may be challenging to offer financial services in rural areas due to the unique
characteristics of agriculture and other kinds of rural economic activity, such as their
dependence on natural resources, extended production cycles, and sensitivity to a number
of risks. The subdivision of property and the generally low transaction sizes of rural non-
agricultural activities necessitate the issuance of a large number of small-value loans, which
often results in an increase in bank operational costs. Farmers and farmer organisations
demand more financing to fund production, inputs, processing, and marketing, as well as risk
management products like insurance for loss of life and assets.
NBFC Characteristics
• NBFCs may accept public deposits for a term of 12 months or up to 60 months, depending
on the option selected.
• There is a limit to the amount of interest that NBFCs may charge. It is necessary for it to
be lower than the maximum rate that has been established by the RBI. The monthly
payment of the interest is required to be made in full.
• The depositors will not get any kind of profit from the NBFCs.
• There is no provision made for the insurance of deposits made with NBFCs.
• There is no backing from the Reserve Bank of India for deposits held by non-bank
financial institutions (NBFCs).
v. Companies that invest in small firms are in their early stages, but their success rate is
strong, and they promise a substantial return in the future.
vi. MSME is one of the foundations of our economy, and millions of people rely on it for a
living, which is why the government introduced such enticement plans for the MSME
sector to boost its development.
Financial mediation is the primary business function of a commercial bank, which is a kind
of economic enterprise. It does this by soliciting deposits from customers and then using
those funds toward the provision of credit in order to generate a profit. The interest rate that
these banks charge for the loans that they make might be considered their primary source of
revenue. Customers put their money in the bank so that it is protected and they may earn a
little interest on it.
ii. Making credit available is the fundamental function of every single sort of banking
institution. Because of this service, banks may operate as a mechanism for a large number of
individuals to pool their savings, even if they only have a modest quantity of money to
deposit. The amount that is collected is significant in terms of turnover, and after it has been
collected, it is distributed in the form of credit to a variety of industries, regardless of how
big, medium, or small they are, with the goal of boosting industrial activity within the
economy and increasing the overall level of prosperity in the society as a whole. As a result,
individuals put away more money, which contributes to the continued expansion of the
economy. As a result, a cycle is created that ultimately results in the expansion of the
economy as a whole.
iii. The rural economy does not produce a significant amount of fresh capital very often.
Banks have developed a variety of strategies to persuade consumers living in rural regions
to put money down in savings accounts. Not only were the programmes designed to inspire
individuals to amass more savings, but they also distributed financial resources to a variety
of markets and fields. This helps to ensure that all sectors of the economy expand at the same
pace by ensuring that all sectors grow at the same rate.
iv. Banks provide financial assistance to businesses and organisations that are in need of
capital but do not have sufficient funds to carry out their operations. They look for industries
that are vital but do not have sufficient funds, and then they solicit financial support from
other businesses that have surplus funds that they can provide to those industries. Banks
have devised programmes that make it possible for underserved communities, self-help
organisations, and less developed rural industrial sectors to get loans at rates as low as or
even lower than zero percent. The process of moving products and services from the people
who manufacture them to the people who purchase them has been facilitated, in part, by the
activities of financial institutions such as banks.
v. A nation may construct a broad variety of infrastructure amenities with the assistance of
banks. This also encompasses the social, educational, economical, and other essential aspects
of development that are required for the expansion of an economy in a particular nation.
vi. The funds that are raised by the banks might be used toward the revitalization of
underdeveloped or outlying regions, as well as specific fields of endeavour. Because of how
efficiently the financial system operates, this is only conceivable. Small-scale enterprises,
handicraft industries, artists, and farmers may all benefit from timely finance flows if they
are made a priority under priority sector programmes. This contributes to the expansion of
the economy as a whole to a greater degree.
vii. In addition to the rise of large-scale businesses, the growth of agriculture as well as small-
scale and cottage industries is crucial for the development of a nation. Agriculture
contributes significantly to the overall Gross Domestic Product of our nation. Small-scale
industries, on the other hand, are responsible for the creation of a significant number of
employment, and the products of these businesses are also exported to other nations. The
financial requirements of these regions must be met by the banks in order to contribute to
the expansion of the national economy.
The Primary Agricultural Credit Society (PACS) is the umbrella group for the first two tiers
of the cooperative credit structure. It's a group that operates out of a village and serves rural
residents directly. It does this by providing incentives for farmers to save, by accepting their
deposits, by lending to responsible individuals, and by recovering the money loaned out. The
Primary Agricultural Credit Society is the last intermediary between rural borrowers and
larger financial institutions like the Central Cooperative Bank, the State Cooperative Bank,
and the Reserve Bank of India.
i. Functions of PACS
• In keeping with the cooperative concept, it seeks to enhance the economic interests of
its members.
• It provides loans for both short and long terms. It instils in its members’ the habit of
being frugal.
• It provides agricultural supplies such as fertilisers, seeds, insecticides, and machinery.
It provides marketing services in order to facilitate the selling of agricultural products.
• It supplies essential household commodities such as sugar and kerosene.
• India's cooperative banking system has been in place for over a hundred years, and its
foundational institution is a Primary and Secondary Cooperative Society (PACS).
• Because of its potential to improve farmers' access to credit, agricultural supplies,
markets, and value-added products, PACS might play a pivotal role in the current
tumultuous situation.
• A Primary Agriculture Credit Society's (PACS) services are in a league of their own, and
no commercial bank branch could ever expect to compete with them.
• By linking its warehouse with the physical and financial supply chain of agro-
commodities, PACS also has the potential to play a significant role in the development
of Gramin Agriculture Markets (GrAMs) or major private sector warehouses.
The fundamental goal of FSS is to offer all sorts of finance as well as a comprehensive package
of services and technical support to farmers, especially small farmers, in order to increase
productivity and diversify farm operations in an integrated and one-stop shop.
FSS provides credit that is both multi-term and multi-purpose. It will undertake an agro-
economic evaluation of the territory under its jurisdiction to identify the present status of
the members' economies, and will then create a credit strategy to help in the overall growth
of the area based on that information. bundled group of services. In addition to providing
loans for agricultural and other related businesses, the FSS provides its members with
critical technical assistance for the agricultural sector's development.
Regional Rural Banks, known simply as RRBs, are the equivalent of commercial banks in
India. These banks have been given the authority to carry out financial transactions in order
to foster economic expansion and development in rural regions. In 1976, Congress enacted
the Regional Rural Bank Act. Providing small craftsmen, labourers, farmers, or merchants in
rural areas with financial assistance and injecting credit into the rural sector. The RRB and
its actions are critical components of understanding the banking sector in non-urban areas.
Furthermore, the RRB plays a significant role in the development of small craftspeople and
agricultural producers in rural regions. The RRB was created as part of a larger effort to
strengthen India's banking system. It was determined in the twentieth century that
opportunities in the banking business were not distributed in a fair way to all socioeconomic
categories of persons. Individuals and organisations in communities who were already
vulnerable and on the fringes were struck the hardest. As a result, the government attempted
to develop a scheme through which anybody and everyone could access financial services.
Objectives of RRBs
• Make loans accessible to those from lower socioeconomic strata, additional banking
offices in more rural areas have been established.
• Safeguard individuals living in rural poverty from unscrupulous lenders.
• Promote banking practises among rural communities and to support the accumulation of
savings in order to promote rural economic development.
• Increase employment opportunities, we must encourage business and commercial
activity in rural areas.
• Encourage an entrepreneurial spirit in rural areas.
• In order to satisfy the needs of undeveloped areas that are not being covered by the
government's other initiatives?
• Enhance economically disadvantaged places while simultaneously focusing on decreasing
broad economic inequities across areas to boost available employment by establishing an
atmosphere conducive to business and trade in rural regions.
• Providing financial help in the form of loans and advances to farmers and other persons
already active in agricultural interests.
• Provision of loans and advances to agricultural cooperatives and other organisations
involved in agricultural product processing.
• Including all of the many types of sediments that originate from rural areas and other
relevant locales.
• Providing financial help in the form of loans and advances to small company owners and
other persons interested in commercial and industrial activities.
• Installation and continuing maintenance of godowns and warehouses.
• Reducing the reliance of disadvantaged communities on money lenders.
• As a business, providing agricultural goods and equipment to agricultural farmers.
• Economically backward and tribal communities would benefit from the development of
new branches, enhanced microcredit facilities, and the implementation of the inclusion
programme.
NABARD is a Development Bank that works to improve rural areas via investments in
agriculture, small businesses, cottage and village industries, handicrafts, and other forms of
traditional rural industry. This is done with the objective of encouraging integrated rural
development and guaranteeing rural prosperity, as well as for issues linked to or related to
those goals.
Functions of NABARD
• To coordinate the efforts of the numerous financial institutions that provide loans for
capital expenditures and industrial output in order to foster growth and progress in rural
areas.
• To take efforts toward institution development in order to strengthen the system's
capacity to absorb additional credit, such as monitoring, the implementation of
rehabilitation programmes, credit institution restructuring, and staff training;
• To keep in touch with the Government of India, state governments, the Reserve Bank, and
any other national level institutions engaged in policy making; To coordinate the rural
finance operations of all institutions engaging in field development efforts;
• Furthermore, as part of its programmes, NABARD makes advice for the development of
group activities and provides comprehensive funding support for such events.
• It is the process of connecting Self-help Groups (SHG), which are groups for the
impoverished and disadvantaged formed in rural areas by nonprofit organisations.
• It offers complete refinancing for projects carried out under the "National Watershed
Development Programme" and the "National Wasteland Development Mission." Both of
these programmes are run by the government.
• It also includes a mechanism known as District Oriented Monitoring Studies, which
enables for a study to be done for a cross-section of projects sanctioned to multiple banks
in a district. The goal of this research is to assess the effectiveness of these programmes
and identify the barriers to their implementation. It then takes the required procedures
to address these issues.
• Furthermore, via the "Vikas Vahini" volunteer programme, it gives financial help to
impoverished farmers while also providing possibilities for economic advancement.
• It routinely inspects and oversees rural cooperative banks and regional rural banks
(RRBs) to safeguard the growth of rural finance and the well-being of farmers.
i. Insufficient funds - The amount of rural credit that is available in the country is still
inadequate in relation to the growing demand for it as a result of increasing costs for
agricultural inputs. This is despite the efforts that the government has made to extend the
structure of its rural credit.
ii. Sanctions are Inadequate - It is also true that the amount of the loan that is sanctioned to
farmers by the agencies is inadequate to satisfy the many requirements that are associated
with the farmers' agricultural activity. Farmers generally see the amount of loan sanctioned
as insufficient and little, and as a result, they frequently utilise such loans for non-productive
reasons, therefore defeating the fundamental aim of such loans. This is because farmers
typically view the amount of loan sanctioned as inadequate and tiny.
iii. Poor Farmers are getting less attention - The inability of rural credit organisations and
the programmes they provide to adequately meet the requirements of the country's small
and marginal farmers has been a persistent problem. As a consequence of this, less attention
has been paid to the financial needs of underprivileged farmers, while the financial needs of
relatively well-off farmers are receiving more attention from credit institutions owing to the
better credit worthiness of the former group. This is because farmers who are in relatively
better financial situations have a greater creditworthiness.
iv. Growing Past Due - When it comes to matters of agricultural financing, one issue that
continues to be a source of worry is the problem of payments that are over their due date. It
is not in any way, shape, or form a gratifying experience to repay agricultural debts to any
one of a number of different organisations. This holds true regardless of which organisation
is owed the money. The inability of farmers to make their payments on time has also been a
factor that has contributed to the increase in the total amount of money that is late. This is
directly contributing to the rising unwillingness of financial institutions to grant any form of
loan to agricultural enterprises, thus it is important to be aware of this.
• In order to give the most advantageous rural credit possible, the structure of cooperative
credit organisations has to be revised so that they are more productive and goal-oriented.
This will allow for the provision of cooperative credit. In addition, if these societies have
sufficient financial resources, they have the potential to develop into civilizations that are
capable of doing a variety of tasks simultaneously.
• There should not be any need for intermediaries to exist between credit agencies and
borrowers. It is vital to do away with this need. Access to long-term loans should be made
available to India's rural sector, and the Reserve Bank of India should provide the
appropriate financial arrangements to make this possible.
• In order to put a stop to the exploitation of farmers, there is a need for checks and
balances to be placed on the power and actions of moneylenders. To ensure that farmers
are able to get loans, the government need to initiate a programme that provides credit
guarantees in order to act as a guarantee in their stead.
• The processes that are involved in the delivery of loans should be made simpler by the
banks, and this could be accomplished by rationalising the operating pattern that they
use. On the basis of the model system created by NABARD, the government has to supply
Kisan credit cards to the farmers so that they may withdraw cash for the necessities of
their output. These cards should be issued in the name of the Kisan Credit and Debit
Association (NABARD).
• Each farmer should be granted a credit card so that they can keep track of the many loans
they have obtained from different organisations. This will allow farmers to identify any
fraudulent activity they may be involved in while seeking to get loans from numerous
banks using the same physical security. Credit should also keep track of how loans are
being used by establishing an effective oversight framework. This should be done to
prevent any possible problems.
The economic rebound that has occurred in India's rural areas is widely acknowledged to be
a crucial component of the country's potential for development in the future months. After
being stung by the first shock of the statewide lockdown caused by Covid, banking
institutions that specialize in lending to rural areas came to a total halt during the months of
April and May. Despite this, they are making good progress on the road to recovery. Rural
areas are becoming home to some of the earliest digital banking users, and microfinance
clients are more inclined to keep their digital presence (Malhan, 2020).
The following are the some of the recent developments in rural consumer finance
a. Ezeepay
Ezeepay is a rural finance start-up founded in 2018. It targets the under-penetration of
financial services in rural India. From Uttar Pradesh, Bihar, Madhya Pradesh, and Jharkhand,
it is moving into South Indian markets. Since 2018, Ezeepay has attracted 2.7 lakh users. It
has over a lakh app downloads and over a crore retail consumer.
Microloans, insurance, investment purchases, money transfers, bank account opening, utility
services like bill payments, mobile recharge, hotel and travel booking, and compliance
services like ITR filing, GST registration, and MSME registration are all examples of what
Ezeepay offers in the way of digital banking services. Without needing to travel, Ezeepay
shops provide digital banking, document renewal, and bill paying (https://ezeepay.app/)
b. Jai Kisan
Jai Kisan, a Mumbai-based rural fintech platform, was founded in 2017 to assist rural
individuals and companies in gaining financial inclusion. The firm provides funding for both
online and offline business. Jai Kisan is developing a full-stack rural fintech stage to fulfil the
financial demands of emerging business sectors. The startup supports 1.5 lakh provincial
residents, including farmers, via 700+ organised and unorganised firms (https://www.jai-
kisan.com/).
c. pSwitch
pSwitch was established in 2020 in Noida with the goal of facilitating digital transactions in
unserved rural and semi-urban areas of India. The company's agent network is being
expanded. The company's mission is to create the most extensive network of last-mile retail
outlets in India so that more people may take advantage of opportunities in the areas of
financial inclusion, social inclusion, Digital India, skill development, employment, and other
government programmes. In 2020, it started offering doorstep banking. Money orders, bank
withdrawals, prepaid cards, domestic travel arrangements, and governmental services
provided by the central and state governments are all included
(https://www.pswitch.in.net/).
d. Dvara SmartGold
Mumbai-based micro-savings fintech Dvara SmartGold. The firm promotes microsavings to
empower financially challenged individuals to build financial security. The "Dvara Venture
Studio" cohort drives the "Dvara SmartGold" programme, which supports entrepreneurs to
create large-scale financial inclusion transformation. Dvar SmartGold's customers are 80%
women and save 560 rupees per month on average. Dvara SmartGold now serves over
70,000 customers and plans to increase its motivation to reach over 400 million
underprivileged Indians by assisting individuals with increasing their savings through
micro-investment funds and achieving their financial goals by providing liquidity and
security (https://www.dvarasmartgold.com/).
The Indian government has initiated a number of financial inclusion programmes, which are
contributing to the enhancement of the country's financial environment for rural areas. The
collaboration of a number of different actors in order to provide individualised solutions for
the people living in rural areas helps to close the current gap in certain areas of the nation.
As time goes on, an increasing number of businesses will develop a marketplace model at
every block level in rural India. These marketplaces will provide a wide variety of goods and
services to satisfy the requirements of rural customers (Kumar, 2023).
Bajaj Finserv offers consumer durable loans for washing machines, refrigerators, air
conditioners, LED TVs, microwaves, furniture, apparel, and groceries. Bajaj Finserv offers
consumer durables loans with various payback arrangements to fund all the expenditures.
One may get finance 100% of the purchases at little or no interest
(https://www.bajajfinserv.in/insights/the-a-to-z-of-consumer-durable-loans)
c. ICICI Bank
The ICICI Bank provides Kisan Credit Card, sometimes known as the KCC, is a credit card that
has been developed with the needs of farmers in mind. This card provides farmers with the
opportunity of a hassle-free and easy credit that they may use to satisfy the day-to-day
necessities of farming. ICICI Bank provides tractor loans in a quick and uncomplicated
manner (https://www.icicibank.com/rural)
Money is a cure for all of the issues that afflict the less fortunate and more vulnerable
segments of society. Commercial banks in India have been giving financial assistance to
economically disadvantaged people as part of the country's priority sector lending strategy
since they were nationalised by the Indian government (PSL). Banks have stated objectives
and sub-targets for distributing money and credit to favoured and wanted segments and
sectors of the economy, the majority of which are rural areas, under this system. These parts
and sectors stand to profit the most from the deployment of finances and credit.
SELF-ASSESSMENT QUESTIONS – 1
6. SUMMARY
• India relies heavily on its rural economy but its rural residents continue to face
significant barriers when trying to get loans. Credit availability influences economic
productivity, household income, and poverty rates. The government must ensure that
the market remains competitive over the long term and the financial sector must
expand in order to attract more customers. People who are extremely impoverished
may be able to move beyond "mouth to mouth" survival if they have direct access to
financial services. They must have access to a wide range of financial services, including
credit, savings, facilities for moving money, and insurance coverage.
• Anyone in poverty, but especially those in severe need, should open a savings account
immediately. Many of the issues with implementing rural financial services may be
traced back to a misunderstanding of the nature of effective demand for these services.
It's likely that applications other than agriculture deserve recognition just as much as
agriculture itself. High-value, high-quality equipment, such as cooking stoves, water
purifiers, and solar power systems, may not always be easily available or inexpensive
to those living in rural areas.
• NBFCs are a kind of financial intermediary that accepts deposits and makes credit
available. These firms play a vital role in directing scarce financial resources toward
capital development. The Reserve Bank of India does not act as a guarantee for the
recoupment of deposits made with NBFCs. Commercial banks provide financial
assistance to businesses and organisations that are in need of capital but do not have
sufficient funds to carry out their operations. The objective is to encourage
entrepreneurial activity on a smaller scale in rural areas so that new firms may be
founded there.
• Banks have devised programmes that make it possible for underserved communities,
self-help organisations, and less developed rural industrial sectors to get loans at rates
as low as or even lower than zero percent. They look for industries that are vital but do
not have sufficient funds, and then solicit financial support from other businesses that
have surplus funds. India's century-old cooperative banking system relies on Primary
and Secondary Cooperative Societies (PACS). By linking its warehouse to the agro-
commodities supply chain, PACS might play a major role in future Gramin Agriculture
Markets (GrAMs) or huge private warehouses.
• Farmers' Service Societies (FSS) were proposed by the National Commission on
Agriculture in 1970. The ultimate objective was to transform smaller-scale service
organisations into large-scale multipurpose credit societies. In addition to providing
loans for agricultural and other related businesses, the FSS provides its members with
critical technical assistance for the agricultural sector's development. Regional Rural
Banks (RRBs) are the equivalent of commercial banks in India. These banks have been
given the authority to carry out financial transactions in order to foster economic
development in rural areas. The RRB plays a significant role in the development of small
craftspeople and agricultural producers in rural regions.
• Agriculture, small companies, cottage and village industries, handicrafts, and other
economic activities in rural areas are encouraged and developed thanks to NABARD's
efforts. The goal is to advance rural prosperity, rural development, and related issues.
The Federal Credit Society (FCSS) provides comprehensive services and technical
assistance to farmers, particularly small farmers, to boost productivity and diversify
agricultural operations. FSS will assess the members' economies via an agro-economic
examination of its authority. Based on the data, it will develop a financing plan to boost
local economy.
• NABARD promotes and develops rural agriculture, small businesses, cottage and village
industries, handicrafts, and other economic activities. How can the bank help to develop
regions not covered by government initiatives? NABARD serves as a central finance
organisation for several institutions that provide investment and production loans to
support rural community development and improvement. For integrated rural
development, rural prosperity, and related challenges, this is done.
• India's rural institutions have granted comparatively little loans. The quantity of rural
credit available in the nation remains insufficient in comparison to the rising demand
for it as agricultural input prices increase. Less focus has been placed on the needs of
poor farmers, while relatively well-to-do farmers are getting greater attention from
credit institutions. The availability of institutional funding for agriculture is impeded
by red tape and other bureaucratic hurdles. Credit institutions are still constructing
cumbersome standards and processes with the objective of giving loans to farmers.
• This, in the end, pushes farmers to depend more on non-institutional sources of credit,
which may be costlier. There is a need for checks and balances to be placed on the
power and actions of moneylenders. The processes that are involved in the delivery of
loans should be made simpler by the banks. Each farmer should be granted a credit card
so that they can keep track of the many loans they have obtained.
7. GLOSSARY
• Non-Banking Financial Institutions - Organizations that offer banking-related
financial services but do not have banking licenses are referred to as non-banking
financial institutions (NBIs). "Nonbank financial institutions" is the term that is used to
refer to these organizations.
• Commercial Banks - A commercial bank is a kind of financial organisation that
provides its clients with a variety of services and products, including loans, certificates
of deposit, savings accounts, overdrafts, and other goods and services. The supply of
loans to debtors and the subsequent collection of interest on those loans are the two
primary means through which these financial organization’s generate revenue.
• Primary agricultural credit society - The Primary Agricultural Credit Society, or
PACS for short, is the most basic and essential co-operative credit institution in India.
It is also known by its acronym. On the most basic level, it achieves its goals successfully.
• Regional Rural Banks - Regional Rural Banks, abbreviated as RRBs, are India's
equivalent of commercial banks. These banks have been granted the permission to
conduct financial transactions in order to promote economic growth and development
in rural areas. These are commercial banks that will be doing business. These banks
assist the economically challenged individuals in the area and function on a regional
basis.
• NABARD - The National Bank for Agriculture and Rural Development, often known as
NABARD, serves as the primary supervisory body for the rural banking industry in this
nation. It is also considered as the most essential financial institution for development,
and the Indian government formed and owns the organization. This bank's purpose is
to give access to financing in rural areas while conforming to appropriate legislation;
this will be the first step in enhancing rural development throughout the country.
8. TERMINAL QUESTIONS
1. What is the importance of rural finance?
2. Explain the Challenges in Rural marketing finance?
3. What are the NBFC Characteristics?
4. Discuss the role of NBFC in marketing finance.
5. Explain the role played by commercial banks in rural areas.
6. What are the activities of Primary agricultural credit society?
7. Elaborate the objective of RRBs?
8. Discuss the main functions of NABARD.
9. Elaborate the Problems of Institutional sources in marketing finance.
10. What are the solutions for Rural Credit Limitations?
11. Discuss the recent development contributed by Fintech companies for rural consumer
finance.
12. Discuss the NBFCs role in rural consumer finance.
9. ANSWERS
Answers for Self-assessment questions
1. b. financial services
2. d. secure and uncomplicated
3. b. increase in bank operational costs
4. c. financial intermediary
5. c. interest rate
6. a. to encourage entrepreneurial activity on a smaller scale in rural areas
7. d. rural
8. b. revitalization of underdeveloped or outlying regions
9. b. primary agricultural credit society
10. b. rural regions
agricultural goods easier. It provides critical goods for households, such as sugar and
kerosene, among other things.
7. Protect those living in rural poverty against predatory lenders. Increase job prospects in
rural regions through encouraging business and commercial activities. Additional
banking branches in more remote regions have been constructed to make loans available
to persons from lower socioeconomic strata. Create a business and trade-friendly
environment in rural areas.
8. Financing and investing in a small business that sells locally made and heritage-
promoting goods to rural areas. Developing plans, regulations, and activities to establish
a stable basis and the capacity to fund several sectors, as well as monitoring them with
records. Staff training to ensure that investment and start up counselling is effective,
smooth, methodical, and consistent. Banks must collaborate and interact in order to
maintain policy transparency. The Integrated Rural Development Programme, a high-
priority government initiative, includes refinancing accounts for poverty reduction with
the most support.
9. Despite the government's attempts to increase its rural credit structure, the country's
rural credit supply remains inadequate. Poor farmers' financial needs have received less
attention, while comparatively well-off farmers have received more attention from
lending institutions. Farmers' inability to make their payments on time has also
contributed to the amount of money that is past due.
10. Cooperative credit organizations’ structures must be altered to make them more
productive and goal-oriented. To put a halt to farmer exploitation, checks and balances
must be put in place on the authority and acts of moneylenders. By developing an
effective control system, credit should also keep track of how loans are utilized.
11. Recent development contributed by Fintech companies for rural consumer finance.
• Through microfinance, tractor loans, housing loans Fintech companies for rural
consumer finance.
• Role of Ezeepay, Jai Kisan, pSwitch and Dvara SmartGold
12. NBFCs role in rural consumer finance
Various functions of NBFCs like Bajaj Finserv, L&T Financial Services, Tata Capital
Financial Services Ltd and HDB Financial services.
Questions
i. Discuss how credit improve the rural farmers?
ii. Can you suggest a suitable strategy like SHG for rural credit facilities and substantiate
your answer?
Books Recommended:
1. Kashyap Pradeep, Rant Siddhartha- The Rural Marketing, Biztantra Publications. 3rd
Edition, 2016
2. Mishra and Puri- Development Issues of Indian Economy Himalaya Publishing House,
39th Edition, 2021
Reference
1. Kumar, S. (2023, January 7). Rural Fintech: A growth Story. BW Businessworld.
https://www.businessworld.in/article/Rural-Fintech-A-growth-Story-/07-01-2022-
417040/
2. Malhan, A. (2020, August 27). Rural-focused lenders a big play for India’s revival story.
The Economic Times.
https://economictimes.indiatimes.com/news/economy/indicators/rural-focused-
lenders-a-big-play-for-indias-revival-story/articleshow/77779725.cms
3. Malik, P. (2022, March 7). 5 fintech startups that are making financial inclusion a reality
in rural India. YourStory.com. https://yourstory.com/2022/03/fintech-startups-
financial-inclusion-financial-literacy
Website Referred
• Tribune News Service. (2022, December 5). Need to make agri credit system equitable.
Tribuneindia News Service. https://www.tribuneindia.com/news/features/need-to-
make-agri-credit-system-equitable-457885
• https://www.rbi.org.in/scripts/AboutUsDisplay.aspx?pg=RegionalRuralBanks.htm
• https://www.nabard.org/ftrcontent.aspx?id=492#:~:text=NABARD%2C%20as%20a%
20Development%20Bank,with%20a%20view%20to%20promoting
• https://www.nabard.org/demo/auth/writereaddata/File/Financing%20and%20devel
oping%20PACS.pdf