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Marketing of FMCG To Rural Consumers in Andhra Pradesh - Literature Review

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Marketing of FMCG to rural consumers in Andhra Pradesh - Literature review

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Asia-Pacific Marketing Review
Vol. I, No. 2, July-December 2012
pp. 49-57, ISSN : 2277-2057
www.asiapacific.edu

Marketing of FMCG to Rural Consumers


in Andhra Pradesh – Literature Review
Venkat Ram Raj Thumiki1 and Mohhammed Abdul Azeem2

FMCG emerged as a major product category in rural consumption in India. Companies marketing FMCG to rural
consumers cannot merely extend their general/urban marketing strategies to rural markets. Instead, they need to devise
rural specific strategies. In this process, they need to understand crucial issues relating to rural consumer behavior and
specifically relating to different geographic regions of the country. The current literature review was conducted to
understand the rural consumer behavior in general and with reference to purchase of FMCG in particular. Along with
literature on FMCG purchase and consumption by rural consumers, literature related to other product categories is also
reviewed. The literature review includes, factors influencing rural purchase, issues relating to rural communication,
media influences, differences in behavior of rural and urban consumers and product preferences of rural consumers
related to consumption of FMCG and other categories of goods. Finally, the gap is identified and presented.

Key Words: trust factor, value for money, low cost, premium products, opinion leaders, below-the-line advertising

Introduction as many companies already started their rural marketing


activities (Bansal & Easwaran, 2004). According to
The basic marketing theory can be traced from Borden’s
Velayudhan (2002), rural marketing includes all
(1964) pioneering work on the marketing mix which was
activities relating to assessing, stimulating and
further simplified by McCarthy (1960). Since then
converting the rural purchasing power into an effective
marketing has evolved as a dynamic discipline (Shapiro,
demand for specific products and with the aim of raising
et al., 1987) and increasingly companies started adopting
the standard of living (Modi, Pratik, 2009). There has
various marketing approaches like, customer-focused,
been confusion as to whether rural marketing and
one-to-one marketing, data-based marketing, IMC,
agricultural marketing are similar. Available literature on
CRM, etc. (Dommermuth, 1965; Sherlekar, 1982; Arens
rural marketing clarifies this doubt. According to
& Bovee, 1994; Mehta, 1999). Marketing scenario in
Ramkishen, Y. (2004), rural marketing is not always
India changed with market liberalization policies after
equal to agricultural marketing. A number of issues such
1990’s (Gopalaswamy, 1997). The rural economy in
as market linkages through cooperatives are involved in
India has graduated from being a `barter economy’ to a
rural marketing which make it much broader and
cash-rich economy. For example, penetration of goods
complex in nature (Mishra & Mishra, 2011). Agricultural
like soap, washing powder, biscuits and hair oil is more
marketing can be said as a part of rural marketing. Rural
than 80% (Business Standard, 2011). Most of the Indian
marketing is complex and studying the behavior of rural
rural markets are ‘Virgin’ in nature and they are now
consumers is always a difficult task. Vaswani, et. al.
opening for most of the packaged goods (Habeeb-Ur-
(2005) explained the domain of rural marketing through
Rahman, 2007) and for a number of product categories
identifying a range of exchange transactions and
(Bijapurkar, Rama, 2000).
relationships on the rural platform. Chart 1 titled, ‘Rural
Concept of Rural Marketing Buyer-Seller (Producer) Matrix’ presents this view.

Rural areas are no longer seen as agrarian-based markets

1
Assistant Professor in Marketing, Dept. of Business & Economics, Modern College of Business & Science, Muscat, Sultanate of Oman.(E-mail: [email protected])
2
Associate Professor & Head, Dept. of Management & Commerce, Maulana Azad National Urdu University, Gachibowli, Hyderabad. (E-mail: [email protected])
Chart 1: Rural Buyer-Seller (Producer) Matrix

Rural Seller (RS) Urban Seller (US)


Rural Buyer I RS-RB Intra-Rural II US-RB Consumer goods, services,
(RB) (All products) agro inputs, farm equipments

Urban Buyer III RS-UB Farm & Non-farm IV US-UB Intra-Urban


(UB) products (All products)
Source: Vaswani, et.al. (2005)
Rural marketing is a two way marketing process that Shelf-III comprises of goods made in rural areas and
involves three type of transactions viz., Urban to Rural, consumed in urban areas like, vegetables, agro-based
Rural to Urban and Rural to Rural. On Shelf-I are the products, products of cottage industries, etc. Shelf-IV
goods which are made and consumed in rural areas. does not fall under the scope of rural marketing. Rural
Examples include pottery, hand-woven woolen, cotton marketing mix in the form of 4C’s to 4P’s to 4A’s gives a
and silk fabrics, vegetables, fruits, etc. Shelf-II clear picture of the concept. Table 1 presents the rural
comprises of goods that flow from urban to rural viz, marketing mix as an extension to the general marketing
automobiles, bicycles, farm equipment and fertilizers. mix concept.

Table 1: Rural Marketing Mix (4Ps – 4Cs – 4As)

4 P’s 4 C’s 4 A’s


Product Customer satisfaction Acceptability
Price Cost to customer Affordability
Place Convenience Accessibility
Promotion Communication Awareness
Compiled from various sources

Challenges and problems in rural marketing characteristics that pose challenge to rural marketers
While rural markets present a great opportunity to include, low literacy, ignorance of their rights as
companies, they also impose major challenges. Though consumers, low purchasing power and indifference to
Green Revolution and rising incomes created demand for quality or standards. According to Mehra, Preeti (2002)
products in rural markets, companies continued their tackling with the problem of spurious products in rural
focus only on urban markets for the obvious reason, high markets is a greater challenge. Table 2 gives a quick idea
cost of distribution in rural areas (Singh, Jagaman, 2008). on some of the major challenges encountered by rural
According to Sayulu & Ramana Reddy (1996), marketers.

Table 2: Major Challenges in Rural Marketing


No. Challenges Source(s)

1 Low literacy, ignorance of their rights as consumers, low Sayulu & Ramana Reddy (1996)
purchasing power, indifference to quality or standards
2 High cost of distribution Singh, Jagaman (2008)
3 Problem of spurious products Mehra, Preeti (2002)

4 The markets are scattered Mukund, A. (2003)


Jha, Mithileshwar (1988)
Surender, P. (2004)

5 To offer world class quality at low price Bhale Rao, et. al. (1981)
Prahalad, C.K. (2005)

50 © Asia - Pacific Institute of Management, New Delhi


Rural Consumer behavior exhibition of impulse purchase behaviour at such places.
Krishnamoorthy (2008) has captured the rural
Understanding the consumer behavior is a key function customers’ shopping preferences and choices. Villagers
of marketing (Kotler, et. al., 2009). It involves prefer to buy from pan shops in small villages, grocery
understanding the consumer needs, desires, likes, shops in large villages and also from haats and weekly
dislikes, tastes and preferences (Schiffman, et.al., 1978). markets.
The average rural consumer is a mythical figure since
third world countries are categorized by wide disparities Rural Communication
in income and lifestyles (Rajashekhar & Sahu, 2004).
Buying attitudes are influenced by market awareness and
Goldman, Arieh (1978) in their study on shopping
market communication in the rural markets as it
behavior among the low-income consumers found that
influences the modernity level of the villagers (Layton,
they are not forced to confine their purchases to the small
1986). Television advertisements unconsciously affect
stores, low quality products and brands. Halan, Deepak
the rural consumer buying behaviour (Bhatt & Jaiswal,
(2003) found lower incidence of premium product
1986). According to Venkatesh & Piyush (2008), rural
purchases by the rural consumers. But despite this trend,
consumers prefer clear messages. They found that the
the rural consumers across all income segments exhibit a
women believed in communication from Government,
marked propensity to spend on premium high quality
where as for men, the belief in a company and its
products. The lower income group categories in rural
products is based on the existence of the company for
India were also found demanding high status
many years. They further found that the villagers’ variety
consumption goods, especially in the more visible
seeking behavior is dependent upon the promotional
categories of cosmetics and clothing (Mitra, Rashmi &
offers and is specific to low priced products like
Venu Gopal, Pingah, 2000). Their research found that the
shampoos. Rural women do not easily believe in the new
rural buyers are now seeking quality for affordable price.
offers vis-à-vis their male counterparts. Dhunna, Mukesh
Ramanacharyulu (2004) has conducted risk analysis in
(1984) found that promotional campaigns effect the rural
rural marketing with reference to purchase decisions
consumer behaviour. Consumers are influenced more by
taken by the rural people. According to him, the rural
promotional schemes such as trial packs and
consumer would minimize four kinds of risks through his
communication through cartoon dummies (Sikroria,
actions. They are financial loss, time loss, physical loss
2012).
or damage and psychological loss.
Bright, Oliver (2007) conducted studies in Kanya
Kaur, P. & Singh, R. (2005), in their research on Conflict
Kumari district in Tamil Nadu to analyse the application
Resolution in Urban and Rural Families, mentioned that
of Buzz Marketing in rural markets to promote the
different family members in a rural family use different
financial products. His findings revealed that buzz works
FMCG brands.
in rural markets but will depend on the type of person
Research work is available on rural family decision creating the buzz. Below-the-line advertising (non-
making. Unlike urban situation, family consumption and conventional methods) will work in rural
family decision making can be seen in rural areas. Due to communication (Jain, Abhay & Hundal, B.S., 2007).
this, daughters-in-law are playing a major role in family Marketers catering to rural poor must use traditional as
purchase, bringing in new products, experiences and well as modern communication techniques to overcome
aspirations into the family (Gopalakrishnan, the complexities involved (Iyer, Gopalakrishnan, 2006).
Jayalakshmi, 2006). This is one of the main reasons
behind HUL choosing female segment to work with on Influencing Factors
Project Shakthi (Lancaster, John, 2003). Various factors influence the purchase decisions of
Literature on rural shoppers’ behavior (Sahoo & Panda, customers (Blackwell & Talarzy, 1977). Krishnamoorthy
1995; Patel, Naresh & Prasad, Reshma, 2005; Anand, (2008) elaborated the factors that influence the rural
Sundeep & Krishna, Rajnish, 2008) reveals that the rural consumer behaviour. Factors like rise in income,
customers do exhibit brand choice in their purchases. technology and culture influence the rural consumer
Outlet choice may not be noticed as there are not many behaviour to a great extent. Social factors like caste and
outlets in rural areas. But this can be noticed in haats and social status influence rural consumer behavior (Yadav,
mandis which have multiple shops to buy a particular 1992). According to Anand, Sandeep & Krishna, Rajnish
good. Ziauddin & Saif (2001) examined the behaviour of (2008), preference for a product/brand in rural India is
rural consumers in the rural gatherings and noticed significantly determined by quality, VFM (Value For

Asia-Pacific Marketing Review Vol. I, No. 2, July-December 2012 51


Money). of literacy, the equations on a rural landscape are
Sarangapani & Mamatha in 2008 studied the post- changing. Teachers too have emerged as opinion leaders
purchase behavior related to FMCG products in the rural in rural areas (Sayulu & Ramana Reddy, 1996).
markets and found that savings of consumers influence Trust prevails in rural markets. Available literature on
their consumption patterns and also consumption Trust Factor in rural marketing reveals that bondings in
patterns are not similar to all categories of consumers. rural areas are stronger. Khatri (2002) found out that
Shivakumar & Arun (2002) in a study of buying behavior there is a strong bonding in terms of trust between a rural
of rural Pondicherry people noted that they considered customer and his retailer. In his research of various daily
only one brand and visited only one shop before making a consumables he found out that the rural consumers have
purchase decision. They found that rural customers been relying on the retailers’ suggestions. According to
considered brand name and price as important elements Ghosh, Aparisim (1994), the retailers in villages
in buying consumer durables. influence up to 35% of purchase decisions. In the low-
income segments, the retailers play a major role in
Influence of Retailers & Opinion purchase decisions of the customers, they stack
Leaders merchandise in varied price ranges to appeal differently
to different shoppers and club this with their influencing
Rural people are influenced by the opinion leaders. power (Ying Zhao, 1994). Table 3 gives a quick idea of
Initially, village head, priest, Sarpanch or a rich farmer of some of the key variables influencing the rural consumer
the village were opinion leaders (Anand, Sandeep & behavior.
Krishna, Rajnish, 2008). But now with increasing levels

Table 3: Variables that influence the rural consumer behavior

No. Influencing variable Source(s)


1 Quality & Value for Money (VFM) Anand, Sandeep & Krishna, Rajnish (2008)
Kumar & Madhavi (2006)

2 Opinion leaders Anand, Sandeep & Krishna, Rajnish (2008)


Kashyap, Pradeep & Raut, Siddharth (2007)

3 Price, attractive packaging and easy Rajeev, et al. (1976)


availability in the market

4 Rural retailer Khatri (2002)


Krishnamoorthy (2008)

5 Social factors like caste and social status Yadav (1992)

6 Brand name and price Shivakumar & Arun (2002)

7 Promotional campaigns Dhunna Mukesh (1984)

8 Social institutions Mandar, et. al. (2008)

9 Consumer education Krishnamurthy, Jagadeesh (2009)

Branding in Rural Markets Pingah (2000) found out that the rural customers are
aware of various brands and variants available. Rural
Rural consumers prefer national brands (Bishnoi &
people are increasingly preferring branded products as
Bharti, 2008) and also there is no significant difference
the brand consciousness is increasing in rural areas
between brand preferences of different income groups
(Patel, Naresh & Prasad, Reshma, 2005).
(Jain & Sharma, 2012). Mitra, Rashmi, & Venu Gopal,

52 © Asia - Pacific Institute of Management, New Delhi


Retention Economics suggest that long-term consumer behaviour. Bijoor, Harish (2004) opines that
relationships bring long-term advantages (Murphy, rural markets are different from urban. Understanding is
1997). The need to establish direct contact with the the key point. Rural consumers vary not only in their
retailers and village consumers has become very behavior and practices but also in conviction and belief
important (Kashyap & Raut, 2007). Accordig to (Vyas, 1997). The rural consumers’ thought process is
Dharmarajan, S. (2000) brand loyalty in rural markets is fairly simple in contrast to a much more complex urban
not always ‘brand loyalty’ but ‘brand stickiness’. In the counterpart (Sahoo & Panda, 1995). The rural market is
urban markets, because a number of alternative brands quite different in terms of the price-value equation,
and substitutes are available, the urban customers may product usage pattern, etc., because the meaning of
not stick to a particular brand. But in case of rural ‘convenience’ differs with market segments (Sivakumar,
customers lack of availability of multiple brands can be a 2002).
reason for brand loyalty. Rajeev, et. al. (1976) in a study Sehrawet, Mahavir & Kundu, Subhash (2007) looked
on brand preferences or rural consumers for washing specifically into the impact of packaging on the buying
soaps in and around Simla found that the education level behaviour of rural and urban behavior and found that
of the consumers significantly influences the formation packaging is more helpful in buying for rural customers
of brand loyalty. Less educated people form their brand than their urban counterparts. Anand & Hundal (2008)
loyalty on the basis of price, attractive packaging and conducted a research to compare and analyze the
easy availability in the market, whereas highly educated importance given to various promotional schemes by
consumers form their brand loyalty on the basis of easy rural and urban respondents of Punjab. Their results
lather formation, convenience in handling, and mildness indicated that there is a significant difference between
and skin-friendliness of the soap. the importance both the urban and rural customers give to
various promotional schemes. Urban respondents
Rural vs Urban behaviour
assigned high priority for the schemes like, installment
Every consumer as an individual is different from others purchase, off-season discount, 0% interest scheme.
(Schiffman, et. al., 1978). Across the world, irrespective Whereas the rural customers rated for replacement,
of the development status of the economy, urban festival offer, free gift scheme, free after-sales service
consumer decision plans are different from the rural ones and exchange offers. Chart 2 show cases some of the
(Park, C. Whan & Richard J. Lutz, 1982). One of the major differences in behavior of rural and urban
better ways of understanding the rural consumer consumers.
behaviour is to compare and contrast it with that of urban

Chart 2: Major differences in Rural & Urban behavior

Characteristic Rural Urban Source(s)


Impact of packaging More helpful and high Relatively less impact Sehrawet, Mahavir &
on buying behavior impact Kundu, Subhash (2007)

Thought process Simple Complex Sahoo & Panda, 1995

Type of promotional Replacement offers, festival Installment purchase Anand & Hundal (2008)
scheme preferred offers, free gift schemes, schemes, off-season discounts,
free after-sales service 0% interest schemes

Information process Contents of cold media Contents of hot media Zacharias & Nadkarni
capability (media with low information (media with high information (2005)
content and less taxing for content: Eg: print media)
senses: e.g., television)

Identification of Mainly by packaging, Mainly by brand name Agarwal, Sujatha (2006)


products colour, visuals & size

Asia-Pacific Marketing Review Vol. I, No. 2, July-December 2012 53


Research Gap Arens, William F and Bovee, Courtland L (1994),
Contemporary Advertising, 5 e, Irwin Publications,
Though studies are conducted on various aspects like, USA, pp. 486-573.
advertising issues in rural marketing (Balakrishnan,
Ravi, 2007), importance of creativity in message
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Rama, 2000), still there is a lot of scope for studying
many more issues relating to rural markets. The literature Bansal, R. and Easwaran, S. (2004), “Creative Marketing
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Indian rural consumers, either in general or with
Bhatt, Rajeshwari G. and Jaiswal, M. C. (1986), “A
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16.
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