Market segmentation is one of the primary behavior that a marketing firm takes up to categorize and choose the consumer segment to target. In the process of segmentation, the market is split into groups of customers with similar needs and behavioral or motivational characteristics which constitute distinct market opportunities. India is the second largest consumer market in the world. With over 1 Million potential customers, it comes as no surprise why consumer goods companies see India as fertile ground for expansion and growth. An analysis of the demographic structure of Brazil, China, India and South Africa suggests that these countries are amongst the largest developing countries1. India for instance has 75{43188a7dd839b6435400250daa1cfd1f7fa6a9f2f74b5d47d7c17eef7596ad2a} of the population in the rural areas, and so is it for China.
The rural market is escalating. The attraction of rural markets lies in their size as mass market. Every year about 2 million households are added. With a number of new players entering the fray the urban market gets crowded. With antagonism getting hotter the manufacturers are struggling to hold on to their market shares. As a result they have to look for new pastures. The obvious choice is to go to villages where the market has not been fully exploited. Many of the national and multinational companies have come to realize this and are gearing themselves for exploiting the potential. There are several companies engaged in increasing their products and marketing to the worldwide economy.
Indian Rural Markets – A picture
The rural market of India is large and scattered and it consists of 63 crore consumers spread throughout the country. More than 70{43188a7dd839b6435400250daa1cfd1f7fa6a9f2f74b5d47d7c17eef7596ad2a} of the rural income is from agriculture. The consumers standard of living is poor because of low literacy, backwardness savings etc. The rural consumers believe in old customs. As of April 2003, the size of the rural market was anticipated to be Rs.50, 000 crore2.By July 2003, the number of credit cards issued under the Kisan Credit cards scheme was 24 million against 17.7 million credit and debit cards issued in urban areas3.Consumer behavior studies have revealed several insights into the values, changing lifestyles, factors influencing individual decision-making and buying patterns of the rural consumer. For ex: Iodex, a pain balm was used to massage the muscles of cattle. In Bihar, Horlicks was fed to ‘fatten up’ cattle. Companies like Hindustan Lever Ltd. (HLL), Coca-Cola,LG Electronics,Britannia,Colgate -Palmolive and Standard Life have been actively involved in serving the rural markets sine the past few years. For Ex. 50{43188a7dd839b6435400250daa1cfd1f7fa6a9f2f74b5d47d7c17eef7596ad2a} of HLL’s sales come from rural markets.
1http://business.wri.org/newsrelease_text.cfm?NewsreleaseID=286
2http://www.xe.com/ucc/
3 [http://www.nabard.org/roles/kcc.thm]
Problems in the Booming Rural sector
Although the rural market does offer a vast untapped potential, it should also be recognized that it is not easy to operate in rural market because of several problems. Rural marketing is thus a time consuming affair and requires considerable investments. The major problems are:
v The number of people below poverty line has not decreased in any appreciable manner.
v Nearly 50{43188a7dd839b6435400250daa1cfd1f7fa6a9f2f74b5d47d7c17eef7596ad2a} of the villages in the country do not have all weather roads.
v Rural areas are scattered and it is impossible to ensure the availability of a brand all over
the country.
v The Literacy rate is low as compared to urban areas. This again leads to problem of
communication for promotion purposes.
v The kind of choices of brands that an urban consumer enjoys is different from the choices
available to the rural customer.
The 4 A Approach
The rural market may be alluring but is not without its problems. Rural-urban linkages flows of agricultural and other commodities from rural-based producers to urban markets, both for local consumers and for forwarding to regional, national and international markets and in the opposite direction, flows of manufactured and imported goods from urban centers to rural settlements.
The more daring MNCs are meeting the consequent changes of availability, affordability, acceptability and awareness ( The 4As).
Availability
The first and foremost challenge is to ensure availability of the product or service. However given the poor state of roads, it is an even greater challenge to regularly reach products to the far-off villages. Over the years, India’s largest MNC, Hindustan Lever a subsidiary of Unilever has built a strong distribution system which helps its brands to reach the interiors of the rural markets. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote offices.
Affordability
The second challenge is to ensure affordability. With low disposable incomes, products need to be affordable to the rural consumers, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Fro ex. Godrej recently introduced three brands of Cinthol , Fair Glow and Godrej in 50 gm packs, priced at Rs.$-5 meant for specifically for Madhya Pradesh, Bihar and Uttar Pradesh.
Acceptability
The third challenge is to gain acceptability for the product or service. One company, which has reached rich dividends by doing so, is LG Electronics. In 1998, it developed a customized TV for the rural market and christened it Sampoorna. It was a runaway hit selling 100,000sets in the very first year.
Awareness
Mass media is able to reach only 57{43188a7dd839b6435400250daa1cfd1f7fa6a9f2f74b5d47d7c17eef7596ad2a} of the rural population. With large parts of rural India inaccessible to conventional advertising media – only 41 of rural households have access to TV- building awareness is another challenge. LG Electronics uses vans and roads to reach rural customers. The key dilemma for MNCs eager to tap the large and fat-growing rural market is whether they can do so without hurting the company’s profit margins.
Role of rural retailing
Retailing is the final phase of the distribution channel and it is clear by now that its availability and distribution that drives growth in rural Indian markets. Hence, retailing will be significant and will undergo greater organization and maturity as is being witnessed in the urban markets, even in the rural markets. Innovative retail models which take in to account the nuances of rural market is the way forward.
Recommendations
v The business model for rural retail can be successful only when integration between the
profit and social motive is apparent.
v The model should empower the rural consumer and at the same time take advantage of
this empowerment through creation of demand for its own products and that of its partners.
