By the way, here's my article.................
RURAL MARKETING IN INDIA: OPPORTUNITIES AND CHALLENGES
Rural Marketing is the latest buzzword in the Indian Market. The villages and small towns, which were once inconsequential dots on maps, are now getting the attention of global marketing giants and media planners Two-third of the country’s consumers live in rural India and almost half of the national income is generated here. Thus not only a large consumer base stays at the backwaters but also because of the stagnancy in the urban demand, the only way out for the companies is to target the Rural India.
Is it that easy to target semi-urban and rural customers? It is in fact easier said than done. There are scores of issues associated with this, from poor infrastructure to low income, from the difference in the buying habits of the urban and rural customers to their wants and desires, from different lifestyles to consumption trends, and several other issues. Think for yourself, would it be a cakewalk for a Korean company to understand the idiosyncrasies of a resident in Siwan (Bihar) or a Marwari in the remote Rajasthan?
This article dwells into the opportunities enfolded in the Rural India and the challenges, which companies need to consider before taking the plunge.
OPPORTUNITIES AT THE HINTERLAND
The most lucrative aspect of Rural Marketing is to reach the untargeted 700 million potential customers, which would bring huge volume Sales to the company. What this data means could be sensed from the case of LIC. Almost 55 percent of LIC's business today comes from villages and as much as 47 percent of the total Sum Assured is accounted for by village folk. Of a total of 1.7 crore life insurance policies bought in the country, more than half have their origin in villages.
The estimated size of India’s rural market stated as the percentage of world population is 12.2%, which consists of largely untapped markets. Besides, introducing the existing products to the rural markets, companies are also bringing the rural customers face-to-face with several new concepts. ITC has been extremely innovative in this regard with its e-chaupal and first rural mall ‘Chaupal Sagar’ (Madhya Pradesh).
It works like this. With its network of e-chaupals, ITC communicates its latest commodity prices to the farmers via the Internet or VSAT lines. If they find these attractive, they sell their produce to ITC. Now, by setting up the mall next to the warehouse, ITC is trying to monetise the footfalls from farmers. Most of the brands sold here are national. You would find Marico, LG, Philips, torches from Eveready, shirts from ITC's apparel business, bikes from TVS, and tractors from Eicher.
With government’s focus shifting to agriculture, rural development and infrastructure, the economics of the agricultural sector is expected to see an upward trend. For example, the increasing focus on organic farming in the Planning Commission, and impetus on growth of rural sector in this Budget show positive signs.
Vanishing Urban-Rural divide
The Urban-Rural divide is shrinking as never before. The aspirations of Rural India are scaling new heights. Increased literacy and greater awareness in rural markets create new demands and discriminating buyers. Villagers who used to spend the entire day munching paan-tambakoos now demand chocolate candies. Charcoal-cleaned teeth have given way to Colgate and the likes.
In fact there are categories where rural market share is greater then urban like batteries, blues, tea, washing cakes/bars, etc. 38% of the two-wheeler consumers are rural. Besides, LG has clearly set a target of 70% value growth in rural market. It anticipates the contribution of the rural market to be 65% this year. As also, 50% of the confectionery market lies in rural areas, and the market is growing at a rate many times more than the urban market. Even Coca Cola India claims that 30% of its sales come from rural markets.
Competition in Urban Markets
Intensified competition in urban markets increases costs and reduces market share. The situation is that the total market in Urban India is not increasing substantially, thus companies are fighting hard to maintain their market share, sometimes at the cost of their profits also. For example, the recent case of price-cuts by HLL and P&G in detergent powder segment has led to drastic cut in the profits of both the companies. It is also not viable to sustain market share in this way because low profits rely on volumes to sustain it.
The rural market thus provides the obvious scope for furthering company’s market. The automobile market brings this out clearly. Bajaj scooters and Ambassador cars find ready acceptance in the rural market in the present scenario, where the urban market is flooded with brands of motorbikes and cars in a variety of range.
Low Income level
Rural consumers have a lower disposable income. A majority of these comprise of daily-wage earners, who rely on their daily earnings for sustenance. Since their disposable income is low, so their needs are also restricted to minimum requirements. For example, if they decide to buy a TV, they would not look at Flat-screen or surround sound system or golden eye. They would buy a TV with the basic functions and no more specialties or value-addition, simply because they cannot pay for it.
In the Television segment, LG’s ‘Sampoorna’ and Onida’s IGO, at lower cost, are targeted towards rural consumers. 14-inch economy colour TV models also saw competitive pricing.
Inadequate infrastructure facilities (electricity and roads)
Poor infrastructure leads to poor physical distribution. When companies target rural markets, availability is also a very important aspect. Poor electricity facilities and poor roads leads to difficulties in distribution of product on time and storage problems.
Retail & Distribution Network
Unlike the variety of stores in the urban market, rural markets have only small retailers in the form of kirana shops. There is no proper display of products and most of the times there is hardly any brand-loyalty.
The rural India had first brush with the concept of shopping malls with ITC’s Chaupal Sagar.
Different Buying Behaviour
It is observed that the buying behaviour of urban and rural consumers is very different. For example, since a majority of rural consumers are daily-wage earners, they cannot possibly buy big ‘money-saver packs’ simply because they are cheaper in effect. The companies fear that if they introduce such packs in the rural markets, it would lead to loose retail of their product by the retailers and they would loose control over quality, brand presentation and price.
HLL had been able to gauge this and it introduced the concept of ‘nano-marketing’, which meant products made available in small sachets especially for the rural consumers. After so many years of introduction of this concept, today everything possible is available in a sachet, from edible oil to shampoo, from tomato sauce to coconut oil, from coffee to milk powder. This concept brings affordability with variety to the rural consumers.
For Coca Cola also the launch of the Rs 5 pack has reaped rich dividends in terms of sales. 50 gm packs of Godrej’s FairGlow and Cinthol at Rs 5 each, and HLL’s Lifebuoy at Rs 2, are examples of how companies are reacting according to the rural markets
Inaccessibility of conventional advertising media
Since TV is accessible to only around 50% of the rural consumers. Thus the conventional advertising media does not really work in these quarters. Thus companies have to take a different route to reach out to the consumers. Rural marketing discourse, Wall paintings Calendar advertising and outdoor advertising are most common. Besides, companies target gatherings like ‘Kumbh Mela’ festival, where they provided ‘touch and feel’ demo and free samples like Colgate-Palmolive distributed free samples of its herbal toothpaste. There are Consumer Video Vans, which carry informecials to rural villages.
One more problem with this market is that it is more-or-less seasonal. In most of the places, there is acute dependence on monsoons. Besides, there is also increase in disposable income and more willingness in the rural consumers during harvests and festivals, unlike urban consumers, who buys throughout the year.
Understanding local tastes
It is easy to imagine how difficult it could be for MNCs to understand the local tastes and preferences of people. To solve this problem several companies go for Joint Ventures o tie-ups. For example, in early 90s, P&G tied up with Godrej, as it was oblivion to local tastes.
Since rural consumers comprise of illiterate people also. It forms ground for the cheap copies of established brand. For example, Fair & Lovely could be Fare & Lovely or Parachute could be Farachute. Since the packaging is so similar that the consumers are easily fooled. Thus, companies also need to monitor what goes on in the rural markets in this respect.
Thus, rural marketing is not a child’s play. It calls for an extensive research about the market and the consumers. Meanwhile, the investment for improving the basic conditions of water, electricity and roads in rural areas must be strengthened so as to create a better environment for growth in all respect.
Looking at the opportunities and challenges in the rural market, it is certain that the rural sector is extremely lucrative but only for those who understand its dynamics and are able to make the best use of it, otherwise it can become a trap in the sense where the companies lose focus of their core customers.
Pitch-The Advertising, Marketing and Media Review
Rural Marketing by Sanal Kumar Velayudhan