Rural Marketing Fortune is Really At The Bottom Of The Pyramid

The future lies with those companies who see the poor as their customers by CK Prahalad
To get rich, sell to the poor by Pradeep Kashyap

Snapshot of Rural India

In general, a rural area is a geographic area that is located outside the cities and towns. The National Sample Survey Organization (NSSO) defines rural as follows: An area with a population density of up to 400 per square kilometer, Villages with clear surveyed boundaries but no municipal board, A minimum of 75% of male working population involved in agriculture and allied activities

Contd..
Up to 70% of Indias population is rural, which contributes a huge amount to Indias GDP by way of agriculture, self employment, services, construction etc . Rural population has grown by 12% in last decade. Rural market has distinguished accounts for 40% of Indian economy. characteristics,

Rural India has huge, heterogeneous and growing consumer market, which contributes more than 50% to Indias total consumer market size.

Evolution of Rural marketing

Phase 1(before 1960) : It was completely an unorganized market, where baniyas and mahajans dominated the market. Phase 2(1960 to 1990): This is the period when green revolution happened which led to farming involving scientific and technological methods. Part 3(after mid 1990) : Since 1990 ,Indias industrial sector had gained strength and maturity. Its contribution to GNP increased substantially. There was metamorphosis of agricultural society to industrial society

Classification of Rural markets

Consumer markets Industrial markets Service markets.

Opportunities in Rural market

Large population. Growth in consumption. Changing life-style. Market growth rate is higher than urban. Raising prosperity. Remoteness is no longer a problem.

Approaches To The Rural Marketing

Trickle Down Approach Undifferentiated Approach Differentiated Approach Bottom of the Pyramid Approach

Trickle Down Approach

Some Companies Believe That there is no need for designing marketing programmes to reach rural areas. There are certain assumptions in this approach The rural market can be ignored. The top end , urban society culture is somewhat similar to the top end , rural society culture. The third assumption is that the householder buys his wares from the nearby feeder town either on a special visit or when he is there on work.

Suitability
This approach is suitable for companies that are offering top end , urban centric premium and luxury products. Luxury market in India is growing very fast. Brands like Damro , ETAM , Zegna ,Fendi , Nike ,high end Plasma TV S and LCD S and cars like Mercedes Benz India ,BMW and AUDI are essentially urban market products.

Rural Focus Of These Companies

These companies are only engaged in rural development activities as a part of their corporate social responsibility. Some examples of CSR The Malanpur plant of the Godrej consumer products ltd has adopted a school at a village Singwari and granting help by way of scholarships to the best performing child belonging to SC/ST from the fifth to the eighth standard. Dabur India Ltd Established Sustainable Development society or SANDESH in 1993 a non profit organization to promote research and welfare activities in rural areas.

Role of Marketing
Educate the target beneficiary groups in order to encourage and engage them in the development process. Building the image of the corporate enterprise as a good citizen and promoting sales of the companys products and services in the urban and to some extent in rural areas by adopting a trickle down approach.

Undifferentiated Approach
Some FMCG and consumer durables companies found the trickle down approach inappropriate. They believed that to reach rural markets , urban market strategies with minor modifications to suit rural conditions would serve the need.

Assumptions
Affordability - its low in the rural market Accessibility Poor road connectivity leads to expensive supply chain Acceptance rural consumers are having the same needs as their urban counterparts Availability is insignificant

Suitability
Many FMCG and Consumer durables companies

Rural Focus
Only CSR was not the main motive behind entering the rural markets. But companies are also getting the economic benefits. This also increased their image. Some examples are ITC focuses on the social forestry HUL projects for the Empowerment of the Indian women.

Rural Marketing
Its main focus is on distribution and less on the other 3 PS Advertisements are not specially designed. Radio advertisements are mostly used.

Differentiated Approach
In this approach marketer design separate marketing programmes for rural markets and leverage on cause branding.

Assumptions
4 AS are again considered but with special focus on the rural markets as the conditions are improving their. Better income levels , better road connectivity etc.

Suitability
Again FMCG companies and consumer durables companies

Rural Focus
The focus is both on the rural market development as well as rural development. There is a tight integration of the CSR with the marketing strategy.

Rural Marketing
All the 4 PS are given due importance.

Bottom of the Pyramid Approach

Differntiated approach + Social Entrepreneurship = BOP Approach Used by companies like HUL and ITC in India. They have rightly understood that development is not a CSR or philanthropic act but a business that benefits the company and the poor. This is a win win sustainable model. This approach has been captured by C.K. Prahalad and Stuart Hart.

Some examples
HUL S shakti entrepreneur programme Canara Bank is imparting vocational skills to the unemployed rural people

Characteristics
It demands innovations. It requires partnerships. It promotes entrepreneurship. It is a core business , not social responsibility.

3 I Model
Integrated , Innovative And Inclusive growth model. The new model should address the BOP with a commitment to uplift the masses and the company goals of profitability.

DEVELOPMENT OF RURAL MARKETING

 In India, rural markets account for 70% of the entire population in the country (833 million/1.21 billion per 2011 Census). The rural segment of the Indian economy is growing at a pace of 8-10% per annum and expected to add new consumption of USD 90100 billion over the period 2012-2017 to the current base of USD 240250 billion. The leading opportunity sectors and growth indicators are listed below.

 Automobiles
Rural India accounts for almost 35% of automobile industry sales.

Fast Moving Consumer Goods (FMCG)

Higher disposable income in the hands of rural households, along with massive promotions by the market players, will take the rural FMCG market from Rs.87,900 crore (GBP 1Bn/USD 1.5Bn) to a market size of over Rs.106,300 crore (GBP 1.2Bn/USD 1.9Bn) by the end of 2012.

 Retail
Organized retail in the country currently stands at about USD 30 billion or 6-7% of total retailing. The total retail market is projected to touch USD 1,250 billion by 2020.

Healthcare
Indias healthcare sector is a USD 50 billion opportunity that will grow at about 10% a year for several years. By 2020, it is expected to reach an opportunity size of USD 280 billion.

 Consumer Durables
Indias consumer durables market is set to increase by 40% in 2011-12.

BPO & IT Services

Rural business process outsourcing (BPO) units account for over USD 10 million towards Indias ITBPO revenues.

 Internet & e-Commerce

In a step to increase Internet penetration in rural India, the Government of India (GoI) will create 250,000 nodes for broadband by 2016 that will serve around 750,000 villages.

Telecommunications
Rural marketing communication is going to emerge in a big way as the users of smart phones are expected to grow from 50 million now to touch 150 million by 2014.

STRATEGIES FOR DEVELOPMENT OF RURAL MARKET ARE AS FOLLOW Venture validation and delivery services for rural markets Concise business plans and financial cases Outline the correct governance, regulatory structure that meets GOIs policy validation Identify legal risks and the relevant mitigations from a distribution and quality control perspective Provide demographic clarity to ensure well-rounded participation in rural India Validation and development of a suitable go-tomarket strategy

 Evaluate and develop operational and risk management processes Map, evaluate and cost any required solutions development that supports the product-to-consumer journey Identify key risks and mitigation plans based on market size, forecast growth, competitive factors, potential for differentiation through technology and potential partners Conduct preliminary discussions and identify potential partners to enable preferred relationship structures (joint venture, revenue share, etc.)