Rural Management

RURAL MANAGEMENT

Rural Management

Rural Management aims at creating an efficient rural

system that integrates operations, marketing, financed,

HR and IT functions for achieving the overall

effectiveness and efficiency.

Rural Management is a subject that studies the various

aspects of rural life and business with a view to suggest

strategies for the optimum utilization of available

Rural Management

Rural Management as a specialized field of a study aims to

bring about an overall positive change in the rural society by

effectively Planning, Organizing, Directing and Controlling

various personal, professional and infrastructural aspects

which are crucial for growth and development.

The objective of Rural Management is to ensure the

progress and development of backward and forward

linkages of agri-businesses by the suitable application of

various tools, techniques and concepts.

Defining Rural India

Organisation Definition Limitations

NSSO (

Census) _{ Population density < 400 / Sq Km}

 75 percent of the male working

population is engaged in agriculture

No Municipal corporation / board

 rural not defined

Planning Commission

 Towns upto 15,000 population are

considered rural Town characteristics not defined

Cont’d

LG Electronics All places other than the

7 metros Only clarifies what are the cities NABARD All locations with a

population upto 10, 000 considered “ rural”

Village & town characteristics not defined

Sahara Commercial

establishments located in areas servicing less than 1000 population

Population

Defining Rural Marketing

National Commission on

Agriculture NGOs Marketing Definition Corporate Rural

Decisions to produce saleable farm

commodities involving all the aspects of the

market system or structure, both

functional and institutional, based on

technical & economic considerations and includes the pre & post

harvest operations.

Marketing products produced in rural areas

to urban areas Marketing products produced in rural areas

in rural markets

Function that manages all activities involved in

assessing, stimulating and converting the purchasing power of rural consumers into effective demand for specific products and

services to create satisfaction & a better

standard of living for achieving organisational

Phases in Rural Marketing

Sr. No Time Frame Key Events & Trends

1 Phase One( Pre 1960’s) Marketing rural

products in rural and urban areas

Agricultural inputs in

rural areas

“Agricultural

marketing”

Farming methods were

primitive and

mechanisation was low

Cont’d

2 Phase Two ( 1960s to 1990s) Green Revolution Companies like

Mahindra and Mahindra, Sri Ram Fertilisers and IFFCO emerge

Rural products were

also marketed through agencies like KVIC 3 Phase Three( 1990s to Present) Demand for

consumables and durables rise

Companies find growth

in urban markets stagnating or falling

Scope of Rural Marketing

• Keenly debated topic

• Definitions based on organisational/ institutional vision,

mission & goals

• Need for a comprehensive and modular understanding

• Rural Marketing is a “ work in progress”

• Multi – disciplinary approach is necessary for sharper

understanding

Domain of Rural Marketing

To Rural Urban From Rural Urban

Scope of Rural Marketing

Domain of Rural

Marketing

Dimensions of the transaction

Participants Products/

services Modalities Norms Outcomes Rural to Rural Rural to Urban Urban to Rural

Changes in Rural India

• Diverse change levers in rural India

• The “ pull of the cities & towns” – migration and its side

effects

• Effect of government programmes

• Civil society interventions

• Natural & manmade disasters

• Slow but sure change

Transitions In Rural India

• Food Grain Crops

• On land activities • Farm Activities

•Non –food, cash crops •Livestock & fisheries •Manufacturing &

services

Rural Employment Patterns( Male)

Sector Year – 1987 ( % share in

employment) Year -2004 ( % share in employment) Agriculture 75 67

Transport &

Communication 2 8 Trade & Hotels 5 7

Construction 4 7 Manufacturing 7 8

Rural India – Population Trends

1971 1981 1991 2001 Total Population (in million) 548.2 683.3 848.3 1026.9 Rural Population (in million) 524.0 628.8 741.6 As a proportion of total population 76.7 74.3 72.2 Decadal Variation 19.8 16.7 15.2 Source: Census 2001

Cont’d

• The joint family system is being replaced by the nuclear family

system

• The occupational pattern shows a predominance of cultivators

and wage earners

• Cultivators( 40.86 %) and Wage Earners( 35.28 %) according to

NCAER studies (2002)

Rural Settlement & Habitation Trends

• Key findings from 2001 census

• Population density 253/ sq kilometer and total number of

villages is 638, 588

• Villages having less than 500 population are falling

• Villages having 2000 + population most prosperous

• What are the implications of these trends?

Cont’d

• Size of villages/ habitations are changing

• Role & influence of towns is changing

• Social interaction is a mix of rural and urban

• Let’s look at some key trends in detail

Rural Income Trends

Annual Income ( at 1998-99 prices) Income Class 1989-90( % Households) 1998-99 ( % Households) <= 35,000 Low 67.3 47.9 35,001- 70,000 Low Middle 23.9 34.8 70,001 – 1,05,000 Middle 7.1 10.4 1,05,001- 1,40,000 Upper Middle 1.2 3.9 > 1,40,000 High 0.5 3.0

Rural Marketing- Schools of Thought

• Determinist School

• Activist School

• What is the right approach?

• Dependent on level of market development, stage in the PLC

and access to resources

• Amul & ITC prominent examples

Strategic Issues & Directions in Rural

Marketing

• Evolutionary Vs revolutionary changes in rural markets

• Role of state & market forces

• ICT based interventions

• Partnership innovations

• Developmental role of rural marketing

ICT in Rural Markets

Category Government Private NGO/ PPP Infrastructure

Provision NIC N- Logue Simputer Rural Services Bhoomi(

Karnataka) Sewa Agri Marketing Agmarknet E- Choupal Ozhwar

Sandhiyes Agri extension Universities EID Parry

Functions / Scope of Rural Management

• Rural Operations

• Rural Marketing

• Rural Finance

• Rural Information & Communication

Technology

• Rural Human Resources

• Rural Development

Importance of Rural Management

• Improving Efficiency

• Quality of Life

• Rural Financing

• Poverty Alleviation

• Overall Development

Features of Rural Society

• Predominantly Agricultural

• Caste System

• Jajmani System

• Poverty

• Illiteracy

• Low Population

• Joint Family System

• Heterogeneity

Geographical Spread of Rural

Consumers

• Geographical Area

• Population Density

• No. of Villages

Physical Structure of Rural Society

• Settlement Patterns

Clustered Settlements

Semi-clustered Settlements

Dispersed Settlements

Hamletted Settlements

• Housing

Rural Infrastructure

• Transport

• Education

• Healthcare

Demographic Profile

• Age

• Literacy

Social Structure of Rural Society

• Religion

• Caste

Hereditary

Hierarchical System

Restrictions on Social Interaction

• Social Class

• Family

• Marriage

• Kinship

Rural Marketing

Rural Marketing can be defined as a two way

process, comprising a set of integrated

activities which ensure the smooth exchange

of products and services within the rural

sector and also between rural and urban

sectors

Classification of Rural Markets

• Local Retailers

• Shandy / Haat

• Mandi

• Mela

Classification of Rural Products

Agricultural products

– Agricultural Input

• Seeds

• Fertilizers

• Pesticides

• Farm Machines & Implements

• Transportation Carts

• Human Labor

• Farm Animals

Classification of Rural Products

Agricultural Output

Food grains

- Rice

- Wheat

- Maize

- Bajra

- Jowar

- Ragi

- Barley

- others

Classification of Rural Products

Agricultural Output

Cash Crops

Tea

Cocoa

Sugarcane

Cotton

Tobacco

Jute & Mesta

Oilseeds

Rubber

Spices

Dry Fruits

Fruits & Vegetables

Others

Classification of Rural Products

Non-Farm Products

• Fisheries

• Poultry Products

• Agro-Forestry

• Dairy Products

• Handicrafts

• Pottery

Reasons for the rise in demand for

Consumer Durables

• Surplus Income

• Rising Corporate Interest

• Industrialization

• Tailor Made Products

• Contact with Urban Agglomerates (Clusters)

• Improved Communications

• Electrification

Corporate Interest in Rural Market

Corporate Houses have now realized the

importance of rural sector, which until a

decade ago was neglected due to a

misconception that it offers fewer rewards,

now more and more companies like HUL, ITC,

Phillips, Nirma, AMUL, Escorts and many more

have undertaken major initiatives to make a

mark in the rural sector.

Corporate Interest in Rural Market

• Market Size

• High Potential, Low Penetration

• Rise in Income

• Risk Diversification

• Urban Competition

Socio-Economic Reforms

• Rural Housing

• Land Reforms

• Rural Literacy

• Rural Employment

Consumer Durables

These are consumer durables that remain in

operation for quite a long duration.

Durables could be classified into following

categories:

– Agricultural input like tractors, tillers, pump sets, generator

sets, etc.

– Non-agricultural goods like refrigerator, television, air

cooler, mixer, automobiles, etc.

Use of Consumer Durables

India's Consumer Markets: identifying a plausible market size for products

This report is intended to assist consumer product companies in identifying a plausible market size for their product/s in India. The table below should be viewed in conjunction with the text that follows.

India's consuming class Table I Table II

Estimated households by annual income Structure of the Indian consumer market (1995-96) Annual income (in

Rupees) at 1994-95 prices

No. of households

(in million) Annual income Classification Number of households (in million) (in Rupees) at

1994-95 prices Urban Rural Total <25,000 80.7 <16,000 Destitutes 5.3 27.7 33 25,001-50,000 50.4 16,001-22,000 Aspirants 7.1 36.9 44 50,001-77,000 19.7 22,001-45,000 Climbers 16.8 37.3 54.1 77,001-106,000 8.2 45,001-215,000 Consumers 16.6 15.9 32.5 >106,000 5.8 >215,000 The rich 0.8 0.4 1.2 Total no. of households: 164.9 million Total no. of households 46.6 118.2 164.8

Source: National Council of Applied Economic Research (NCAER). The above presentation has been slightly modified by IndiaOneStop.Com

 Data on income distribution of households is insufficient in determining market size for different consumer products in India. This is because of the lack of homogeneity of the consuming class and the varying prices of a single product in different parts of India. For example, vegetables generally cost more in Mumbai than in Calcutta, hence vegetable-purchasing power for identical income groups would be different in the two places even though they are the two biggest cities in India with comparable populations. In other words, purchasing power is location-specific, not income specific. Consumption habits of households are therefore better determinants of consumer market size than income distribution. Of course, other factors are also to be considered and they are detailed below.

 While determining market size for a consumer product, the structure of the consuming class as seen in Table II above, can be both revealing as well as misleading depending on the kind of product. For example, any specific consuming class would be fit to be a market for consumer products like tea or soap, but a product such as vacuum cleaners would find market largely only in the "consumers" and "rich" segments of the market

Rural Demand

The rapid rise in surplus income has led to an

increased demand for consumer durables in

rural areas.

Use of Consumer Durables

Rural consumers exhibit a skewed use of

consumer durables possibly reflecting the lack

of suitability of the current products available

in the market. The rural consumers require

products suited to their needs. Rewards await

the marketer willing to invest in understanding

their needs and translating them into products

and services.

Use of Consumer Durables

Rural markets, with a share of 71 per cent of

the population, own about 54 per cent of the

total stock of consumer durables.

The opportunity for marketers of durables is

present as the average number of durable

goods owned per rural household

is only 3.84 compared to 8.19 in urban areas.

The use pattern, however, is skewed.

Consumer Market

India's Consumer Markets: identifying a plausible market size for products

This report is intended to assist consumer product companies in identifying a plausible market size for their product/s in India. The table below should be viewed in conjunction with the text that follows.

India's consuming class

Table I Table II

Estimated households by annual income Structure of the Indian consumer market (1995-96) Annual income (in

Rupees) at 1994-95 prices

No. of households

(in million) Annual income Classification Number of households (in million) (in Rupees) at

1994-95 prices Urban Rural Total <25,000 80.7 <16,000 Destitutes 5.3 27.7 33 25,001-50,000 50.4 16,001-22,000 Aspirants 7.1 36.9 44 50,001-77,000 19.7 22,001-45,000 Climbers 16.8 37.3 54.1 77,001-106,000 8.2 45,001-215,000 Consumers 16.6 15.9 32.5 >106,000 5.8 >215,000 The rich 0.8 0.4 1.2 Total no. of households: 164.9 million Total no. of households 46.6 118.2 164.8

Source: National Council of Applied Economic Research (NCAER). The above presentation has been slightly modified by IndiaOneStop.Com

 Data on income distribution of households is insufficient in determining market size for different consumer products in India. This is because of the lack of homogeneity of the consuming class and the varying prices of a single product in different parts of India. For example, vegetables generally cost more in Mumbai than in Calcutta, hence vegetable-purchasing power for identical income groups would be different in the two places even though they are the two biggest cities in India with comparable populations. In other words, purchasing power is location-specific, not income specific. Consumption habits of households are therefore better determinants of consumer market size than income distribution. Of course, other factors are also to be considered and they are detailed below.

 While determining market size for a consumer product, the structure of the consuming class as seen in Table II above, can be both revealing as well as misleading depending on the kind of product. For example, any specific consuming class would be fit to be a market for consumer products like tea or soap, but a product such as vacuum cleaners would find market largely only in the "consumers" and "rich" segments of the market as defined in Table II above. Furthermore, even this may not be correct, because a taste for a vacuum cleaner is not necessarily a function of purchasing power but of culture and/or taste as well.

For instance:

More than half the rural households own

bicycles and mechanical wristwatch.

About 49 per cent of the rural households

have radios or Transistors.

Rural Communication

Rural consumer behavior differs from the

urban consumer behavior and so requires

developing communication strategies unique

to the rural markets. A study of TV

commercials for four brands brings out the

differences in the comprehension of the

messages between the rural and the urban

consumers

Factors Affecting Rural

Communication

Literacy level Media Habits

Traditional approach

High resistance – more so initially Lavish at occasions (e.g. Marriage)

Purchasing power also depending on weather- the crops Inequitable distribution of wealth

Too many languages Culture

RURAL COMMUNICATION

Effective Communication goes a long way in

establishing the right Messages and thereby

more interaction with Potential Customers

Communication, however, is not complete if

there is no feedback, It is very important to re-

enforce messages in Rural areas

Rural Communication

Communicating in the Rural

Market Landscape

This chapter examines the complexity in communication strategies due to the spread and heterogeneity of rural markets. Managerial actions for reducing the large heterogeneous market into smaller homogenous ones

are considered in this chapter. A process perspective of communication is used to understand communication strategies in rural markets. The consumer influence on the communication process is examined to overcome the problem of ‘selective comprehension’. The influence of ‘stage of readiness’ and ‘involvement’ of the consumer on communication is discussed. These address the issue of ‘selective comprehension’ by consumers. These different variables are put together by developing a taxonomy of communication strategies for rural markets.

Rural consumer behavior differs from the urban consumer behavior and so requires developing communication strategies unique to the rural markets. A study of TV commercials for four brands brings out the differences in the comprehension of the messages between the rural and the urban consumers

Variation in the Comprehension of Communication in Rural and Urban Markets

The brands tested included Babool toothpaste (showing a young man in different situations dancing to a catchy jingle), Navaratna Oil (featuring Govinda and Rambha), Samsung Colour TV (sparks coming from the TV) and Asian Paints (Sunil Babu!). While the total understanding of the main message of all the four spots among the urban audience was calculated to be 100 per cent, it was only 30–60 per cent among the rural audience. When it came to specifi c attributes, some of the comments from the rural folks were interesting. Let us take the example of Babool toothpaste:

� Too quick to understand. � Confused with a toothpowder. � Is it for a shaving cream?

� No one will dance simply for a toothpaste. � What is a dog doing in a toothpaste advertisement? � Characters are not actually recommending the toothpaste. � The jingle was catchy, but I cannot relate to the person.

In the case of the Navaratna Oil fi lm, the audience in Tamil Nadu could not recognise Govinda while the UP audience did not recognize Rambha. In both markets, the rural audience was surprised that a character with a headache can dance so vigorously. So the conclusions from the study, which only endorsed the already established beliefs, were as under:

� Rural folks do not understand clever, gimmicky, quick (fast-paced), suggestive and hi-tech fi lms. � Use of unrelated symbols, characters and icons confuse and distance them. � They want a clear connection between the problem and the solution offered by a brand.

Types of Rural Communication

Rural Communication Media

Conventional - Radio Television Cinema Personal Selling Hoardings

Point of Purchase (POP)

Non-Conventional- Puppet Shows Wall Paintings Trolleys Folk Theatres Mobile Vans Demo Contests Direct Mail

Rural Communication - Challenges & Strategies

• Illiteracy

• Language

• Media

• Values & Ethics

• Heterogeneity

Geographical Spread of Rural Consumers in India

Geographical spread of rural consumers could

be analyzed in terms of:

•

Geographical area

•

Population density

Physical Structure of Rural Society

Some physical elements of the rural society:

•

Settlement Patterns

•

Clustered Settlements

•

Semi-clustered Settlements

•

Dispersed Settlements

•

Hamletted Settlements

•

Housing

Rural Infrastructure

• Transport

• Education

• Healthcare

• Age

• Literacy

• Occupation and Income

Social Infrastructure of Rural Society

• Religion • Caste

• Hereditary

• Hierarchical system

• Restrictions on Social Interaction • Social Class • Family • Marriage • Endogamy • Exogamy • Rituals • Dowry • Kinship

Classification of Socio-Economic Reforms in India

Rural Housing Rural Land Reforms Rural Poverty Eradications

Socio-Economic

Reforms

Rural Literacy Rural Employment

Factors affecting Rural Consumer Behavior

Socio-cultural factors Status Family Reference Groups Festivals / Ceremonies Customs Personal Factors

Age and Lifecycle Occupation Lifestyle Personality Psychological Factors Perception Attitude Motivation Learning FACTORS

Stages of Buying Process

Need Recognition Information Search Evaluation of Alternatives Purchase Decision Post-purchase Evaluation and Feedback

Market Segmentation

It is important for marketers to thoroughly understand the

market and indentify that particular groups which can offer

maximum returns. Segmentation is like profiling buyer groups

and clubbing together people with similar needs and

demands.

This activity of identifying groups with similar habits , needs,

behavior, socio-psychological traits, etc. is known as market

segmentation. It is about moving from generic to specific.

Benefits of Segmentation

• It helps the marketers identify those sections of the market that provide the best business opportunities. They can compare across various segments that are available and select the one that promises the best potential for their products.

• Selecting a particular segment helps the marketers channelize their resources and efforts on that particular group which can offer the maximum returns.

• Marketers find it easy to identify the needs of a homogeneous group as compared to the entire population which is highly heterogeneous.

• It is easy to serve a limited number of people who exhibit similar characteristics.

• In case of any change in customers’ preferences, tastes, needs etc. marketers can quickly modify their marketing strategies.

• In their targeted segments, marketers can introduce unique products thereby minimizing competition from rival firms, it helps them assess their competitive strategies and redesign the marketing approach, if necessary.

Bases of Market Segmentation

Sociological Land Holding Occupational Rural Market Segmentation Demograhic Village Size

Occupational Segmentation

The occupation that they follow depends on a number of factors

like inheritance, availability of resources, terrain, climate, etc.

Following are some of the important occupations practiced in

rural areas:

•

Farming

•

Livestock

•

Fishing

Sociological Segmentation

Rural Market could be segmented into six types

on the basis of social standing:

•

Proprietors of Land

•

Rich farmers

•

Small Peasants or Marginal farmers

•

Tenant Farmers

•

Agricultural Laborers

•

Artisans

– Potters – Blacksmiths – Carpenters

Requisites for Successful

Segmentation

• Homogeneous

• Measureable

• Practically Accessible

• Responsive

• Purchasing Power

Thomson Rural Market Index

The first real & highly successful attempt at assessing the

potential of Indian rural markets was made by Hindustan

Thompson Associates (HTS) Pvt. Ltd. In the year 1972. The

Thompson Rural Market Index, which it came up with was the

first guide to the rural market. At that time, HTA collected data

for 334 districts of the country. For establishing accurate market

potential, 11 most important factors were identified and

according to their relative importance a weight was assigned to

each. Though at that time it was a big achievement yet only

within a few years need was felt for a more comprehensive

market study which would involve more factors and a better

market potential . Therefore in the year 1986 another index by

the name of Thompson Rural Market index, 1986 was published.

Indicators for Thompson Rural Market Index

1. Area of the district in sq. kms.

Demographics

2. Population: Rural Number 3. Number of Males

4. Number of Females 5. Density per sq. km.

6. Percentage Distribution of population by population strata 7. Number of Villages

8. Percentage Distribution of villages by population strata 9. Number of Rural Literates

10. Per cent of Literacy 11. Literate Males

Indicators for Thompson Rural Market Index

Occupational Pattern

13. Number of Cultivators

14. Number of Agricultural Laborers

15. Number of Non-Agricultural Laborers

Agriculture Related Data

16. Gross Cropped Area in Hectares 17. Gross Irrigated Area in Hectares

18. Area under Non-food crops in Hectares

19. Average Size of Operational Holdings in Hectares Agricultural Input Data

20. Number of Pump Sets and Tube-wells 21. Fertilizer Consumption in Metric Tonnes 22. No. of tractors

Indicators for Thompson Rural Market Index

Rural Electrification Data

23. Percentage of Villages Electrified Commercial Banks Data

24. No. of Rural Branches 25. Deposits in Rs. Lakh 26. Advances in Rs. Lakh

Agricultural-related variables

1. Agricultural Laborers

2. Gross Cropped Area

3. Gross Irrigated Area

4. Area under Non-Food Crops

5. Pump Sets

6. Fertilizer Consumption

7. Tractors

8. Rural Credit

9. Rural Deposits

10. Villages Electrified

MICA Rural Market Rating

It ranks districts according to seven parameters like

population, fertilizer consumption, etc. It also depicts census

data in digital maps, where one can zero in on district level

details. It was priced at Rs. 35000 in 1999

Linquest

Market mapping tool from AP Lintas was the predecessor of

Lincompass. IT ranked districts on 42 variables. It was

available for Rs. 75000 in the year 1999

MICA Ratings

Though there were many scientific methods for studying markets and predicting their potential yet a need was felt to have an index that was on entire country’s data. “MICA ratings” seems to be answer. Credit for its development goes to Mudra Institute of Communications Ahmedabad; hence the name of MICA. It collaborated with ML Infomap Pvt. Ltd., and came up with MICA Rural Market Ratings (MRMR). While MICA is one of the best institutes for training communication professionals, ML Infomap is a consulting firm. Together, they carried out the research work and prepared what is “the best guide’ to rural India. MRMR is important because it gives marketers a wider range of information needed to judge the potential of various rural markets. The Rural Market Index is a comprehensive guide to rural India, which the marketers find quite useful. Because it was conducted all across the country the index indicates the market potential of all districts. The comprehensive research covered:

579 Districts 79 Urban Agglomerations (UA) 5154 Towns 42 Variables

MICA Ratings

Methodology

The research was done simultaneously for urban and rural sectors.

Following are the steps involved during the development of the

index:

Identifying Variables

Demographic

Ownership

Financial Services

Agricultural

Amenities

Market potential Index

Salient Features of MRMR

• As a by-product

• Data on 42 Demographic & Economic

Variables separately

• Digitized Maps of all Districts with Pictorial

Location

Highlights of MICA Rating

• Credit for the development of MICA goes to Mudra Institute of

Communications, Ahmedabad; hence the name MICA

• The research was done simultaneously for urban and rural sectors

• The first job was to identify the variables on whose basis research

was to be carried out

• Using discriminant analysis, weights for the linear combination of

principle variables are calculated

• Using weighted linear combination of rural and urban market

potential indices, based on projected consumer expenditure for

rural and urban segments, the districts market potential rating is

calculated

• MRMR is important because it gives marketers a wider range of

information needed to judge the potential of various rural

markets

Highlights of MICA Rating

• The research results are all presented in the form of maps.

Using digital mapping technique, it has been made user

friendly so that the districts are all plotted on the Indian Map

and just by clicking on a particular district information can be

obtained.

• Ratings have been calculated scientifically through a linear

combination of demographic and economic variables values

so that these are applicable across a large variety of consumer

products

• Principle variables could be manipulated to devise new ratings

for new product or location

Targeting / Target Market

A target market strategy is a group of customers

at whom the sellers specifically aim their

marketing efforts. IT is based on effective

segmentation of the market which provides the

marketer with clearly-defined market segments

from which he/she can be picked one market

segment that is most appropriate for his/her

organization to serve. This market segment is

called the target market

Developing a Targeted Marketing Strategy

The process of segmenting is a sequential process which

involves the following eight steps:

• Define relevant market

• Analysis of characteristics and wants of potential customers

• Identify the basis for segmenting the market

• Define & describe market segments

• Analyze competitor’s position

• Evaluate market segments

• Select market segment(s)

• Finalize marketing mix (es)

Identifying and Selecting Target Markets

This is one of the toughest tasks for a rural marketer. After he has

segmented the rural market, he has to consider a combination of

factors (for which the availability of authentic data is not easy even in

the present day information age) to decide which rural market

segments an organization would like to target and the ones which are

not fit to be targeted. Some of the factors important for this analysis

are as follows:

•

Socio-cultural, economic development and Infrastructural

environment of different districts

•

Density of population in different villages

•

Heterogeneity and homogeneity of population across regions

•

Mobility, media availability and cost of access to the area

Product

Product refers to anything that is capable of or can be

offered to satisfy a need or want . The term product

includes both tangible goods and intangible services. It

involves a decision on the number of variants, sizes,

packaging, color, logo and the brand name. However a

product must deliver a minimum level of performance;

otherwise even the best work on the other elements of

the marketing mix won’t do any good in the long run.

Price

Price refers to the amount the customer has to pay in order to acquire a product or service. It depends on a host of factors that include: cost of production, segment targeted, ability of the market to pay, demand and supply of competing products and substitutes, pricing objective of the firm and host of other direct and indirect factors.

Pricing involves not only a decision on the retail price but also decisions on dealer and dealer and retailer margins that need to be provided to the channel partners. There can be several types of pricing strategies each tied in with an overall business plan. Pricing can also be used as a tool to promote, differentiate and enhance the image of a product or service.

4C’s of Pricing:

(a) Customer Value (b) Competitors’ Prices

Pricing Methods

(a) Cost plus Pricing

(b) Target-return Pricing

(c) Value-based Pricing

(d) Psychological Pricing

Pricing Through the Product or Service Life Cycle

Organization have not only to determine the price for the new products but they also have to decide on the different price-mixes over the different stages of the product life cycle. The product is likely to face different demand levels and competitive scenario at different stages of its life cycle; this change in demand changes the price of the product. Companies also have to determine the position of the product on the product or technology life cycle in order to decide the right price for it at different times. Pricing new technologies and new product introductions is different from pricing products and services during competitive turbulence and pricing for products in nature or declining markets.

Promotion

This refers to all the activities undertaken to make the product or service known to and preferred amongst the user and trade. This can include advertising, word of mouth, press reports, incentives, commissions and awards to the traders; it can also include consumer schemes, direct marketing, contests and prizes. Advertising a paid form of non-personal communication from an identified sponsor using mass media to persuade or influence an audience is generally the most important element of the promotion mix.

The 1990s and 2000s bought the concept of Integrated Marketing Communication (IMC). IMC is the practice of unifying and synergizing all marketing communication tools so that they send a consistent and persuasive message promoting the company’s goals to its target audiences.

Sales Promotion:

It refers to the value provided by the product or service by offering an extra incentive to purchase a brand or product.

Promotion Strategies

• Think Global Act local

• Think in local Idiom

• Simplicity and Clarity

• Narrative Story Style

The rural rich may have less exposure to

brand but he is willing to pay the extra price

for the premium products in the market.

Brands like Onida KY Thunder and LG Golden

Eye series were the highest selling brands in

the rural markets.

Marketing of Agricultural Products

Agricultural marketing covers the services involved in moving

an

agricultural

product from the

farm

to the

consumer

.

Numerous interconnected activities are involved in doing this,

such as planning production, growing and

harvesting

, grading,

packing, transport, storage, agro- and

food processing

,

distribution,

advertising

and sale. Some definitions would even

include “the acts of buying supplies, renting equipment, (and)

paying labor", arguing that marketing is everything a business

does

[1]

_{. Such activities cannot take place without the exchange of}

information and are often heavily dependent on the availability

of suitable finance.

Marketing of Agricultural Products

Marketing systems are dynamic; they are competitive and

involve continuous change and improvement. Businesses that

have lower costs, are more efficient, and can deliver quality

products, are those that prosper. Those that have high costs, fail

to adapt to changes in market demand and provide poorer

quality are often forced out of business. Marketing has to be

customer-oriented and has to provide the

farmer

, transporter,

trader,

processor

, etc. with a profit. This requires those involved

in marketing chains to understand buyer requirements, both in

terms of product and business conditions.

Marketing of Agricultural Products

Consumable Input Fertilizers Seeds Insecticides Fuel Veterinary Medicines Durable Input Tractors Pump Sets Power Tilters Other Implements and Machineries Other Input Repair Services Human Labor Credit

Agricultural Input

Major Agricultural Commodities in

India

• Food Grains

• Jute

• Cotton

• Sugar

• Milk

• Areca Nuts

Government Efforts

Agricultural Marketing Regulations in India

• The agricultural marketing system in India operates primarily by the

supply and demand forces within the private sector Producer’s and

consumer’s interests are well protected by the Indian Government, who

are also interested in the promotion of organized marketing efforts for

agricultural commodities.

The following are organizations operated by the central government.

who are involved in the marketing of agricultural goods in India :

• Commission for Agricultural Costs and Prices

• Food Corporation of India

• Cotton Corporation of India

• Jute Corporation of India

Government Efforts

• Independently owned marketing operations are most often run by large enterprises producing agriculture in India. Medium-sized companies such as those who trade in rice, oil, cotton, and jute are often part of

cooperative marketing efforts within the country. •

Various measures have been put into effect by the Indian Government in order to improve agricultural marketing, such as :

• Establishing Regulated Markets • Constructing Warehouses

• Grading and Standardizing Produce • Standardizing Weights and Measures

Government Efforts

The government’s ultimate objective is to provide

reasonable prices for basic food products throughout

the country. This is achieved through the Public

Distribution System, which is a network of 350,000

fair-price shops that are monitored by

state-governments. This ensures that all agricultural

commodities remain at a stable level, and at a fair

level for all consumers.

Challenges

There are several challenges involved in marketing of

agricultural produce. There is limited access to the market

information, literacy level among the farmers is low, multiple

channels of distribution that eats away the pockets of both

farmers and consumers. The government funding of farmers

is still at nascent stage and most of the small farmers still

depend on the local moneylenders who are leeches and

charge high rate of interest. There are too many vultures that

eat away the benefits that the farmers are supposed to get.

Although we say that technology have improved but it has not

gone to the rural levels as it is confined to urban areas alone.

There are several loopholes in the present legislation and

there is no organized and regulated marketing system for

marketing the agricultural produce. The farmers have to face

so many hardships and have to overcome several hurdles to

get fair and just price for their sweat.

Challenges

Slow agricultural growth is a concern for

policymakers as some two-thirds of India’s people

depend on rural employment for a living. Current

agricultural practices are neither economically nor

environmentally sustainable and India's yields for

many agricultural commodities are low. Poorly

maintained irrigation systems and almost universal

lack of good extension services are among the

factors responsible. Farmers' access to markets is

hampered by poor roads, rudimentary market

infrastructure, and excessive regulation.

Challenges

The low productivity in India is a result of the following factors:

• According to World Bank, Indian Branch: Priorities for Agriculture and Rural Development", India's large agricultural subsidies are hampering productivity-enhancing investment. Overregulation of agriculture has increased costs, price risks and uncertainty. Government intervenes in labor, land, and credit markets. India has inadequate infrastructure and services. World Bank also says that the allocation of water is inefficient, unsustainable and inequitable. The irrigation infrastructure is deteriorating. The overuse of water is currently being covered by over pumping aquifers, but as these are falling by foot of groundwater each year, this is a limited resource.

• Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce.

Challenges

• Inconsistent government policy. Agricultural subsidies and taxes often changed without notice for short term political ends.

• The average size of land holdings is very small (less than 20,000 m²) and is subject to fragmentation due to land ceiling acts, and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labor.

• Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings.

• Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was irrigated in 2003–04,which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth. Farm credit is regulated by NABARD, which is the statutory apex agent for rural development in the subcontinent. At the same time over pumping made possible by subsidized electric power is leading to an alarming drop in aquifer levels.

Agriculture Marketing

What Is Marketing?

• The process of determining the needs and

wants of consumers & being able to satisfy

those needs & wants

• Marketing includes all of the activities

necessary to move a product from the

producer to the consumer

What Is a Market?

What Is a Market?

• A market is made up of buyers & sellers

• Buyers are people who need or want a

product or service and have the money to buy

it

• A market must also have sellers who are

willing & able to produce goods & services for

sale

Two Types of Markets

Input market

– The input market includes items like metal, fertilizer, seed & wood

– These types of products are purchased by

producers

Product market

– This is the market where final products are sold to consumers

– Eggs and potatoes from farms

Types of Agricultural Markets

Input markets

Supply and Demand

• The price of a product is determined by

the value that buyers place on the

product

• When many buyers want a certain

product the price will be higher

• If few buyers want a product the price

will be lower

Supply and Demand

Low quality

How Can I Add Value?

Simple vegetables

Production

The goal is to add value through effective

management:

Value Added Labor Equipment Operating inputs Vegetables Dairy products Other

Two Types of Markets

Input market

– The input market includes items like metal, fertilizer, seed & wood

– These types of products are purchased by

producers

Product market

– This is the market where final products are sold to consumers

– Eggs and potatoes from farms

Types of Agricultural Markets

Input markets

Supply and Demand

• The price of a product is determined by

the value that buyers place on the

product

• When many buyers want a certain

product the price will be higher

• If few buyers want a product the price

will be lower

Supply and Demand

Low quality

How Can I Add Value?

Simple vegetables

A Value Chain

Customer Farmer Wholesaler Cooperative Equipment supplier Retail Sales Input supplier Exporter

Customer Farmer Wholesaler Cooperative Equipment supplier Retail Sales Input supplier Exporter

A Value Chain

Customer Farmer Wholesaler Cooperative Equipment supplier Retail Sales Input supplier Exporter

A Value Chain

Conducting Market Research

Market research is essential in order to

identify a specific target market for your

product. The ideal marketing plan contains a

mix of product, promotion, advertising, price

and distribution information.

• Knowing a specific target market and the consumers needs

within it, will increase your chances of making a profit with

your product.

• If you don’t have adequate knowledge and information about

your target market you will be shooting in the dark and your

chances of success will be slim.

• One of the best methods of obtaining information about a

particular market is to create a survey and send it out to

potential customers

Analyzing Market Research

After collecting your survey and other sources

of data, it is time to assemble it into

meaningful information.

Physical Resource Inventory

Resources

• Land

• Livestock

• Equipment

• Facilities

Pricing Your Product

• Higher prices usually result in lower sales

volume and encourages competition

Price Market

demand

Marketing of Non-Farm Products

As about 72% of the Indian population lives in rural areas, agriculture is already overburdened with a large proportion of people depending on it for their livelihood. With a constant increase in population and limited land

resource availability there is a very high percentage of disguised employment in agriculture sector . Therefore a large number of people have started opting for non-farm activities either as a sole source of earning or sometimes to add to the small and irregular income from agriculture. Apart from primary

agriculture all the other activities providing employment or income to the rural people are termed as non-farm activities. E.g. dairy business is a non-farm

activity, providing milk for final consumption. The major activities providing employment in non-farm sector in rural areas are listed below:

Fisheries Agro-forestry Dairy farming Poultry Farming Beekeeping Food Processing Handicrafts Tourism

Marketing Network

A set of interrelated organizations that work in

close coordination to ensure timely delivery

and availability of a product or service.

Intermediaries in the rural

Distribution channel

• Primary

– Wholesalers – Manufacturer’s agents – Brokers – Retailers

• Secondary

– Clearing & Forwarding Agents – Warehousing Firms

STRUCTURE OF RURAL SOCIETY

Main features of rural society

VILLAGE IS A COMMUNITY-

The village satisfies all their needs in the village. They have a sense of unity and a feeling of amiability towards each other.

VILLAGE IS A INSTITUTION-

The development of villages is influenced considerably by the life of the village. In this way village is a primary institution.

RELIGIOSITY-

Faith in religion and universal power is found in the life of the villages. The major

occupation is agriculture which involves dependence on nature. Farmers worship forces of nature. The life of the village is the joint family system.

Family has a strict control and administrative powers over the individual. All the members of the family share the burden of the family occupation. In this way of

working together the villagers maintain sense of cooperation among themselves. In the life of the villagers group feeling occupies an important place. They respect the

judgment and obey the orders of their elders and the panchayats. Society, caste and panchayat have control over the individual.

Marketing Research

‘the systematic gathering, recording and

analysing of data about problems relating to

the marketing of goods and services’

Rural Marketing Research

Marketing research is the process of identifying

variables and situations that are bound to affect

the Product, Price, Place and Promotion

strategies of an organization. The data obtained

through

Marketing

Research

helps

the

organization device a strategy for a particular

function.

Market Research Process

• Defining a research problem

• Finalizing a research design

• Developing a research hypothesis

• Planning the research methodology

• Data Collection

• Data Analysis

Major Techniques of Market Research

Market Research Techniques

Market research can provide critical information about

the buying habits, needs, preferences and opinions of

current and prospective customers. There are many

ways to perform market research, but most businesses

use one or more of five basic methods:

1.

Surveys

2.

Focus Groups

3.

Personal Interviews

4.

Observation

Major Techniques of Market Research

1. Surveys

Using concise, straightforward questionnaires, you can analyze a sample group that represents your target market. The larger the sample, the more reliable the results.

a. In-person surveys are one-on-one interviews. They allow you to present people with samples of products, packaging or advertising and gather immediate feedback. While In-person surveys can generate response rates of more than 90 percent they are also costly.

b. Telephone surveys are less expensive than in-person surveys, but costlier than mail. However, due to consumer resistance to relentless telemarketing, getting people to participate in phone surveys is difficult.

c. Mail surveys are a relatively inexpensive way to reach a broad audience. They're much cheaper than in-person and phone surveys; however they only generate response rates of 3 percent to 15 percent. Despite the low return, mail surveys are still a cost-effective choice for small businesses.

d. Online surveys usually generate unpredictable response rates and unreliable data because you have no control over the pool of respondents. But an online survey is a simple, inexpensive way to collect anecdotal evidence and gather customer opinions and preferences.