Study of Changes in Rural Marketing Strategies due to changing attitude of rural consumer towards packed snacks products

Submitted By:

Prof. Vishakha Dhawangale

Assistant Professor, MBA Department

Kamla Nehru Mahavidyalaya, Nagpur

Mobile:-9923571105, e-mail- hade.vishakha@gmail.com

Abstract

Think of rural India and the images that come up are of bullock carts, cow-dung, miles and miles of paddy fields and kutcha roads and houses. Several studies have shown that rural consumers are generally ignorant and they are also unorganized. Under these circumstances, the sellers or the manufacturers, exploit the consumers. Though, the consumers in India have been provided with various safety measures against their exploitation, still the sellers and producers are hoarding and black-marketing the essential goods, involving economic corruption and frequently cheating the consumers. Rural markets are full of substandard goods and duplicity of branded goods is another major problem in rural areas. These facts may not be true any longer. The rural market has changed drastically in the past decade. A decade ago, the rural market was more unstructured and was not a prioritized target location for corporate. Very few companies, mainly the agro-based ones, were concentrating in these markets. The Introduction of currency, transport, and communication and developments in infrastructure has increased the scope of rural market. Gradually, corporate realized that there was saturation, stiff competition and clutter in the urban market, and a demand was building up in rural areas. Seeing the vast potential of 75 per cent Indians living in rural areas and demand base offers great opportunities to marketers, they started focusing on these unexplored, high-potential areas. The companies are applying several models and strategies to be winner in the rural market. In recent years, rural markets have acquired significance, as the overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities. This paper discusses the present scenario of rural marketing especially rural produce, and its importance, current trends, and highlights certain problems related to rural marketing. Further it highlights the improvements that make the rural marketing system most effective.

“The future lies with those companies who see the poor as their customers.”- C. K. Prahalad

Keywords:- Rural, Marketing, packed snacks, rural consumer, strategies

Introduction:-

The Indian rural market with its vast size and heterogeneous demand base offers great lucrative opportunities to marketers. After all, two thirds of countries consumers live in rural areas and almost half of the national income is generated in the rural hinterland. India is classified into around 593 districts, and approximately 6,38,000 villages, which can be segmented in different parameters such as literacy levels, accessibility, distribution networks, income levels, market penetration, distances from nearest towns, etc.India’s economy is predominantly rural in character. Recent developments, which has taken place in the rural areas under the five- year plans and other such special programmes, are phenomenal. The overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities.

Today the rural market offers a vast untapped potential. Development programs in the field of agriculture and related activities such as health education, communication, rural electrification, etc have improved the lifestyles of village population. Rural India, which accounts for 83.3 per cent of the country’s more than one billion population (according to the Census of India 2011), is not just witnessing an increase in its income but also in consumption and production. However the boom in the retail market has been confined primarily to the urban markets in the country. Even there, large chunks are yet to feel the impacts of organized retailing in rural India. There are two primary reasons:

1. Modern retailer is yet to feel the saturation in the urban market and has, therefore probably not looked at other markets as seriously.
2. The modern retailing trend, despite its cost-effectiveness, has come to be identified with life styles. In order to appeal all classes of society, retail stores would have to identify with different lifestyles.

But often, rural marketing is confused with agricultural marketing. Agricultural marketing denotes marketing of produce of the rural areas to the urban consumers or industrial consumers. These primarily consist of agricultural commodities and some small scale industry products such as Khadi Gram Udyog products or Amul’s dairy products. On the other hand, rural marketing involves delivering manufactured or processed goods or services to rural consumers. As rural markets acquire significance the Indian growth story spreads itself to India’s hinterlands.

India’s packaged food retail sales grew at an average of 11.5% annually during the past five years, with a Compound Annual Growth Rate (CAGR) of 12.93% between 2004 and 2009. With the arrival of international packaged fast food outlets in India, the food industry has experienced steady growth. It contributes 9% to India’s GDP; however, India’s share is just 1.7% in world trade. It is difficult for most regional packaged food companies in India to expand nationally due to the country’s underdeveloped infrastructure. Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF) was the leader in the packaged food market, with an 8% share in 2009.

The last decade has not only been a period of phenomenal growth but also a period of optimism about the bottom of pyramid. Census of India defines rural as any habitation with a population density of less than 400 per sq km., where at least 75% of the male working population is engaged in agriculture and where there exists no municipality or board, and the same definition is accepted for this paper as well. The Government of India statistics reveals that even with the increasing urbanization and migration, 63% of India’s population would still be living in rural areas in 2025. Thus, rural market was, is, and will continue to be vitally important to the Indian economy. The Indian packaged food industry is expected to touch $30 bn by the year 2015 on the back of growing awareness, busier lifestyles, and a booming economic environment.

Increase in competition, saturated urban markets, more and move new products demanding urban customers, made the companies to think about new potential markets. Thus, Indian rural markets have caught the attention of many companies, advertisers and multinational companies. According to a recent survey conducted by the National Council for Applied Economic Research (NCAER), the purchasing power of the rural people has increased due to

Increase in productivity and better price commanded by the agricultural products. By and large this rise in purchasing power remains unexploited and with the growing reach of the television, it is now quite easy for the marketers to capture these markets

Features of Indian Rural Markets:

Large, Diverse and Scattered Market: Rural market in India is large, and scattered into a number of regions. There may be less number of shops available to market products.

Major Income of Rural consumers is from Agriculture: Rural Prosperity is tied with agriculture prosperity. In the event of a crop failure, the income of the rural masses is directly affected.

Standard of Living and rising disposable income of the rural customers: It is known that majority of the rural population lives below poverty line and has low literacy rate, low per capital income, societal backwardness, low savings, etc. But the new tax structure, good monsoon, government regulation on pricing has created disposable incomes. Today the rural customer spends money to get value and is aware of the happening around him.

Traditional Outlook: Villages develop slowly and have a traditional outlook. Change is a continuous process but most rural people accept change gradually. This is gradually changing due to literacy especially in the youth who have begun to change the outlook in the villages.

Rising literacy levels: It is documented that approximately 45% of rural Indians are literate. Hence awareness has increases and the farmers are well-informed about the world around them. They are also educating themselves on the new technology around them and aspiring for a better lifestyle.

Diverse Socioeconomic background: Due to dispersion of geographical areas and uneven land fertility, rural people have disparate socioeconomic background, which ultimately affects the rural market.

Infrastructure Facilities: The infrastructure facilities like cemented roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution is a challenge to marketers who have found innovative ways to market their products. As part of planned economic development, the government is making continuous efforts towards rural development. In this age of liberalization, privatization and globalization, rural market offers a big attraction to the marketers to explore markets that are untapped.

Rural Marketing

Rural marketing involves the process of developing, pricing, promoting, distributing rural specific product and a service leading to exchange between rural and urban market which satisfies consumer demand and also achieves organizational objectives.

It is a two-way marketing process wherein the transactions can be:

1. Urban to Rural: It involves the selling of products and services by urban marketers in rural areas. These include: Pesticides, FMCG Products, Consumer durables, etc.
2. Rural to Urban: Here, a rural producer (involved in agriculture) sells his produce in urban market. This may not be direct. There generally are middlemen, agencies, government co-operatives, etc who sell fruits, vegetables, grains, pulses and others.
3. Rural to rural: These include selling of agricultural tools, cattle, carts and others to another village in its proximity.

 Strategies for Effective Rural Marketing

Rural Marketing mix would traditionally include the strategy which encompasses the four Ps namely Product, Price, Place and Promotion that a company uses to promote and sells its brand or product in markets. Apart from this rural marketing also includes four A‘s, namely Affordability, Availability, Awareness and Acceptability.

By definition a product refers to anything that is capable of or can be offered to satisfy need or want.

Affordability

Availability

Awarenes

• Product for rural market must be built or modified to suit the lifestyle and needs of the rural consumers, at the same time keeping in mind their paying capacity as well as their willing to pay.
• Secondly, the product has to be utility oriented. British Petroleum‘s energy cell manufactures and sells smoke less, biomass run stoves.
• The second P refers to Price. Price is the amount the customer has to pay in order to acquire a product or services. Rural pricing revolves around 3 C’s, namely customer value, competitors prices and cost to company. Rural population due to its irregular income and limited resources is highly price sensitive. Ensuring a high market share and deep penetration will ensure large volumes thereby achieving overall economies. This overall price benefit has to be passed on to the consumer who requires value for money products.
• Promotion implies all the activities undertaken to make the product or service known to and preferred among the user and trade. Promotion aspect always creates a challenge in rural markets because of the fact that village have thin population density and are widely spread over large remote areas and poor media penetration. NCAER sponsored by the India Society of Advertisers conducted survey to study the socio economic effects of advertising. It covered 3,836 household in 50 towns and 50 rural districts in 10 states. It showed a clean rural urban divide, 16% of rural and 25% of urban customers felt that advertising influenced them to frequently or always buy products they do not really need. With fewer people having traditional media access and even fewer getting influenced by it non-traditional media vehicle like hoardings and wall painting, street plays and musicals are providing greater influence
• Effective Rural Market Research is also a critical component for a successful rural marketing strategy.
• Once, the private companies, who have successfully launched campaigns in rural areas, share their data and findings. Their understanding of the rural markets can give valuable insights to newer ventures.
• Secondly government should be more proactive in their research. A lot of government researched data, for example in health care industry, has prompted companies to venture into specific markets.
• Companies are promoting Indian sports teams so that they can associate themselves with India. With this, they can influence Indian mindset like during Cricket World Cup.
• Many companies are developing rural-specific products. Keeping into consideration the requirements, a firm develops these products.

Objectives:-

1. To understand rural marketing and study its current scenario.
2. Understanding different strategies followed by companies for rural marketing.
3. To study the opportunities in rural market and understanding the challenges ahead.
4. To study the changes in Attitude of rural consumers leading to changes in marketing strategies

Literature Review

• Marketing scenario in India changed with market liberalization policies after 1990’s(Gopalaswamy,1997).
• Most of the Indian rural markets are ‘Virgin’ in nature and they are now opening for most of the packaged goods (Habeeb-Ur-Rahman,2007) and for a number of product categories(Bijapurkar, Rama 2000).
• Rural marketers have to differentiate themselves on quality and value for money (Anand& Krishna, 2008).
• For this purpose, they need to understand the factors that influence the rural purchase of FMCG (Krishnamoorthy,2008). Various factors influence the purchase decisions of customers (Blackwell and Talarzy, 1977).
• Available literature mentions that packaging (Pandey, 2005; Venkatesh, 2004), brand name (Narang, 2001; Bishnoi& Bharti, 2007; Sahoo&Panda, 1995), quality (Rashmi&Venu Gopal,2000; Kumar &Madhavi, 2006), price(Sarangapani& Mamatha, 2008) and promotions(Bhatt &Jaiswal, 1986) influence the rural purchase.
• Opinion leaders also influence the rural consumption behaviour (Sayulu&Ramana Reddy,1996).
• In the process, retailers have emerged as key influencers of rural purchase of FMCG (Ying Zhao, 1994).
• Venukumar G., (2012)*2 in his study conclude that, it is certain that F.M.C.G. companies will have to really gain inroads in the rural markets in order to achieve double digit growth targets in future. There is huge potential and definitely there is lot of money in rural India. The companies entering rural market must do so, for strategic reasons and not for tactical gains as rural consumer is still a closed book and it is only through unwavering commitment that the companies can make a dent in the market.
• Siras M. (2012)found that in his study that, rural marketing should not give the impression that rural markets have not been exploited at all. Its purpose is only to highlight the growing importance of rural markets in the fast changing economic situation.

Research Methodology:-

The major objective of this research if to find out the perception of rural consumer towards packed snacks products, their willingness to buy the products and the change in their attitude for snacks products. Firstly the changes are taking place in the globe every minute hence to collect fresh data from a sample of 100 respondents a close ended structured questionnaire was prepared. Secondly when it comes to collecting data for marketing strategies lot of inputs can be gained from the retailers of Rural area as well. Hence a survey was conducted for consumers as well as retailers of packed snacks products .

The questionnaire primarily tries to ascertain on what are the important aspects in marketing of a product that attract rural consumer as well

as are beneficial to the retailer as well. This questionnaire is not focusing on a particular Brand of product but is trying to find out the inclination of rural consumer towards ready to eat packed snacks products.

The survey was conducted for 100 respondents whose demographic data is as follows

Content of the questionnair and analysis

Table No.1.1

Table No. 1.2

Conclusions:-

• The paper was inspired by the fact that even though the market attractiveness of rural markets has been accepted but very few of the private retailers have actually made a success entry into the market. An attempt has been made to understand the marketing issues underlying marketing of retail products in rural areas and what are the opportunities for retailers to entering rural areas
• Companies should think and compete with ladled products which are local made and develop the interest of rural consumers by Highlighting the manufacturing and expiry date
• According to rural consumers shop display and advertisement on radio plays a very important role in creating awareness about a product and enhancing its sale
• Rural customers trust retailers in their villages. During the field visits, it is observed out that though the retailers are aware of the fact that their customers listen to them, they are not aware of this wonderful principle called, the ‘Trust Factor’. The companies must educate rural retailers about such modern marketing principles for a better performance.
• Rural marketers should design innovative promotional strategies for rural markets that can express messages in an easy way to the villagers and compatible with their education and understanding levels.
• Packaging creates a favorable impression in rural customers’ minds which impacts their buying behavior It is recommended to allot great deal of attention towards designing attractive packaging while keeping the costs low.
  

References:-

1. Rural Marketing Text and Cases, C.S.G. Krishnamacharyulu et al, Pearson Education, third edition, 2009.
2. Rural Retailing in India – A Changing Paradigm,  Mr. Puneet Bansal, Ms Veerpaul Kaur Maan Mr. Mandeep Rajora,  International Journal of Advanced Research in Computer Science and Software Engineering, Volume 3, Issue 11
3. Rural consumers attitude towards Branded Packed food Products, B.Amarnath & G. Vijayudu,Asia Pacific Journal Of Social Sciences, Volume III
4. Rural Marketing Strategies for Selling Products & Services: Issues & Challenges,Dr. Ashfaque Ahmed, Journal of Business Management & Social Sciences Research (JBM&SSR), Volume 2, No.1
5. Factors Influencing Purchase of FMCG by Rural Consumers inSouth India: An Empirical Study, Md. Abbas Ali, Venkat Ram Raj Thumiki and Naseer Khan, International Journal of Business Research and Development Vol. 1 No. 1
6. Ramkishen Y. Rural & Agricultural marketing, Jaico Publlishing House, Mumbai, 2004
7. Jha, M.1988. ‗ Rural Marketing: some conceptual issues‘, Economic and Political Weekely, 23(9): M8‐M16.
8. http://www.slideshare.net/shami1988/scope-of-rural-marketing-in-fmcg-industries