CU-BBA-SEM-III-Rural Marketing

2017-18 with a target to complete 10 million houses for the houseless by the year 2019.  The pace of roads construction under Pradhan Mantri Gram Sadak Yojana (PMGSY) has been accelerated to 133 kms per day as against an average of 73 kms per day during the years 2011-14.  The allocation to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been Rs 48,000 crore (US$ 7.2 billion) in the year 2017-18, which is the highest ever allocated amount.  The Government of India is looking to install Wi-Fi hotspots at more than 1,000 gram panchayats across India, under its ambitious project called Digital Village, in order to provide internet connectivity for mass use, as well as to enable delivery of services like health and education in far-flung areas.  In the Union Budget 2017-18, the Government of India mentioned that it is on course to achieve 100 per cent village electrification by May 1, 2018.  The Government of India has sought Parliament’s approval for an additional expenditure of Rs 59,978.29 crore (US$ 8.9 billion), which will be used to support the government’s rural jobs scheme, building rural infrastructure, urban development and farm insurance. As is the trend with urban India, consumers in the rural regions are also expected to embrace online purchases over time and drive consumption digitally. The rural regions are already well covered by basic telecommunication services and are now witnessing increasing penetration of computers and smartphones. Taking advantage of these developments, online portals are being viewed as key channels for companies trying to enter and establish themselves in the rural market. The Internet has become a cost- effective means for a company looking to overcome geographical barriers and broaden its reach. Market research firm Nielsen expects India’s rural FMCG market to reach a size of US$ 100 billion by 2025. Another report by McKinsey Global Institute forecasts the annual real income per household in rural India to rise to 3.6 per cent 2025, from 2.8 per cent in the last 20 years. 9.4 KEYWORDS  Development Program: The process of formulating, improving, and expanding educational, managerial, or service-oriented work plans (excluding computer program development).  Policy: A policy is a set of ideas or plans that is used as a basis for making decisions, especially in politics, economics, or business. 201 CU IDOL SELF LEARNING MATERIAL (SLM)

9.5 LEARNING ACTIVITY 1. Consider all the government initiatives for rural development since the last 5 years and map the successful implementation/ withdrawal/ failure of any 5 of them. Share your findings in class discussion. ___________________________________________________________________________ ___________________________________________________________________________ 2. What is a major drawback of implementing a rural development program in India? ___________________________________________________________________________ ___________________________________________________________________________ 9.6 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. State any 2 rural development programs 2. Write a short note on NSAP. 3. Write a short note on ODF. 4. Write a short note on Jal Jeevan Mission. 5. Name any 4 recent initiatives by the Indian government towards rural development. Long Questions 1. Discuss the concept of Customer Relationship Management in rural context? 2. Discuss the problems associated with marketing of rural products. 3. Should the government opt for protectionist policy for rural marketing? Explain. 4. Explain any 3 programmes for rural development. 5. What are rural development programmes oriented towards? Explain. B. Multiple Choice Questions 1. In which year did the government take a series of bold initiatives to take the economy away from controls (economic reforms and liberalization)? a. 1985 b. 1990 c. 1991 202 CU IDOL SELF LEARNING MATERIAL (SLM)

d. 1995 2. In which year Green Revolution programme (increase the production of food grains) was launched ? a. 1950-51 b. 1970-71 c. 1990-91 d. 1966-67 3. What was the purpose of Jan shree Bima Yojna (2010)? a. Providing insurance security to people living below poverty line b. To fulfil basic requirements in rural areas c. To provide food security to poor d. To connect all the roads with Pacca road 4. What was the purpose of Sansad Adarsh Gram Yojna (2014)? a. To provide bank account to poor (Financial Inclusion) b. Restructured from Swarna Jayanti Gram Swarojgar Yojna c. To develop model village d. To improve employability, skill development and other convenience for labour 5. What was the purpose of Pradhan Mantri Ujjwala Yojana (2016) a. Launched to provide free LPG connections to women from below poverty line families. b. To improve employability, skill development and other convenience for labour c. To develop model village d. To fulfil basic requirements in rural area Answers 4-c, 5-a 1-c, 2-d, 3-a, 203 CU IDOL SELF LEARNING MATERIAL (SLM)

9.7 REFERENCES Text Book  NCAER, New Perspectives in Marketing, New Delhi.  V.S. Ramaswamy and Namakumari S., Marketing Management, McMillan, Delhi, 1990  Kashyap, Pradeep, Amp, Raut, Siddhartha, Rural Marketing, Wiley, New Delhi  Krishnamacharyulu, C.S.G and Rama Krishnan Lalitha, “Rural Marketing – Text and Cases”, Pearson Education, New Delhi. Website:  https://www.insightsonindia.com/wp-content/uploads/2020/03/INSTA-PT-2020- Exclusive-Government-Schemes.pdf  https://www.ibef.org/industry/indian-rural-market 204 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 10: NEW PRODUCT DEVELOPMENT FOR THE RURAL MARKET Structure 10.0 Learning Objectives 10.1 Introduction 10.2 Product Development For Rural Market 10.3 Product Considerations For Rural Markets 10.4 Challenges In New Product Development 10.5 Summary 10.6 Keywords 10.7 Learning Activity 10.8 Unit End Questions 10.9 References 10.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  State the underlying marketing concepts with reference to the Unit topic  Apply generic marketing concepts to rural market context  Get familiarized with variables peculiar to a rural market 10.1 INTRODUCTION In most cases, the product is developed for the urban market and is later pushed into the rural market. Only in recent years have companies started customizing their products for rural markets. E.g., LG Television, Philips Free power radio. Life cycle of a product in the rural market is often longer due the multiple challenges involved in the distribution, communication and adoption of the product. Low growth in the rural market has forced companies to reengineer their products (Free power Radio) or introduce low price packs (sachets, 200 ml Chota Pepsi). They are also trying to change consumption patterns through consumer education (increasing soap usage frequency from weekly to daily) and adopting alternate channels to reach deeper (HUL‘s Project Shakti, haats, mandis) to grow the market. What is new product? The term new product can mean different things. Six different categories of new products can be identified that are all quite different from each other. Still, they are all called new 205 CU IDOL SELF LEARNING MATERIAL (SLM)

products. Let’s investigate the different categories of new products and what the term new product may actually mean. The six categories of new products range from new-to-the-world products (sometimes called really new products), as well as a range of minor repositionings and cost reductions. The list containing the six categories of new products may include things you would exclude. For instance, can we have a new item just by repositioning an old one (telling customer it is something else)? Yes, we can have a new product then. You might consider this to be only a new use, but the firm still went through a process of discovery and development. And a new use may occur in a completely separate division. For example, the Dove soap name has, by now, been extended to almost two dozen box soaps and almost as many liquid body washes. 10.2 PRODUCT DEVELOPMENT FOR RURAL MARKET The definitions of new product development are given as under: “By new product we mean original products, product improvements, product modification and new brands that the firm develops through its own research and development efforts”. In the light of above definition, a new product will be considered anything which is perceived as such by the consumer or with which the firm has no previous experience. It means that a consumer views a product as new if any new thing is experienced or any additional variants are provided with the existing product. He must feel that such a new thing in the product had not come to his use earlier to the current one. Then from the view point of a firm, a product is new to it when existing products are improvised, capacity or life is enlarged or more want satisfying ingredients are added to the earlier products. A firm in order to deliver a new shaped product faces the problems as that of releasing totally new product to the market. It is quite difficult to give the concept of a new product. A product may be new to company but not new to customers or the product may be new to customers but not new to the company. Booz, Allen and Hamilton have identified six categories of new product in the terms of their newness to the company and to the market place. i. New to the world – New products that create an entirely new product. 206 CU IDOL SELF LEARNING MATERIAL (SLM)

ii. New product lines – New Product that allows a company to enter an established market for the first time. iii. Additions to the existing product lines – New products that supplement a company’s established product line. iv. Improvements in revision to existing product – New products that provide improved performance or greater perceived value and replace existing product. v. Repositioning – Existing products that are targeted to new markets or market segmentation. vi. Costs reductions – New product that provides similar performance at lower costs. Concept of New Product Development: A new product is a product that is new to the company introducing it even though it may have been made in same form by others. In the area of toilet soaps, different brands introduced by each company are that way, new products as it is new to the company. New products are those whose degree of change for customers is sufficient to require the design or re-design of marketing strategies. Product development is the next step to product planning. Product development is the process of finding out the possibility of producing a product. It includes the decision as to whether it would be feasible or not to produce the product and whether it would be profitable or not for the enterprise to do so. W.J. Stanton, M.J. Elzel and B.J. Walker define ‘new product’ as, “A new product is one which is really innovative which is significantly different from existing and imitative products that are new to the company.” If a company once has carefully segmented the market, chosen its target customers, identified their needs, and determined its market positioning, it is better able to develop new products. Marketers play a key role in the new-product process, by identifying and evaluating new- product ideas and working with R&D and others in every stage of development. 207 CU IDOL SELF LEARNING MATERIAL (SLM)

Need of New Product Development with examples The need for new product development on various counts described below: a. Putting All Eggs in One Basket: If an organization depends on only one product to get all the business and profits, it faces the danger of losing everything in one stroke. E.g. Automobile Products of India (API) selling Lambretta scooters lost its business to Bajaj Auto and it had no option but to close down. Similarly, Amrutanjan, India’s number one pain balm, a single product company, and Vazir Sultan Tobacco Company, manufacturer of the largest selling cigarette, Charminar, again a single product company, closed when they lost business to rival products. b. Creating New Avenues for Growth: The market is always evolving itself and newer consumer needs and demands are created. To take care of such situations, organizations must come out with new products that will create new avenues for the growth of organizations. Organizations that are slow in creating new avenues fall behind others in business. E.g. Godrej, the only organization manufacturing refrigerators in India (GEC, the other brand used to be imported), did not come out with smaller refrigerators to take care of the middle class willing to buy them and lost business first to Kelvinator/Leonard/Gem (all manufactured by Kelvinator but marketed by self/Blue Star/Voltas) and then to Hyderabad Alwyn and now Whirlpool/LG etc. c. Giving Choice to Consumers for Selection: The consumer needs and demands keep changing and upgrading/downgrading and organizations should create products in both upward and downward changes. E.g. Maruti launched its 800 and van initially and then went on to introduce Zen, Esteem, 1000, Swift, Swift Dezire, WagonR, Ecco, SX4 etc., to give the consumers various choices and keep them tied to its own products. d. Multiple Attacks on Competition: 208 CU IDOL SELF LEARNING MATERIAL (SLM)

When competition is the market leader, organizations introduce multiple products to corner small portions of the competitor’s market share and collectively win a larger market share. E.g. Vadilal ice-cream introduced as many as 24 flavours to beat Quality Ice-cream and become the market leader (Quality sold out to Walls to become Quality Walls, a HUL company). e. Cater to New Tastes of Consumers: Consumers keep changing their expectations and the organization needs to give them newer products to take care of new needs. E.g. Introduction of dish washers and food processors in India by most of the electronics companies. f. Taking Advantage of Market Fads/Fashion: There are many fads and fashions that rule a particular time and organizations need to take care of them by introducing products for such fads/fashions. E.g. KeMnator had introduced refrigerators with various scenes like the Taj Mahal on Its door. It became an instant success and was followed by all the other companies. The process of new product development for rural market involves the following stages: Stage 1. Idea Generation: This is the first stage in the new product development process. Ideas may be contributed by scientists, professional designers, competitors, customers, dealers, top management, company salesmen, etc. Companies must monitor the new product development of their competitors. Many companies often copy the competitors’ products and build a better one. For example- BPL introduced the CONVERTI refrigerator, a unique product. Now, competitors in the same field are coming up with similar products, with similar or more attractive features. Similarly, Bajaj Auto Ltd. introduced India’s first 4 – stroke scooter with a throttle regulated ignition control system, for maximum fuel efficiency. Now, competitors from the two wheeler sector are developing similar products with added features to their credit. Stage 2. Idea Screening: If the purpose of idea generation is to create a number of good ideas, idea screening, is done to reduce the number of idea. At this stage, though ideas at not clear, some rough guess work is done as to the market size, product price development time and costs, manufacturing costs level of return, target market etc., on the basis of this analysis, poor or bad ideas are dropped 209 CU IDOL SELF LEARNING MATERIAL (SLM)

and only the most promising and profitable ideas of picked up for detailed investigation and research. Stage 3. Concept Development and Testing: At this stage, those ideas that have survived screening must be developed into fully mature product concepts. For example- if the Bangalore Dairy Development Corporation gets an idea to produce a milk powder that consumers can use instead of milk, then this is a product idea and it can be turned into a large number of product concepts; like whether the product can be a substitute for baby food or the taste, nutrition, energy and refreshment contained in the product; whether the product can be substitute for milk; and so on. At this stage, it is advisable to conduct a consumer survey, which will enable the company to know which concept has the strongest appeal. Accordingly, the firm can develop the product. Stage 4. Marketing Strategy and Development: This is the stage of introducing the product into the market, based on the ideas and consumer preferences gathered at the concept development stage. A marketing strategy is developed for the product. For example- when MILKMAID introduced its kulfi mix, the company offered it as a dessert that could be prepared in five minutes. The introductory price was half of the original price and four kulfi moulds were distributed as a free gift. At this stage, a company gathers information from the market about the behaviour of the target market, the expected sales, intended price, distribution strategy, etc. Stage 5. Business Analysis: At this stage, the management has to analyses the business feasibilities of the proposal. In other words, the management must analyse future sales, costs, profit estimate, etc. to evaluate whether they satisfy the company’s objectives. If they satisfy the desired objectives, then the product concept is moved to the product development stage. Thus, at this stage the economic prospects of the new product are analyzed in detail. On this basis, the company has to aim at attaining the desired profit level. Stage 6. Product Development Programme: A product concept that is found feasible during business analysis is turned over to the Research and Development department to be developed into a physical product. To develop and convert the product description into a physical and feasible product, huge capital investment is involved. Consumer testing is also done at this stage, usually by distributing free sample in sachets. Moreover, the branding, packaging and labeling of the product are also finalized upon at this stage. For example- the Pune based Kinetic Motors developed its product concept, a small car for the Indian market for which the company spent Rs.5 crore on Research and Development. Stage 7. Market Testing: 210 CU IDOL SELF LEARNING MATERIAL (SLM)

Market testing is the stage where the product and marketing programme is introduced in select cities or areas. This helps the company understand consumer reaction through a trial and error approach. The company can gather valuable information for product improvement, modifications, marketing mix, marketing strategy, etc. For example- Master card International is planning to introduce multi – purpose smart cards in India in the next 6-18 months. Towards this Master card will initially launch its “Mondex” smart cards as a pilot project in one city, say, Bangalore and later move on to other cities. In this case, Bangalore is the test market for the “Mondex” smart cards. Test marketing is a must to find out the viability of the marketing programme at the national level. Test marketing helps predict future sales, the trying out of different marketing plans, etc. It is not done for industrial products like computers, gadgets and machinery. It is popular for products like cosmetics, credit cards, and toiletries. Industrial goods, automobiles, etc. are introduced at trade shows in order to analyses the market potential, a buyer’s interests, distinctive features of the product from rival companies and similar purposes. Stage 8. Commercialization: This is last stage of new product development. At this stage the management takes the final decision of launching the new product. If the decision is to go ahead with the idea, the company will have to arrange for machinery for the required production, along with the full- fledged advertising and sales promotion campaign to go with the mass production. The decision to commercialize involves four important decisions: a. Timing: This is an important issue concerned with a product. If the new product is an improvement over the existing product, then the product introduction has to be delayed until the old product stock is completely exhausted. For example- if a text book’s revised edition at a reduced price has to be introduced, the old edition at a higher price has to be completely sold out. If the product is completely seasonal, say for example a soft drink, it is advisable to introduce the product during summer. But if it is mineral water it can be introduced at any time. Similarly, if the test market calls for an improvement of the product, the product should be introduced with the modifications, even if the company has to delay the product launch. b. Geographical Strategy: This decision is concerned with issues of whether a company should launch its product in a single city, in selected cities of a single state, in selected states or at the national or international level. For example- when BPL introduced its Double Cool refrigerators, it was done at the national level. c. Target Market: 211 CU IDOL SELF LEARNING MATERIAL (SLM)

The target market is another important factor to be considered in association with the product launch. A company gathers the necessary information about this through test marketing. As a result, it gets to know about the customer demand and can thus propagate the sale of the product by targeting it at the right category. d. Introducing Marketing Strategy: The final step in the commercialization stage is to introduce the product in the market. For example- the Indica car was first introduced in a trade fare and through advertisements they popularized the product and started accepting orders also. Some companies popularize and introduce the product specifying the distinctive features of the product as compared to rival products in the market. For example- Ken star’s water purifiers always state their distinctive features or price in their advertising campaign against Aqua Guard. Importance Of New Product Development For Rural Markets Given the rising interest of companies in the rural market, developing new products suitable for the rural market has become an imperative. For e.g., Jolly battery-operated color television, 5 kg cooking gas cylinder by HPCL, Philips free power radio, LG Washing Machine, Kisan Credit Card, Max Gas LPG cylinder. Philips free power radio does not require batteries or any external source of electricity for operation. LG Electronics spent 21 lakhs to develop a set, that would have on-screen displays in the vernacular languages of Hindi, Tamil and Bengali. Max Gas LPG Cylinder has special steel-braided hose pipe, which is rat resistant and wider base of cylinder to ensure stability even on uneven rural kitchen floors. Sturdy Products – Village people believe that the product should be sturdy enough to withstand rough consumers handling and storage. Rajdoot Motorcycle manufactured by Escorts Ltd. Is very popular in rural areas because of its adaptability, low maintenance costs, minimal breakdown and easy accessibility of service and repairs. LG Electronics has devised a semi-automatic washing machine with double the capacity of their urban based machines. Brand Name – A brand should have short, simple, easy to pronounce, can be remembered easily and should lend itself to virtual interpretation. In rural markets, consumers do give their own brand name or the name of an icon. Many a times rural consumers ask for peeli (yellow) tikki or neeli tikki in case of washing soaps. E.g., LG Electronics branded one of the TV set as Sampoorna. Fertilizer companies normally use a logo on the fertilizer bag. 212 CU IDOL SELF LEARNING MATERIAL (SLM)

Small Unit Packings – Rural consumers receive daily wages and at the same time their income is unsteady. Hence they can‘t make purchases in large quantities. E.g., HUL sells Shampoo and Hair oil in sachet packs in rural areas. Cavin Kare Ltd. has launched a sachet priced at 50 paise for its Chic Shampoo. Low Priced Packing – Tata Tea launched ‗Agni ‘as an economy brand in rural areas to compete with loose tea powder. ITC has launched ‗Hero ‘containing blended tobacco and is priced just for the pockets of rural consumers. 10.3 PRODUCT CONSIDERATIONS FOR RURAL MARKETS Design and features of the products - While designing the products for the rural market, comprehensive market research is very important. Marketer cannot push the products manufactured for the urban consumers towards the rural market. New product designs - R&D activities become lot more important when company enters into unexplored territory. A close observation of rural people and their lifestyle indicates the significance of redesigning or modifying the products. Efforts should be channelized towards the manufacturing of products that are specifically meant for rural market by understanding behavior of the rural consumer. Robust products- Rural people give immense importance to durability of a product. They also have a psychological belief that products which are heavy in weight and bulky in appearance are sturdier and long lasting. Given the fact that rural people in general roughly handle the product, the product manufactured for rural market must be sturdy to bear the rough handling by rural people. Alteration to the existing product- Product innovation requires heavy investment. In certain cases, instead of completely designing the new product, marketers can make changes to the existing product to suit the requirement of the rural customers. Avoid complexity- Too much of intricacies in the product add up to its complexity. It makes it difficult for rural consumers to understand the functioning of the product. Simpler products can be more conveniently used by the rural consumers. Easy to maintain- To keep the maintenance cost of the product low is equally important while manufacturing the product for the rural market. Durability and ease in maintenance must go hand in hand. Servicing of the product- For the servicing of the products, it becomes cumbersome for rural consumers to carry huge consumer durables to towns. Arrangements must be made to provide accessibility to after sales service. 213 CU IDOL SELF LEARNING MATERIAL (SLM)

Product Mix - The product mix in rural markets is simple. Mostly only one product of a particular company registers its availability on rural shelves. Limitations of investment in stocks, the slow movement and replenishment of stocks and the dominance of the retailer in rural markets are some of the important factors responsible for the smaller range of products available at retail shops in rural. E.g., HUL has good product width, with a presence in toothpaste, shampoo, detergent etc. Packaging in Rural India Packaging in rural India needs special focus because of poor Transport System (poor road conditions), difficulties of safe storage (rats, moisture, heat, rainwater), poor Facilities (erratic power supply leading to poor cold-storage facilities for food products). The product for rural market should: Have a longer shelf life than the product for urban. Be able to withstand extreme weather conditions Be able to withstand sudden and jerky movements on dusty roads. Have alternate storage arrangements (ice box for cold drinks). Packaging Aesthetics include - Bright colors like red, yellow, green etc. Use of local languages on the pack, images. Texla TVs – Launched new range in bright red and yellow color as the old one with black and grey cabinet was a failure. ITC – Gold flake with a yellow cover in the south whereas golden color in north because yellow is associated with ill-health and jaundice in north. 10.4 CHALLENGES IN NEW PRODUCT DEVELOPMENT Fake Brands Rural markets suffer from the problems of low penetration and poor availability of branded products. Hence, although there exists a huge demand for branded products, there are no distribution channels to make the product reach the customer. This has led to the growth of fake brands. Ponds has been replaced by Bond’s talc Fair & Lovely by Fair & Lonely Lifebuoy by Likebuoy 214 CU IDOL SELF LEARNING MATERIAL (SLM)

The Fakes Market Look-alikes – Products where the color scheme on the packaging material closely resembles that of a popular brand but the pack carries a different name. Shagun for Lifebuoy, Lalita Amla for Dabur Amla Spell-alikes – Fakes of original brands packaged in colors and designs similar to those of the originals but have names that are subtly and cleverly misspelt. E.g., Paracute for Parachute, Fair & Lonely for Fair & Lovely. Duplicates – Exact replicas of original brands. The color, design, and name on the package are the same as those of the original brands. Other urban national branded products – In certain villages, the proliferation of national brands is quite evident. More likely in villages that are on the periphery of larger towns because of the spillover from urban centers. Regional urban branded products – regional brands of unorganized sector are quite common. True for soaps. Local urban brands – These products are manufactured in urban centers and find their way into rural India through the wholesale channels like washing products, bangle etc. Local village brands – Products manufactured in the village itself. For e.g., ropes, bread etc. Substitutable products or indirect competition – Products that can be substituted. E.g., Ash for washing vessels, neem twigs for toothpaste. Product warranty and after sales service - When purchasing high-value durable products, rural consumers attach a great deal of value to the warranty offered on the products. With the increase in the usage of machinery, appliances and equipment, there has been a continuous demand for after-sales service. Tractor servicing – Most tractor companies regularly organize service camps in big villages/ small towns. They invite tyre, battery, fuel injection and other component suppliers to participate. Advance notice is sent to tractor owners of the company brand with a request to come on a scheduled date for a free-checkup. Videocon servicing – Company mechanics go around to villages twice a week to provide after-sales service, an important factor in the decision to purchase consumer durables. 215 CU IDOL SELF LEARNING MATERIAL (SLM)

10.5 SUMMARY  As the primitive urban market required some breakthrough innovation to expedite the process of development, this market also calls for some properly chalked out, relevant and path breaking innovations. Being on a different plane of market evolution, the taste, preferences, wants, and likings of the Indian rural market are markedly different from those of the Indian urban market. (Chattopadhyay, 2011) Technology is going to make a huge difference to the way we look at rural India. The process has started and in the next few years there will be more progress in this area. (Goel, 2011) “Rural marketing, as of now, is all about seeding the markets, creating awareness about brands and promoting a culture for consumption.” said Sharat Dhall, one of the persons who spent a lot of time in effective implementation of HUL’s rural initiative, Project Shakti. (Dixit, 2011).  Rural areas exhibit sharper and varied regional preferences with distinct predilections, habit patterns and behavioural characteristics. A company has to assimilate these regional and local variations in the marketing-mix of a new product. This paper explores the possibilities of gauging the potential of rural markets through conducting test-markets. 10.6 KEYWORDS  Product mix: Product mix, also known as product assortment, refers to the total number of product lines a company offers to its customers. For example, your company may sell multiple lines of products. 10.7 LEARNING ACTIVITY 1. Take a product and a service of your choice. Identify through survey which factor- affordability or features is more important to an urban consumer versus a rural consumer. Ensure to include at least 20 respondents for each group representation. ___________________________________________________________________________ ___________________________________________________________________________ 2. ‘A product that is in the decline stage in the urban market should be in the introduction stage in the rural market.’ Do you agree? ___________________________________________________________________________ ___________________________________________________________________________ 10.8 UNIT END QUESTIONS A. Descriptive Questions 216 CU IDOL SELF LEARNING MATERIAL (SLM)

Short Questions 1. How many stages are involved in new product development for rural markets? 2. What are the important considerations for product commercialization? 3. What are the sources of idea generation? 4. What are packaging aesthetics? 5. What do you mean by fake brands? Long Questions 1. How do you evaluate the effectiveness of product—mix? 2. What is the significance of product strategy in the current marketing environment? 3. How do you design products for rural and urban population? 4. What is the role played by women in the purchase decision in rural India? 5. Do only sturdy products do well in rural India? Explain. B. Multiple Choice Questions 1. Which activities become a lot more important when a company enters into unexplored territory? a. Research and development (R&D) b. Market Survey c. Understanding of competitor d. Ease of doing business 2. Why Life cycle of a product in the rural market is often longer & challenging? a. Distribution b. Communication c. Adoption of product d. All of these 3. How Fake brands can be minimized or zero down? 217 a. Increasing Penetration of branded products b. Increasing availability of branded products c. None of above CU IDOL SELF LEARNING MATERIAL (SLM)

d. Option A & Option B (Both) 4. What is the project name under HUL’s rural initiative? a. Project Aarush b. Project Shakti c. Project Pradhan Mantri Yojana d. National Rural Livelihood Mission 5. Why does Rural India Packaging in rural India need special focus? a. poor transport system (poor road conditions), b. difficulties of safe storage (rats, moisture, heat, rainwater) c. poor infrastructural facilities (erratic power supply leading to poor cold-storage facilities for food products). d. All of these Answers 3-d, 4-b, 5-d 1-a, 2-d, 10.9 REFERENCES Text Book  NCAER, New Perspectives in Marketing, New Delhi.  V.S. Ramaswamy and Namakumari S., Marketing Management, McMillan, Delhi, 1990  Kashyap, Pradeep, Amp, Raut, Siddhartha, Rural Marketing, Wiley, New Delhi  Krishnamacharyulu, C.S.G and Rama Krishnan Lalitha, “Rural Marketing – Text and Cases”, Pearson Education, New Delhi. Website:  https://www.economicsdiscussion.net/marketing-management/rural-marketing-in- india/3195 218 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 11: RURAL MARKET AND PRODUCT LIFE CYCLE Structure 11.0 Learning Objectives 11.1 Introduction 11.2 Rural Product lifecycle 11.3 Product life cycle strategies 11.4 Summary 11.5 Keywords 11.6 Learning Activity 11.7 Unit End Questions 11.8 References 11.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Explain the underlying marketing concepts with reference to the Unit topic  Apply generic marketing concepts to rural market context  Get familiarized with variables peculiar to a rural market 11.1 INTRODUCTION The rural population in India is around 70 per cent. Of the total population, 62 per cent of consumer expenditure in India comes from rural market. The rural market in India is not a separate entity in itself and it is highly influenced by the sociological and behavioural factors operating in the country. Rural markets are tomorrow’s market and marketers should know how to penetrate these markets. Rural markets are the new markets which are opening up for various product categories. Rural market offers growth opportunities as the urban markets are increasingly becoming competitive and in many products even getting saturated. Now income level and standard of living is increasing rapidly in rural areas. The demand of branded products is also increasing. The rural market in India brings bigger revenues in the country, as the rural regions comprise of the maximum consumers in this country. The rural market in Indian economy generates almost more than half of the country’s income. 219 CU IDOL SELF LEARNING MATERIAL (SLM)

Rural market covers all marketing activities ascertain the demand, product planning, distribution and facilitating the entire marketing process, with aim of satisfaction of rural consumer. Rural market includes all business activities which involved in flow of goods and services from producers to rural consumers. The definition of rural as given by the Census of India is not being Urban. There could be several approaches to understand the rural market. It will not be an exaggeration to state that if the whole of India excluding the metropolitan cities, various district headquarters and the large industrial townships is considered as the rural market. Rural market is not an independent entity by itself. In fact, there are sociological and behavioural factors which affect the economy of rural market. By and large, markets may be described as an environment of the country side and the habitants thereof. People are the market for marketers. In that sense, India is the second market in the world. As per 1991 Census, the population of India is 844 million. It is growing at the rate of 2.00 per cent every year. The rural population of the country is at 627 million, accounting for 74.3 percent of total population. The Rural Marketing refers to the activities undertaken by the marketers to encourage the people, living in rural areas to convert their purchasing power into an effective demand for the goods and services and making these available in the rural areas, with the intention to improve their standard of living and achieving the company’s objective, as a whole. 11.2 RURAL PRODUCT LIFE CYCLE When a new product is being introduced in to a market, it normally undergoes a series of step in the market; these steps are introduction growth, maturity and lastly the decline stage. These steps follow each other chronologically and thus referred to as the product life cycle (PLC. The PLC sequence or series is closely linked with the dynamics in the market environment and has subsequent effects on the product marketing mix and marketing strategies. A graph that is normally plotted of the revenue against the stages of product is referred to as the product life cycle graph. In the introduction stage of the PLC, the firms normally aim at creating the product awareness in the market through the employment of the marketing mix. Initial stages involve the establishment of quality and branding couples with the intellectual property protection like the trade marks. The pricing strategy may be low to ease the entry into the market if there are already established firms while it may be high if there are no competitors and this enables fast recovery of the initial cost . Distribution is normally selective while the promotion targets early adaptors and innovators at the growth stage of the PLC, the firms aim at increasing its share market by offering additional features to its product quality while maintaining the prices. Distribution is increased to meet the increased demand while the promotion aims a bigger audience when your buyer says your brand is to be delisted; all you can hear is the blood pulsing through your heart, and the taste of bile on your 220 CU IDOL SELF LEARNING MATERIAL (SLM)

mouth…\" The product can be defined as goods, services or both; in the other words it's anything that satisfies customer need. Each product has its own limited life, however it shares the same aspect and we define the period that the product goes through as the \"Product life cycle\". Rural growth - Most FMCG categories are growing faster in rural as compared to urban India. This growing importance of rural India will also mean that regional players and categories with a strong regional franchise will influence marketing plans. As these categories expand, they will influence the way adjacent categories and emerging alternatives will seek to market themselves. Innovation Imperative – Innovation is imperative in the FMCG category today. Differentiation is the key. Product life cycles are getting shortened given the highly competitive scenario. There is therefore a very strong thrust on innovation in the FMCG space across various aspects ranging from brand proposition, packaging, communication, consumer in sighting to pricing. We are constantly re-engineering our offerings on the innovation plank with the objective of serving the evolving needs of the consumer. Some of the examples in the innovation space include the launch of Goodnight Advanced Active+ and Good Knight Advanced Low Smoke Coil. Shopper Marketing – With the growth in modern retail, the store is emerging as the most potent medium in the marketing of brands. The Indian consumer is clearly enjoying the modern trade shopping experience and is increasingly shopping there, as is evident from the increased spending at modern stores. Shopper marketing has, therefore, become an important tool for marketers driving brand choice inside the stores. Connecting and engaging with the Indian Digital consumer - With 50+ million active social media users, Indians spend more time on social media than on any other activity on the Internet, according to Nielsen. Increasingly marketers are focusing on this medium, however what will be critical is how brands can effectively break away from the pack in order to differentiate and improve social media engagement levels. 11.3 PRODUCT LIFE CYCLE STRATEGIES Strategies followed During Various Stages of Product Life Cycle are: 1. Strategies during Product Development Stage: a. Focus is on product b. Emphasis is on cost reduction c. Trials are the main tools d. Exploring of the market starts e. Publicity of the product (about its coming) f. Minimum expenses to be maintained during this period g. Production capacity must be looked after h. Quality must be checked 221 CU IDOL SELF LEARNING MATERIAL (SLM)

i. Focus on work is to be given j. A good introducer of the product is required k. In-house working should be emphasised. 2. Strategies during Introduction Stage: i. Persuade people to try the products. ii. Stress should be on advertising to inform the customer about the product iii. Give introductory offers by providing some attractive gifts to entice the customers. iv. Give a valid reason to the customers to buy the product v. Dealers should be given good discounts vi. There should be selective distribution to focus on target customers vii. Skimming pricing should be followed to earn higher profits in the initial stages viii. Removing the product deficiencies must be focused on 3. Strategies during Growth Stage: a. Aggressive advertising is required to stimulate the sales of the product b. Availability of the product should be ensured to a large number of customers c. Modifications or new versions of the product are required to be introduced to fulfill the requirement of different customer classes. Strengthening of the distribution channels are required so that the product is easily available wherever required. d. Focus should be on developing the brand image through promotional activities e. Competitive prices must be maintained to grab the market. f. Activities should be customer oriented, an emphasis should be given on customer services to satisfy them to a maximum level. 4. Strategies during Maturity Stage: i. More and more emphasis is required on the brand image in order to differentiate the product from products of the competitors. ii. More benefits may be provided to the customers e.g. extending the warranty period, guarantee period etc. iii. Change in packaging may be introduced (Reusable packaging). iv. Packaging may be used as a silent salesman by making it more attractive. v. Requirement to explore the new markets for the product. vi. New uses of the product may be developed. vii. New users of the product may be developed. viii. New Technology can be adopted to enhance the quality of the product. ix. New features can be added to enhance the value of the product. 5. Strategies during Decline Stage: i. More emphasis on the promotional schemes ii. Distribution cost should be reduced and the benefit should be transferred to the customers iii. More value addition to the product can be done. 222 CU IDOL SELF LEARNING MATERIAL (SLM)

iv. Packaging will play a very important role at this stage also, so it should be focused on. v. Cost of production should also be reduced. vi. Economy packs of the products should be introduced. vii. Try to increase the life of the stage viii. Emphasis is on sales volume with minimum profit margins. If after all these efforts company fails to restore its position in the market, than the best thing for the company is to take out their existing product from the market and come up with a new product comprising of unique features that can hit the market. The product life cycle contains four distinct stages: introduction, growth, maturity and decline. Each stage is associated with changes in the product's marketing position. You can use various marketing strategies in each stage to try to prolong the life cycle of your products. Product introduction strategies Marketing strategies used in introduction stages include:  rapid skimming - launching the product at a high price and high promotional level  slow skimming - launching the product at a high price and low promotional level  rapid penetration - launching the product at a low price with significant promotion  slow penetration - launching the product at a low price and minimal promotion During the introduction stage, you should aim to:  establish a clear brand identity  connect with the right partners to promote your product  set up consumer tests, or provide samples or trials to key target markets  price the product or service as high as you believe you can sell it, and to reflect the quality level you are providing You could also try to limit the product or service to a specific type of consumer - being selective can boost demand. Read more about the introduction stage of a product life cycle. Product growth strategies Marketing strategies used in the growth stage mainly aim to increase profits. Some of the common strategies to try are:  improving product quality 223  adding new product features or support services to grow your market share  enter new markets segments CU IDOL SELF LEARNING MATERIAL (SLM)

 keep pricing as high as is reasonable to keep demand and profits high  increase distribution channels to cope with growing demand  shifting marketing messages from product awareness to product preference  skimming product prices if your profits are too low. Growth stage is when you should see rapidly rising sales, profits and your market share. Your strategies should seek to maximise these opportunities. Product maturity strategies When your sales peak, your product will enter the maturity stage. This often means that your market will be saturated and you may find that you need to change your marketing tactics to prolong the life cycle of your product. Common strategies that can help during this stage fall under one of two categories:  market modification - this includes entering new market segments, redefining target markets, winning over competitor's customers, converting non-users  product modification - for example, adjusting or improving your product's features, quality, pricing and differentiating it from other products in the marking Product decline strategies During the end stages of your product, you will see declining sales and profits. This can be caused by changes in consumer preferences, technological advances and alternatives on the market. At this stage, you will have to decide what strategies to take. If you want to save money, you can:  reduce your promotional expenditure on the products  reduce the number of distribution outlets that sell them  implement price cuts to get the customers to buy the product  fin another use for the product  maintain the product and wait for competitors to withdraw from the market first  harvest the product or service before discontinuing it Another option is for your business to discontinue the product from your offering. You may choose to:  sell the brand to another business  significantly reduce the price to get rid of all the inventory 224 CU IDOL SELF LEARNING MATERIAL (SLM)

Many businesses find that the best strategy is to modify their product in the maturity stage to avoid entering the decline stage. Failure Of A Product: Despite all the efforts made for the success of a product by development and planning, some products have a very short life span and are market failures. Following are the reasons given for the failure of new products: 1. Inadequate market analysis and market appraisal 2. Insufficient and ineffective marketing support 3. Bad timing of introduction of a new product 4. Failure to recognize rapidly changing marketing environment 5. Absence of formal product planning and development procedure 6. Failure to satisfy customer’s needs or expectations about the new product 7. Technical or production problems 8. Higher costs than estimated costs 9. Product problems and defects 10. Failure to estimate strength of competition, and 11. Market may be flooded with new products, all giving more or less the same features, etc. But a company can avoid the reasons mentioned above for product failure through proper planning, analysis and control measures since these factors are within the control of the management. Chances for the failure of a new product are less, if the product has any of the following advantages: 1. Product advantage 2. Marketing advantage, or 3. Creative advertising advantage. In other words, if a product can satisfy customer needs precisely, supported by a better marketing and advertising advantage, the product will definitely be a success. For example, Hotmail, the Internet’s first free e-mail service, made Saber Bhatia rich, famous and sought after. Sabeer Bhatia and his friend Jack Smith, while trying to communicate with each other without any middlemen, hit on Hotmail by chance. Now we know that this led to an Internet revolution and it already has 65 million users worldwide. Branding: 225 CU IDOL SELF LEARNING MATERIAL (SLM)

One of the most significant product policy decisions that an organization faces is the means to identify its products. In general, branding is a means for an organization to identify its offering and distinguish them from those of its competitors. In simple terms a brand can be defined as “a name, term, sign, symbol, design or a mix thereof used to identify the product of one firm and to distinguish it from competitive products.” A brand can be composed of a name, mark or a mnemonic. Moreover, a brand name is the part of a brand which can be vocalized. For example- the brand mark of Wipro Ltd. is a sunflower, that of Air India is the maharaja and the ISI mark is for manufactured goods. Brand marks are designed to aid the easy and immediate identification of a product. The continued uses of a brand mark are generally due to: i. Crowing competition, ii. Growth of national, local and international advertising, iii. Growth of packaging, and iv. The development of consumer brand consciousness. Harry L. defined a brand image as “the impression of a particular product that has formed in the consumer’s mind.” ‘Brand’ plays a significant part in deciding the production policy. When a marketer opts to brand his product, he is intending to create an asset out of his brand. Moreover, his promotional programmes get centered around the distinctive features of his brand. On the other hand, if the basic brand decisions go wrong, then the entire marketing programme will suffer a set-back. For developing a brand, the first step is to give the product an-identify through a name. The second step is to enhance its recognition by the provision of a symbol of identity. The third step is to develop a unique image for the brand and to build its personality over a long term. Building a brand personality is a difficult task for any product and service and only a handful of brands emerge successfully. Moreover, years of uninterrupted nursing with the support of a good marketing programme is required to get a brand established in the market. Selecting a brand name is a difficult task for the marketer. A good brand name must be distinctive, easy to pronounce, recognize and remember. Also, it must represent something about the nature or function of the product and be appealing to the general public. For example- Amul is a popular brand name. Along with the brand name, companies also use a logo for visual identification. For example- the logo used by the State Bank of Mysore is a blue circle with a central dot. Successful brands are major assets for companies. It is a valuable, renewable and lasting asset capable of producing a sustainable competitive advantage for the company. This will help the company earn its reputation and profits for years just like any other durable asset. 226 CU IDOL SELF LEARNING MATERIAL (SLM)

11.4 SUMMARY  Product management is a middle level management function that can be used to manage a products life cycle and enables a company to take all the decisions needed during each phase of a product’s life cycle. The moment of introduction and of withdrawal of a product is defined by the use of product management by a Product Manager. A Product Manager exists for three basic reasons. For starters he manages the revenue, profits, forecasting, marketing and developing activities related to a product during its life cycle. Secondly, since to win a market requires deep understanding of the customer, he identifies unfulfilled customer needs and so he makes the decision for the development of certain products that match the customers and so the market’s needs.  Finally he provides directions to internal organization of the company since he can be the eyes and ears of the products path during its life cycle.  To improve a product success during each of its phase of its life cycle (development - introduction – growth – maturity – decline), a product manager must uphold the following three fundamentals. Understand how product management works: When responsible for a given new product, a product manager is required to know about the product, the market, the customers and the competitors, so that he can give directions that will lead to a successful product. He must be capable of managing the manufacturing line as well as the marketing of the product.  When the product manager has no specific authority over those that are involved in a new product, he needs to gather the resources required for the organization to meet product goals. He needs to know where to look and how to get the necessary expertise for the success of the product. Maintain a product / market balance: The product manager as the person that will make a new product to work, needs to understand and have a strong grasp of the needs of the customer / market and therefore make the right decisions on market introduction, product life cycle and product cannibalization. To achieve the above he must balance the needs of the customers with the company’s capabilities. Also he needs to balance product goals with company objectives. The way a product’s success is measured depends on where the product is in its life cycle. So the product manager must understand the strategic company direction and translate that into product strategy and product life cycle position. Consider product management as a discipline: Managing a product must not be taken as a part time job or function. It requires continuous monitoring and review. Having said that, it is not clear why many companies do not consider product management as a discipline. The answer lies in the fact that product management is not taught as engineering or accounting i.e. does not have formalized training. 227 CU IDOL SELF LEARNING MATERIAL (SLM)

11.5 KEYWORDS  Rapid skimming - launching the product at a high price and high promotional level  Slow skimming - launching the product at a high price and low promotional level  Rapid penetration - launching the product at a low price with significant promotion  Slow penetration - launching the product at a low price and minimal promotion  Product life cycle- it refers to the length of time a product is introduced to consumers into the market until it's removed from the shelves. The life cycle of a product is broken into four stages—introduction, growth, maturity, and decline 11.6 LEARNING ACTIVITY 1. Meet market intermediaries and develop a profile of them. Gather data on sales, stock, number of invoices per year, average collection period, outstanding debts, number of employees, number of inside and outside sales persons, space available, computerization of operations, and problems encountered from the company and customers. ___________________________________________________________________________ ___________________________________________________________________________ 11.7 UNIT END QUESTIONS 228 A. Descriptive Questions Short Questions 1. What are the 3 fundamentals to make a product successful? 2. What strategy can one adopt during product maturity stage? 3. What strategy can one adopt during product introduction stage? 4. Write a short note on rural product life cycle. 5. Give any 4 reasons for product failure. Long Questions 1. How do PLC factors affect rural marketing efforts in India? 2. What is the difference between the rural and urban market? 3. What are the factors that affect the product adoption process? 4. How would you launch a technology product in a rural market? 5. Stating a company of your choice, explain its PLC in rural market. CU IDOL SELF LEARNING MATERIAL (SLM)

B. Multiple Choice Questions 1. Which of below is Rapid skimming marketing strategy used in introduction stages? a. launching the product at a high price and low promotional level b. launching the product at a low price with significant promotion c. launching the product at a high price and high promotional level d. launching the product at a low price and minimal promotion 2. What causes the end stages of a product while you see declining sales & Profits? a. Changes in consumer preferences b. Changes in technological advances c. Changes in alternatives on the market d. All of these 3. What are the series of steps in the market for new products being introduced? a. Introduction growth, Maturity & decline stage b. Introduction growth, Maturity & revenue stage c. Market balance, Maturity & decline stage d. Introduction growth, Market balance & decline stage 4. Product Managers are most required for which stage of the product life cycle? a. Introduction b. Growth c. Maturity d. Decline 5. What does it means when your sales team states that your product will enter the maturity stage? a. Market will be saturated b. Change marketing tactics to prolong the life cycle of your product c. Both (a) and (b) 229 CU IDOL SELF LEARNING MATERIAL (SLM)

d. None of these Answers 5-c 1-c, 2-d, 3-a, 4-a, 11.8 REFERENCES Text Book  NCAER, New Perspectives in Marketing, New Delhi.  V.S. Ramaswamy and Namakumari S., Marketing Management, McMillan, Delhi, 1990  Kashyap, Pradeep, Amp, Raut, Siddhartha, Rural Marketing, Wiley, New Delhi Website:  https://www.economicsdiscussion.net/marketing-management/rural-marketing-in- india/3195 230 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT – 12: ROLE OF FINANCIAL INSTITUTIONS IN RURAL MARKETING Structure 12.0 Learning Objectives 12.1 Introduction 12.2 Agricultural- financing bodies 12.3 Factors Affecting Access to Financial Services 12.4 Implementation and Support of Infrastructure 12.5 National Strategy for Financial Inclusion for India 2019-24 12.6 Summary 12.7 Keywords 12.8 Learning Activity 12.9 Unit End Questions 12.10 References 12.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Explain the underlying marketing concepts with reference to the Unit topic  Apply generic marketing concepts to rural market context  Get familiarized with variables peculiar to a rural market 12.1 INTRODUCTION The financial institution deals with finance-related services. These are gaining popularity day by day nowadays. The attractive rate of returns on the customer’s investment is very demanding. It also provides specialized services like hire purchase and leasing, etc. The simple and organized procedure of the institutions is becoming very complementary. It provide a broad range of business opportunities. There are different types of financial institutions. The goal of all the institutions is different and they provide different services and have different levels of risk associated with it. All the financial institutions have unique features and it works in a specialized way. The financial institution is gaining immense popularity in broadening the finance-related services in the country. Financial institutions work like banks in some ways. They give loans and advances to the customers and also set a 231 CU IDOL SELF LEARNING MATERIAL (SLM)

platform for the customers to do some investments. The customers get exciting offers and returns from them and therefore these institutions are gaining popularity. It also provide consultancy services to the clients on their investments related to the financial markets where the huge amount of risk is involved. Moreover, the customers who are handing over their hard-earned monies to such institutions should check for the history and origin of this financial institution. What Is a Financial Institution (FI)? A financial institution (FI) is a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange. Financial institutions encompass a broad range of business operations within the financial services sector including banks, trust companies, insurance companies, brokerage firms, and investment dealers. Virtually everyone living in a developed economy has an ongoing or at least periodic need for the services of financial institutions. Financial institutions serve most people in some way, as financial operations are a critical part of any economy, with individuals and companies relying on financial institutions for transactions and investing. Governments consider it imperative to oversee and regulate banks and financial institutions because they do play such an integral part of the economy. Historically, bankruptcies of financial institutions can create panic. In the United States, the Federal Deposit Insurance Corporation (FDIC) insures regular deposit accounts to reassure individuals and businesses regarding the safety of their finances with financial institutions. The health of a nation's banking system is a linchpin of economic stability. Loss of confidence in a financial institution can easily lead to a bank run. 12.2 AGRI-FINANCE BODIES IN INDIA Vast geographical base and large population make India unreasonably difficult for banks and other financial institution to reach out to every individual. Thus, there are three major challenges: First, to provide access to basic banking services. Second, to retain every individual in the financial system by making them an active user by participating in transactions regularly. Third, Lack of financial literacy: A large number of people in India are unaware of the significance of different financial products and services. Financial knowledge helps individuals become self-sufficient so that they can achieve financial stability. On the other hand, lack of basic financial knowledge results in poor investments and financial decisions. NABARD NABARD is an autonomous body having a chairman, MD and 13 Board of Directors consisting of experts in rural development, banking and RBI representatives. The authorized capital is Rs.500 crores and it can raise funds from the Government of India, World Bank, financial institutions and also from the open market. 232 CU IDOL SELF LEARNING MATERIAL (SLM)

Where a bank fails to fulfil its commitment towards priority sector lending, it is currently required to contribute to Rural Infrastructure Development Fund set up by NABARD. NABARD in turn provides these funds to State Governments and state owned corporations to enable them to complete various types of rural infrastructure projects. It is pertinent to recognize that there are a large number of credits linked programmes sponsored by the Government for direct assault on poverty. In programmes relating to self-employment and women welfare, the multiplicity of programmes has been reduced by having a comprehensive and consolidated programme named Swaranjayanti Gram Swarojgar Yojna. The financial sector reforms, which were introduced from 1991 onwards were aimed at transforming the credit institutions into organisationally strong, financially viable and operationally efficient units. The measures introduced include reduction in budgetary support and concessionally of resources, preparation of Development Action Plans and signing of Memoranda of Understanding with the major controllers, and introduction of prudential norms relating to income recognition and asset classification for RRBs and cooperative banks. The lending rates for these institutions have also been deregulated. Other measures of liberalization include allowing non-target group financing for RRBs, direct financing for SCBs and CCBs, and liberalization in investment policies and non-fund business. These measures have contributed to many RRBs turning around and becoming more vibrant institutions. In the case of cooperative banks, there is greater awareness of the problems of officialization and politicization and initiatives in this regard include legislative actions on cooperative banks in Andhra Pradesh. Recently, several policy initiatives have been taken to advance rural banking. These include additional capital contribution to NABARD by the RBI and the Government of India, recapitalization and restructuring of RRBs, simplification of lending procedures as per the Gupta Committee recommendations, preparation of a special credit plans by public sector banks and launching of Kisan Credit Cards. Finally, a scheme linking self-help groups with banks has been launched under the aegis of NABARD to augment the resources of micro credit institutions. A Committee has gone into various measures for developing micro credit, and has submitted its report, which is under the consideration of the RBI. In respect of cooperatives, a Task Force under the chairmanship of my esteemed and affectionate colleague Shri Jagdish Capoor, Deputy Governor has been constituted to review the status and make recommendations for improvement. Undeniably, these initiatives have enabled a very wide network of rural financial institutions, development of banking culture, penetration of formal credit to rural areas and a counter to the dominance of moneylenders. These initiatives have also financed modernization of rural economies and implementation of anti-poverty and self-employment programmes. However, for the purpose of focusing on the future, generalization on some concerns regarding the current approach to rural credit and banking would be appropriate. Functions of NABARD 233 CU IDOL SELF LEARNING MATERIAL (SLM)

Let us take a look at some of the main functions of this organisation. It basically performs three kinds of roles, i.e. credit functions, development functions, and supervisory functions.  Frames the policy for rural credit in the country for all financing institutions  National Bank for Agriculture and Rural Development will itself provide finance and refinancing facilities to the banks and rural regional banks  Identification of credit potential and preparation of the credit plans for all districts  It also helps all regional banks and institutes under its governance with the preparation of their own credit plans and policies  Helps Regional Rural Banks establish an agreement with State Governments and other Co-op Banks and institutions  It will also monitor the implementation of such plans and track their progress  Helps banks improve their MIS system, modernize their technology, develop human resources etc  As per the Banking Regulation Act 1949, NABARD has to conduct the inspection of Regional Rural Banks and other Co-op banks  It communicates and consults the RBI in matters such as issuing of licenses for new banks, the opening of branches of Rural Banks etc.  From time to time it will also inspect the investment portfolios of Regional Rural Banks and other State Co-op Banks Panchayat Mandi (Agri-Mandi): The concept of self-governance has gone to the level of marketing of village produce through village markets and fairs. The Indian Constitution’s 73rd Amendment Act in 1993 empowers Panchayat Raj institutions to implement programmes of economic development in the rural sector. The concept of ‘Panchayat Mandi’ is to reduce the influence of middlemen and traders. This is possible only if functioning of the Ziila Panchayat is effective in coordination with State marketing boards and APMC (Agriculture Produce Market Committee). State Agricultural Marketing Banks (SAMB): State Agricultural Marketing Banks are set up to actively regulate markets for food crops and follows: Total number of regulated markets in the country - 6809 numbers Grading centres provided for 150 agro-commodities. 3124 cold storages arranged with capacity for 8.2 million tonnes of fruits and vegetables Specialized boards formed for tea, coffee, rubber, spices, coconut, oilseeds, vegetable-oils and horticulture. The National Council for State Marketing Boards (NCOSAMB): An agro-based country like India needs training centres with modern facilities throughout the country. The Government of India provides grants-in-aid to states to set up such training facilities. NCOSAMB is the body to coordinate the programmes of such training, which is mainly for 234 CU IDOL SELF LEARNING MATERIAL (SLM)

farmers and traders dealing in farm-related inputs and outputs. The advice and assistance of various agricultural universities and management institutions is taken for more effectiveness. NIPM (National Institute of Plantation Management) is one such institute which imparts managerial and agro-related technology and techniques to students. Similarly there is NIAM (National Institute of Agricultural Marketing) which gives training to various levels of marketing personnel. High Powered Committee on Agricultural Marketing: In June 1992, the Shankarlal Guru Committee on agricultural marketing gave a report with the following recommendations: 1. To make a plan to regulate at least half of the unregulated markets in the country during the 8th five-year plan. 2. To start a separate nationalized bank to help agricultural marketing with its branches in the regulated markets spread all over the country to work in close cooperation with the marketing committees. 3. The majority members of SAMB should be farmers and the chairman must be an agriculturist. There should be regular elections to select committee members and 4. Public agencies should purchase agro-produce directly from farmers and not through intermediaries. The national level organization NCOSAMB was set up in February 1988 as an apex body for member boards in each state SAMB. This will facilitate to discuss agro- marketing problems and to share experiences of various people related to marketing activities. It also formulated guidelines and laws for the balanced development of food and agricultural marketing systems. 12.3 FACTORS AFFECTING ACCESS TO FINANCIAL SERVICES Access to financial services has been recognized as an important aspect of development, and more emphasis is generally given to extending financial services to low-income households. Some of the factors affecting access to financial service are as follows: • Place of living: Most commercial banks operate only in urban commercial areas and these banks set-up their branches in profitable areas. Hence, people living in rural areas find it difficult to access financial services. • Lack of infrastructure in rural and semi-urban areas: Distance or access to a formal banking outlet is a major roadblock to both consumers and financial institutions. On the one hand, financial institutions face challenges such as access to proper internet, electricity and other facilities. On the other hand, they also find standalone bank branches as a non-viable option due to high costs and other factors. The consumers, as a result, do not have access to proper bank branch and financial services at their nearest location. 235 CU IDOL SELF LEARNING MATERIAL (SLM)

• Rising unemployment and low wages: Financial prominence of people always plays a pivotal role in accessing available financial services. In India, not many consider using financial services due to low levels of income and unemployment • Service charges: High bank charges not only discourage the people but also create lack of trust among people using banking and financial services. While 80% of the Indian population may have bank accounts, almost 45% of such accounts still remain inactive due to a combination of these factors. Thus, concrete steps are required to be undertaken to make financial services accessible and affordable in a safe and transparent manner. In India, financial institutions are the robust pillars of progress, economic growth and development of the economy. Financial inclusion has been implemented through multiple institutes across India such as: • Scheduled commercial banks • Regional rural banks • Payment banks • Micro-finance institutions • Business correspondents (Bank Mitra) • Small finance banks ATM services are not ‘core’ banking services for commercial banks. The high costs associated with operating ATMs in tier 3-6 cities deter banks from expanding into these regions. • The cost per transactions relative to the realization per transaction is usually loss making for commercial banks. • The reduction in interchange fee from card issuing bank to the ATM service provider in 2012 and the incremental compliance costs have led to viability issues for ATM service providers. • BCs, although pivotal in driving financial inclusion in India, are not well equipped to provide cash-out services. Hence, they are not an ideal service provider to replace ATMs and the void must be filled by companies such as BTI that operate on the WLA business model. 12.4 IMPLEMENTATION AND SUPPORT OF INFRASTRUCTURE Post demonetization in 2016, over 20 million zero-balance savings accounts were opened under PMJDY, while the number of taxpayers increased by over 30%. For the growth of businesses and activities in rural areas, expansion of banks and banking services have become a necessity. Since opening more bank branches is costly endeavor, the government has realized the need for alternative banking formats, such as digital financial services, low-cost 236 CU IDOL SELF LEARNING MATERIAL (SLM)

micro-ATMs and white label ATMs, and BCs to cater to this rising demand. Hence, post demonetization, there is considerable push from both government and private sector to utilize such alternative banking channels, especially in the rural and semi urban areas. Another key government initiative which emerged post demonetization was making India a cashless economy. To take this forward, the government of India along with financial institutions has helped create the following digital infrastructure: • Unified Payment Interface (UPI) • Unstructured Supplementary Service Data (USSD) • Immediate Payment Service (IMPS) • National Electronic Funds Transfer (NEFT) • Aadhaar Pay and BHIM • Debit cards and credit cards In 2015, a digital pipeline was created for the implementation of PMJDY. The pipeline involved linking of Jan Dhan accounts with mobile numbers and Aadhaar cards or Jan Dhan Aadhaar Mobile (JAM). This infrastructure pipeline acts as an essential backbone for DBT flows, adoption of social security/pension schemes, facilitating credit flows and promoting cashless and digital payments through the use of RuPay cards. This accelerated the pace of attaining the goal of a secured, insured, digitalized and financially empowered society. 12.5 NATIONAL STRATEGY FOR FINANCIAL INCLUSION FOR INDIA 2019-24 While financial inclusion has expanded greatly, and digital financial services are being vigorously promoted by the government of India, there is still a long way to go. In 2019, to achieve this objective, the National Strategy for Financial Inclusion for India 2019-24 was prepared by the RBI along with the Financial Inclusion Advisory Committee (FIAC) based on the inputs and suggestions from the government of India and financial sector regulators like: • Securities and Exchange Board of India (SEBI) • Insurance Regulatory and Development Authority of India (IRDAI) • Pension Fund Regulatory and Development Authority (PFRDA) Under this strategy, the government is looking to make formal financial services available, accessible and affordable to all the citizens of India in a safe and transparent manner. The government has also revamped the Lead Bank Scheme (LBS), 2018 where one bank in each district is assigned a leadership role and acts as a consortium leader to coordinate the efforts of the banks in that district. 237 CU IDOL SELF LEARNING MATERIAL (SLM)

12.6 SUMMARY  Indian bank and financial institutions face a number of challenges in providing financial services in rural India. Some of these are highlighted below:  High cost of service delivery - There is poor transportation infrastructure, leading to long journey duration, inefficient transportation technology and inefficient routes, which add to the cost of transportation. • Low population density in rural areas leads to time wastage and also limits benefits of economies of scale. • Low ticket size contributes significantly to high delivery cost. Building trust and attracting customers • Large population in rural India still lacks adequate levels of financial literacy, a key deterrent in the adoption of a number of financial products and services. • There is lack of trust amongst customers in rural market who still doubt the credibility of online services, especially financial services. • Despite rapid growth in rural internet penetration, internet literacy still remains a challenge. • There is preference for personal relationships over digital. 12.6 KEYWORDS  NABARD (National banking for agriculture and rural development): This is the bank which provides loans and other facilities to the farmers and it is responsible for many developmental works in rural areas. This bank also provides loans and money to the other rural banks.  NCAER (National Council for Applied Economic Research): This is a nodal and central government agency which carry out the work in the field of economic progress, especially publish the report regarding rural development and other economic indicators.  Rural Communication: All types of channels through which interaction take place among rural population and the other stakeholders who are interested in this market.  Expenditure pattern: A social system where rural population spend money on efficient items. 12.7 LEARNING ACTIVITY 1. Describe the nature and importance of rural Finance. ___________________________________________________________________________ ___________________________________________________________________________ 2. State the non-institutional and institutional sources of rural finance 238 CU IDOL SELF LEARNING MATERIAL (SLM)

___________________________________________________________________________ ___________________________________________________________________________ 12.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Describe the meaning of Panchayat Mandi? 2. State any 2 recommendations of the Shankarlal Guru Committee on agricultural marketing 3. Analyze the role of NABARD in rural development 4. Discuss the 4 sources of rural institutional credit? 5. Evaluate the non-institutional sources of rural finance? Long Questions 1. Do the farmers need loans? Explain the main functions of NABARD. 2. Explain the challenges in adopting urban credit policy at rural markets. 3. What are rural credit institutions? 4. How can rural markets go cashless? 5. What are the latest initiatives taken by the Indian government towards improving rural financing? B. Multiple Choice Questions 1. A small loan amount given to low-income household or group is known as. a. Cash credit b. Micro credit c. Rural credit d. Simple credit 2. In India, which of the following organizations take care of the agriculture and rural development credit’s needs? a. IDBI b. NABARD c. ICAR 239 CU IDOL SELF LEARNING MATERIAL (SLM)

d. FCI 3. Which option blocks the poor to get bank loans? a) Absence of collateral b) High rates of interest c) Complexity of procedure d) None of the above 4. Which of the below mentioned digital infrastructures have been built by the government of India and financial institutions? a. UPI b. IMPS c. BHIM d. All of above 5. How much capital amount is authorized for NABARD? a. Rs 200 Crores b. Rs 800 Crores c. Rs 1000 Crores d. Rs 500 Crores Answers 3-a, 4-d, 5-d 1-b, 2-b, 12.9 REFERENCES Text Book  NCAER, New Perspectives in Marketing, New Delhi.  V.S. Ramaswamy and Namakumari S., Marketing Management, McMillan, Delhi, 1990 Website:  https://www.economicsdiscussion.net/marketing-management/rural-marketing-in- india/3195 240 CU IDOL SELF LEARNING MATERIAL (SLM)