About 70% of India's total population is rural by nature. Rural India has a population of 83.3 crore spread across 6,38,000 villages. The rural-urban distribution ratio currently is 68.84% & 31.16% respectively. A report by National Council of Applied Economic Research (NCAER) shows that rural segment comprise more than 50% of consumers constituting as a prime market for consumer goods. Corporate businesses in India are under pressure to capture the untapped rural market to increase their profitability and market share. Companies are adopting rural marketing in a broader context of sustainability in the era of intense competition to grow their businesses and thereby also contributing towards the economic development and the welfare of the rural economy.



The total number of rural households is expected to rise from 135 million in 2001-02 to 153 million in 2009-10. This presents the largest potential market in the world. The annual size of the rural FMCG market was estimated at around US$ 10.5 billion in 2001-02. With growing incomes at both the rural and the urban level, the market potential is expected to expand further.

Issues in Rural Marketing

The major issues faced by companies are:

*Unorganized and dispersed Markets,

*Lack of proper infrastructure and other physical communication facilities,

*Media for Rural Communication,

*Many Languages and Dialects,

*Low Per Capita Income,

*Low Levels of Literacy,

*Availability of duplicate and cheap brands.

Rural Market Potential  

India's literacy rate stands around 65 per cent, up from 52 per cent in 1991(NSSO Survey). Considering the rate of increase, it would take some 20 to 25 years to clear this problem. Hence, the CSR agenda adopted by corporate firms consider rural development as one of the important dimension. According to a survey by the National Council for Applied Economic Research (NCAER), from 55 to 58 per cent of the average urban income in 1994-95, the average rural income has gone up to 63 to 64 per cent by 2001-02 and touched almost 66 per cent in 2004-05.

Table: 2 RURAL SHARES IN STOCKS OF CONSUMER DEMAND

 The above table shows the rural share in the stock of consumer goods like scooters, motorcycle, mopeds, cars/jeeps, automotive, television, other white goods, fans and other low cost items. From the table it is clear that the percentage of rural share in the stock of consumer goods has been rising since 1995-96 to 2009-10. The rural share for scooters was 25.2% 1995-96 which increased to 32% in 2009-10, followed by motorcycles, i.e., from 45.8% to 55.4%, mopeds from 37.3% to 46.6%. However in cars/jeeps it has increased from 7.4% to 9.3% only. Similarly, in television it has registered an increase from 40.7% to 44.9%. Thus, we can see that the percentage of rural share in stock of consumer goods has increased of the period of 15 years i.e. from 1995-96 to 2009-10.

 Penetration level in most product categories like jams, toothpaste, skin care, hair wash etc in Rural India is low at present. Low penetration indicates the existence of unsaturated markets, which are likely to expand as the income levels rise as well as awareness increases. This provides an excellent opportunity for the industry players in the form of a vastly untapped market.

Much also depends on the sector and products sold. In fast-moving consumer goods, products are capturing a sizable portion of rural consumer spending in a number of areas, with year-on-year increases in rural spending in 2009 on shampoos (70%), washing powder (60%) and toothpaste (12%), say researchers at IMRB thereby concluding that the average spending on these products is growing faster in rural than in urban markets.

Corporate Strategies for Rural Markets

Although the rural market does offer a vast untapped potential, it should also be recognized that it is not that easy to operate in rural market because of several problems. Most MNCs are therefore accepting the challenges of the rural markets with the help of the 4A's i.e. availability, affordability, acceptability and awareness. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system, which helps it to reach the interiors of the rural market for selling products like Sunsilk and Clinic shampoos in small, inexpensive packets as product cost is a major consideration which determine purchase decision in rural segment. It has also launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market Rural India accounts for nearly half of HUL's revenue.

Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. Because of the lack of electricity and refrigerators in the rural areas, Coca-Cola has also provided low-cost ice-boxes for its outlets. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5.

LG Electronics in 1998 developed a customized TV set for the rural market named Sampoorna which was a big success as 100,000 sets were sold in the very first year. For this model, LG also introduced a new technology that provided better reception in low signal locations which is a common problem in rural areas. Later another low priced TV - Cineplus was also launched to meet further demands. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices.

Due to low disposable incomes, companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5.

The insurance companies that have tailor-made products for the rural market have performed well. Lack of awareness is also one of the major challenges of rural marketing being faced by most of the firms.  Mass media is able to reach only to 57% of the rural population. Fairs and festivals, Haats, Melas etc., are used as occasions for brand communication. Cinema vans, shop-fronts, walls and wells are other media vehicles that have been utilized to increase brand and pack visibility. Ideas like putting stickers on the walls of wells, huts, are some of the innovative media used by personal wash like Lux and Lifebuoy and fabric wash items like Rin and Wheel.

Hindustan Lever relies heavily on its own company-organised media. These are promotional events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language. Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. It has also doubled its spend on advertising on Doordarshan, which alone reached 41 per cent of rural households. It also uses banners, posters for promotion. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media. Philips India uses wall writing and radio advertising to drive its growth in rural areas.

Conclusion

Two-thirds of the country's one billion consumers live in rural India, where almost half of the national income is generated.  Higher rural incomes have meant larger markets. MNCs have built roads in rural India that help them deliver their goods, provided education and health care for communities whose workforces they rely upon, and implemented environmental programs to protect precious natural resources needed to keep supply chains to run smoothly. After analyzing the rural-urban divide, we can say that the rural markets are becoming more and more lucrative for the marketers, because of growing demand in rural sector.

References

1.         Orlitzky, M, Schmidt, F & Rynes, S 2003, 'Corporate social and financial performance: A meta analysis', Organization Studies,                vol 24, no. 3, pp 403-11.

2.         S.L. Gupta -Rural Marketing Text and Cases

3.         PJC, Parliamentary Joint Committee on Corporations and Financial Services 2006, Corporate responsibility: Managing risk                 and creating value, June, Canberra.

4.         Schlesinger, L. and Heskett, J. (1991) "Breaking the cycle of failure in service", Sloan Management Review, spring, 1991, pp.                17-28.

5.         Joshua Karliner, The Corporate Planet: Ecology and Politics in the Age of Globalization, (Sierra Club Books, 1997).

6.         http://www.ibef.org/india/CSR.aspx

7.         helpruralindia.org

8.         http://www.helpruralindia.org/html/csr.htm

9.         http://www.itcportal.com/itc-business/agri-business/e-choupal.aspx

10.       http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4472

11.       http://abrmr.com/pdf/Case%20study%20on%20Corporate%20Social%

            20Responsibility%20of%20MNCs%20in%20India%20-%20G%20Muruganantham%20.pdf

12.       http://brandactivationideas.blogspot.com/2010/01/rural-marketing-by-p-india.html

             (Shaili Vadera is assistant professor, Amity Business School,

             Amity university, Lucknow campus)