Channels of Distribution in Rural India Channels of distribution refer to the pathways through which goods and services flow from producers to consumers. Distribution channels in rural India cater to specific challenges like dispersed populations, inadequate infrastructure, and low literacy rates. Companies have developed innovative models to penetrate rural markets.
A. ITC (e-Choupal)
Description:
ITC e-Choupal is a digital platform that connects rural farmers directly with ITC, bypassing traditional middlemen. It provides real-time information on weather, prices, best farming practices, and market demand via internet kiosks installed in villages. Local farmers, trained as ‘Sanchalaks,’ operate these kiosks. Benefits:
Reduces information asymmetry. Farmers get better prices for their produce. ITC saves on procurement costs and ensures quality. Example: A soybean farmer in Madhya Pradesh checks e-Choupal for current market prices and weather updates before deciding the best time to harvest and sell his crop.
B. Godrej Adhaar Description:
Godrej Adhaar is a rural retail initiative that offers a one-stop shop for farmers, selling seeds, fertilizers, pesticides, animal feed, and even consumer goods. Stores also provide services like soil testing, veterinary advice, and farm equipment rentals. Benefits:
Increases rural access to quality products. Generates employment and entrepreneurial opportunities in rural areas. Example: A farmer visits a Godrej Adhaar store to buy certified seeds and receives free soil testing and crop advisory services.
C. HUL Shakti (Hindustan Unilever Limited)
Description:
Project Shakti empowers rural women by turning them into direct-to-home distributors of HUL products. HUL provides training and micro-credit support to women entrepreneurs, known as Shakti Ammas. Benefits:
Expands HUL’s rural reach cost-effectively. Promotes women’s empowerment and rural development. Example: A Shakti Amma sells soaps, shampoos, and detergents to 150 households in her village, earning extra income for her family.
D. Trade Management Description:
It involves the efficient management and organization of the supply chain, including logistics, inventory, distributor relationships, and retailer training. In rural areas, this means developing smaller SKUs (stock-keeping units), building last-mile connectivity, and educating retailers. Benefits:
Enhances product availability. Reduces stockouts and improves brand visibility. Example: FMCG companies appoint rural distributors and organize training programs for shopkeepers on product placement and customer service.
E. Rural Retailing Description:
Refers to organized retail formats specifically designed for rural consumers, such as rural malls, haats (weekly markets), and mobile vans. Retailers customize product assortments, pricing, and communication strategies. Benefits:
Brings urban retail experience to rural customers. Offers a wider range of products under one roof. Example: Hariyali Kisan Bazaar by DCM Shriram offers agricultural inputs, groceries, and household goods in a supermarket format in rural towns.
Case Study: ITC e-Choupal Background: ITC, a major Indian conglomerate, wanted to procure high-quality agricultural produce directly from farmers. The traditional mandi (market) system involved middlemen who often exploited both farmers and companies.
Solution: Launched in 2000, e-Choupal set up internet kiosks in villages, operated by local farmers. These kiosks provided:
Real-time market price updates Weather information Best agricultural practices Results: Over 4 million farmers across 40,000 villages benefited. Farmers’ incomes increased by 5–10% due to better price realization. ITC reduced procurement costs and built long-term farmer relationships. Exam Tip: Highlight how e-Choupal used technology to transform rural supply chains, improve transparency, and empower farmers.
Summary Table Channel Key Feature Benefit Example/Case Study ITC e-Choupal Digital farmer kiosks Direct market access, better prices A soybean farmer checks market prices Godrej Adhaar Rural retail stores Quality inputs and services, employment Farmer buys seeds & gets advice HUL Shakti Women micro-entrepreneurs, women empowerment, rural reach Shakti Amma distributes HUL products Trade Mgmt Efficient distribution Product availability, retailer support Rural retailer training Rural Retailing Rural malls, haats Urban retail experience, variety Hariyali Kisan Bazaar For exams:
Discuss the innovative approaches taken by companies to reach rural consumers. Use ITC e-Choupal as a detailed case study. Mention the social impact (empowerment, employment) in addition to business benefits.
A. Concepts and characteristics of the rural economy
Concept
Rural development is the process of making people’s lives better and their finances better, especially those who live in thinly populated or remote places. In the past, rural growth was based on misusing natural resources that needed a lot of land, like farming and forestry. But now, more and more people live in cities, and changes in global production networks have changed the way rural places work.
The progress of rural areas is still crucial to the growth of the whole country. More than two-thirds of the population in the country depend on farming for their livelihood, with one-third of rural India still living in poverty. Because of this, it is important for the government to work diligently and give them enough facilities to raise their level of living.
The actions that are taken to make rural areas better places to live and work to boost the economy are called rural development.
Characteristics of rural economy
The village is an institution: the village is the main institution in the rural community, and it meets almost all of their needs. People who live in rural areas feel like they belong and are united with each other.
Dependence on Agriculture: An important part of the country’s economy is nature and farming. In rural places, farming and related jobs are the main source of income.
Life in the Country: People who live in the country have basic lives. There are insufficient public services available, such as housing, schooling, health and sanitation, transportation and communication, banking, roads, and markets. Faith, traditions, and old ways of doing things are critical to people who live in rural areas. Most rural people have very low standards of life, which is sad. The rural sector lags significantly behind in terms of production methods, social organization, and political action. In the past few years, more people have been drinking booze.
Population Density: The number of people living in one square kilometer is very low, and houses are spread out all over the villages.
Employment Opportunities: In rural places, there is unemployment, seasonal unemployment, and underemployment. Individuals who are ready and able to work but cannot find work are said to be unemployed. Underemployment, which is also known as “disguised unemployment,” is when people are working more than they need to. When people work but production doesn’t go up, the condition is called “masquerading unemployment.” In rural places, both of these things constantly happen.
Poverty: People are poor when their basic needs aren’t met, like getting food, clothes, and a place to live. The figures for 2011–12 show that about 22 crores of people in rural areas are poor and live below the poverty line.
Debt: People in rural areas have a lot of debt because they are poor and don’t have enough jobs. This is because farm and non-farm jobs are scarce, the jobs pay little, and output is seasonal. In 1925, the famous British author Sir Malcolm Darling said, “An Indian farmer is born in debt, lives in debt, dies in debt, and leaves debt behind.” The villagers can’t get formal loans, so they have to rely on local moneylenders, who take advantage of them like parasites. As a result, many people in the village kill themselves.
Rural Income: People in rural areas earn little because the rural economy is too weak to provide jobs or self-employment opportunities. Many trained workers and laborers are underemployed, and there aren’t many ways for them to make more money.
Dependence: Most rural households rely on social grants and money sent back from family members who work in cities and towns.
Dualism: Two very different things existing together in the same place, such as developed and underdeveloped, organized and disorganized, traditional and modern, controlled and unregulated, poor and rich, skilled and unskilled, and other situations that seem to go against each other. People who live in country areas often have these traits.
Inequality: The distribution of income, wealth, and assets is uneven for individuals residing in rural areas. Numerous factors in history, society, and politics contribute to this imbalance. Landlords and owners control most of the operations in rural areas. A small group of people own land, animals, and other things.
Migration: People from rural areas have to leave their homes and move to cities in search of work to make a living. Cities are made possible by the way that growth works in this way. Bad relationships and a lack of basic amenities lead people to migrate from rural areas to cities. For Schumacher, this is like “double poisoning” because on one side, the farms are empty, and on the other, the towns are crowded. In his book “Small is Beautiful,” he discusses the problems with the way things are growing now.
B. Factors affecting rural economy
1. Rising level of knowledge
More reading and writing skills mean more job opportunities. According to the NSS, the literacy rate in rural areas in 2014 was 72.3% for men and 56.8% for women. This number is better than the rate in 2000, which was 68% for men and 43% for women.
Literacy rates are going up every year. Through SWAYAM and eVIDYA, the government has started to offer online classes. Through programs like Sarva Shiksha Abhiyan (SSA) and Rashtriya Madhyamik Shiksha Abhiyan (RMSA), the government has tried to get more people to go to school.
2. Work on infrastructure
For rural areas to grow, they need to have excellent infrastructure. Some of the most important signs of rural growth are roads, ways to communicate, electricity, clean water, irrigation systems, drainage lines, and decent places to live. In rural India, there have been more building projects and public service announcements in the past 20 years.
3. Adding new job opportunities
India’s rural areas have grown thanks to different policies, which have created new job possibilities. This kind of program is called TRYSEM (Training Rural Youth for Self-Employment). The main goal of this strategy was to teach young people technical skills.
The most recent example is the Atma Nirbhar Bharat Abhiyan, in which Hon. PM Modi asked companies to receive money to build prototypes. This will lead to more jobs over the next ten years.
4. The growth of mass media
People in rural areas are more aware now that there are more ways to communicate, like TV, social media, and radio. They can now seek employment, learn new skills, and talk to people outside the town thanks to cell phones and the internet.
Many people in rural places now know about government programs that can help them with farming and other activities. This is because of the growth of mass media.
5. Research in agriculture
The Indian Council of Agricultural Studies (ICAR) is in charge of agricultural studies in India. Research helps us figure out how food yield changes when the weather and soil are different, as well as how using certain fertilizers can boost production. Farmers have been helped by the use of new scientific tools. The green revolution came about because of this.
6. The effect of cities
Social media and other forms of communication have brought people from rural areas closer to people from cities. People in cities have an effect on people in the country. It changed how they lived and what they bought, which made more people want to buy consumer things.
Many industries and MNCs joined the rural market because of higher demand. MNCs worked to deliver their products to people at prices they could pay. More purchases contributed to the market’s growth. MNCs also started hiring locals, which raised the rate of employment.
7. Initiatives by the government
India’s government has done a lot to help rural areas grow and improve. Here are a few examples:
For self-sufficiency, Operation Flood and the White and Blue Revolution
The Integrated Rural Development Program (IRDP)
REP—Rural electrification program for providing an electricity supply
PSU and Banks lending money to farmers
Banks and the PSU Getting farmers loans
8. Contract farming
Contract farming is when businesses give farmers high-yield seeds and expect them to grow crops and send them back to the business. In this way, farmers don’t have to use their money to grow.
C. Basics needs of rural economy
Rural development is crucial for the comprehensive growth and advancement of the Indian economy for the following reasons.
A significant portion of the population resides in rural areas, and their growth and contributions play a crucial role in supporting the nation-building efforts. India cannot achieve development by keeping rural areas underdeveloped.
The rural economy aids the urban sectors by providing essential resources such as drinking water, milk, food, and raw materials. The underdevelopment of the rural sector will significantly hinder the overall economic advancement.
Enhancements in education, health, and sanitation in rural areas can prevent certain urban issues such as begging, scavenging, and the formation of roadside slums.
Agriculture and related activities are essential for creating employment opportunities in rural regions and enhancing total food output.
Developing rural areas can help decrease the negative effects of brain drain and rural-urban migration.
Developing the rural economy is necessary to make better use of underused and underutilized resources.
Rural development should reduce the disparity in infrastructure provision between rural and urban areas.
To enhance the country’s position in the global sphere regarding economic metrics such as the Human Development Index (HDI), Women Empowerment Index (WEI), Gender Disparity Index (GDI), Physical Quality of Life Index (PQLI), and Gross National Happiness Index (GNHI), these factors should be prioritized.
D. Rural-Urban disparities and Policy interventions.
Introduction
Rural development requirements differ from urban development demands and vary across different geographic locations and regions. Rural development in India largely focuses on the development of resources necessary for daily activities in a large and divided country. The main reason for a limited sectoral approach to rural development is the illogical placement of manufacturing facilities, inadequate infrastructure, and various other issues. The focus is on electrification, jobs, basic healthcare, and water management. Development work is carried out for a specific group or area within a cluster using a cluster management approach.
Urban development involves improving systems, traffic management, transportation, infrastructure, building management, and institutional management. The attitude, literacy, desire to adapt, and flexibility of target audiences vary in each scenario. Rural and urban development are interdependent for achieving comprehensive economic growth.
Should India change its focus?
Mahatma Gandhi’s statement, “India lives in its villages,” remains accurate in the present day. Rural communities have not benefited from development despite rising urbanization. These regions continue to experience challenges such as malnutrition, lack of education, joblessness, and inadequate infrastructure, including schools, universities, hospitals, and sanitary facilities.
The significant difference in living standards clearly indicates the contrasting aspects of India, which is a rapidly rising economy and one of the largest in the world. Rural Indian communities must develop concurrently with metropolitan regions, and the quality of life there must be enhanced for inclusive growth to take place.
The following are some disparities between rural and urban regions:
1. Disparities in Education
Urban areas undoubtedly boast superior infrastructure and educational systems compared to their rural counterparts. At both the elementary and secondary school levels, educational institutions in urban areas are extremely advanced, and the urban area education system is designed to provide students with a more enjoyable learning environment.
Conversely, in rural regions, students are deprived of even the most fundamental services and infrastructure; private schools and colleges are nonexistent, and teachers in government schools rarely attend classes. Only in such circumstances do students have the opportunity to receive an appropriate education.
2. Urban versus Rural Health Disparities
This section will cover healthcare disparities. Overall, urban health and medical systems are superior to their rural counterparts. The health sector in urban areas is more advanced and developed than that in rural areas.
In the rural healthcare sector, there is a dearth of appropriate medical equipment, inadequate infrastructure, and the majority of practitioners engage in fraudulent practices. This is the rationale behind the preference of individuals residing in rural regions to seek medical services in urban areas. The Indian government has been diligently operating in an effort to reduce the disparity between urban and rural health.
3. Employment Opportunity Disparities
In this regard, the contrast between urban and rural areas is likely the most pronounced. The rural populace relies heavily on agriculture for sustenance. Additionally, approximately sixty percent of the nation’s populace is involved in agricultural pursuits. Work restraint in the secondary and tertiary sectors or in the non-agricultural sector.
Certainly, those with an interest in pursuing careers in the tertiary or secondary sectors will find more favorable opportunities in urban settings. Over the past few years, rural areas have witnessed the emergence of several employment opportunities beyond farming. These include working in the marketplace, mining, teaching, small-scale industries, and more.
4. Architectural Disparities
In rural regions, the majority of inhabitants inhabit modest dwellings constructed from mud, thatched roofs, and huts; these structures are typically uncomplicated and impermanent, rendering them susceptible to damage from natural calamities such as heavy rainfall, floods, or tsunamis.
Conversely, an urban region predominantly comprises expansive apartments, while houses in this sector are built utilizing cement, cutting-edge technologies, and contemporary machinery, none of which are susceptible to damage.
5. Lifestyle Disparities
The rural populace generally leads a very uncomplicated way of life. Due to the prevalence of day-to-day employment in the agriculture or dairy industries, rural residents typically lack access to electricity in their dwellings and rely on ovens to prepare their meals. The lifestyle in urban areas is characterized by greater development and improvement.
Individuals in urban areas earn higher wages as a result of increased employment opportunities, which in turn raises the demand for shopping, food, and new digital technologies. Consequently, novel products and services are imported from other nations, and new categories of items have emerged in urban areas, all of which contribute to the enhancement of the lifestyle of urbanites.
E. Role of Agriculture in the Economic Development of India.
Agriculture’s significance in India’s economic development cannot be ignored, despite the crucial role performed by industries. This section will outline the seven crucial roles of agriculture in economic development.
1. Meets the growing food demands of the nation
Agriculture in India plays a crucial part in providing food. Agriculture meets the increasing food demands of the growing population. Food production is rapidly expanding, putting a heavy burden on surplus labor markets like India. If agriculture cannot continually increase its surplus of food grains, a catastrophe is likely to happen. Several developing countries are currently experiencing this phase, and agricultural practices will be enhanced to fulfill the increasing food requirements.
2. Distribution of raw materials to agricultural-based industries
Agriculture supplies raw materials to many agro-based industries like sugar, cotton textiles, jute, and vanaspati. Agriculture is crucial to the food processing business. The expansion of these industries is crucial for agriculture and farmers.
3. Improving Rural Quality of Life
Greater agricultural surpluses resulting from higher agricultural production have a positive impact on society welfare, particularly in rural areas.
4. Facilitates capital accumulation
There is a general agreement on the necessity of capital formation. Agriculture plays a crucial role in the economic growth of emerging countries like India by speeding capital formation due to its significance as the primary industry. If it does not comply, the entire economic growth process will face a setback.
5. Industrial Product Market
Rural purchasing power expansion is essential for industrial development, as villages are home to two-thirds of the Indian population. Big farmers had an increase in spending power due to their higher revenues and minimal tax obligations following the green revolution.
6. Contributes to the national Gross Domestic Product (GDP)
Agriculture has always played a vital part in contributing to India’s national GDP. In 1950-51, agriculture and related sectors contributed around 59% to the total national income. Although the share of agriculture has decreased steadily due to the growth of other industries, it remains comparatively high compared to industrialized nations worldwide.
7. Infrastructure Development
Agriculture’s involvement in economic development requires the establishment of infrastructure such as roads, postal services, marketplaces, warehouses, shipping facilities, and other components to facilitate the rise of industries and the commercial sector.
Before independence, farmers who sold their goods to sellers had to deal with many wrong weights and hacked accounts. The farmers lacked accurate information about prices, which forced them to sell their goods at low prices due to insufficient storage facilities.
The product might sometimes be sold at a weekly village market in the village of the farmer or in a village nearby. If these shops aren’t open, the goods are sold at the mandi or at unofficial markets in a nearby village or town. So, the government did several things to keep the traders in line.
Definition
Agriculture marketing, in a very limited sense, means getting farm products from farmers to people who will buy them. The decision to grow a crop for sale initiates agricultural marketing, according to the National Commission on Agriculture. It includes all parts of the market structure, both functional and institutional, as well as technical and economic factors. It also includes operations before and after the harvest, such as sorting, storing, transporting, and distributing.
A. The wider part of marketing in India
Balancing demand and supply
To transmit macroeconomic signals to farmers and producers.
The strategy involves offering incentives to producers in order to boost their production and output levels.
The aim is to encourage the efficient utilization of resources within the production and distribution system.
B. Challenges in marketing agricultural produce in India.
Insufficient storage and warehouse facilities in India lead to the wastage of farming products and a reduction in farmers’ earnings.
Inefficient transportation infrastructure: India’s transportation infrastructure isn’t up to par, which raises the cost of moving goods and makes Indian farming products less competitive on the world market.
Broken supply chain: In India, the supply chain for agricultural goods is fragmented, involving many middlemen. This can lead to high trade costs, which means farmers can’t make as much money.
Not enough market information: Indian farmers often don’t have enough market information, which makes it challenging for them to decide how to sell their goods.
Quality of Produce: The Green Revolution and other “Lab to Land” programs have expanded the potential for food production. However, with rising incomes and living standards, stricter health and safety rules, and a lot of new processing industries, there is a need to improve both the quantity and quality of food that can be grown. This issue has limited the potential of agriculture for selling food on both the national and international markets.
Less consumer satisfaction: customer loyalty is the most important thing in any marketing system. If farmers don’t grade, sort, standardize, and clean their products properly, they won’t sell for as much on the international market when they ship them.
Prices change all the time: In India, the prices of agricultural products change all the time, which makes it challenging for farmers to plan their production and selling.
C. The Indian government wants to improve marketing in a number of reforms.
Improvements to the infrastructure of the supply chain: The Indian government is spending money to improve the infrastructure of the supply chain, which includes buildings for storage and transportation.
Setting up markets for farming goods: Agricultural Produce Market Committees (APMCs) were set up by the Indian government to make sure that agricultural goods have a safe place to trade.
Promoting contract farming: The Indian government is supporting contract farming, which helps farmers get a better price for their crops and helps them plan how they will grow and sell them.
Supporting direct marketing: The Indian government supports direct marketing for farming products. This helps farmers get a better price for their goods by cutting out middlemen.
Giving farmers information about the market: The Indian government provides farmers information about the market through mobile apps, SMS services, and toll-free helplines.
D. Issues in agricultural marketing
1. Today, Indian farmers can sell their goods at:
The farmgate or local market (haat) is for village aggregators, and the APMC (agricultural product market committee) is for private traders.
So that the government can obtain the minimum support price (MSP),
But there are some problems with all three ways to sell.
2. MSP
The MSP was promised for 23 crops, but it has only been implemented for 3 crops.
Produce that meets the standards for “fair average quality” is the only one that gets MSP.
There aren’t any government procurement centers in every part of the country.
Also, the next step in the rise of agricultural income will be high-yield goods like dairy products, vegetables, fruits, and so on. However, the government is still giving MSP to cereals.
3. APMC
a. In theory, there is more than one buyer for an APMC, but in fact, there is no open auction system for setting prices through transparent bidding.
b. In most APMCs, buyers have to go through licensed aadhatiyas to make purchases.
People in the middle are paid for their “services” by both the buyer and the seller.
The aadhatiya also often lends money to farmers and provides them seeds, fertilizer, and chemicals on credit. Therefore, they have to sell through him and pay their debts forever.
c. Furthermore, mandi fees vary by state and type of goods, but they are usually between 0.5% and 5% of the sale price.
d. Adding more mandi fees to trade between states would be like taxing people twice, which goes against the idea of a single national market.
e. Sale in distress because of a lack of storage space
When it comes to mandis, prices are lowest three to four months after harvest and highest right before harvest.
Farmers make the most sales right after harvest because they need to buy things for the next planting season.
4. To correct this APMC problem
The Model Agricultural Produce Market Committees (APMCs) Act was made by the Union Agriculture Ministry.
The Act wants to provide farmers more options for selling their crops. It does this by letting private markets operate (instead of just APMCs), letting farmers buy in bulk directly from the farm gate, labeling warehouses or cold storages to be markets, and getting rid of the idea of a “market area.”
This is because the definition of “market area” has an effect on how much money APMCs can make.
5. Changes in prices
Uncontrolled patterns of oversupply and shortage are what make prices change all the time.
Price predictions for a certain good are often based on trends from previous years, but these trends might not be accurate this year, potentially leading to oversupply or shortage.
E. Reforms are needed in APMC.
1. Standardized market charges
A consistent mandi tax of either 0.25% or 0.50% is suggested to be imposed statewide on foodgrains, oilseeds, and fruits & vegetables.
The central and state governments could reimburse the losses incurred by APMCs, following the model of the Goods and Services Tax.
2. Abolish Aadhatiya-centered commerce.
All transactions in Agricultural Produce Market Committees (APMCs) should be conducted via open auctions, with participation from numerous bidders for each batch of produce. Trades should occur directly between buyers and sellers, without intermediaries demanding fees.
Aadhatiya can only participate in the capacity of a trader.
3. Activate sample-based sales.
Today, the farmer takes all his produce to the APMC, where buyers do physical inspections before placing bids.
This leads to duplicate transportation, from the farm gate to APMC and then from APMC to the final destination.
If grading and sorting facilities are nearby the farm gate, the farmer merely needs to bring a sample of his crop and the necessary quality certification paperwork to the mandi. It would be a cost-effective and time-saving solution.
4. Storage and banking amenities in close proximity to APMCs
To prevent distress sales, having bagging and storage facilities, as well as offering loans based on warehouse receipts, can help satisfy urgent cash needs. These should be located near APMCs.
Encourage the establishment of Farmer Producer Organizations in marketing.
Encourage farmer producer organizations/companies to engage in direct marketing of their members’ produce to major buyers and processors.
It will lead to increased competition and improved pricing at APMCs.
5. Relax or abolish the Essential Commodities Act (ECA).
ECA imposes limitations on the transportation of goods, inventory management, pricing, and implementation of innovative technologies.
Removing these prohibitions under ECA and other laws will increase commerce and result in improved profits for farmers.
The concept of “ease of doing business” is essential for agriculture as well as other industries.
6. e-NAM
The government established an electronic national agriculture market (eNAM) to link all regulated wholesale produce marketplaces via a nationwide trade site.
Its efficiency relies on the involvement of traders from various markets.
7. Risk management
Crop insurance plans provide farmers with protection against weather-related hazards as part of risk management.
The majority of the premium in the Pradhan Mantri Fasal Bima Yojana is covered by the Government.
Although still being developed, this system is more thorough and user-friendly than any prior ones.
8. Expand the quantity of markets
As per the Ashok Dalwai Committee, India requires a minimum of 30,000 agricultural produce markets, compared to the current number of around 6,500.
A “mini-market” concept is needed to narrow this significant disparity.
The government’s announcement of GRAMs (Gramin rural agricultural market) is a positive step.
With widespread electronic connection and dependable rural roads, GRAMs can develop into sustainable centers for economic activity and job creation.
9. Producer consolidation
Consolidating small and fragmented farms into larger, more sustainable holdings can enhance producers’ ability to obtain financing and high-quality inputs, as well as achieve higher prices for their products.
This will also encourage necessary investments in land development, improvement, and agricultural mechanization.
I. RURAL MARKET STRATEGIES WITH SPECIAL REFERENCE TO SEGMENTATION, TARGETING, AND POSITIONING.
Introduction
Segmentation
Rural markets in India are segmented based on factors such as geography (villages, regions), demographics (age, income, occupation), psychographics (lifestyle, aspirations), and purchasing behavior. For example, HUL segments rural consumers by income and product usage patterns, identifying needs for basic hygiene and affordable products.
Targeting
After identifying the segments, companies choose the target groups that best align with their products. For rural India, companies often target low- and middle-income groups seeking value for money and essential goods. For instance, Coca-Cola targeted rural youth and families by launching smaller, affordable “Chota Coke” bottles at ₹5, making it accessible to rural consumers.
Positioning
Brands position their offerings by aligning with rural aspirations, trust, and value. HUL positions its “Lifebuoy” soap around health and hygiene, communicating its benefits through local influencers and rural media. Likewise, ITC’s e-Choupal initiative positioned ITC as a farmer-friendly company by providing digital resources and transparent pricing, building trust and loyalty.
A. SEGMENTATION
Segmentation involves dividing the rural market into distinct groups based on various characteristics to better understand consumer needs and tailor marketing efforts.
Types of Segmentation in Rural Markets:
Geographic Segmentation:
Dividing rural areas by regions, states, climate, or village size.
Example: FMCG companies often design different product packages for North vs. South India due to climate differences.
Demographic Segmentation:
This segmentation is based on factors such as age, gender, income, education, and occupation.
Example: Tata Tea targets different age groups with its “Jaago Re” campaign, focusing on youth and middle-aged adults.
Behavioral Segmentation:
This segmentation is based on factors such as usage rate, brand loyalty, and purchasing behavior.
Example: Mobile companies offer special recharge plans for heavy users in rural areas.
Psychographic Segmentation:
This segmentation is based on factors such as lifestyle, values, and aspirations.
1. HUL’s Project Shakti: Hindustan Unilever Limited (HUL) segmented rural women with entrepreneurial aspirations and trained them to become direct-to-home sales agents (Shakti Ammas). This approach tapped into women as both consumers and influencers, allowing HUL to reach the “household decision-maker” segment in rural India.
2. ITC e-Choupal: ITC segmented rural farmers based on crop type and region to launch its e-Choupal initiative. The company set up digital kiosks in villages, providing market information tailored to different segments (soybean farmers in Madhya Pradesh, wheat farmers in Uttar Pradesh, etc.).
3. Coca-Cola’s “Chhota Coke”: Coca-Cola segmented the market by purchasing power and consumption patterns, introducing a ₹5 “Chhota Coke” (small Coke) for low-income rural consumers who preferred affordable, single-use products.
4. LG’s Rural Appliances: LG Electronics segmented villages by electricity availability and income levels, launching semi-automatic washing machines and “Power Cut” TVs tailored for rural households.
Summary: Segmentation in rural markets helps companies identify specific consumer needs and develop targeted strategies. Successful brands like HUL, ITC, Coca-Cola, and LG use geographic, demographic, behavioral, and psychographic segmentation to effectively penetrate rural India.
B. TARGETING IN RURAL MARKET STRATEGIES
Targeting refers to selecting specific segments identified through segmentation and focusing marketing efforts on them to maximize effectiveness in rural markets.
Key Approaches to Targeting in Rural Markets:
Focusing on Income Groups
Companies often target low- and middle-income consumers by offering affordable products and value packs.
Example:Coca-Cola’s “Chhota Coke” at ₹5 was designed to target cost-sensitive rural customers, making the brand accessible to a wider audience.
Targeting Women as Influencers
Recognizing that women often make household purchasing decisions, campaigns are tailored to engage them directly.
Case Study: HUL’s Project Shakti HUL targeted rural women by training them as direct sales agents (“Shakti Ammas”), empowering them and using their local influence to expand product reach in villages.
Targeting Rural Youth
Brands target younger rural consumers, who are aspirational and open to new products.
Example:Hero MotoCorp tailors advertising for affordable motorcycles to young men in villages, highlighting style and fuel efficiency.
Village Size and Accessibility
Companies may target larger or more accessible villages first for logistical efficiency.
Example:ITC’s e-Choupal program began in larger, agriculturally important villages, targeting progressive farmers who could influence others.
Occupation-Based Targeting
Brands target farmers, artisans, or small business owners with products suited to their needs.
Example:Mahindra Tractors targets small and marginal farmers needing affordable, fuel-efficient tractors.
Case Studies
HUL’s Wheel Detergent: Targeted low-income rural households with a low-cost detergent, distributed via local retail networks and direct saleswomen.
Colgate-Palmolive: Targeted rural families by promoting oral hygiene education in schools, building trust, and encouraging mothers to adopt Colgate for their children.
Godrej Chotu Kool: Targeted rural households without refrigerators, offering a compact, affordable fridge designed for the rural market.
Summary: Targeting in rural markets is about understanding specific needs—be it cost, convenience, or local influence—and tailoring strategies to reach and win over key consumer groups. Successful brands like HUL, Coca-Cola, and Mahindra have grown in rural India by precisely identifying and targeting their ideal rural customers.
C. POSITIONING IN RURAL MARKET STRATEGIES
Positioning involves creating a distinct image and value proposition for a product or brand in the minds of rural consumers, often by connecting with their aspirations, values, and daily needs.
Examples and Case Studies
1. Mahindra Tractors—“Rise“for Good” Positioning Mahindra positioned its tractors as partners in progress for the Indian farmer. The brand emphasizes reliability, ruggedness, and empowerment, using slogans like “Rise for Good.” Mahindra’s rural marketing focuses on demos, farmer meets, and real-life success stories, making the tractor a symbol of pride and aspiration for progressive farmers.
2. Hero MotoCorp – “Har Ghar Mein Hero” Hero MotoCorp positioned its motorcycles as affordable, fuel-efficient, and reliable vehicles for the rural youth and families. Through targeted campaigns like “Har Ghar Mein Hero” (“A Hero in Every Home”), the brand associates bike ownership with upward mobility and independence, resonating with rural aspirations.
3. Godrej ChotuKool—“Cooling“for All” Godrej positioned ChotuKool as an innovative, affordable cooling solution for rural households lacking access to traditional refrigerators. The product is marketed as simple, portable, and specifically designed for rural conditions, making refrigeration accessible and aspirational.
4. Emami Navratna Oil—“Thanda Thanda Cool Cool.” Emami positioned Navratna Oil as a remedy for the stresses and heat of rural life, using the tagline, “Thanda Thanda Cool Cool.” The brand focused on the cooling and stress-relief aspects in its communication, using local language ads and rural influencers to reinforce the product’s relevance.
5. CavinKare Chik Shampoo—“Sastha“aur Accha” CavinKare positioned Chik Shampoo in the rural market as a high-quality yet affordable product, introducing single-use sachets priced at ₹1. This made shampoo accessible to rural consumers and positioned Chik as a “value-for-money” brand for households with limited budgets.
Summary: Effective rural positioning involves understanding rural needs and aspirations, then crafting a message that connects emotionally and practically. Brands like Mahindra, Hero MotoCorp, Godrej, Emami, and CavinKare have succeeded by positioning their products as solutions to rural problems and symbols of progress.
