Marketing in Rural India

chillibreeze writer — Vivek Kumar Kaushik

Increase in purchasing power of rural masses in recent past has fuelled lot of interest in rural India. Hitherto considered a market only for low end products, today companies are seeing rural market as the new growth avenue. Comprising more than 70 per cent of the total consumers in India and annual market potential in excess of Rs 1230 bn, rural India is being charmed by novel ways and means. According to a survey conducted by Mckinsey in 2008, rural India with a population of 630 million (approximately) would become bigger than total consumer market in countries such as South Korea or Canada in another 20 years and it will grow at least four times from its existing size.
70% of India’s population lives in 627000 villages in rural areas. As per the National Council for Applied Economic Research (NCAER) study, there area as many ‘middle income and above’ households in the rural areas as there are in the urban areas. At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas. According to NCAER projections, the number of middle & high income households in rural India is expected to grow 80 million to 111 million by 2007.However, myths abound. India’s rural markets are often misunderstood. A clear distinction needs to be made with regard to the reality versus the image of rural India. If such a distinction is not made, we will be unable to distinguish between the serpent and the rope.

The rural market is not homogeneous. The individual sections of this market are not too big, although the overall size is large. There are Geographical, demographical, statistical and logistical differences. Positioning and realities regarding the potential of each of these market segments differ and lie at the very core of forming the strategy for the rural markets. Gone are the days when rural consumer went to nearby city to buy ‘branded products & services’. The rural consumer is growing and this is an opportunity to grab the market share for all the global players in the market – whether it is into Fast Moving Consumer Goods (FMCG) sector or retail sector (either insurance or banking). Insurance sector has one of the biggest potential in the upcoming scenario and the fact lies in the statement that only eight to ten percent of the rural households are covered by life insurance.

Several companies trying to reach out to rural consumers are exploring alternative cost effective channels. Direct selling through company delivery vans, syndicated distribution between non-competitive marketers, setting up of temporary stalls in rural melas/haats are few successful examples. Use of stockists and their staff for effecting direct sales to rural consumers has also been found to be successful by companies like Hindustan Unilever / ITC / Colgate / Godrej. Rural markets/mandis are emerging as the target centers for direct sales. BPCL introduced specially designed Rural Marketing Vehicle, which moved from villages to villages to fill cylinders on spot.

Another innovative distribution model that merits mention is the HLL’s Shakti project, which connects Self-Help Groups (SHGs) with business opportunities. Hindustan Lever promotes and uses the SHGs network present in the villages for increasing its sales in the rural areas. The SHGs are offered chance to become company’s local small scale distributor in the rural areas. The groups, typically of 15 to 20 people, buy a small stock of items such as soap, detergent or shampoo and then sell directly to consumers in their homes. The model is a win-win for the company and the village SHGs

Lower prices/smaller packaging has been the most common strategies adopted by FMCG companies to penetrate rural markets. HLL initiated Operation Bharat to tap rural market by rolling out low priced sample packets of its toothpaste, fairness cream, shampoo, cream and other products. Similarly LPG companies have introduced small sized cylinders ensuring that price remains in the affordable range for its rural consumers. When developing products in any category, marketers must identify the typical rural specific needs. Urban products cannot be dumped into rural markets without modifications. The rural audience better receives tailor-made products as the consumers feel empowered and tend to identify with the offering. For instance, shampoos or soaps with distinctive, strong rose or jasmine perfumes are very with the rural women in South India. The urban women do not identify as strongly with these perfumes.

Every marketer must realize that the rural consumer is not a miser. He is not simply looking for the cheapest product in every category. He understands and demands value for money in every purchase that he makes. Pricing therefore is a direct function of factors including cost-benefit advantage and opportunity cost. Pricing offered to consumers should be for value offerings that are affordable. Price sensitivity is extremely high and comparison with competitive prices is common.

It must be remembered that the rural consumer does not have a budget problem. He has a cash flow problem. This is because the village folk receive funds only twice a year. At these times, he is capable of making high volume purchases. At all times, however, the unit price is critical and so is the pack size. Because of this, in the lean season when there is a cash flow crunch, marketers need to provide financial products, schemes or solutions that suit the needs of the rural population

Different target segments require different marketing approach and rural market is no exception to it. Experience suggests that mere extension of urban marketing strategies in rural India will fail unless they are customized to the needs, ethos of rural India. In the rural context, one of the best way to capture the audience is through Event Management. Since rural areas have limited venues for entertainment, conducting an event in rural areas can bring a good response. Some of the interesting events that can be conducted are Road Shows, Melas, Street Theatre, Film Shows and so on. Several Agrochemical companies such as Rallis India Limited, Wockhardt and tractor companies like Escort, Mahindras have successfully employed melas, local communication to get higher sales.

The classic conundrums of reach and coverage of the media are shattered. Several creative communication media have been used by various companies to tackle the problem of having to use visual communication and non-verbal communication to reach the rural audience. This is required because a large proportion of the rural population cannot read or write. Getting together with small industries, dharmasalas, post offices or other rural outlets for advertising and marketing purposes can be quite useful. Word of mouth is a big advantage in rural India.

Rural Marketing is an evolving concept, and as a part of any economy has untapped potential; marketers have realized the opportunity recently. Improvement in infrastructure and reach promise a bright future for those intending to go rural. Any macro-level strategy for these markets should focus on availability, accessibility and affordability. Constant scanning and sieving of ideas and plans is essential at all times. Focused attention needs to be paid to market research that goes on to reduce the uncertainly in dealing with these markets. More specifically, in relation to rural areas, demand is seen to a very highly price elastic. To break the price barrier is essential. Only this can keep the grey area local brands in check.

There is no doubt that divides do exist between urban India and Rural Bharat. However, with a silent revolution that has already begun, a seamless integration of rural and urban markets is underway. Once this happens the gulf that divides the two markets will become bridges. For this, change needs to be engaged and managed. The overall marketing mix framework for rural markets must therefore focus around plugging the segments with the right product, using value for money pricing, selecting the most appropriate channel of distribution, building long term relationships with the customers and finally, using the power of emotional brands.

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