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Electronic copy available at: https://ssrn.com/abstract=2912820
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
EXPLORING INDIAN RURAL MARKET –
PROSPECTS AND PROBLEMS
Abstract
In the recent years rural market have
acquired significance and attract the
attention of marketers as 68.84% population
of India reside in 6, 38,000 villages and
overall growth of economy has resulted into
substantial increase in the purchasing power
of the rural communities. Due to green
revolution, the rural areas are consuming a
large quantity of industrial and
manufactured products. In this way rural
market offers opportunities in the form of
large untapped market, increase in
disposable income, increase in literacy level
and large scope for penetration. To take the
advantage of these opportunities, a special
marketing strategy ‘Rural Marketing’ has
emerged. Though there is huge potential
and substantial growth opportunities in the
rural markets, yet there are some challenges
too, which caused hurdles in tapping rural
markets. This study is a step forward in
exploring various strategies to be adopted in
the rural market along with the current
scenario of rural marketing, highlighting
key challenges related to rural marketing.
Key Words – Indian Rural Market,
Strategies, Prospects, Problems.
Dr. Ashok Kumar Panigrahi
Associate Professor,
NMIMS University,
Shirpur.
E-Mail ID –
panigrahi.ak@gmail.com
M – 8888810975
Electronic copy available at: https://ssrn.com/abstract=2912820
Electronic copy available at: https://ssrn.com/abstract=2912820
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
INTRODUCTION
The Indian rural market has been growing steadily over the past few years and is now even
bigger than the urban market. More than 800 million people live in villages of India. ‘Go rural’
is the marketer’s new slogan. Indian marketers as well as multinationals, such as Colgate-
Palmolive, Godrej and Hindustan Lever have focused on rural markets. Thus, looking at the
opportunities, which rural markets offer to the marketers, it can be said that the future is very
promising for those who can understand the dynamics of rural markets and exploit them to
their best advantage.
Since ancient times, Indian villages had the concept of village markets popularly known as the
village haats. The haats are basically a gathering of the local buyers and sellers. The barter
system was quite prevalent, which still continues in a number of places even today. Haats are
basically a weekly event, and are central to the village economy.
The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two-thirds of countries consumers live in rural areas and almost half of the national
income is generated here. It is only natural that rural markets form an important part of the total
market of India. Our nation is classified in approximately 630000 villages, which can be sorted
in different parameters such as literacy levels, income levels, penetration, distances etc.
The main reason why the companies are focusing on rural market and developing
effective strategies is to tap the market potential, which can be identified as follows:
• Large and scattered population:
Nearly 70 per cent of India’s population live in rural areas. The rate of increase in rural
population is also greater than that of urban population. The rural population is scattered in
over 6 lakhs villages. The rural population is highly scattered, but holds a big promise for the
marketers.
• Higher purchasing capacity:
Purchasing power of the rural people is on rise. Marketers have realized the potential of rural
markets, and thus are expanding their operations in rural India. In recent years, rural markets
have acquired significance in countries like China and India, as the overall growth of the
economy has resulted into substantial increase in purchasing power of rural communities.
• Market growth:
The rural market is growing steadily over the years. Demand for traditional products such as
bicycles, mopeds and agricultural inputs; branded products such as toothpaste, tea, soaps and
other FMCGs; and consumer durables such as refrigerators, TV and washing machines has also
grown over the years.
Electronic copy available at: https://ssrn.com/abstract=2912820
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
• Development of infrastructure:
There is development of infrastructure facilities such as construction of roads and
transportation, communication network, rural electrification and public service projects in rural
India, which has increased the scope of rural marketing.
• Low standard of living:
The standard of living of rural areas is low and rural consumers have diverse socio-economic
backwardness. This is different in different parts of the country. A consumer in a village area
has a low standard of living because of low literacy, low per capita income, social
backwardness and low savings.
• Traditional outlook:
The rural consumer values old customs and traditions. They do not prefer changes. Gradually,
the rural population is changing its demand pattern, and there is demand for branded products
in villages.
• Marketing mix:
The urban products cannot be dumped on rural population; separate sets of products are
designed for rural consumers to suit the rural demands. The marketing mix elements are to be
adjusted according to the requirements of the rural consumers.
RURAL STRATEGY
Some companies have even re-engineered products, pricing and packaging to customise
features and value relevant for these markets. For instance, Godrej has introduced chotukool
refrigerator; Vortex has launched low cost ATMs and Nokia has developed Life tools - a mobile
application that provides access to agricultural, educational and entertainment content. These
innovative features and products have facilitated a better lifestyle for the people residing in
hinterlands. Some players have developed new communication and distribution channels
within the rural agents (HUL's Project Shakti; Tata Tea's 'Gaon Chalo') and some have created
completely new products. ―Rural India is where the opportunity is that is where the money
will come from to drive current business and breed new entrepreneurs‖. The research facts
support this claim- eight of the world‘s population resides in India‘s rural markets. Mere one
percent increase in India‘s rural income translates to a large buying power of Rs 10,000 crore.
Nearly two-thirds of all middle-income households in the country are in rural India. And close
to half of India's buying potential lies in its villages. This is indeed a huge untapped market.
What had hitherto prevented its conquest was the innate Indian problem due to lack of
infrastructure to access this market. Rural India being an untapped market initially the
successful strategy rested on the implementation of the 3 A's: Availability, Affordability and
Acceptability.
But during the last decade companies were forced to re-look at the rural markets owing to
number of reasons. The important ones were the saturation of urban markets and immense
Electronic copy available at: https://ssrn.com/abstract=2912820
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
market competition leading to flat or declining sales. The easiest way for growth was by
reaching out to 150 million strong rural markets and tapping the latent demand there.
Micr6finance and sachet marketing provided the means to do so. Sachet marketing in
particular, as rural populace could now buy products in smaller and affordable packs. Marketers
suddenly found that they had made great strides, as they unleashed a plethora of products and
services with innovative financing schemes to back them up. Suddenly the rural markets no
longer appeared unviable. Where until some years ago, the rural market was being given a step-
motherly treatment by many companies and advertising to rural consumers was usually a hit
and miss affair, the sudden realisation of the potential of rural India changed all that. It was
realised that the communications that is rooted in urban sensitivities didn't touch the hearts and
minds of the rural consumer. Organisations started looking at the right product and
communications mix that would have a pan-Indian rural appeal. Coca Cola, with their ad
campaign succeeded in providing just that. Pioneers like CavinKare came up with innovative
ideas to target the rural markets. CavinKare came up with its brand Chic shampoo in small
sachets. Bigger players like HLL took the cue and followed up with their own versions. HLL
also launched Project Shakti, with a greater emphasis on volumes from the rural markets.
Nestle came with maggi ka chota pack, even Cadbury came with one rupee chocolate and very
popular campaign like pappu pass ho gaga & cow campaign. On the other hand ITC has totally
brought new perspective to rural India's branding history by launching e-chaupal first at Sagar
district of Madhya Pradesh. This was a few years ago, forwarding to the present things are
changing fast now. Thanks to the increasing literacy level and media explosion, people in the
rural areas are becoming conscious about their lifestyles and about their rights to live a better
life. Brand consciousness is on the rise. This, clubbed with increasing disposable income of
rural households, has made the rural consumer more demanding and choosier in his purchase
behavior than ever before. In the rural families, studies indicate a slow but determined shift in
the use of categories. There is a remarkable improvement in the form of products used. For
instance, households are upgrading from indigenous teeth-cleaning ingredients to tooth powder
and tooth-pastes, from traditional mosquito repellent to coils and mats. There is also a visible
shift from local and unbranded products to national brands; from low-priced brands to premium
brands. And now, the dream is blazing brighter than ever as the Indian rural bazaar is displaying
a market trend towards consumerism, outpacing the urban market in its ever-increasing demand
for durable products like wrist-watches, fans, televisions, video cassette recorders as also non-
durables like nail polish, lipstick, ice-cream, shampoo and mosquito repellents. All this has
created the demand on the organizations that to continue to prosper and develop in these
untapped markets need to invest their energies in their only future proof patent: Their Brand.
As per Alvin Toffler's revolutionary book third wave the need gap of rural market can be put
as following:
The first wave was Production
The second wave was availability or distribution
The third wave will be Branding.
Electronic copy available at: https://ssrn.com/abstract=2912820
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
ITC, Godrej Agrovet, DCM Shriram and other companies expanding in rural areas may eclipse
the growth of their urban counterparts, including Reliance Fresh and the Future Group-owned
Food Bazaar chain, helped by higher farm income that is spurring a boom in sales of fast
moving consumer goods (FMCG), consumer durables and apparel.
The FMCG sector in rural areas is expected to grow by as much as 40 per cent compared with
the growth of 25 per cent in urban areas ―The growth in rural income has been better than
urban income since the minimum support price for crops like wheat and paddy has been
substantially hiked. Even prices of pulses, rice, oilseeds and milk have increased dramatically
over the last one year. The disposable income with the farmer is still higher now. DCM Shriram
Consolidated-promoted Hariyali Kisaan Bazaar runs 180 stores and is present in Uttar Pradesh,
Punjab, Haryana, Rajasthan and Maharashtra. These stores saw a 30 to 40 per cent growth in
FMCG sales and a three-figure growth in grocery sales during the April-June quarter. ―The
FMCG growth at 25 per cent in the April-June quarter (over the corresponding period last year)
is higher than earlier years. Better prices for farm produce, the increased government spending
and remittances from workers in urban areas have contributed to higher income. ITC has 23
stores in Uttar Pradesh, Madhya Pradesh and Maharashtra. In fact the sales of agricultural
inputs have done even better. With higher prices for the produce providing the incentive, on
the one hand, and shortage of labour spurring the use of inputs, on the other hand, there is an
increase in sales of the farm input. Rise in food prices is not the only reason. Large retail players
like Reliance, Spencer‘s and Subhiksha procure farm commodities in bulk directly from the
fields and this has cut out the middle man‘s commission, which farmers used to pay. Moreover,
farm earnings do not attract income tax. The future is set to see a further improvement in the
disposable income from agriculture due to the Rs 71,000-crore farm-loan waiver and increased
government spending on raising the farm output through schemes. ―When disposable income
goes up, a part of it is spent on apparel, FMCG and education. It seems that we are going
through this phase. At the same time, the farm-loan waiver and debt-relief scheme, which
became public about four months ago, has also been factored into by farmers.
THE 4A APPROACH
The rural market may be alluring but it is not without its problems: Low per capita disposable
incomes that is half the urban disposable income; large number of daily wage earners, acute
dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and
festivals and special occasions; poor roads; power problems; and inaccessibility to
conventional advertising media. However, the rural consumer is not unlike his urban
counterpart in many ways. The more daring MNCs are meeting the consequent challenges of
AVAILABILITY, AFFORDABILITY, ACCEPTABILITY, and AWARENESS. (The so-
called 4 A‘s).
AVAILABILITY
The first challenge is to ensure availability of the product or service. India's 627,000 villages
are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is
not easy. Any serious marketer must strive to reach at least 13,113 villages with a population
Electronic copy available at: https://ssrn.com/abstract=2912820
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
of more than 5,000. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of
Unilever, has built a strong distribution system, which helps its brands reach the interiors of
the rural market. To service remote village, stockiest use auto-rickshaws, bullock-carts and
even boats in the backwaters of Kerela. Coca-Cola, which considers rural India as a future
growth driver, has evolved a hub and spoke distribution model to reach the villages. LG
Electronics defines all cities and towns other than the seven metros cities as rural and semi-
urban market. Study on buying behaviour of rural consumer indicates that the rural retailers
influences 35% of purchase occasions. Therefore sheer product availability can affect decision
of brand choice, volumes and market share. Some of the FMCG giants like HLL took out
project streamline to significantly enhance the control on the rural supply chain through a
network of rural sub-stockiest, who are based in the villages only. Apart from this to acquire
further edge in distribution HLL started Project ―SHAKTHI” in partnership with Self Help
groups of rural women.
AFFORDABILITY
The second challenge is to ensure affordability of the product or service. With low disposable
incomes, products need to be affordable to the rural consumer, most of whom are on daily
wages. Some companies have addressed the affordability problem by introducing small unit
packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm
packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh - the
so-called `BIMARU' States. Hindustan Lever, among the first MNCs to realise the potential of
India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2
for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has addressed the
affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The
initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. Coca-
Cola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-
mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and multi serve sachet
of 200 gm priced at Rs 15.
ACCEPTABILITY
The third challenge is to gain acceptability for the product or service. Therefore, there is a need
to offer products that suit the rural market. One company, which has reaped rich dividends by
doing so, is LG Electronics. In 1998, it developed a customized TV for the rural market and
christened it Sampoorna. Because of the lack of electricity and refrigerators in the rural areas,
Coca-Cola provides low-cost ice-boxes - a tin box for new outlets and thermocol box for
seasonal outlets. The insurance companies that have tailor-made products for the rural market
have performed well. HDFC Standard LIFE topped private insurers by selling policies worth
Rs 3.5 crore in total premia. The company tied up with non-governmental organizations and
offered reasonably priced policies in the nature of group insurance covers.
AWARENESS
Mass media is able to reach only to 57% of the rural population. Creating awareness then,
means utilizing targeted, unconventional media including ambient media .For generating
Electronic copy available at: https://ssrn.com/abstract=2912820
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
awareness, events like fairs and festivals, Haats, etc., are used as occasions for brand
communication. Cinema vans, shop-fronts, walls and wells are other media vehicles that have
been utilized to increase brand and pack visibility. Innovative media used by personal wash
like Lux and Lifebuoy and fabric wash items like Rin and Wheel. Idea was to advertise not
only at the point of purchase but also at the time of consumption. With large parts of rural India
inaccessible to conventional advertising media - only 41 per cent rural households have access
to TV - building awareness is another challenge. However, the rural consumer expressions
differ from his urban counterpart. Outing for the former is confined to local fairs and festivals
and TV viewing is confined to the state-owned channels. Consumption of branded products is
treated as a special treat or indulgence. Hindustan Lever relies heavily on its own company-
organised media. These are promotional events organized by stockists. Godrej Consumer
Products, which is trying to push its soap brands into the interior areas, uses radio to reach the
local people in their language. Coca-Cola uses a combination of TV, cinema and radio to reach
53.6 per cent of rural households. Since price is a key issue in the rural areas, Coca-Cola
advertising stressed its `magical' price point of Rs 5 per bottle in all media. LG Electronics uses
vans and road shows to reach rural customers. The company uses local language advertising.
The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether
they can do so without hurting the company's profit margins. In case of nestle, company's
product portfolio is essentially designed for urban consumers which cautions companies from
plunging headlong into the rural market as capturing rural consumers can be expensive.
Rural Marketing in India: It’s Potential, Importance, Problems and Distribution
Strategy!
Rural marketing involves addressing over 700 million potential consumers and over 40 per
cent of the Indian middle income. No wonder, the rural markets have been a vital source of
growth for most companies. For a number of PMCG companies is the country, more than half
their annual sales come from the rural market.
(a) Rural Marketing Potential in India:
While we all accept that the heart or India lives in its villages and the Indian rural market with
its vast size and demand base offers great opportunities to marketers, we tend to conclude that
the purse does not stay with them. Rural marketing involves addressing over 700 million
potential consumers and over 40 per cent of the Indian middle income. No wonder, the rural
markets have been a vital source of growth for most companies. For a number of PMCG
companies is the country, more than half their annual sales come from the rural market.
Among various media of communication, television and radio have played prominent rules in
the rural India to-day. In the South, the penetration of satellite television is very high. Due to
globalisation, economic liberalisation, IT revolution, female power, and improving
infrastructure, middle and rural India today has more disposable income than urban India.
Rural marketing is getting new heights in addition to rural advertising. Rural marketing gives
challenge to ensure availability of product or service in India’s 6, 27000 villages spread over
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
3.2 million square kilometers. Marketers have to locate over 700 million rural Indian and
finding them in not easy.
The size of the rural market is one that companies cannot afford to ignore, particular, as the
number of simple lining in non-metro areas increased by 10 percent over the past decade. Thus,
looking at the challenges and opportunities, which rural markets offer to the marketers, it can
be said that the future is very promising for these who can understand the dynamics of rural
markets and export them to their best advantage. It is often said that markets are made not
found. This is especially true for the rural market like India. Rural market is a market for a truly
creative marketer. Civilization always begins with the development of villages, therefore, if
needs high concentration — Mahatma Gandhi.
(b) Nature and Importance:
In the 21st century, the rural markets have acquired significance. The green revolution and the
white revolution combined with the overall growth of Indian economy have resulted into
substantial increase in the purchasing power of the rural communities. Rural marketing denotes
blow of goods and services from rural producers to urban consumers at possible time with
reasonable prices, and agricultural inputs and consumer goods from urban to rural.
It is of paramount importance in the Indian marketing environment as rural and urban markets
in India are so diverse in nature that urban marketing programmes just cannot be successfully
extended to the rural market differs from that of the urban Indian. Further the values aspiration
and needs of the rural people hasty differ from that of the urban population.
Buying decisions are highly influenced by social customer’s tradition and beliefs in the rural
communities. As regards the purchasing power, the urban markets are segmented according to
income levels, but in rural areas, the family incomes are grossly underestimated.
Farmers and rural artisans are paid in cash as well in kind, and their misrepresent their
purchasing power. For their reason, a marketer must therefore, make an attempt to understand
the rural consumer better before meaning any marketing plans.
Rural markets in India have untapped potential. There are several difficulties confronting the
effort to fully explore the rural markets. The concept of rural markets in India is still in evolving
shape, and the sector pages a variety of challenges. Distribution costs and non-availability of
retail output are major problems faced by marketers.
Many successful brands have shown high note of failure in the rural markets because the
marketers try to extend marketing plans that they use in urban areas. The unique consumption
pattern, tastes, and need of the rural consumers should be analysed at the product planning
stage so that they match the needs of the rural people.
(c) Main Problems in Rural Marketing are as Follows:
1. Under developed people and underdeveloped markets:
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
The impact of agricultural technology is not felt uniformly throughout the country. Some
districts in Punjab, Haryana and the Western U.P. where the rural consumers are somewhat
comparable to their urban counter part; but there are large areas and grown of people who have
repaired beyond the technological breakthrough. In addition, the farmers with small
agricultural land holding are also unable to take advantage of the new technology.
2. Lack of power physical communication facilities:
Nearly 50 percent of the villages in India do not have all weather roads, physical
communication to the villages is highly expensive. Especially during the monsoon 4 months
these villages become complete inaccessible.
3. Inadequate media coverage for rural-communication:
A large number of rural families own radio and TV sets, there are also community radio and
TV sets. These have been used to diffuse agricultural technology to rural areas. However, the
coverage relating to marketing is inadequate.
4. Many languages and dialects:
The number of languages and dialects vary from state to state and region to region. This type
of distribution of population warrants appropriate strategies decide the extent of coverage of
rural market.
5. Other problems of rural marketing are natural Calamities:
Of draught or examine rain, epidemics, primitive methods of cultivation, lack of printer storage
facilities, transportation problem and inadequate market intelligence, including long chain of
intermediaries between cultivator and farmer and wholesaler and retailers.
There are also problems of extending marketing efforts to small villages with 200-500
population. Vast cultural diversity, vastly varying rural demographics, poor infrastructure, low
income levels and low levels of literacy often tend to lower the presence of large companies in
the rural markets.
(d) Rural Marketing Strategy:
Rural marketing strategy is based on their A’s – Availability Affordability and Acceptability.
The first ‘A’-Availability emphasizes on the availability of the product for the customers, i.e.,
this gives importance on effective distribution through efficient channels of distribution.
The second ‘A’- Affordability which focuses on product pricing, i.e, this gives importance for
smaller packages/pouches easily affordable by families in the rural areas, The third ‘A’ –
Acceptability focuses on convincing the customers to buy the product, i.e., extending suitable
promotional efforts to influence the customers to buy the product. Marketers need to
understand the psycho of the rural consumers and then act accordingly.
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Rural marketing involves more intensive personal selling efforts compared to urban marketing.
Firms should refrain from pushing goods designed for urban markets to the rural areas. To
effectively tap the rural market a brand must associate it with the same things the rural
consumers do.
This can be done by utilizing the various rural folk media to reach them in their own language
and in large number so that the brand can be associated with the myriad rituals, celebration,
festivals, melas, fairs and weekly hats.
(e) Rural Distribution Strategy:
One of the ways would be using company delivery mass, which can serve two purposes – it
can take the products to the customers in every hook and corner of the market and it also enables
the firm to establish direct contact with them and thereby facilitate sales promotion.
However, only the large manufactures can adopt this channel. The companies with relatively
fewer resources can go in for the syndicated distribution where a tie-up between non-
competitive marketers can be established to facilitate distribution.
Back-haul method for the distribution vehicles:
Organising a suitable back-hual method for distribution vehicles may prove to be an economic
to transport the “urban goods” like soap, detergent, oil, cream, shampoo, tooth paste, and other
daily necessary items for the rural consumers and in the return journey, the energy verticals
will transport the fruit and vegetables etc. from rural areas to the nearest towns and cities for
distribution among the urban consumers.
But this needs a well co-ordinated “VMS” distribution strategy in which the manufacturer,
distributor/relation and the customers jointly make a strong distribution chain. Annual “melas”
and “fairs” organized are quite popular and provide a very good platform for distribution
because profit visits them to make several purchases. According to the Indian Market Research
(IMRB) Burean, around 8000 such nulas and fairs are held in the rural India every year.
Rural markets have the practice of faxing specific days in a week as weekly market days, i.e.,
“Haats” when exchange of goods and services are carried out. This is another potential low
cost distribution channel available for the marketers.
Also, every region consisting of several villages is generally served by one satellite town,
formed as “Mandia” or Agri-markets where people prefer to go and buy from their
commodities. The marketers using their feeder fown will be able to cover a large section of
rural population.
The other distribution strategies for the rural population are as under:
i. The general insurance companies may promote their policies of health insurance, crop
insurance and vehicle insurance through the existing co-operatives.
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ii. Marketers may arrange more number of wave-houses for storage and re-packaging into
smaller pouches for which employing local villages will work profitable and popular.
iii. All communication in the rural areas must be in the regional language and dialects.
iv. Markets need to develop innovative packaging technology which would be economic,
protective and improve shelf-life of goods.
v. In addition to focusing on targeted promotions and advertising, there is an urgent need to
work on economical packaging, dual pricing and special size of PMCQ and household
products.
vi. Marketers need to place emphasis on retailers directly rather than depending on the
wholesalers for distribution in the rural market as this has not proved to be very effective
marketing channel.
vii. Marketers targeting the rural market should be well aware about the seasonality of the
business. Because the trade is seasonal, employment and disposable income can fluctuate
arrange the villages during the year. This means that business should view market research data
that relies on yearly aggregate statistics with caution.
viii. Marketers must trade off the distribution cost with incremental market penetration.
Bharti Airtel Rural Strategy
Challenge/Opportunity
Bharti Airtel was faced with the challenge of profitably serving the rural areas of India. It is an
extremely daunting task due to a variety of factors: rural users' low incomes, a widely dispersed
population, and a less than ideal public infrastructure (i.e., roads, electricity, etc.). Specifically,
Bharti Airtel had to address the following conditions:
• The incomes of Indian rural residents are significantly lower than urban residents. The
average revenue per user (ARPU) for rural residents was typically less than US$2 per month.
• Besides deploying a scalable network, Bharti Airtel also needed to establish a cost-effective
marketing, sales, and distribution channel to provide service promotion and customer support.
Counter to these challenges were the significant opportunity that the Indian rural market
represented and Bharti Airtel's unique ability to address it.
• The future growth of the Indian mobile market is expected to be driven by rural customers,
which account for about 70 percent of the country's total population (1.1 billion people) with a
teledensity of only 18.5 percent as of September 2009. Indian urban mobile penetration is
already over 100 percent.
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• Rural dwellers place a high value on communications. Contacting urban/overseas relatives
and friends often requires a long and sometimes treacherous trip to the nearest town to reach a
payphone.
• Various studies (e.g., fishermen in the Indian state of Kerala and grain producers in Niger)
have shown that increased mobile service penetration in rural areas could have tremendous
socio-economic benefits for the rural population.
• With its strong presence in the relatively untapped rural market (over 27 percent market share
as of September 2009), Bharti Airtel is well-placed to continue growth with its focus on under-
penetrated Indian regions with new revenue streams such 3G-enabled data services and pay-
TV.
Alliances/Partnerships
To extend its reach in India's rural markets, Bharti Airtel is focusing on innovative initiatives,
including efficient infrastructure deployments, expanding its distribution network via
partnerships, and customized content and tariffs.
• Bharti Airtel has launched microfinancing agreements in collaboration with Nokia and SKS
Micro-finance. Under these partnerships, Bharti provides subsidized tariffs and subscriber
identity module (SIM) cards to rural users, Nokia provides subsidized handsets, and SKS offers
microfinancing.
• To expand coverage into rural regions, Bharti Airtel is sharing passive infrastructure services
with Vodafone (42 percent ownership) and Idea (16 percent ownership) through its joint
venture, Indus Towers. Sharing the infrastructure cost and usage between multiple operators
has helped Bharti Airtel to reduce its operating and capital expenses.
• Bharti Airtel also formed a joint venture with the Indian Farmers Fertilizer Cooperative
Limited (IFFCO). Its joint venture, IFFCO Kisan Sanchar, uses IFFCO's wide rural presence
(present in 80 percent of Indian villages) and appeal among the rural agricultural community
to market and distribute Bharti's products.
• IFFCO Kisan Sanchar provides subsidized handsets and connections at competitive rates in
rural areas. It also helps Bharti Airtel to identify and acquire suitable locations for deploying
its cell sites. In addition, it offers tailored services including voice-based updates on crop prices,
farming techniques, rural health initiatives, and "help line" services.
Strategy
Bharti Airtel first studies the commercial viability of a rural community (and the surrounding
villages) based on parameters such as source of livelihood, average income, and involvement
in frequent commercial transactions or travels. The company has developed a prioritized
deployment strategy based on the specified criteria. Qualifying villages are first to receive a
base station, which also caters to nearby communities. To help ensure efficient usage and
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RURAL INDIA : STRATEGISING BUSINESS ISBN – 978-1542495318
profitability for each of these base stations, Bharti Airtel tracks the revenue generated per base
station (instead of ARPU, which is considered less relevant in a rural context).
The following best practices have also been established:
• Bharti Airtel has adopted the strategy of direct communications to market its value
proposition to rural customers. To make its services accessible, the company provides all of its
marketing content in local languages. Vans are used to cover rural areas with staff who educate
locals about mobile services and usage.
• The company has developed a shared phone service called Public Call Offices (PCOs) in rural
regions to increase awareness about its brand and services.
• Bharti Airtel Service Centers have been set up in villages to address customer queries and
complaints as well as act as sales and distribution points. These centers employ local people
and offer sales and customer services using local dialects.
• Bharti Airtel has already established over 18,000 service centers in rural India, covering over
400 languages and local dialects. The company plans to expand this network.
Success Factors/Metrics/Monetization
Bharti Airtel does not provide separate rural key performance indicators, but the following
results have been publicly announced:
• As of April 2010, Bharti Airtel's network covered 440,000 villages in India, which, together
with its urban services, accounted for coverage of approximately 84 percent of India's total
population.
• As of March 31, 2010, Bharti Airtel had added 9 million new customers to reach a total of
128 million connections. Ovum estimates that rural users accounted for 60 percent of the
company's net subscriber adds in that quarter.
• Despite Bharti Airetel's overall ARPU of just under $5, its mobile division's earnings before
interest, taxes, depreciation, and amortization (EBITDA) margin was approximately 30
percent, and its earnings before interest and taxes (EBIT) margin was approximately 19
percent, which indicate a healthy return on overall (including significant rural) investments.
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CONCLUSION
Thus looking at the challenges and the opportunities which rural markets offer to the marketers
it can be said that the future is very promising for those who can understand the dynamics of
rural markets and exploit them to their best advantage. A radical change in attitudes of
marketers towards the vibrant and burgeoning rural markets is called for, so they can
successfully impress on the 230 million rural consumers spread over approximately six
hundred thousand villages in rural India. Given the well-documented problems of traditional
communications, such as advertising and direct marketing, there is a clear need for academics
and practitioners alike to re-evaluate the means by which brand messages are best conveyed.
Greater attention has been paid recently to the role of experience in brand performance, and
how experience and interaction between internal and external brand representatives can sustain
consumer brand relationships, as they co-produce added value.
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