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Rural Market Segmentation

Market segmentation is a method for achieving maximum market response from limited marketing resources by recognizing differences in the response characteristics of various parts of the market. It is one of the most interesting and an effective tool in the hands of marketer. Marketer segmentation is the sub-division of a market into homogeneous subset of customers where any subset may conceivably be selected as a target market to be reached with a distinct market mix.

Rural market segmentation is the process of dividing a potential rural market into distinct sub markets of consumers with common needs and characteristics. Rural market segmentation is the starting step in applying the rural marketing strategy. Once, segmentation takes place, the marketer targets the identified customer groups with proper marketing mix, so as to position the product/brand of company as perceived by the target segments.

According to Philip Kotler, “Market segmentation is the sub dividing of a market into homogeneous subsets of consumers, where any subset may conceivably be selected as a market target to be reached with a distinct marketing mix.”

Important Characteristics

It is difficult to effectively catch everybody in the market place, so business will aim their producers and services at specific parts of the market. After selecting a segment of the market, marketer should evaluates their choice carefully and ensure that they have made the right decision. If a business begins with promoting products of market segments without a full evaluation, it is risky, wasting time and money. A successful market segment will usually meet the various criteria.

To be useful, segmentation of market must exhibit some characteristics that are as follows:

  1. Measurable:

The market segment must be measureable in order to calculate the market potential. The segment variables must be distinct, clear and measurable. The size, profit and other relevant characteristics of the segment must be measurable and obtainable in terms of data. If the information is not obtainable, no segmentation can be carried out.

Companies are unable to reach rural markets effectively due to lack of comprehensive data related to markets and consumers. In the absence of information related to size, purchasing power and profiles of rural consumers, these were considered similar to urban cities. Today rural markets are being studied by various companies to obtain valuable data that can be used for segmentation.

  1. Accessible:

The segment should be accessible through existing network of people at a cost that is affordable. Reach is important to serve the segment. Now, while segmenting rural markets, it is important to ensure that the segmented market is conveniently reachable to the marketer to deliver products.

Till recently, marketers preferred urban markets to rural one because of the inaccessibility of the rural markets. But due to improvement in infrastructure and in connectivity of villages and other new channels of distribution, rural markets are becoming increasingly accessible. Rural consumers can be reached through vans and through village retailers visiting nearby town distributors and retail outlets.

Segments must be accessible in two senses. Firstly, marketers must be able to make them aware of products and services. Secondly, they must get these products to them through distribution system at a reasonable price. For example targeting rural population could be through television, radio and by opening outlets locally.

  1. Differentiable:

The market segments have to be diverse that they show different reactions to different marketing maps, if not then there would have been no use to break them up in segments. Segments attract the consideration of marketers only when they have distinguishing features. Rural consumers are identified as different segments as their responses may be different from urban consumers at least for some products.

For Example: While buying a motorbike, rural consumers give more importance to sturdiness, mileage and carrying capacity of bike, whereas urban consumers look for style, power and aesthetics.

  1. Substantial:

The segment should be large enough to be profitable. The segment should comprise either a large number of light users or a small number of heavy users so that marketing becomes beneficial to the company. It should consist of people, who are similar in perceptions, learning, attitude, preferences and actions. As such, covering them will be easy.

Rural areas are not homogenous. Region-wise differences are found in language, mind set and behaviour. So, it is difficult to design separate promotional programmes as the size of consumers is not large enough to make the effort viable.

  1. Actionable or Feasible:

It has to be possible to approach each segment with a particular marketing programme and to draw advantages from that. The segments that a company wishes to peruse must be actionable in the sense that there should be sufficient finance, personnel and capability to take them. Hence, depending upon the reach of the company, the segments should be selected.

  1. General Considerations:

Apart from the above requisites, the segment must have growth potential, be profitable, carries no unusual risk and has competitors, who do not fight directly with the product or brand. The firm must possess enough resources for market segmentation. The segment criteria should follow the instructions and guidelines issued by the government regarding distribution of a particular product.

The segment should be relatively stable over a period of time. The segment that emerge rapidly and disappear just as quickly will not be a good segment. So segment must be suitable, practicable and attractive to the firm.

Major Segmentation

  1. Geographic Location:

Geographic Location is the usual and popular basis for market segmentation. The market could be divided into urban and rural markets. While urban population is highly concentrated, rural population is scattered over a wide geographical area. Since 1980s, many companies are targeting rural consumers due to growing purchasing power. About 50 per cent of the rural population lives in about one lakh villages having a population of over 2,000 each and companies like HUL have been able to cover this segment by establishing retail network in these villages.

We have four regions, i.e., South, West, East and North. It has been observed that consumers in South, by and large, are conscious about cleanliness, health, education and culture. Due to hot weather conditions, there is increased use of talcum powder in South and Ponds has a high market share in this region. The demand for woollen dress materials is high in North during winter season compared to other regions in the country.

  1. Demographic Segmentation:

In rural areas, the husband provides economic security to the members of the family and he makes purchase decisions. Nowadays, school-going children have high awareness about new products and they are influencing buying decisions in the family. Therefore, the marketers are targeting the younger lot for products like biscuits, chocolates, shampoos and soft drinks.

  1. Socio-Economic Segmentation:

Major income still comes from agriculture though the share of non-farm income has gone up in recent years. Based on occupation, there are four important groups, who form the target population for consumer durables like colour TV, refrigerator and two-wheelers.

  • Farmers:

(a) The landlords which include Zamindars/Mitadars/Thakurs, traders and local moneylenders. They possess large acres of land and have spacious houses in the village. They have high disposable income. Their lifestyle can be compared to that of upper income group of urban areas. They have relatives staying in cities and in many cases abroad also. Their children go to urban schools.

(b) Affluent farmers who live in villages and follow modern methods of cultivation. They occupy a high position in the society that is above the normal population with respect to social and economic status in the village. They are hardworking and aspire for better living conditions. They have high disposable income and try to maintain their status in the village. The owner farmers who constitute 34 per cent of households, own about 30 per cent of durables.

The small and marginal farmers occupy low rank in the rural social hierarchy and their needs are basic, i.e., food, clothing and shelter.

  • Traders:

The traders constitute about 8 per cent of the rural households and own between 15-20 per cent of the durables.

  • Service Class:

The service class who includes teachers, clerks, mechanics, electricians in the villages and office and factory workers, who work outside the village, constitute about 13 per cent of rural households and own 30-40 per cent of durables.

Rural income is highly seasonal as it is dependent on agricultural activities. Therefore, most of the purchases of durables, jewellery and clothes takes place during post-harvest season and during festivals like Onam, Pongal, Diwali, Idd, Gudipadwa and Baisakhi.

Family life cycle exercises definite influence on consumer behaviour with regard to purchase of consumer goods.

Example: In rural areas, the users of shampoo are the young daughter or the daughter- in-law and the elderly women continue to use natural products like shikakai powder.

  1. Rural Youth:

The rural youth in the age group of 20-25 years, play a major role in the purchase decisions of the family. They view television and cinema and enjoy seeing cricket matches and action movies. They are the target group for products like toothpaste, shampoo, soft drink, deodorant, television model, audio system, mobile phone, etc. They are moving from bicycles to motor cycles. Even branded clothes and shoes have entered rural homes, though the sales volumes are low at present. Marketing researchers can meet them at telephone booth, playground, retailer shop and village square. However, all decisions regarding agriculture and inputs are taken by the head of the family in most of the cases.

  1. Psychographic Segmentation:

Personality traits such as dominance, aggressiveness, achievement orientation, motivation, etc., may influence buyer behaviour. Lifestyle can be measured by the products the person uses and the person’s activities, interests, opinions and values.

In a rural society, there are grades of people based on income, occupation and wealth. The educated youth, innovative farmers, village president are the important opinion leaders and marketers are targeting this group for promoting products and services.

  1. Product-Oriented Approach (Customer Response Behaviour):

The customer response or buyer behaviour may be considered in relation to product benefits, product usage, store patronage and brand loyalty. We want to know why consumer buys a certain product. Example- Bullet Motor Cycle is considered as a sturdy vehicle (product benefits) and creates a ‘Macho Image’.

  1. Use Pattern:

A buyer may be classified as heavy, medium, light user and non-user. The use of consumer products such as shampoo, hair oil, toothpaste, talcum powder is low in rural areas due to poor affordability and many marketers have introduced small unit packs of these products to meet the requirements of lower and middle class rural consumers. In agriculture, cotton farmers are heavy users of pesticides and the marketers have come out with large packs (20/25 liters) of the products to meet their special requirements.

  1. Benefits Pattern:

Consumers buy products primarily to secure expected benefits. Rural buyers look for value for money while purchasing products. They look for quality but cannot afford high prices. They are concerned with utility of the products rather than mere good looks and frills. The rural consumers particularly the lower/middle income group are budget- conscious unlike, urban consumers who are comparatively more status-seeking.

Examples:

  1. Bullet motor cycle is popular in villages due to its ruggedness.
  2. HMT watches are seen on many a wrists for its utility value.
  3. Rural consumers prefer strong tea (Kadak Chai).
  4. Titan has introduced Sonata brand watches; priced between Rs.350 and Rs.800 to meet the requirements of price-sensitive rural and semi-urban consumers.
  5. Brand Loyalty:

A rural consumer is price sensitive due to low purchasing power and lack of awareness about the quality of products available in the market. However, they will continue to patronise a brand once they are satisfied with the product.

Example: A few of the popular brands are Lifebuoy, Parle, Ponds, Nirma, Tata Salt, Colgate, Philips, etc.

  1. Store Patronage:

It has been observed that rural consumer buys from the same shop. The retailer extends credit to the consumers and many have running credit account with the same retailer. He influences buying decisions of the consumers. Therefore, the marketers have to identify key retailers in rural markets and ensure product availability for success of business.

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