Executive Summary

In contrast to the ideal-type markets used in economic literature, real markets

are very diverse and complicated, having widely different formal & informal
institutions, and economic context, particularly in developing countries like
Bangladesh. This paper analyses real rural markets in Bangladesh & argues that,
in an underdeveloped and unequal society, market interactions reproduce and
deepen the already existing inequalities through the interactions of various formal
and informal institutions. Using the example of paddy-markets in rural
Bangladesh, this paper explains how the existence of vertical integration, patron
client types of relationship between market players and the interlocking of
different markets, results in greater benefits for those relatively powerful and rich
among the market players, through the use of greater bargaining advantage.
Rural marketing is now a two-way marketing process. There is inflow of products
into rural markets for production or consumption and there is also outflow of
products to urban areas. This paper also covers the comparative scenario in
between Bangladeshi and Indian rural market.

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Introduction
The rural market has been growing steadily over the past few years and is now
even bigger than the urban market. About 65 per cent of Bangladeshs
population lives in villages. Go rural is the marketers new slogan. Bangladeshi
marketers as well as multinationals, such as Unilever, Pepsi-cola 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, Bangladeshi 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.
Markets have been subject to considerable research, not only in neo-classical
economics, but in other disciplines in the arena of broader social sciences as
well. Particularly in recent times as development policies in most of the third
world countries evolved around market-oriented reforms, mainly imposed by the
international financial institutions to get prices right markets have become
subject to even more research and debates by scholars of various disciplines. As
De Alcantara(1992) notes, the process of reform has given rise to increasing
concerns with regard to the political economy of real markets, frequently
referred to by a growing number of scholars. Although the reforms have led to a
certain degree of economic stabilization, defined in a rather narrow sense, this
has almost always had regressive effects on income distribution and general
welfare (Ghai, 1991 and Taylor, 1988 as cited in De Alacantara, 1992).

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Literature Review
Marketing:
Institutionalists across the social sciences agree that markets are systems of
economic exchange and spaces for social interaction as well as complex bundles
of institutions (Geertz, 1978; La Porta, Lopez-de-Silanes, Shleifer, & Vishny,
1998; McMillan, 2002; North, 1990). The context-specific and often complex
assembly of institutions including both formal rules and informal norms generates
market microstructures and institutional architectures that configure sociopolitical contexts (Fligstein, 2001). Along with this recognition, scholars caution
for the need to maintain a healthy skepticism toward the idea that a specific type
of institution is the only type that is compatible with a well-functioning market
economy (Rodrik, 2007: 162-163).
Identifying the needs of customers and potential customers, providing
products/services that satisfy their needs, and developing efficient processes or
systems to deliver your product/service to the market when, where, and how
consumers want it.
Rural Marketing:
Rural marketing is a function which manages all those activates involved in
assessing, stimulating and converting the purchasing power into an effective
demand for specific products and services, and moving them to the people in
rural area to create satisfaction and a standard of living to them and thereby
achieves the goals of the organization.
Bangladeshs vast rural market offers a huge potential for a marketer facing stiff
competition in the urban markets. The rural market environment is very different
from the familiar surroundings of the urban market. Rural consumers have
customs and behavior that the marketer may find difficult to contend with.

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Corporate interests in Rural Market

When rural customers discover the new and exciting choice of brands available
in urban markets, a demand for these brands is created in rural areas. Marketers
have entered the rural markets by extending the distribution of their existing
offering or developing a separate marketing strategy for the rural markets. When
Titan, the watch manufacturer, found rural consumers purchasing their Sonata
brand of quartz watches, they formulated a marketing strategy tailored to the
requirements of the rural market.
Reasons for the interest

There are quite a few reasons for the growing interest in rural markets. A
very straightforward reason is the growth of these markets are :

Untapped Potential

The large number of consumers

Largely untapped markets

Market Size and Potential

Unmet Needs/Low Penetration

Current Consumption a Pointer to Potential

Increasing Income and Purchasing Power

Accessibility of Markets

Competition in Urban Markets

Consumer Behaviour Changes

Profile of the Rural Market

The size of rural markets, demographic profile of the rural market and market
volume help us to draw a broad mental picture of the rural markets. The number
of villages, population and the number of households indicates the market size.
The demographic profile of the rural market is described in terms of household
size, sex distribution, literacy levels, occupation and income.

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Features of Rural Marketing:

Rural marketing is now a two-way marketing process. There is inflow of products
into rural markets for production or consumption and there is also outflow of
products to urban areas. The urban to rural flow consists of agricultural inputs,
fast-moving consumer goods (FMCG) such as soaps, detergents, cosmetics,
textiles, and so on. The rural to urban flow consists of agricultural produce such
as rice, wheat, sugar, and cotton. There is also a movement of rural products
within rural areas for consumption.The main reason why the companies are
focusing on rural market and developing effective strategies is to tap the market
potential,that can be identified as follows:
1. Large and scattered population:
According to the 2001 census, 740 million Indians forming 70 per cent of Indias
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.
2. 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.
3. 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.

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4. 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.
5. 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.
6. 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.
7. 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

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Markets and Inequality: Experiences from Rural Bangladesh

It is evident from the above discussion that there are inequalities among those
who participate in market exchange in terms of the differences in their wealth,
socio-economic status and political power and influence. As stated earlier, the
main focus of this paper is the process of reproduction of that inequality through
market interactions in such unequal societies. Specifically, this paper will
concentrate on the paddy-markets currently operating in two villages in Dinajpur,
a northern district in Bangladesh, which is one of the major paddy-producing
districts in the country. Before examining how the unequal socio-economic status
of the villagers is reproduced through market interactions among them, it is
important to introduce the two villages. The two villages are Telkupigaon (almost
15 kilometres away from the district town) and Shantipur (about 4 kilometres
away). Although both the villages are agricultural, the lives and livelihood of the
people of Telkupigaon depend relatively heavily on agricultural activities the
majority (53%) of the 507 households in the village depends directly on
agriculture, with half of these households living on agricultural wage labour. The
other half consists of the farmers, including those who cultivate their own land,
and the sharecroppers. The influence of these farmers rests largely on how much
paddy they produce, which is in turn determined by the amount of land owned by
them. The distribution of land in the village also reflects sharp inequalities: about
two thirds (64%) of the households do not have any cultivable land and of the
remaining 36%, only a little over 3% (17 out of 507 households) have more than
five acres of cultivable land each. About 11% of the households have cultivable
land between one and five acres and 22% of the households have less than one
acre of cultivable land. There are two paddy harvests in the village: during the
wet season, various high yielding varieties of paddy are cultivated alongside the
traditional local variety called aman; and during dry season it is only the high
yielding varieties which are cultivated all over the village.

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Profile of the Rural Market in India

The size of rural markets, demographic profile of the rural market and market
volume help us to draw a broad mental picture of the rural markets. The number
of villages, population and the number of households indicates the market size.
The demographic profile of the rural market is described in terms of household
size, sex distribution, literacy levels, occupation and income.
Market Volume
The market volume is an indication of the market attractiveness and this is
influenced by the market size and also the market profile. The large population
and increasing incomes make the rural markets an attractive proposition for
marketers. The market volume is captured by the consumption expenditure. The
ownership of consumer durables is useful in understanding market volume; and
in the case of consumer non-durables the consumption expenditure pattern is a
useful measure of market volume.
Market Size
The number of villages, population and number of households captures the rural
market size.
Physical Coverage

The number of villages in India is more than .64 million. The number of
villages or locations that are to be served is 124 times that of the urban
markets as the number of urban locations or towns is 5,161.

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Understanding Rural Consumer

The popular image of a rural consumer is of one who has limited educational
background, is exposed to limited products and brands, chooses price over
quality, and is influenced by word-of-mouth communication. There is also the
view that a rural consumer is no different from his urban counterpart. Changing
consumption patterns reflect the evolving lifestyle of rural consumers.
Examining the lifestyle of the rural consumer helps to understand the
consumption pattern and the influence of the environment on consumer behavior.

The lifestyle of rural consumers is influenced by

Increasing incomes and income distribution.
Marketers efforts to reach out and educate potential consumers.
The situation in which the consumer utilizes the product.

Influence of Situational Factors on Consumer Needs and Use Pattern

Many households in the rural area are not electrified which:
1. (a) affects the ability of the rural consumer to use electrical products
(b) increases the demand for batteries.
2.

The non-availability of piped running water affects both the durable

and non-durable markets:

(a) automatic washing machines have no demand in such situations;
(b) washing powders cannot be used if clothes are washed in streams
or ponds.
3. The availability of roads influences the purchase of motorized vehicles.
In direct contrast:
(a) more than half the rural households own bicycles;
(b) Automobile manufacturer will face the hurdle to sell car or bikes to
rural households.

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GEOGRAPHIC

AND

DEMOGRAPHIC

INFLUENCES

ON

BEHAVIOUR

VARIATIONS
To understand rural buying behavior, a marketer must first understand
(a) the factors that influence buying behavior and
(b) the variations in behavior.
These help to generate information upon which a marketer can create
bases to segment the rural market.

Environment of the consumer

Geographical influences

Influence of occupation

Place of purchase

Creative use of products

Geographical Variations in Market Behavior

The rural market is not a homogeneous one. Variations in economic
development and in consumer willingness to accept innovations are
evident in rural markets.
for example, the difference between parts of western and eastern Uttar
Pradesh (UP) is extreme.
In western UP, villagers speak Hindi whereas in eastern UP they speak
Bhojpuri.
Variations in consumer behaviour due to geographical locations are also
reflected in the variations in their innovativeness.
SOCIAL AND BEHAVIOURAL INFLUENCES
Understanding the social and attitudinal influences on rural consumer
behaviour is important to the marketer, as these serve as a guide to
decisions on product offering, pricing, distribution, media and message; in
effect forming the rural marketing strategy.
In rural areas the houses are painted during festival season. The demand
for distemper paints is therefore very large. This demand is met by local
brands, which are of low quality. Asian Paints developed a product with
bright colour shades (preferred by the rural consumers) for rural markets
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and which had greater durability than the local brands. It launched the
product in a pouch form and with the brand name Utsav.
Utsav was promoted as a good quality economy brand. It used wall
paintings and point-of-purchase displays to create awareness. It identified
dealers and sub-dealers who had the potential to stock and sell Utsav. To
demonstrate the quality of Utsav, the company painted the headmans
house or post office. The brand was well accepted by the rural consumer.

Perception and its Influence on Product Design and Message

The marketer who seeks to modify the behaviour of the rural consumer
needs to influence the consumers perception and attitude. It is here that
the marketer has to be careful in designing products and developing
message for the rural market.
The interpretations of the rural consumer differ from those of the urban
consumers. Colours are interpreted differently, so are sizes and shapes.
In interior markets, brand identification is through visual patternsa red
soap cake signifies Lifebuoy soap.

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Attitude to Quality and Price

Conventional wisdom on rural marketing believes that the villager craves,
but cant afford the products his city cousin consumes. As a result,
companies usually try to reduce the prices of their products either by
creating smaller pack sizes, or by compromising on quality. This works
sometimes, and with some products.
However, it is not true that only cheap brands sell in rural markets. Usha
found that the sale of its economy models was falling sharply in rural
areas. Farmers preferred Ushas premier Century brand, though it was
priced 20 per cent higher.

The Buying Process

The rural consumer has a very high involvement in any product
purchased, especially when he decides to buy high-end products which
cost a few hundreds or thousands of rupees. He has his daily routine, and
there is no sense of urgency in his lifestyle. He understands symbols and
colors better, and looks for endorsement by local leaders or icons.

Brand Preference and Loyalty

A marketer does not perceive an opportunity in rural market when he or
she thinks that the rural consumer buys only unbranded items. It is useful
to have a good understanding of the purchase behaviour of the consumer
in order to guide decisions in the rural markets.
The loyalty of rural consumers to a brand varies according to product
categories. It has been seen that loyalty is low in toilet soaps, toothpaste,
batteries and washing cakes but high in home insecticides, chyavanprash,
shaving preparations and skin cream.

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Thompson rural market index

A successful attempt in the direction of assessing the potential of rural
markets has been made by Hindustan Thompson Associates limited.
They made the first attempt in 1972. Since most of the data are available
at district level, they collected these data for 334 districts. They identified
11 factors and assigned a weightage to each other. However, this was not
considered to be satisfactory approach.
Hence another attempt was made in the year 1986. During the second
attempt, they considered 26 factors for constructing the rural marketing
index, in this attempt they considered 383 districts.

Indicators considered for rural market index

Area of the district in sq km
Demographics

Population

Males

Females

Density per sq km

Number of villages

Percentage distribution of villages

Literate rural numbers

Percentage of literacy

Literate : males

Literate : females

Occupational pattern

Cultivators

Agricultural laborers

Non Agricultural laborers

Agricultural related data

Gross cropped area in hectares

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Gross irrigated area in hectares

Area under non-food crops in hectares

Average size of operational holdings in hectares

Agricultural inputs data

Pump sets and tube wells

Fertilizer consumption in metric tonnes

Number of tractors

Rural electrification data

Percentage of villages electrified

Commercial banks data :

Number of rural branches

Deposits in lakh of currency

Advances in lakh of currency

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Rural marketing strategies

Considering the environment in which the rural market operates and its
associated problems, and the experience of manufacturer and marketing
men who operates in the rural market, it is possible to evolve certain
strategies specifically for rural marketing.
In this section we try to draw a framework for the adoption of a mix of
marketing strategies pertinent for rural marketing.
Product strategies

Drawn from the experience of companies operating in the rural market,

meaningful product strategies for the rural market and rural consumer
have been discussed here.

Small unit packaging : this appears to be an effective strategy for realizing

the potential of rural market. The reduced pack sizes attract a large
number of rural consumers to at least try and test the products.

Low priced packaging : take an e.g. of Janta blend, they marketed a

brand of tea which contained 70 percent tea, 20 percent of chicory and 10
percent of tipoca flour.

New product designs

Sturdy products

Utility oriented products

Brand name
Pricing Strategies

Pricing strategies are linked to the product strategies. The product

packaging and presentation also keeps the price low to suit the rural
consumer.

Some of the pricing strategies are discussed below:

Low cost/ cheap products: the price can be kept low by low unit packing's
like paisa pack of tea, shampoo sachets, Vicks 5 grams tin, etc. this is a
common strategy widely adopted by many manufacturing and marketing
concerns.

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Refill packs / Reusable packaging: in urban areas most of the health

drinks are available. The containers can be put to multipurpose uses.
Such measures can a significant impact in the rural market.

Application of value engineering: in food industry, Soya protein is being

used instead of milk protein. Milk protein is expensive while Soya protein
is cheaper, but the nutrition content of both is the same. The basic aim is
to reduce the value of the product, so that a larger segment can afford it,
thus, expanding the market
Distribution Strategies

While it is necessary to formulate specific strategies for distribution in rural

areas, the characteristic of the product whether it is consumable or
durable, the life of the product and other factors have to kept in mind.

The following strategies formulated for the rural category.

Coverage of villages with 2000 and above population: Ideally,
coverage of villages with up to 2000 and above population could
be the break-even point for a distribution setup. By doing so the
percentage of villages covered comes to only 10% of all the rural
population covered will b substantial. With improved communication
facilities it is possible to reach distribution vas to these villages.

Use of co-operative societies: There are over 3 lacks co-operative

societies operating in rural areas for different purposes like marketing
cooperatives, farmers service cooperatives and other multipurpose
cooperatives. These cooperatives have an arrangement for centralized
procurement and distribution through their respective state level
federation.

Utilization of public distribution system: The PDS in the country is fairly

well organized. The revamped PDS places more emphasis on reaching
remote rural areas like the hills and tribal. The purpose of PDS is to make
available essential commodities like food grains, sugar, kerosene, edible
oils and others to the consumers at a reasonable price.

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PROBLEMS IN RURAL MARKETING

There are many problems to be tackled in rural marketing, despite rapid strides in
the development of the rural sector. Some of the common problems are
discussed below:
Transportation: Transportation is an important aspect in the process of
movement of products from urban production centers to remote villages.
The transportation infrastructure is extremely poor in both rural India and
Bangladesh. Due to this reason, most of the villages are not accessible to
the marketing man. Many parts in rural India and Bangladesh have only
clay roads. During the monsoons, even these roads become
unserviceable.
Communication: Marketing communication in rural markets suffers from
a variety of constraints. The literacy rate among the rural consumers is
very low. Print media, therefore, have limited scope in the rural context.
Availability of appropriate media: It has been estimated that all
organized media in the country put together can reach only 30 per cent of
the rural population of India. The print media covers only 18 per cent of
the rural population. The radio network, in theory, covers 90 per cent. But,
actual listenership is much less. TV is popular, and is an ideal medium for
communicating with the rural masses. But, it is not available in all interior
parts of the country.
Warehousing: A storage function is necessary because production and
consumption cycles rarely match. Many agricultural commodities are
produced seasonally, whereas demand for them is continuous. In
warehousing too, there are special problems in the rural context. The
central warehousing corporation and state warehousing, which constitute
the top tier in public warehousing in our country, have not extended their
network of warehouses to the rural parts.

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