The application of marketing principles to rural marketing precludes that companies know their customers. Marketing thought has progressed over the years and companies have modified their approaches to rural marketing as they have moved along. Earlier they were just content with supplying goods to rural areas, but many of these companies have adopted innovative approaches of solving problems and have thus endeared themselves to rural customers, establishing long-term relationships.
Seybold (2001) writes that relationships with customers do not just exist in a vacuum. Companies need to examine broader customer scenarios, which include customers’ unique needs, wants and expectations and individual uses for products/services. They need to study the customer scenario—the broad context in which customers select, buy and use products and services.
This is true in rural areas because little is known about the consumer. The need and motivation of using products is also quite different for rural customers than for urban customers. In both marketing approaches and market research, this is an important element for rural success.
1. Marketing Approaches:
Marketing has evolved over a period of time. The first approach, used widely in rural marketing, has been summed up by what is known as the production concept – sell whatever a company is able to produce. There is no modification of products and the same strategies that the company uses in urban markets is replicated in rural areas. If this did not work, the thinking moved to the sales concept, which called for aggressive sales effort and pushy salespersons, because companies had built excess capacities and wanted to get rid of their stocks.
This is unlikely to work in rural areas and is, in any case, a short-term strategy. Customers turned away from such an approach, so the marketing concept was born, which focused on satisfying customers’ needs rather than pushing products that companies could produce. This led to the study of consumer behaviour and needs.
As people became more aware, they questioned the role of marketing and the tremendous waste it produced, aptly described by Packard in his book, The Waste Makers (1960). Could marketing be used for changing society and create a better world? Thus was born the societal marketing concept, which means using the tools of marketing in changing habits or attitudes.
This evolution can be seen in the approach to rural marketing as well. Initially, some companies tweaked products and distribution to reach villages. Much effort was expended- on building products for rural markets. Some were stripped down versions of products sold in urban areas (to reduce the cost), while others got packed in small units. These strategies worked to some extent. Other companies, however, tried to understand and solve problems in rural areas. By using the societal concept, they have established themselves and succeeded in villages.
2. Marketing Mix:
Marketing consists of actions undertaken to elicit desired responses from a target audience. The commonly used framework is that of marketing mix consisting of 4Ps—product, price, place and promotion. This is also understood as 4Cs—customer solutions, customer cost, convenience and communication. Companies work out a combination of the 4Ps or the 4Cs to make products that will be acceptable by the target audience.
They have modified products, channels, promotional techniques and offered products at convenient price points to make rural folk buy their products. But this approach has not been found to be sufficient in rural markets. The 4Ps have thus been modified to 4As in the case of rural marketing—availability, affordability, acceptability and awareness.
i. Product-Acceptability:
Farmer consumers are more interested to know the technical details or the performance of agricultural inputs. There is higher importance of product knowledge and advisory services provided by a company. Rural farmers generally show their liking for simple and easy to use products. Acceptability is increased if the packaging of a product has pictorial demonstration, is convenient and it is easy to use.
Additional packaging increases the cost but gives advantage. The product literature on the cover packaging and in the user manuals should be expressed in simple and local language, providing clear benefits. The products should meet the expected needs of rural farmers and provide them value.
ii. Price-Affordability:
Agricultural inputs and industrial products share similar response patterns from users. Buyers of agricultural inputs are more quality conscious than price conscious, but in India they rely on word-of-mouth recommendations. The important factor is pricing, which has to be in accordance with their expectation. Subsidies are provided for agricultural inputs, which tend to skew usage patterns.
iii. Place-Availability:
The levels of channel and the network intensity required for agricultural inputs are higher than that required for industrial products. The channel plays the role of both pull as well as push function. It is supported by demonstrations, personal contacts and other extension means. Direct contact with retailers must be established. Cooperative societies, PDS, village weekly markets, fairs and festivals are utilized to ensure adequate distribution of agro-inputs.
iv. Promotion-Awareness:
As the number of prospects is large, diverse and spread across different regions, the product requires innovative promotion. Promotional activities are required to be undertaken through local media. Positive word-of-mouth publicity through local reference groups and opinion leaders is considered as the key to success in the rural markets.
Traditional art forms such as puppet shows and street plays or creating awareness through village panchayat members can prove to be fruitful. Other methods such as distribution of pamphlets, use of mobile vans for publicity and advertising through wall posters can also assist in establishing a relationship with the consumers.
3. Segmentation:
At the centre of all rural marketing, there is the rural customer. Companies realize that none of their attempts would succeed without understanding the rural consumer. They follow techniques such as market segmentation, the process of profiling and identifying distinct groups in the population who would be interested in a product.
Some of the differences on which market segments are identified are:
i. Geographic – Based on physical location of the customer.
ii. Demographic – Finding differences on the basis of population statistics.
iii. Psychographic – Identifying different lifestyles based on activities, interests and opinions.
iv. Socio-Cultural – Based on social classes and cultural life.
v. Personality – Finding about the consumers’ personality, perception, learning and attitudes.
vi. VALs – The Value Attitude Lifestyle framework is a technique for psychographic segmentation. It helps discover lifestyles of customers.
However, segmentation depends on data, which is scarce in rural markets. For example, agricultural income is not taxed in the country. Both small and large farmers include income from other sources as agricultural income. The economy is largely cash-based, hence accurate data on rural incomes is not available. Moreover, the character and nature of villages, the lifestyle of the people and their consumption patterns vary within the same district.
For instance, villages close to a highway will show a different pattern than a village located, say, 10 km away in the interior. That is why, the usual segmentation techniques hardly work in rural areas. They will at best aggregate the many diversities that one finds in villages and reliance on such data will lead to faulty conclusions.
Companies can only broadly use segmentation techniques to understand customers. What they require is granular information, for instance, data on communities doing well within a poor and underserved landscape. In the absence of data, companies have to depend on another technique—observation. But this calls for deep insight, which is often lacking. Marketing managers also have to give up their comfort zones and travel deep into rural areas.
Similarly, differentiating markets on the basis of demographic, psychographic or other basis will depend on physical observation by an astute marketing person rather than data.
4. Relationship Marketing:
What works in rural areas is what is known as relationship marketing, which is the process of building long-term economic, technical and social relationships with customers, suppliers and distributors. Company men trained in selling often lack relationship building skills. Nowhere is this more evident than in rural markets, where the influence of word-of-mouth recommendations is far more important than any promotion technique.
Rural folk depend on opinion leaders—respected people in the community—for product recommendations. The role of local shopkeepers is also very important, as people tend to buy what is pushed by the retailer. Failure to build relationships with these ground level soldiers has cost many large companies dearly, because dealers only send products to village stores on which they get good margins. As a consequence, local brands are bought more frequently than reputed urban brands.
5. Marketing Channels:
There are three types of channels that companies build to reach their market segments. The first is a communication channel that effectively communicates to the target segment. For this, a combination of media and BTL methods are used. Second, distribution channels deliver and display the goods and services to customers where they want them. Delivery of after-sales service must also be built into distribution channels.
Finally, selling channels are required to affect transactions and interact with customers. Sales persons push the products along these channels. Companies must figure out the kind of salespersons they should have and the level of their interaction. Banks and insurance companies are required to facilitate transactions, but their presence in village areas is still limited.
Since rural marketing requires deeper interactions with customers than urban markets, communication channels are crucial. The lack of suitable media makes the task of building them quite difficult. Further, a dialogue can usually be established through physical presence. Village shopkeepers do not have proper displays and dealers with adequate warehouses, transportation vehicles and sales persons are simply not available. Companies thus face design problems in building their rural marketing channels. Very often dealers and infrastructure have to be developed in order to do business in such areas.
6. Supply Chains:
A supply chain is a longer channel than a marketing channel. The marketing channel connects companies with consumers, but the supply chain is a longer channel that starts from raw materials and goes all the way up to final buyers. The objective of the supply chain is to deliver value.
Rural markets defy the logic of supply chains. To supply in large towns, companies can use economic methods of transport, like full truckloads. To supply to villages, managers often face the problem of sending small quantities of goods over large distances on a regular basis. Innovative methods have to be used. Since purchasing power in villages is limited, companies often have to build supply chains that source raw materials from villages, helping villagers to become producers and thus increase their incomes. This enhanced income helps them to become consumers as well.
7. Competition:
Another aspect of marketing is competition, which includes current and potential products that rival companies offer. In rural areas, the competition is likely to come from unbranded goods, local brands and fake brands. These are priced cheaper, as they use local materials to make and have shorter channels. Big brands have higher costs and must be sent over large distances, pushing up their prices. Even if companies tackle problems of distribution and selling, they must find ways to fight these nimble local players.
8. Brand Management:
Branding involves creating a unique name and image for a product in the consumers’ mind. Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers. Rather than advertising, branding activities consist of personal communication in rural areas.
A study by Anand and Krishna (2008) shows that branding in rural areas depends on quality, value for money and belongingness. Brands are often not able to bring all three things on the table. In the white goods and agro-input category, only value for money works, and not quality or product parameters. The challenge then is to encourage product trials for adoption in rural markets.
9. Consumer Behaviour:
The study of consumer behaviour helps us to know why, how and from where consumers like to buy products. It studies motives and personality.
10. New Product Development:
To serve rural markets, companies have to come up with products, services or solutions based on new and untested ideas. They must have the courage to pursue bold initiatives. The more an idea deviates from the status quo, the greater is the market opportunity and larger is the risk. New product development follows the steps of generating ideas, idea screening, concept testing, market analysis, test marketing and, finally, commercial launch.
In rural marketing, however, this does not work. Usually the company has to identify a problem to solve and then use innovative techniques to solve that problem. There are no antecedents and the only help that can be accesses is the experience of rural folk. This can be unearthed by market research.
11. New Marketing Tools:
Marketing concepts cannot be used blindly, hoping that consumers will respond to stimuli. For rural marketing, innovation is required at every step.
The following tools must supplement the marketing effort:
i. Re-Engineering:
Hammer and Champy (1993) define re-engineering as the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance, such as cost, quality, service and speed. In rural markets, this has meant cost saving in operations, reduction in pack sizes and deletion of frills from the core product, but this reduction in price should not be at the cost of quality and service. The development of ChotuKool refrigerator by Godrej and Tata Swach are examples of successful re-engineering of existing products.
ii. Innovation:
Thanks to Internet technologies, firms are realizing the importance of collaboration for creating and sustaining competitive advantage. In rural marketing, they collaborate with customers to co-create value through product innovation. Innovation in products and processes is sought for reaching customers and reducing costs of distribution.
iii. E-Commerce:
E-commerce has a great potential not only to supply goods to rural areas but also to help villagers become producers. Some initiatives have already been taken. As Internet services and logistics improve e-commerce will have a more important role to play in rural marketing.
As Prahalad and Hammond (2002) had written, “E-commerce systems that run over the phone or the Internet are enormously important in BoP markets because they eliminate the need for layers of intermediaries.” The initiative by Amazon illustrates how e-commerce helps rural products find large markets.
iv. Partners:
Companies have to work with local partners to penetrate rural areas. They have to move from a perspective of total control of marketing activities to developing partners whom they can trust. This means they have to learn to make deep relationships with dealers, NGOs, small entrepreneurs and customers, requiring a great shift in thinking – for a large company giving up control is often not easy.
v. Decentralization:
Managing marketing in more than six lakh villages from a single head office is an impossible task. A decentralized marketing operation is required, which is difficult for most large companies. Further, as consumption patterns differ from region to region, each district must have a unique approach. Companies have to move from being managed top-down to encouraging more initiative at the local level. In the process, they have to learn to find new methods of control.
vi. Social Approach:
Moving away from commercial objectives, companies need to have an approach that encourages social thinking and must have social objectives integrated in its approach. Indeed, many companies have put social objectives above commercial objectives and have gained huge traction in rural markets.