IMT-72: RURAL MARKETING

PART - A

Q1.    Define rural marketing.

Q2.    Describe the occupation pattern in rural areas and sources of income generation.

Q3.    What does the expenditure pattern in rural areas, as per NSS Survey, indicate? Give illustrations.

Q4.    How does the demand pattern in rural areas differ from that of urban areas?

Q5.    What is rural market index? What are the important factors influencing rural market index?

PART - B

Q1.    Give examples of commodities flowing from rural areas to urban areas and vice versa.

Q2.    Comment on the location of rural population and its impact on rural marketing.

Q3.    Comment on the land distribution and land utilization in rural areas and its impact on rural marketing.

Q4.    What is hierarchy of markets? What is its importance in rural marketing?

Q5.    Briefly describe the problems in rural marketing.

PART- C

Q1.    What is rural market index?

Q2.    Mention five important factors having influence on rural market index.

Q3.    What is SWOT analysis?

Q4.    Mention three consumable inputs in agriculture.

Q5.    Why are small unit packs important in rural market? Give examples.

CASE STUDY -1

SHRI SUBRAMANIAM BUYS A MOPED: TVS 50

Abstract: This case is prepared with a view to understanding the 'Buying Decision Process' in rural areas, especially for a consumer durable. Under the guidance of Prof. T.P. Gopalaswamy, two groups of four students each interviewed thirty rural consumers who owned mopeds in Andhra Pradesh and Tamil Nadu. The interviews were entirely tape recorded. The tape recorded version was transcribed. By analysing the transcribed material, the group arrived at the essential questions to be asked in order to understand the buying decision process in rural areas. These questions related to aspects like how the need was felt, the process of search for solutions and alternatives, choice of solution, its acceptability among the family members, process of brand selection and the like. The identified questions did not preclude any further questions to be asked depending on the situation. Armed with this instrument, an interview was conducted with one moped owner in a very detailed way. This was again tape recorded, transcribed and translated into English. The interview turned out to be very exhaustive. The translated version was prepared into a case. By analyzing the case, it was possible to arrive at the buying decision process in rural areas for any consumer durable.

 THE CASE

Shri. Subramaniam of Nemili village in the North Arcot district of Tamil Nadu, was celebrating his purchase of a TVS Moped in November 1989. He was very proud of possessing a moped and so was his small family consisting of his wife and daughter. With a view to understanding the consumer characteristics and the process of buying decision of the moped, Sri R.Narayanan, and seven of his colleagues, PGP (1990-92) students of IIMB had a long discussion with Shri Subramaniam.

The conversation was recorded and is reproduced below:

Q. How did you get the idea of purchasing a Moped?

A. In this village, three people possess mopeds. One is the village shopkeeper and the other two are farmers. Seeing them, I also thought that I should have a moped.

Q. How did your family members react to the idea of buying a moped?

A. I did consult my wife about this and she readily supported the idea. My daughter is just 8 years old. So I did not consult her. My wife had seen people using the moped to travel to nearby villages or towns, to visit relatives and also to go to the movies at least once in a fortnight. She had also seen the others taking their children to the school, which is five kilometers away.

Q. Who else did you consult besides your family?

A. I consulted the other three moped owners. Two of them have TVS 50 mopeds and the third has a Luna. I also consulted some of the mechanics in the nearby town. 

Q. What made you to think of buying a moped?

A. There are a number of chores I have to do every day. I have ten acres of wetland and five dairy cows. At least four of them are milked throughout the year and they yield about 25 litres of milk everyday. I am a member of the Dairy Cooperative Society (DCS) under the Tamil Nadu Milk Producers' Cooperative Federation, which is situated in a neighbouring village two kilometers away. The cows have to be milked twice a day, morning and afternoon. I am required to hand over the milk to DCS twice a day within one hour of milking. My daughter, who is eight years old studies in a Christian Mission School, which is four kilometers away. She goes to the school everyday by bullock cart with two other children from our village. When the bullocks are engaged in the field, the children walk the distance, which happens at least once in a fortnight. All these things made consider purchasing a moped, so that I could deliver the milk fast and also drop and pick up my child daily. I was earlier using my bullock cart to transport the milk. However, this proved to be time consuming and also led to spoilage of milk in the summers. The DCS does not accept spoiled milk. 

Q. How long did you take to make the decision of purchasing a moped?

A. Initially, only five out of the ten acres of land had irrigation facilities. I took a loan from the Land Development Bank for digging another well and installing an electric motor and pump set. The loan (Rs12,000 + interest) was also to be returned in twenty equated half-yearly instalments. This meant that I had to be an efficient farmer and grow crops which would bring in more revenue. I watched and consulted the other moped owners. I also waited a while for my income to stabilize after the new well and pump set. It took nearly two years for me to decide on purchasing a moped.

Q. What type of additional income made you go in for one more well and pump set?

A. Earlier, I had only five acres under irrigation and I was growing only traditional crops like paddy and jowar. Then, I started growing groundnuts along with paddy, which brought in more income. Then I thought of sinking another well for which loans were readily available, but I had to find margin money. The groundnut crop gave me the necessary income for margin money. In addition, I also watched some farmers in the village cultivate flowers and vegetables and earning more money. I thought that I could also grow vegetables and flowers for some additional income.

Q. When did you actually buy the moped and did you have to wait for the moped delivery?

A. I bought the moped in November 1989 and I had to wait for about three months to get the delivery. The waiting period was due to my choice of the brand, TVS 50. There were other mopeds available ex-stock such as Luna, Hero Majestic and of course the second hand ones. But I preferred to wait for TVS 50 for three months. There are a number of moped dealers in Arakonam, the nearby town, which is twenty kilometers away. 

Q. Did you get any technical advice about the moped from anybody?

A. Honestly, I contacted only the actual moped users in my village and also a few neighbouring villages. In addition, I did talk to a couple of moped repair mechanics. Since I had made up my mind to buy TVS 50 only, I did not really worry about consulting many people. The decision to buy TVS 50 was based mainly on my own observations of the experience of others who own this brand of mopeds in my village.

Q. Before deciding on TVS 50, did you know about the other models and brands?

A. Yes. Not only had I observed the moped owners in my village, but on my trips to Arakonam, I observed the moped owners there, especially when they visited the mechanics for repairs. So, I was aware of the brands like TVS 50, Luna, Hero Majestic and others. 

Q. What really made you go in for TVS 50?

A. There are several reasons for my decision.

1.       I observed the three moped owners in the village. I found the owner of the Luna moped facing problems with his moped quite often. On the other hand, the TVS 50 owners seemed to be enjoying hassle-free service.

2.       TVS 50 mopeds have a good resale value. The mechanics whom I consulted were prepared to get me a second-hand moped of any brand I wanted. But the price for a second-hand TVS-50 moped was always higher than other brands of nearly equal life.

3.       Better performance: I also observed that the TVS 50 moped carried a load of 50 to 75 kgs easily. A bag of cattle feed or fertilizer weighs 50 kgs on an average. With this load, the speed and performance of TVS 50 appeared to be satisfactory. I had also seen that this moped easily carried one or two more persons - just appropriate for a family like mine.

4.       The design of the TVS 50 moped appeared to be very sturdy, light in weight, comfortable, less in height and fast in speed.

5.       The fuel consumption was better in TVS 50 than in Luna. The two TVS 50 owners were getting a mileage of 55 to 60 kms/litre of petrol while the Luna gave only 45 kms/litre.

6.       Since TVS 50 is manufactured by a company situated in Tamil Nadu, the availability of spares and services posed no problem. The company also has an excellent network of dealers and service centres.

7.       I found out that during usage or while running, this moped seldom broke down. Since I have to carry a perishable product such as milk twice daily, minimal breakdown was an essential deciding factor.

8.       I also observed that it requires very little repairs.

9.       Further, brown colour was available in TVS 50. This colour, in my opinion, is more suitable for rural roads than other colours like green or red as the dust is less visible on a brown surface.

10. Last, but not the least, I had seen the others with TVS 50 having less or no problems at all. Since it offered a good resale value too, I knew I could realize my capital with very minimal loss, in case I ever wanted to sell it.

Q. How did you come to know about these qualities?

A. As I told you earlier, it is my observation of the experience of other actual users. 

Q. Did you come across any negative features of TVS 50 mopeds?

A. The only drawback is that it is slightly more expensive than the Luna. I had to pay Rs.1000/- more for this brand but this did not bother me, considering the advantages this brand offered.

Q. How much have you invested on this moped?

A. I have invested Rs 10,000 on this moped, with some additional fixtures like steel 'S' shaped hooks for carrying the milk cans. I also got a foldable carrier attached behind the rear seat to carry cattle feed/fertilizer bags. Now that I have started cultivating vegetables and flowers, the additional fixtures enable me to carry them also. In addition, this allows me to take my wife and daughter together for social visits.

Q. Do you think that the investment in the moped will be paid back?

A. Yes. In the absence of the moped, I would have had to use the bullock cart for taking milk to the Dairy Cooperative Society. I would have had to depend upon public transport to carry vegetables and flowers to the nearby town for which I would have had to spend on bus fare plus luggage charges. Many a times, the luggage charges by public transport are arbitrary. If there are many farmers with luggage, the charges go up. Now, I need not own a bullock cart, which costs about Rs 3000. I can hire a cart when I want to sell food grains or groundnut, which is just once in six months.

Q. Did you plan for any cropping pattern change on your farm?

A. Yes. After I purchased the moped, I introduced vegetables and flower cultivation on my farm, which requires marketing twice or thrice a week. The purchase of the moped gave me the confidence to go in for cultivation of vegetables and flowers. My future plan is to add a poultry unit of 500 birds to my farm to produce eggs so that I can also earn additional income. The moped will certainly help me in selling the eggs, produced daily, in the nearby town. 

Q. Did any salesmen of mopeds contact you?

A. No. In fact, I went to collect the relevant details myself. Of course, I had seen signboards on highways, slides in cinema houses and advertisements in newspapers. Most of my communication has been through the clients of the moped manufacturers (those who own mopeds).

Q. If you had been unable to get a loan for the new well and pump set, would you still have gone in for the moped?

A. No. I would not have. First, I would not have had the money to buy the moped. Second, I wouldn't have been able to afford a vehicle just for pleasure. The vehicle would have had to primarily help me in my occupation.

Q. Do you at any time think of buying a tractor, which is more directly relevant to your occupation?

A. Not now. My ten-acre farm does not justify owning a tractor. As of now, whenever required, I hire one on an hourly basis from others who possess tractors in my village. If my farming business gets me adequate income, I would first like to enlarge my size of holding to about fifty acres over a period of time. Then I can think in terms of owning a tractor.

Q. Have you adopted any modern technology in agriculture like high- yielding varieties of seeds, etc?

A. So far, I have not told you that I graduated from the Tamil Nadu Agricultural University in 1980. I wanted to join my father in farming, which I tried for six months. My father would not allow me to practise any modern technology on the farm. Hence, I joined the Agricultural Department and worked as an Extension Officer for five years. After my father's death, I resigned from the job and took to farming. I have improved my farm a lot. I grow high-yielding varieties of paddy and groundnut. I intend taking up sugarcane cultivation in the near future. I use fertilizers, insecticides, pesticides, etc., as per the recommendations of the Agricultural Department and the Agricultural University.

Q. Had your father been alive, would he have allowed you to purchase the moped?

A. Not at all. He would have preferred to have one more bullock cart than the moped.

A profile of Shri Subramaniam is enclosed as Exhibit -1.

Based on the above conversation with the proud moped owner, comment on the following: 

Q1:    Is Shri Subramaniam a typical farmer?

Q2:    What were the important factors which motivated him to go in for a moped?

Q3:    What is the general profile of a rural moped owner?

Q4:    What is the buying decision process in rural areas?

CASE STUDY - 2

INDRADHANUSH PAINTS LIMITED1

ABSTRACT: A leading paint company (name not mentioned) was facing the problem of reducing market share, for their leading brand of distemper, in rural areas. With the guidance of Prof. T.P. Gopalaswamy, two students took up the investigation with the full cooperation of the company. They collected lots of internal data with regard to the marketing aspects like the number of dealers, margin given to dealers, supply aspects, colour of distemper, quantities sold and data about the competitors. In addition, they lay their hands on two surveys conducted by the company. The two students visited some villages and talked to the residents with a view to understanding the usage of paints and distempers, occasions of use, their place of purchase and the like. The company did find an answer to their problem. The case tested the understanding of the rural peoples' habits, tastes and preferences. This should lead the student to arrive at a solution for the problem.

THE CASE

Indradhanush Paints Limited (IPL) has been operating traditionally in the rural market for a number of years. Mr. R. Gupta was in charge of rural market operations. The sales force working with Mr.R.Gupta reported that the sales had declined during the past nine months in comparison to the corresponding period during the previous year. As a result of this, the rural market share of the company had dipped from 45 per cent to 43 per cent this year. Hence, Mr.R.Gupta was a very worried man and he rightly felt that the situation is serious enough warranting a review of their rural market operations.

The Company

IPL was formed by an Indian visionary in the early 1940s. It was aptly called Indradhanush to add colour to the life of rural India. At that time, the whole paint industry was mostly dominated by multinationals like ICI, British Paints, Goodlass Nerolac and others.

IPL had a very humble and modest beginning. By the 1960s, IPL had a wide network of distribution systems spanning the whole country. Today, it is one of the largest paint companies with four manufacturing units incorporating state-of-the-art technology. It produces the entire gamut of decorative and industrial paints, comparable in quality with the best in the world. It is a market driven company and has forty-seven sales offices throughout the length and breadth of the country.

The company had first started off with small distributors, since the large distributors were already under the control of the multinationals. The rural market was totally neglected by the multinationals, and hence as a conscious strategy, IPL entered the rural market. Over the years, IPL built up a strong distribution network which covered the rural areas also. Now, it has a presence in all settlements with a population of at least 5000 persons.

Product Range

The products manufactured and marketed by IPL fell into the following broad categories:

1.       Enamel Paints

2.       Liquid Paints

3.       Distempers

4.       Aluminium Paints

5.       Wood Finishes and Varnishes

6.       Stainers

7.       Patti and Filler

Of these categories, the first three items (Enamel paints, liquid paints and distemper) had substantial sales in rural areas. For the other categories, the rural market was not significant.

The low purchasing power in rural areas was a well-known fact which made IPL introduces small pack sizes of 50 ml, 100 ml, 200 ml tins in case of paints and one litre packs in case of distempers, which was acknowledged as a pioneering strategy. These small size packs gave the company a competitive advantage in the rural market. IPL had always given importance to the rural market and this strategy paid handsome dividends in the form of a loyal customer base.

Rural Paint Market

The rural paint market had been observed to be highly price sensitive. This was over and above the requirements of timely supply and high level of service. The rural retailer preferred a 'personal touch'. The bulk of the sales was during different festival seasons in various parts of the country.

The use of distempers or paints in rural areas was usually the same as in urban areas. Paints were mainly used for painting bullock carts and the horns of bulls, bullocks and cows. On the other hand, distempers were used for colour washing the walls of the houses. Traditionally, the rural folk used a mixture of lime and gum (called 'chuna') for whitewashing the walls of their houses. But they slowly got disenchanted with this, since it had to be done every year. This process was not only tedious but also hazardous since 'chuna' affects the hands, eyes and sometimes even the lungs. Moreover, there was no choice of colours. Although it was possible to add stainers to get a few shades, the scope was somewhat limited. This was a significant problem since the rural people preferred dark, bright and strong (gaudy) colours. This was not possible in the case of'chuna'. Further, 'chuna' also tended to flake off over time leaving ugly patches on the walls. The fact was that 'chuna' was the cheapest material available for whitewashing the walls, even though the rural folk were slowly getting disillusioned with it.

Paints were mostly used by the rural people to paint the horns of animals and the wheels and bodies of bullock carts. The rural households which could afford it, painted the front entrance door of the house for a better appearance. Distemper was used to colour wash the walls as in any urban middle and lower income class households. The sale of paints and distemper was seasonal and it was associated with festivals where the animals and bullock carts were worshipped. In such seasons, paints and distemper were used extensively. During such seasons, the rural retail shopkeepers purchased stocks from nearby urban towns and sold them in the villages. This often deflated the share of rural market for all companies. Then, the unorganized sector in the paint industry started making inroads into the rural areas. These paints and distemper were cheaper but the quality was poor.

IPL'S Strategy and Position

IPL enjoys the highest market share (30-35 per cent) in rural areas among the organized sector units. As said earlier, this was due to the fact that IPL adopted a strategy of 'going rural'. They realized the potential in the rural market and introduced small size packs. IPL recommended low margins for its rural retailers (traditionally, IPL kept a margin of 10 per cent for itself and one to two per cent for retailers). The rural retailers were to be compensated by ensuring higher turnover with adequate promotion measures, steady supply and high level of service. In spite of having the largest market share, IPL never adopted a market skimming strategy.

The company's strength was its distribution network. Following a conscious strategy of widening the distribution base so as to reach as many customers as possible, IPL had about 15,000 retailers, 47 branches and 7000 distributors. IPL followed a policy of keeping identical margins for all dealers irrespective of their size and location. The company fixed a maximum retail price and the retailer was given the freedom of discounting the retail price. The company had a 'cash and carry' system with the result that the incidents of 'bad debts' were minimal. It also discouraged the distributors from monopolizing the stock. IPL's sales people visited the rural areas regularly even if there was no immediate expectation of sales. This formed a part of their public relations exercise.

IPL's 'Harvester' brand of distemper introduced about six years ago had not been doing well in the rural areas. This was a high-quality distemper which provided a smooth finish to the walls. This brand was quite popular in urban areas but surprisingly did not do too well in the rural areas. This distemper was available in shades of light pink, sky blue, pale yellow, sea green and red. Of these, the only shade that sold decently in rural areas was red.

Competition

The share of rural paint/distemper market was as follows:

Organized sector:  40 per cent

Unorganized sector:        60 per cent

IPL had a 31 per cent share of the organized sector market in rural areas for paints and distempers. The break up of the share of organized sector in rural areas was as follows:

1.       IPL                                           31 percent

2.       Goodlass Nerolac                      15 percent

3.       Berger paints                            11 percent

4.       Others in organized sector        43 per cent

The unorganized sector had about 1,500 to 2,000 small-scale units. This sector consisted of mainly trading companies producing cheaper, low-quality paints and distemper. These manufacturers competed purely on price and catered to the markets of geographic proximity. The reasons for the price advantage enjoyed by these units were low overhead costs, lower excise duties, etc. While the organized sector manufacturers were trying to push the paints and distemper as a branded product, the unorganized manufacturers were using no frills and many a times not even a brand name.

The distemper sold by the unorganized sector was cheaper than IPL's Harvester brand distemper by about Rs 15-20 per litre. Even though the quality was not comparable to that of Harvester, their sales were growing at an annual rate of about 12 per cent. The way things stand today, the unorganized units are gaining market share at the expense of IPL.

A Survey

In 1993, Mr. R. Gupta initiated a survey in some selected rural areas with a view to understanding the market better. His own field force conducted this survey. He had received the results of the survey by the end of 1993 and compared it with a similar survey that was conducted in the year 1989.

By this time, the Board meeting was fast approaching wherein Mr.R.Gupta had to present the reasons for the fall in the market share and also his future plans to increase the market share.

A comparison of the two surveys brought to light many crucial issues for which he had to find answers. Given the survey results, he was pondering over issues like:

1.       Whether they had the right product for rural areas

2.       Whether the pricing strategy which was the same for rural and urban areas, was correct

3.       Whether the rural retailers had to be treated differently from the urban ones

4.       Whether the number of rural retailers was adequate Whether any improvement could be brought about in the promotion measures for rural areas

The results of the survey conducted in 1993 and in 1989 are presented as Exhibits 1 and 2 respectively.

Exhibit 1

Results of the Survey conducted in 1993.

The survey was conducted in fifteen villages in various parts of the country and covered 200 households. The results of the survey are presented below: 

The proportion of households using different types of materials for colourwashing the walls, painting doors and the horns of animals and bullock carts are as follows:

Comparative prices of materials required to paint or distemper 100 square feet of area:

Salient observations:

1.       Rural people found Harvester distemper and IPL paints expensive and were not prepared to invest such large amounts in spite of good quality.

2.       The shades available in Harvester distemper were very light and did not meet the rural requirement, which was for dark and strong colours.

3.       Paints were used for painting the horns of animals, bullock carts and the front entrance door of the houses, while distemper was used for colour washing the walls of the houses.

4.       It is found that the rural consumers were switching over to cheaper brands of paints and distemper from the traditional 'chuna' because of its inherent disadvantages.

5.       There is a definite market for paints and distemper in rural areas but it should be inexpensive and affordable. This is the main reason why the inferior quality paints and distemper were preferred by them.

6.       Cheaper paint and distemper manufacturers resorted to direct selling to the rural retailers.

7.       It is customary to paint or colour wash every year before the festival seasons like Sankaranthi or Pongal in the South or Baisakhi and Deepavali in the North.

Exhibit 2
Results of the Survey conducted in 1989. 

This survey was also conducted in fifteen villages across the country and covered 200 households. The results of this survey are presented below: 

The proportion of households using different types of materials for painting the walls, doors, and the horns of animals and bullock carts are as follows:

Comparative prices of materials required to paint 100 square feet area were:

Salient observations:

1.       'Chuna' application was found to be tedious by rural people.

2.       Those who used Harvester distemper accepted this as very superior to 'chuna'.

3.       Cheap paints and distempers used 'low price' as their USP.

4.       Price of Harvester distemper was found to be prohibitive for a large number of rural customers.

5.       In addition to about 1000 manufacturers in the unorganized sector, another 400 units were coming up and their products were to reach the market in three to four years time.

6.       Paints were normally found to be used for painting the horns of animals and bullock carts. Very few people used paints to paint the front entrance door of the house. Distemper was used to colour wash the walls by the richer households who could afford it.

7.       Painting and distempering were very much associated with festivals and hence the demand was purely seasonal.

Questions:

Q1.    What seems to be the main factor/s determining the choice of paints and distempers in the rural market?

Q2.    How can the company ensure that their product grabs the lion's share of the rural market and also maintain its position?

Q3.    Suggest positive changes in IPL's marketing strategy.