Challenges in Rural Marketing

Previously, we explored the abundant opportunities that rural markets, particularly in India, present for both the corporate sector and non-corporate institutions involved in the production of goods and services. Nearly three-fourths of the country's consumers are situated in the rural market, contributing to half of the national income. The market's potential began to emerge in the 1960s and 1970s, with steady development observed in the 1980s and 1990s. As we enter the first decade of the new millennium, there is a promising outlook for the rural market, poised for further growth and expansion. 

Several corporations have been making concerted efforts to tap into rural markets through diverse strategies. The challenges, often reiterated, are numerous and include issues such as providing affordable products, reaching villages with smaller populations, ensuring connectivity, addressing communication barriers, overcoming language differences, and combatting counterfeit products. Despite these obstacles, for those who persevere, substantial rewards are within reach.  

Certainly, the rural market offers enticing opportunities for marketers, but entering this market smoothly is far from simple. It is fraught with a variety of challenges, and marketers must exert considerable effort to navigate them successfully. Some of the challenges that a marketer may encounter when entering a rural market include

1. Vast and Scattered Market

Rural India constitutes a vast and widely dispersed market, with approximately 75 percent of the total population residing in these areas. In certain states, the rural population reaches as high as 80 to 90 percent, emphasizing the significant demographic presence in rural regions.  While the urban population in India is concentrated in 3,200 cities and towns, the rural population is dispersed across 570,000 villages. Remarkably, only 6,300 villages, accounting for less than 1.1 percent, have a population exceeding 5,000 each. Over 55 percent of the total number of villages, equivalent to more than 3 lakh villages, have populations of 500 people or fewer. Furthermore, 25 percent of villages, or more than 1.5 lakh, fall into the category of 200 people or fewer. This stark contrast implies that, unlike urban demand, which tends to be highly concentrated, rural demand is spread across a vast and diverse area. 

2. Transportation Bottlenecks

The functioning of transportation serves as the essential hub for any business center. Regrettably, many rural markets face significant disruptions when this crucial hub is not operating effectively. This issue is particularly pronounced in the realm of rural marketing, especially when dealing with agro-based products such as fruits, vegetables, fish, poultry, and dairy items. The efficient and prompt transportation of these products is vital to prevent spoilage. 

Inadequate road infrastructure poses challenges in accessing rural markets. A significant number of villages lack all-weather roads, with approximately 1.69 lakh villages having connectivity through such roads, while only 92,800 villages have fair-weather roads. Consequently, in numerous villages, residents are compelled to travel by foot due to the absence of transportation facilities in those areas  

Despite having the fourth-largest railway system globally, significant portions of rural India remain excluded from the rail network. In terms of road transport, nearly 50 percent of the country's approximately 570,000 villages lack proper road connectivity. While certain progress is evident due to various rural development programs, numerous areas are still reliant on unpaved "Katcha" roads, with many interior regions having negligible road infrastructure. The prevalent modes of transport in these areas are delivery vans and animal-drawn carts. The challenges in accessibility persist, making the delivery of products and services a persistent difficulty in rural areas.  

3. Seasonal and Irregular Demand

Rural demand is more seasonal compared to urban demand. The pre-dominance of agricultural in the income pattern is one main reason for this. The relatively greater influence of marriages and festivals on the purchase pattern is another. Interestingly, marriages and festivals often coincide with the harvest. Besides being seasonal, rural demand is some what irregular as well... After all, agriculture in many parts of India still depends on the vagaries of the monsoon (Ramaswamy & Nanakumari, 2002, p. 703). So, during harvest and festival seasons, demand increases substantially and vice verse (Dey and Adhikari, 1998, p. 21).

4. Low Standard of Living

The rural consumers are having low per capita income, low purchasing power, low literacy rate and therefore, low standard of living. The per capita income of rural people is low as compared to their urban counterparts. The level of literacy rate is also lower in rural areas than that in urban areas, but the picture is now changing offering greater opportunities to marketers. 

5. Lack of Desire for New Life-Style

Rural consumers are a tradition bound community. Their culture, religion and even superstition strongly influence their purchasing decision. There is a dominance of traditionality in rural areas. The pace of life is slow in rural areas and as a result there is a tendency to stick to old principles and traditions. By and large, the rural consumers are marked by a conservative and tradition-bound lifestyle. But, what is striking today about this matter is not the basic conservative characteristic, but the fact that the lifestyle is undergoing a significant change. 

6. Language Problem

Multiplicity of languages spoken in villages is another difficulty faced by marketing people. This poses insurmountable problem in designing the communication strategy. More than 30 languages and about 1700 dialects make rural communication difficult. In the urban areas, marketing communication can be managed by and large with English and Hindi. However, marketing communication in the rural area has to necessarily be in the local language and Idiom.

7. Urban Mind Vs. Rural Mind

There is a gulf of difference between urban mind and rural mind. That is why there is a wide gap in consumer behaviour in rural areas and urban areas. Marketers are generally from urban areas. Their minds are urban and when they want to enter into the rural areas and win the rural minds with their urban frame there is a great problem.

8. Overall Backwardness

Rural people are economically backward. Poverty is one of the main problems with India and rural people are poorer than urban people. About 30 per cent of the rural population lives below the poverty line. Poverty confines people's expenditure to it's basic necessities also.

9. Low Turn Over

Due to limited demand in rural areas, marketing agencies face the stiff problem of low turnover that adds to the interest burden on business resources. This makes the whole exercise un-remunerative and unprofitable. Now, commercial banks in urban areas are giving consumption loans liberally. Such loans must be given in rural areas also so that consumption could be increased. This will increase rural demand for outside products and will raise the living standards of the people there. 

10. High Inventory Costs

Rural marketing outlets don't have the necessary knowledge and aptitude to decide the optimum level or inventory. In the absence of proper inventory management, many times, they have unnecessary stock which squeezes the profit margin.

11. Inadequate Marketing Support

Producers wholesalers don't extend full support in the form of liberal credit to the rural marketing outlets due to the limited potential of these outlets. This reduces their competitiveness in comparison to urban marketing institutions. If the network of financing agencies is improved in rural areas this problem can be solved.

12. Inadequate and Inefficient Communication Facilities

Business is a game of opportunities and one has to take full advantage when opportunities knock at one's door. But in rural areas, the marketing system is unable to take advantages of these opportunities whereas its counterparts in urban areas encases them. But the situations are fast changing with optimum utilization of information technology, to connect rural India. Koshika Telecom, through a tie up with Uptron Electronics, has recently opened the first cyber dhaba in Ismailganj, near Lucknow. Cyber Dhabas will make it possible for rural folk to send and receive e-mails from the village.... The cyber dhaba concept in an extension of Koshika's earlier strategy of opening up cellular phone booths, called YES-TDS, in the villages of Uttar Pradesh. With cost of technology coming down day by day, several companies are attempting to create virtual bazaars or agri-portals akin to weekly Mandis. The most notably virtually Mandis are the e-choupal by ITC, India Agriline by EID Parry and Dairy Portal by Amul. ITC has already set up 1,000 Choupals covering 6,000 villages in four states where farmers can sell products ranging from soya-bean, coffee, fish and wheat. It is a win-win model as both ITC and the farmers make a neat saving by bypassing the middlemen in the physical Mandi. The same kiosk is now being used for reverse trading also - for companies to sell products and services needed by farmers directly. In the coming years, more and more companies are going to take the IT route to make the rural markets more accessible and this should open up new business opportunities. Cellular operators across the country are seeing more than 50 per cent of all incremental growth in their cellular business coming from small towns and rural areas, not necessarily from mobile-totting rich farmers atop tractors. Cell phones have reached the man on the cycle, the fishermen and the village Sarpanch.

13. Lack of Proper Planning

Most of the retailers in rural markets do not start a business for economic reasons; rather there are established and run with non-business objectives, viz. compulsion, or running family business, or to fight unemployment. Even agriculture is performed, not with profit motive nor on commercial lines, but at a substance level; it is not business-oriented but is undertaken as a way of life, simply because f the complete non-existence of any alternative avenues of employment and income generation (Sharma and Katewa, 1997).

14. Ancient and Obsolete Business Techniques

Rural marketing is run on old management lines. As such they lack specialized managerial skills, resulting in inability to attract and serve customers. Rural marketing is devoid of modern advertisement strategy, aggressive salesmanship, window-dressing, etc. (Sharma and Katewa, 1997).

15. Insufficient Storage and Warehousing Facilities

In warehousing too, there are special problems in the rural context. Business firms find it quite difficult to get suitable godowns in many parts of rural India (Ramaswamy and Namakumari, 2002, p. 710). There are no sufficient storage and warehousing facilities in rural areas. Of course, there is a corporate body named Hindustan Warehousing Corporation Ltd., but it is of no use of the people working in remote rural areas (Sharma and Katewa, 1997). This problem adversely affects the service as well as the cost aspect in distribution. Maintaining the required service level in delivery of products becomes very difficult. At the same time the cost of distribution is escalated.... It has been estimated that the overall distribution cost per unit is higher by as much as 50 per cent on an average in the rural market as compared to the urban market

(Ramaswamy & Namakumari, 2002, p. 710).

16. Raw and Immature Consumers

Another aspect of the challenges of the rural marketing system is raw consumers. They suffer mainly from the following handicaps: (i) illiteracy, (ii) poverty, (iii) untimely and hurried shopping. As the consumers are illiterate, they are unable to form associations or to take advantage of modern remedies like the Consumer Protection Act. They need credit for shopping which puts extra pressure on rural retailers, who generally work with limited working capital. Besides this, they indulge in untimely and hurried shopping, so that they don't go through the process of shopping (Sharma and Katewa, 1997).

17. Liberalisation and Globalisation

India is passing through a transition phase. It has opted for liberalisation and globalization and reaffirmed it's commitment to new economic policies. This will bring about a sea change in rural markets too, as there will now be flooded with a variety of foreign products. With the entry of many multinational corporations, industrial production will grow, and they will try to penetrate the unexplored and unexplored rural markets of India (Sharma and Katewa, 1997). With the flood of Chinese products in Indian markets, there is a big question whether Indian brands will survive? The fact is that the bulk of India's consumer base is poor, and the market is defined by a whole lot of people consuming a little but at low prices rather than a few people consuming a lot at high prices. Indian brands that understand and adopt this way of doing business are well protected because of their reduced cost and capability advantages. This is the true source of delivering value advantage, on a large scale, and profitability. Fortunately the Chinese have a far better inherent cost structure to play this game. So more essential for survival needs to be better distribution and retailer

18. Proper Segmentation Difficult

Demand for product varied for people living in different areas with different climatic conditions, occupations, their level of literacy, their outlook towards life, and their exposure to modern sophisticated goods and services. The income differences between wealthy few and the common masses also create differences in the demand, customs, beliefs, etc. All these make proper segmentation difficult (Sahoo & Panda, 1997, p. 72). It would, therefore, be unwise for firms to assume that the rural market as a whole can be served by a single offer or a single product-price-promotion combination. Firms have to analyze the consumers in-depth, carry out thorough market segmentation and select relevant segments as target markets. And, they have to develop a distinctive positioning and a distinctive marketing mix for each target segment (Ramaswamy and Nanakumari, 2002, p. 705).

19. Inadequate Bank and Credit Facilities

A large majority of the villages, especially those with 2,000 populations or less do not enjoy banking facilities. Whatever RRBs are operating under the various nationalized commercial banks might be quantitatively satisfactory, but subject-wise their performance is not up to expectations. In the process, the rural retailers experience several problems not only in financing their business operations, but also in making payments to the suppliers. For want of credit facilities, retailers are unable to carry enough stocks with them (Sahoo & Panda, 1997, p. 73).

20. Problems in Organizing Marketing Channels

(a) Multiple tiers add to the costs: At minimum, the distribution chain in the rural context needs three tiers, viz. the village shopkeepers, the Mundi-level distributor, and the wholesaler/stockist/C&F agent in the town. In addition, it involves the manufacturer's branch office operations in the territory.... Producers who can reach the customers through the shortest distribution chain can do better in this market; (b) Non-availability of dealers; (c) Poor viability of the outlets in rural areas (Ramaswamy & Nanakumari, 2002, p. 711).

21. Availability of Appropriate Media

It has been estimated that all organized media in the country but together can reach only 30 per cent of the rural population of India. The print media covers only 18 per cent of the rural population. The radio network, in theory, covers 90 per cent. But, actual listenership is much less. TV is popular, and is an ideal medium for communicating with the rural masses. But it is not available in all interior parts of the country. It is estimated that TV covers 20 per cent of the rural population. But, the actual viewership is much meagre. The cinema, relatively, is available more as a medium of rural communication. But, these opportunities are very low in rural areas (Reddy, 1997, p.44).

22. Constraints in Marketing Communication

The literacy rate among the rural consumers being low, the scope for using the print word is rather limited. The tradition-bound nature of the people and their cultural barriers and taboos add to the difficulty of communication task. The situation is further compounded by the linguistic diversity. In the urban areas, marketing communication can be managed by and large with English and Hindi. Marketing communication in the rural area has to necessarily be in the local language and idiom. The constraints in media compound the difficulty Rural Communication is also quite expensive.

Rural communication has to go through the time-consuming stages of creating awareness, altering attitudes and changing behavior. In addition, it has to break, the deep-rooted behaviour patterns (Ramaswamy and Namakumari, 2002, pp. 714-715).

23. Rural Markets and Sales Management

Rural marketing involves a greater amount of personal selling effort compared to urban marketing. The rural salesman must be able to guide the rural customers in the choice of products. It has been observed that rural salesmen do not properly motivate in rural consumers. The rural salesman has to be a patient listener as his customers are extremely traditional. He may have to spend a lot of time on customers visits to gain a favourable response from him. Channel management is also a difficult task in rural marketing. The distribution channels in villages are lengthy involving more intermediaries and consequently higher consumer prices. In many cases, dealers with required qualities are not available (Reedy, 1997, p. 44).

24. Branding

The brand is the surest means of conveying quality to rural consumers. Day by

day, though national brands are getting popular, local brands are also playing a significant role in rural areas. This may be due to illiteracy, ignorance and low purchasing power of rural consumers. It has been observed that there is greater dissatisfaction among the rural consumers with regard to selling of low quality brands, particularly soaps, creams, clothes, etc., whose prices are often half of those of national brands, but sold at pries on par or slightly less than the prices of national brands. Local brands are becoming popular in rural markets in spite of their lower quality (Reddy, 1997, p. 45).

25. Packaging

As far as packaging is concerned, as a general rule, smaller packages are more popular in rural areas. At present, all essential products are not available in villages in smaller packaging. The lower income group consumers are not able to purchase large and medium size packaged goods. It is found that the labeling on the package is not in the local language. This is a major constraint to rural consumers understanding the product characteristics (Reddy, 1997, pp. 45-46).

26. Marketing Planning and Awareness

Rural markets are different from urban markets. Unlike urban markets, they are unplanned in nature. Till years back, rural markets were simply not eared about. Companies which have been household names for decades in urban areas, were not even heard of in the rural markets. But, with the increase in competition in urban areas, emphasis on rural areas has emerged. However, the executives in the companies do not understand the consumer psychology in rural markets, and it makes the planning process all the more complex. Lack of awareness and understanding of consumer behavior in rural markets, creates problems in formulating strategies and plans for these (Sharma & Rohmetra, 1997, p. 103).

27. Designing the Products

A product which is selling well in urban markets, may not necessarily be a success in rural markets, the reason being the difference in utility value of the product. For example, consumer goods which are becoming more or less a necessity in urban areas as a result of changing lifestyles may still be categorized as luxurious in rural areas. Although, it is wrong to say that the rural markets have not changed during the last 50 years, there does exist a different with regard to the pace of growth in rural and urban areas. Therefore, a product with a particular design and pattern may not find acceptance in rural markets, but may be a success in urban areas. Thus, there is a need for paying considerable attention to the design of the product, to make it acceptable in the rural markets (Sharma & Rohmetra, 1997, p. 103).

28. Pricing of the Product

‘Price' is a tool with which companies can compete with one another. It is a sensitive index, while considering the product. Price plays an important role in urban as well as rural markets, but it is more crucial in rural areas because the income is low. Moreover, price has to justify itself. "The consumer must feel satisfied and benefitted after paying the price for a particular product. Thus, price remains the point of contention (Sharma & Rohmetra, 1997, p. 103).