What is Rural Marketing? Definition, Scope, Feature, Importance, Characteristics

  • Post last modified:6 August 2021
  • Reading time:13 mins read

What is Rural Marketing?

Rural marketing can be defined as a function which manages all those activities in asserting, stimulating and converting the purchasing power of rural people into an effective demand for specific products and services and thereby achieving the goals of the organisation.

Table of Contents

Rural marketing is now a two-way marketing process. There is inflow of products into rural markets for production or consumption and there is also outflow of products to urban areas.

The urban to rural flow consists of agricultural inputs, fast-moving consumer goods (FMCG) such as soaps, detergents, cosmetics, textiles, and so on. The rural to urban flow consists of agricultural produce such as rice, wheat, sugar, and cotton.


Definition of Rural Marketing

Rural marketing is a process which starts with a decision to produce a saleable farm commodity and it involves all the aspects of market structure or system, both functional and institutional, based on technical and economic considerations and includes pre and post harvest operations, assembling, grading, storage, transportation, and distribution‖. – National Commission on Agriculture


Characteristics of Rural Market

These are the nature or characteristics of rural market:

  1. Large, Diverse and Scattered Market
  2. Major Income of Rural Consumers is from Agriculture
  3. Heterogeneity
  4. Standard of Living and Rising Disposable Income of the Rural Customers
  5. Collective Decision-Making
  6. Diverse Socio-Economic Background
  7. Infrastructure Facilities

Large, Diverse and Scattered Market

Rural marketing 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 agricultural prosperity. In the event of crop failure, the incomes of masses are directly affected.

Heterogeneity

Rural markets comprise heterogeneous population. Various tiers are present depending on the incomes like big landlords, traders, small farmers, marginal farmers, labourers, artisans. Statewise variations exist in rural demographics like literacy (Kerala 90%, Bihar 44%), population below poverty line (Odisha 48%, Punjab 6%), etc.

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 savings, etc. Today the rural customers spend money to get value and are aware of what’s happening around them.

Collective Decision-Making

In rural markets decision-making process is collective. Purchase process-influencer, decider and buyer, message at several levels. Rural youth brings brand knowledge to households.

Diverse Socio-Economic Background

Due to differences in geographical areas and uneven land fertility, rural people have different socio-economic background, which ultimately affects the rural markets.

Infrastructure Facilities

The infrastructure facilities like warehouses, communication systems and financial facilities are inadequate in rural areas. Physical distribution is a challenge to marketers who have found innovative ways to market their products.


Features of Rural Marketing

Features of Rural Marketing are given below

  1. Large and Scattered Population
  2. Higher Purchasing Capacity
  3. Market Growth
  4. Development of Infrastructure
  5. Low Standard of living
  6. Traditional Outlook
  7. Marketing Mix

Large and Scattered Population

According to the 2001 census, 740 million Indians forming 70 per cent of India’s population live in rural areas. The rate of increase in rural population is also greater than that of urban population. The rural population is scattered in over 6 lakhs villages. The rural population is highly scattered, but holds a big promise for the marketers.

Higher Purchasing Capacity

Purchasing power of the rural people is on rise. Marketers have realized the potential of rural markets, and thus are expanding their operations in rural India. In recent years, rural markets have acquired significance in countries like China and India, as the overall growth of the economy has resulted into substantial increase in purchasing power of rural communities.

Market Growth

The rural market is growing steadily over the years. Demand for traditional products such as bicycles, mopeds and agricultural inputs; branded products such as toothpaste, tea, soaps and other FMCGs; and consumer durables such as refrigerators, TV and washing machines has also grown over the years.

Development of Infrastructure

There is development of infrastructure facilities such as construction of roads and transportation, communication network, rural electrification and public service projects in rural India, which has increased the scope of rural marketing

Low Standard of living

The standard of living of rural areas is low and rural consumers have diverse socio-economic backwardness. This is different in different parts of the country. A consumer in a village area has a low standard of living because of low literacy, low per capita income, social backwardness and low savings.

Traditional Outlook

The rural consumer values old customs and traditions. They do not prefer changes. Gradually, the rural population is changing its demand pattern, and there is demand for branded products in villages.

Marketing Mix

The urban products cannot be dumped on rural population; separate sets of products are designed for rural consumers to suit the rural demands. The marketing mix elements are to be adjusted according to the requirements of the rural consumers.


Scope of Rural Marketing

Here the scope of rural marketing

  1. Population
  2. Rising Rural Prosperity
  3. Growth in consumption
  4. Change in life style and Demands
  5. Market growth rate higher than urban
  6. Life cycle advantage
  7. Decision-making Units

Population

According to 2011 Census rural population is 72% of total population and it is scattered over a wide range of geographic area. That is 12% of the world population which is not yet fully utilized.

Rising Rural Prosperity

Average income level has unproved due to modern farming practices, contract farming industrialization, migration to urban areas etc. There has been an overall increase in economic activities because during the planned rural development heavy outlay of resources on irrigation, fertilizers, agricultural equipment’s and agro processing industry has been made. Saving habits in rural people also has increased. This too contributes in higher purchasing power

Growth in consumption

There is a growth in purchasing power of rural consumers. But, the average per capita house hold expenditure is still low compared to urban spending

Change in life style and Demands

Life style of rural consumer changed considerably. There has been increase in demand for durables and non-durables like table fans, radios, mopeds, soaps, etc. by rural consumers. This provides a ready market for the producers. Rural market is expanding day after day.

Market growth rate higher than urban

The growth rate of fast moving consumer goods [FMCG] market and durable market is high in rural areas. The rural market share is more than 50% for products like cooking oil, hair oil etc.

Life cycle advantage

The products which have attained the maturity stage in urban market is still in growth stage in rural market.

Decision-making Units

Women in rural areas are beginning to make fast decisions for purchases. Studies reveal that 72.3% of decisions are taken jointly in a family. With education and mass media, role of children in decision-making is also changing.


Factors Affecting Rural Marketing

Here are the Factors Affecting Rural Marketing

  1. Professionalisation of the Marketing
  2. Rapid Urbanisation
  3. Developing means of Transportation and Communication
  4. Technological Change in Agriculture
  5. Cooperative Marketing

Professionalisation of the Marketing

Marketing has been recognised as profession in the early 1950. The tendency towards increasing specialization by persons in certain jobs has resulted in an increase in their efficiency. Specialization has resulted in increased production, which is the base for the growth of marketing.

The government is also motivating the people and providing marketing education by allowing fellowship to the graduates and a huge amount of grants to the institutions.

Rapid Urbanisation

The rural population is moving to the urban areas for the purpose of acquiring education seeking employment, business purposes and selling the agricultural and rural products in the urban areas this has necessitated a faster growth of agricultural marketing.

Developing means of Transportation and Communication

The modern means of transport and communication are the most important tool of developing the size of rural marketing. The increasing transportation and communication facilities have widened the market for farm products. In the absence of these facilities, the movement of produce from one area to another was limited, and the consumption of a product was restricted only to the areas of production or, at the most, to nearby areas.

Technological Change in Agriculture

Technological developments in agriculture has resulted in the substantial increase in farm production. The marketed surplus of the agricultural produce has therefore increased. This has resulted in the growth of the marketing system.

Cooperative Marketing

Marketing Committee system and cooperative marketing are the two parallel institutions framed for the purpose of rural marketing. The marketing system is working under the direct control of the respective state governments having its three tier system The apex institution is state marketing board, at district level central marketing committee and at block level.

The primary marketing committees are functioning in the areas. This is the main reason that rural marketing is gaining more and more attention in the Indian market scene.


Limitations and Challenges of Rural Marketing

  1. Distribution and logistics
  2. Payment collection
  3. Pricing
  4. Scaling across geographies
  5. Developing inorganic scale
  6. Social and cultural challenges

Distribution and logistics

Infrastructure continues to be a challenge in rural India. Moreover, the lack of an efficient distribution network prevents penetration of products/ services into rural India. One of the most innovative models in recent times has been the usage of the postal service by mobile operators to penetrate scratch cards to the villages.

Payment collection

The majority of the rural population is still unbanked. Clearly, noncash collection becomes rather unlikely. Cash collections, on the other hand, are messy and difficult to monitor, especially since cash cards or technology-enabled centralized POS (like Suvidha or ItzWorld) have still not reached rural areas. The time-tested manufacturer-distributor-retailer network has been the only real success so far but setting up such a structure is rarely feasible.

Pricing

While Sachet pricing may have worked very well for Chik shampoo, the overheads involved in payment collection do not always allow easy execution of sachet pricing. It is easier to collect in larger amounts as every instance of collection and carrying of cash has associated costs.

Disposable income, though, isn’t always high since the bulk of rural India is agricultural and income cycles in agricultural

Scaling across geographies

If India is a land of many cultures, the contrast becomes that much starker in the case of rural India. Setting up operations on a pan-India level presents different types of hurdles in different states ranging from political juggling to downright local factors.

Any model where scalability involves scaling on-ground operations (and not merely an increase in downloads) is bound to run into myriad issues as we move from one state to the next. Add to that the greater differences in consumer tastes and behavior across geographies than in the relatively more cosmopolitan urban population.

Developing inorganic scale

Developing synthetic scale through partnerships typically results in larger overheads in the rural context. Finding the right partner with reach and presence in villages is difficult to start with. More importantly, there are very few players who are strong on these counts across multiple geographies.

Hence, a pan-India rollout typically requires multiple partnerships resulting in higher partner management overheads.

Social and cultural challenges

The cyber café model has not worked in many parts of rural India due to socio-cultural issues. One of the reasons for the failure of the kiosk model in Kuppam was the lack of usage by women which was largely due to their discomfort in going to kiosks run by men.


Importance of Rural Marketing

  1. Large Market
  2. Socio-economic Changes in Rural India
  3. Market Growth
  4. Higher Purchasing Capacity
  5. Changes in the Buying Behaviour

Large Market

Increase in population, and hence increase in demand. Approximately 75% of India’s population resides around 6,38,365 villages in rural areas. The Indian rural consumers live in 6,00,000 villages across the country and they account for over 70% of population of the country.

For several product categories, rural markets account for over 60% of the national demand.

Socio-economic Changes in Rural India

The socio-economic changes can be linked to an increase in productivity in the farm sector. Following agricultural revolutions, green or white, the yield per acre or animal increased substantially.

This is largely due to the application of technology to the farm sector and modern farming methods. Cooperatives in India helped the farmer to increase farm productivity.

Market Growth

Urban markets are becoming competitive and even getting saturated. Consider the case of toiletries, packaged tea, dry cell batteries and even electronic entertainment products.

The demand has reached the saturation point. In such a situation, one has to find a strategy to find a new market for the existing products. Rural markets are the new markets which are opening up for most of these packaged goods.

Higher Purchasing Capacity

According to National Council for Applied Economic Research (NCAER) study, there are many middle income and above households in the rural areas, as there are in the urban areas.

There are almost twice as many lower middle-income households in rural areas as in urban areas. Because of this purchasing power of rural people is on the rise.

Changes in the Buying Behaviour

Changes in the land tenure system are causing a structural change in the ownership pattern and consequent changes in the buying behaviour.

The general rise in the level of prosperity appears to have resulted in two dominant shifts in the rural consumption of consumer durables by almost all segments of rural consumers, and the obvious preference for branded


Types of rural markets

Here are the Types of rural markets

  1. Consumer Market
  2. Industrial Market
  3. Service Market

Consumer Market

Constituents: Individuals and Households. Products: Consumables, Food- Products, Toiletries, Cosmetics, Textiles and Garments, Footwear etc.

Durables: Watches, Bicycles, Radio, T.V, Kitchen Appliances Furniture, Sewing Machines, Two Wheeler etc.

Industrial Market

Constituents: Agricultural and allied activities, poultry farming, fishing, Animal husbandry, Cottage Industries, Health center, School, Co-operatives, Panchayat office, etc.

Products: Consumables, Seeds, Fertilizers, Pesticides, Animal feed, Fishnets, Medicines, Petrol diesel, etc. Durables: Tillers, Tractors, Pump sets, Generators, Harvesters, Boat, etc.

Service Market

Constituents: Individuals, Households, offices, and Production firms. Services: Repairs, Transport, Banking credit, Insurance, Healthcare, Education, communications, Power, etc.


Difference Between Rural and Urban Marketing

BasisUrban MarketingRural Marketing
InfrastructureThe facilities like electricity, Internet, roads and rail transportation and buildings, educational institutions, financial institutions, communication, and organized market, other facilities get implemented soon and availability is also there.In rural market everything takes a good amount of time.
CompetitionIn urban market brand plays a great role.In rural markets it is always the channel partner and retailer who plays a vital role.
CustomersIn an urban market customers are more aware, standards of living are higher and customers are more comfort demanding.On the other hand, customers are less aware in rural markets, standards of living are poor and customers are less demanding.
PhilosophyMarketing and relationship market.Marketing and social concepts development marketing.
AdvertisingPrint, audio, visual media outdoors, exhibition, etc.Radio, T.V. and print media.
Personal SellingDoor-to-doorOccasionally
Sales PromotionContest, gifts, price discountGift and price discount.
DemandHighLow

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