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Rural Marketing Environment

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Intro to Rural Market

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Rural Marketing Environment

  1. 1. Rural Marketing, 2e Chapter 2 The Rural Marketing Environment
  2. 2. Rural Marketing, 2e Learning Objectives • Describe the evolution of rural marketing • Track the rural marketing environment in terms of demographic, physical, social, cultural, political and technological aspects • Understand the rural economic environment, the changing rural economic structure, and income spending pattern • Understand rural infrastructure, government support, and its relevance for marketing • Describe the initiatives in the rural employment generation programme 2
  3. 3. Rural Marketing, 2e The Evolution of Rural Marketing •Marketing of rural products in rural and urban markets and agricultural inputs to rural markets. •A totally unorganised market Phase I (Prior to the 60s) •Green revolution ushered in scientific farming practices resulting in exponential growth in agricultural production •White revolution gave a fillip to cooperative movement •Establishment of distribution networks by FMCG companies Phase II (60s to 80s) •Increased rural thrust and strengthening of local governance resulted in socio-economic progress. •Growth in consumables and durables Phase III (90s) •Going rural becomes the mantra even for high value products and services •Government initiatives of rural loan waiver, employment and rural infrastructure development provide further acceleration Phase IV (2000 to present)
  4. 4. Rural Marketing, 2e Rural Environment Demographic Physical Social and Cultural Political Technological 4
  5. 5. Rural Marketing, 2e Rural Demographic Environment • Rural population is nearly 70% of total population down marginally from 74% in 1991 • Total number of households 165 million with average family size of 5 per household 5 The Rural Population in India
  6. 6. Rural Marketing, 2e Rural Demographic Environment 6 A Break-up of the Type of Households in India Others includes siblings living together, etc. Source: Indian Readership Survey •Joint family structure giving way to individualized joint families staying in the same house but with separate kitchens
  7. 7. Rural Marketing, 2e • 35% of the population is in the consuming age group of 15 to 34 years The Rural Population in India Rural Demographic Environment
  8. 8. Rural Marketing, 2e Rural Demographic Environment • Literacy rate up from 53% in 2000 to 63% in 2010 Literacy Among Individuals of Age 12 years and Above
  9. 9. Rural Marketing, 2e • Land fragmentation, rising education and increased skill sets have encouraged shift from agricultural to non-agricultural occupation Rural Demographic Environment Occupation Break-up in Rural Areas
  10. 10. Rural Marketing, 2e Rural Demographic Environment • Total land under farming almost constant but growth in small and marginal farmers • Per capita income up from INR 11,227 in 2004-05 to INR 15,173 in 2010 The Landholding Pattern in Rural India
  11. 11. Rural Marketing, 2e Rural Physical Environment Settlement Size • Total of 6.39 lac villages of which 5.93 lac inhabited Housing Structure • Type of houses indicators of economic growth • Share of pucca houses up from 31% in 1990 to 65% in 2010 Spread of Villages in Rural India The Housing Pattern in Rural Areas Source: Census of India and Indian Readership Survey.
  12. 12. Rural Marketing, 2e Rural Physical Environment Settlement Size • 36.4% of villages have population of 500 or less with no shops • Villages with population of 2,000+ (15.7%) most prosperous with 50% of the rural population and 60% of the rural wealth Housing Structure • Type of house was part of SEC classification in rural
  13. 13. Rural Marketing, 2e Rural Social and Cultural Environment • India has 56 socio-cultural regions which were later split into 90 to be used for market segmentation and targeting • Villages have local Gram Panchayats with reservations on caste and gender lines • The role of elders as influencers now giving way to youth and knowledgeable • Houses in villages are owner occupied • Houses in villages are clustered by caste or religion • The influence of the caste system reducing over the last few years
  14. 14. Rural Marketing, 2e Rural Political Environment • Panchayati Raj provides a three-tier system of self- governance in all states with a population of over two million with elections every five years • Villages with a population of 5,000 or a cluster of villages with a population of 5,000 form a panchayat • A minimum of 33% seats are reserved for scheduled castes, scheduled tribe and women • Involved in preparation of economic development plans and their implementation • Gram Sabhas (assembly of all sections of society) to meet at least once a quarter
  15. 15. Rural Marketing, 2e Rural Technological Environment • Rapid mechanization  Total cropped area constant at around 190 million hectares  Tractors nearly doubled between 1994 and 2006 15 Rapid Growth of Farm Mechanization
  16. 16. Rural Marketing, 2e • Share of animal power down from 16% to 7% Increasing Mechanization: Source of Power Source: India Brand Equity Foundation, www.ibef.org Rural Technological Environment
  17. 17. Rural Marketing, 2e Rural Technological Environment • Information and communication revolution enhancing exposure to weather forecasts, mandi rates, health and legal advice, job opportunities • Effectiveness of e-Choupal introduced by ITC 17
  18. 18. Rural Marketing, 2e The Rural Economic Environment Rising rural incomes is fuelling consumption growth increasing the share of total Parameter Contribution of Rural India (%) Total Population 70 Total Income 56 Total Expenditure 64 Total Savings 33 • Rural growth was the highest in 2009 • All human development indicators on the rise • Persons below the poverty line down from 27% to 22% 18 Table 2.9
  19. 19. Rural Marketing, 2e The Changing Face of Rural Development • Growth in nominal rural GDP has increased to over 12% per annum over the last few years. • Political environment more friendly. • All human development indicators in rural India are improving 19 Growth in Rural Consumption Source: Credit-Suisse
  20. 20. Rural Marketing, 2e The Changing Face of Rural Development • Six fold increase in budget allocations for agriculture and rural development between the 8th and the 11th Five Year Plan • Farm to non-farm income at 40:60 in 2010 • Shift from food grains to cash crops • Off-land activities like livestock, poultry and fisheries on the increase 20 Sectoral Allocations During Five Year Plans (billion, INR)
  21. 21. Rural Marketing, 2e The Transition of the Rural Economy Transition has occurred at three levels: • Food grain crops • On-land activities • Farm activities Transition linked to high opportunity for value addition resulting in high rural incomes. Farm sector now contributes only 40% of the rural income with non-farm activity contributing to 60%.
  22. 22. Rural Marketing, 2e The Rural Economic Structure From food grain-scarce economy to a food grain- surplus economy India largest producer of coconut, mangoes, bananas, milk and dairy products, cashew nuts, pulses, ginger, turmeric and black pepper. Second largest producer of rice, wheat, sugar, cotton, fruits and vegetables.
  23. 23. Rural Marketing, 2e The Farm Sector • Shift from staples to more lucrative cash crops • Area under food grains and coarse grains declined by 2 and 18% while sugarcane and cotton up by 25 and 10% respectively • Minimum Support Prices now being increased at a faster pace • Production of foodgrains in 2009–10 is estimated at 216.8 million tonnes. • Allied activities like dairy, poultry and fishing also growing 23
  24. 24. Rural Marketing, 2e The Non-farm Sector Secondary sector • Cotton textiles, wood, pottery, food, metal products, handicrafts • Electrical equipment, paper, chemicals and power looms Tertiary sectors • Trade, transport, food business, education, personal services Non-farm sector accounts for 60% of rural GDP employing only 27% of the rural workforce • Estimated to contribute 70% by 2020 24
  25. 25. Rural Marketing, 2e Rural Enterprises • Total rural enterprises 25.54 million (61% of total) • Non-agricultural enterprises 19.83 million (58% of total) • Retail trade (39%) dominant activity followed by manufacturing (26%) • Number of workers employed up by 20 million between 1990 and 2005 25
  26. 26. Rural Marketing, 2e Rural Enterprises 26 The Status of Rural Enterprises in India Non-agricultural Establishments in Rural India Source: Economic Census, 2005.
  27. 27. Rural Marketing, 2e Changing Migration Trends • Migration from rural areas has a positive impact on rural incomes since money is remitted home • Migration from rural to rural highest indicating higher opportunities in rural. • 24% of male migrants returned to their homelands in 2007–08 27 Migration Pattern
  28. 28. Rural Marketing, 2e Income and Expenditures • Healthy increase of 50% in rural incomes in last five years The Rural Income–Expenditure Profile (in INR) Source: Max–NCAER and Edelweiss–MART Survey. • Spending up by 33% in same period. • Maximum income growth experienced by labourers (includes both farm and non-farm)
  29. 29. Rural Marketing, 2e Income and Expenditures • Non-farm households reported higher incomes led by salaried and self-employed Changes in Rural Income by Occupation Groups
  30. 30. Rural Marketing, 2e • More buying power among non-farm households The Rural Income–Expenditure Profile (in INR) Source: Max–NCAER and Edelweiss–MART Survey. Income and Expenditures
  31. 31. Rural Marketing, 2e Income and Expenditures Income Disparity • Top quintile earns seven times that of bottom quintile • Top two quintiles contribute to 60% of total rural incomes Distribution of Rural Population and Income by Income Quintiles
  32. 32. Rural Marketing, 2e Income and Expenditures Rural Spending • Rural consumption market: USD 190 billion • Share of food dropped from 58% to 42% in the last decade • Sectors gaining were transport, education and recreation • Shift from unbranded to branded goods • Durables have not grown in wallet share largely due to drop in prices • Rural consumption market will triple by 2020 as per Edelweiss estimates
  33. 33. Rural Marketing, 2e The Changing Wallet Share in Rural India Source: NSSO and Edelweiss–MART Survey Income and Expenditures
  34. 34. Rural Marketing, 2e The Rural Infrastructure 34 • Bharat Nirman, covering all-round infrastructural development launched in 2005 • Road connectivity through Pradhan Mantri Gram Sadak Yojna launched in December 2000 Areas of Development Under Bharat Nirman
  35. 35. Rural Marketing, 2e The Rural Infrastructure 35 • Rural eletrification is 95% although proportion of electrified households is only 60% • Rural housing (Indira Awas Yojna): 7.2 million households built between 2005–06 and 2008–09 Drinking water through Rajiv Gandhi National Drinking Water Mission (RGND-WM) under Bharat Nirman • Provide a supply of 40 litres of safe drinking water per capita per day to rural households
  36. 36. Rural Marketing, 2e The Rural Infrastructure Telecommunications • Total rural users: 219 million • 26 fold growth in teledensity in the last eight years • Between 2006 and 2010 mobile penetration grew seven times in rural India against threefold growth in urban Rural Teledensity Growth
  37. 37. Rural Marketing, 2e The Rural Employment Generation Programmes 37 The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) • Launched in February 2006 covering 619 districts and promising 100 days of guaranteed wage employment in a financial year The Swarnjyanti Gram Swarozgar Yojna (SGSY) • Launched in April 1999 and now covers over four million Self Help Groups and 15.4 million swarozgaris The Pradhan Mantri Rojgar Yojna (PMRY) • Launched in October 1993 and provides self-employment to educated unemployed youth from economically weaker sections
  38. 38. Rural Marketing, 2e Rural Marketing Case NREGA Refer to video case and answer the following questions: • How have ICT-enabled info-kiosks helped NREGA workers in rural India? • What kind of technology is being used in NREGA and why? • What kind of benefits are NREGA workers getting with ICT’s intervention? 38
  39. 39. Rural Marketing, 2e Rural marketing is marketing to a rural mindset, not a rural market. It is all about understanding the mind rather than manipulating it or adapting marketing theory to a rural environment. Successful Mantra in Studying Rural Marketing Environment

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