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Hierarchy of Rural markets

The lands in India consist of about 650,000 villages. These villages are enclosed by about 850 million consumers making up for about 70 per cent of population of our country and contributing around half of the country’s Gross Domestic Product (GDP). Consumption patterns in these rural areas are gradually changing to as equal as the consumption patterns of urban areas.

Some of India’s largest consumer companies serve one-third of their consumers from rural India. Owing to a favorable changing consumption trend as well as the potential size of the market, rural India provides a large and attractive investment opportunity for

private companies. India’s per capita GDP in rural areas has grown at a Compound Annual Growth Rate (CAGR) of 6.2 percent since 2000.

Market Structure

The structure of the rural market can be defined by interlinking the Product and Consumer flow processes as mentioned in the illustration below. We have taken the buyer and seller to define different systems in rural markets.

Quadrant I: It explains a situation in which both the buyer and seller are from rural area. This is a constant economy system in which all rural produce is consumed within the system.

Quadrant II: It explains that the majority of people concentrate on Quadrant II situation, which unsustainably is tried by marketers to sell urban products in rural markets.

Quadrant III: It is necessary to develop an urban-rural marketing linkage, so that both urban and rural products can freely move across both the markets. Marketing should work as a process of motivation to deliver and improve standards of living of rural people and consumption rural products by urban people.

Quadrant IV: It explains a situation in which both the buyer and seller are from urban area. This is a constant economy system in which all urban produce is consumed within the system.

Market Segmentation

Rural India accounts for a total of 55% of the manufacturing GDP. They were host to nearly 75% of the new factories built in the last decade. Rural consumption per person has increased by 19% yearly between 2009 and 2014.

Rural marketing strategies include the following:

  • Segmentation: This includes heterogeneity in rural market, prerequisites for effective market segmentation, degrees of segmentation, basis of segmentation and approaches to rural market segmentation.
  • Targeting: This shows the evaluation and selection of segments, coverage of market segments.
  • Positioning: This identifies, selects, develops and communicates the positioning concept in market.

The following are the degrees of segmentation:

  • Mass Marketing: In this, all the consumers are being treated the same. It allows the company to target the maximum number of consumers. For example, HUL has offered only one detergent that is “Surf” to all consumers but Norma entered the market and grabbed a sizeable market share because of which HUL woke up and introduced wheel.
  • Segment Marketing: Marketers determines the potential of the market and its consumers segments which are substantial enough to target and respond by offering low-priced products and products that are designed appropriately.

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