26-07-2012, 03:41 PM
Social structure of rural society
The Indian rural market with its vast size offers a huge opportunity with 128 million households and the rural populatio (Size: 26.57 KB / Downloads: 29)
The Indian rural market with its vast size offers a huge opportunity with 128 million households and the rural population is nearly three times the urban. India today has about 6.4 lakh villages. All except about 15,000, have a population below 5000. Looking at marketer defined classification, most companies in the FMCG sector would define any area with primarily agriculture based occupation and with a population of less than 20,000 as rural. Rural areas exhibit several distinctive characteristics that are different from the urban areas. Literacy levels, family structure, occupational patterns, social customs and norms, and several other features are unique to rural India. A complex set of factors influence rural consumer's behavior. Social norms, traditions, castes, and social customs have greater influence on the consumer behavior in rural areas than in urban areas. The seasonality of agricultural production influences the seasonality of rural consumers' demand. Although rural areas offer attractive opportunities to marketers at an aggregate level, about 68 percent of these markets remain untapped mainly due to inaccessibility. It is uneconomical to access a large number of small villages with a very low population density spread over a large geographic area. Factors such as limited physical access, low density of shops, limited storage facilities, need for a large number of intermediaries in the distribution channel to reach the end customers, and low capacity of intermediaries to invest in business (investments for keeping stock, storage facilities, vehicles for distribution) make the tasks of reaching rural consumers very complex. It is in this context we need to understand the importance of alternative means of reaching rural consumers through periodic village markets (or haats), agricultural markets (mandis), and rural fairs (melas). According to National Council for Applied Economic Research (NCAER) survey the number of middle and high income households in rural India is expected to grow from 80 million to 111 million by 2007. In urban India, the same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be double that of urban India.
* A survey by NCAER shows that the rural market is growing faster than the urban market in several products. These include packaged tea, detergent powder, washing soap and detergent cake. Growth in motor cycles too has been more in rural market than the urban market.
Introduction
Rural market is dynamic and has stood for centuries on its own. Nobody can ignore rural India which comprises one tenth of the world population. A revolution is sweeping the Indian countryside which has compelled companies to go rural. The rural consumer is discerning and rural markets are vibrant. The Indian rural market with its vast size offers a huge opportunity with 128 million households and the rural population is nearly three times the urban. Rural India has a large consuming class with 41 percent of India's middle-class and 58 percent of the total disposable income. According to a study by Chennai based Francis Kanai Marketing Planning Services Pvt. Ltd. the rural market for FMCG is Rs 65000 crore, for durable Rs 5000 crore, for tractors and agri-inputs Rs 45000 crore and two and four – wheelers Rs 8000 crore. In total a hopping Rs. 123000 crore.
There is no official definition of what constitutes a rural area. However, an urban area is defined as per the census of India as "all places with a municipality, corporation, cantonment or a notified town area" and "all other places satisfying the following criteria:
a) Minimum population of 5000,
b) At least 75 percent of male working population in non-agricultural pursuit, and
c) Density of population of at least 400 persons per square kilometer. Therefore, an area that does not satisfy the criteria specified above can be considered a rural area.
Taking on from the above, a habitation is defined as rural if
* It has a population density of less than 400 per sq. Km.
* At least 75 percent of male working population is engaged in agriculture related activities, and
* There is, in the location, no municipality or municipal board.
India today has about 6.4 lakh villages. All except about 15,000, have a population below 5000. Looking at marketer defined classification, most companies in the FMCG sector would define any area with primarily agriculture based occupation and with a population of less than 20,000 as rural. The construct called rurban is the overlap between rural and urban, with physical features closer to urban areas and proximity to large urban centers, but with deep rural social moorings.
Characteristics of Rural Markets
Rural areas exhibit several distinctive characteristics that are different from the urban areas. Literacy levels, family structure, occupational patterns, social customs and norms, and several other features are unique to rural India. Some of the features having important implications for marketers are:
Demographic Characteristics of Rural India
There are 6,39,000 villages in India with a total population of 743 million people, accounting for about 72 percent of India's population. This population, however, is distributed across a large number of villages, where many are sparsely populated. In table 1 , is given the distribution of population in villages.
Table 1 Distribution of Population in Villages in India
Population (Number) No. of Villages Proportion of Total Villages (%)
Less than 500 people 236,004 37.00
Between 500 and 999 158,124 25.00
Between 1000 and 4999 221,040 35.00
Between 5000 and 9999 15,058 2.00
More than 10,000 3,976 1.00
Total 634,202 100.00
Source: Census of India
About 62 percent of villages have a population below 1,000 and only 3 percent of the villages above 5000. Most villages with less than 500 people do not have any shops. These characteristics point toward the complexities of distribution and logistics management.
Characteristics of the Rural Economy
Income levels in the rural areas have increased over the years. About 67 percent of the rural households had an annual income of less than Rs. 35,000 in 1989-90 whereas by 1998-99, this proportion decreased to about 48 percent. Proportion of households with an annual income of above Rs. 70,000 constituted about 9 percent in 1989-90 and by 1998-99, this proportion had increased to about 27 percent. Thus, the households belonging to the middle-income and above categories that constitute the bulk of the consuming class had been increasingly steadily over the years. The fact is that the urban consumers have to incur a higher cost of living while the rural population has higher levels of disposable income for the same levels of income. For marketers this is an encouraging fact.
The consumption patterns of the rural consumers are also undergoing a shift. In 1983, the per capita consumption expenditure in rural areas was Rs. 112 per month whereas it was Rs. 166 in the urban areas. In 2001, the per-capita monthly expenditure increased to Rs. 486 in rural areas and to Rs. 855 in urban areas. Moreover, there is a shift in the expenditure pattern of rural consumers. In 1983, about 66 percent of the per capita consumption expenditure was on food and, by 2001, this proportion declined to about 59 percent. This trend indicates that while incomes as well as expenditure in rural areas have increased, their spending on nonfood items have also increased. The increasing demand for many products can be accounted for this by changing pattern. However, the rural income is seasonal in nature and to a great extent influenced by non-controllable factors such as draughts and floods, crop failures due to pests, and similar factors. For the working class in rural areas, wages are distributed daily, weekly, or fortnightly and come in small installments. Demand for many products in rural areas, thus, is seasonal in nature.
Social and Cultural factors
Social hierarchy, traditions, social norms and customs play significant roles in determining individual and collective behavior in rural India. One of the most important determinants of social hierarchy in the rural areas is the caste system. The Caste system determines the social status of the individuals and families, and this has important implications for individual and social behavior. However, within the caste system itself, there are sub-castes, religious groups and sub-groups, making the social hierarchy more complex. Manifestation of social hierarchy is exemplified by the pattern of household settlements. While in the urban areas, household settlements are often referred to as low-income group (LIG), middle-income group (MIG), or high-income groups (HIG), in many parts of rural India, geographic demarcation of household settlements is based on caste affiliations. In some parts of India, these settlements are known as harijan basti (harijan colony) or thakur gaon (village of the upper-caste Thakurs). Social interactions and norms of behavior are governed by considerations in rural areas. In some rural areas, even the common facilities like well water or grazing land is demarcated based on caste. People belonging to some castes are prohibited from accessing common facilities demarcated for other caste groups. Any violation of these norms can lead to social tensions. Unlike in urban areas, these behavioral norms are strictly implemented in rural areas.
Traditions are rigidly followed in rural areas. For example, in many rural areas (and even in some sections of the urban society), women are expected to cover their head with the end portion of their sari as a mark of pious behavior. Talking directly to men who do not belong to the immediate family is not considered to be good behavior.
Consumer Behavior in Rural Areas
A complex set of factors influence rural consumer's behavior. Social norms, traditions, castes, and social customs have greater influence on the consumer behavior in rural areas than in urban areas. The seasonality of agricultural production influences the seasonality of rural consumers' demand. Given the fact that the landless laborers and daily-wage earners get their income in installments, their purchasing is restricted to small quantities of products at a time, mostly on a daily basis or once in two or three days.
Purchase-decision processes and preferences also show certain characteristics that implication for marketers. Exhibitions and road shows act as some of the key triggers for information-search behavior. Opinion leaders and people who are perceived to be knowledgeable play an important role as information providers and advisors. Word of mouth has more significance in purchase decisions of rural consumers. Family members, relatives, and friends are consulted before making purchase decisions of higher-value products. However, as the exposure to mass media and information technology is increasing, rural consumers are becoming more informed about products and services, and their dependence on traditional reference groups is gradually waning. As a result of the increasing role of self-help groups and other government institutions involved in developmental activities, professionals working for such agencies act as reference sources. They tend to exhibit greater trust in products and services endorsed by the government and its agencies. Rural consumers also tend to be more loyal as brand switching has greater perceived risk.
Compared to the urban counterparts, rural consumers have different interpretations of colors, symbols, and social activities. Rural consumers show a preference for bold, primary colors; red color connotes happiness and auspiciousness, and green color prosperity. Ownership of a large tractor, large house (pucca house), telephone and other higher-value consumer durables, and education of children in cities are considered as status symbols.
Marketing Infrastructure in Rural Areas
Although rural areas offer attractive opportunities to marketers at an aggregate level, about 68 percent of these markets remain untapped mainly due to inaccessibility. It is uneconomical to access a large number of small villages with a very low population density spread over a large geographic area. Factors such as limited physical access, low density of shops, limited storage facilities, need for a large number of intermediaries in the distribution channel to reach the end customers, and low capacity of intermediaries to invest in business (investments for keeping stock, storage facilities, vehicles for distribution) make the tasks of reaching rural consumers very complex. It is in this context we need to understand the importance of alternative means of reaching rural consumers through periodic village markets (or haats), agricultural markets (mandis), and rural fairs (melas).
Haats are a "public gathering of buyers and sellers of commodities, meeting at an appointed or customary location at regular intervals. Most of these periodic markets are held once a week. Haats function as physical markets for selling agricultural surplus as well as retail points for buying daily-use items and supplies for farming activities. The number of haats in rural areas in India is about 42,000. On an average, one haat covers 20 to 50 villages, has about 300 outlets, and is visited by more than 4,500 people.
Mandis or agricultural markets are set up by the state governments for facilitating exchange of agricultural produce (providing information on prices and arrivals of produce, meeting of buyers and sellers) and for procurement of food grains by the government agencies. There are about 6,800 mandis in India, each catering to about 0.14 million people. Companies use mandis to promote their brands by setting up "stalls" for carrying out sales promotion activities and for gathering market-research information.
Melas or fairs are an integral part of human life. There are different types of fairs: commodity fairs, cattle fairs, and fairs in connection with religious festivals. Although there are more than 25,000 fairs, about 90 percent of them are held in connection with religious festivals and, hence, have limited marketing value. But the remaining fairs are used by companies to promote their products and brands.