• Opportunities

The buzzword today is about finding parameters that change the dynamics of marketing. Rural markets offer great potential to help India Inc—which has reached a plateau in its business curve in urban India—to bank upon volume-driven growth.

Potential
India, with the second-fastest GDP growth in the world and set to become the third largest economy in the world by 2050, is effectively a rural economy. After all, 70 percent of the population and 94 percent of the country is under rural cover, as per an ASSOCHAM report. According to Census 2001, this amounts to 31.18 lakh square kilometers with 6,38,588 villages in India falling in 612 districts.

According to data provided by the 64th round of NSSO, the average monthly per capita consumer expenditure in 2005-’06 in rural India was Rs.625 as compared to Rs.1,171 in urban India.

The moves
It is an essential lesson in marketing to not put all your eggs in one basket. The entire gamut of white and brown goods has found a place in the rural market, and industries are now actively looking to tap this segment. In this scenario, companies should change their marketing strategies and offer products especially designed for these markets, with suitable price points.

Mawana Sugars is a case in point. The company has one of the best geographical penetrations in north India amongst all sugar brands. Though packaged sugar is still an urban phenomenon and does not get onto rural shelves as such, Mawana Sugars is continuously working on its expansion plans in rural towns, keeping in mind the huge potential of that market.

“Rural markets are loyal to brands, unlike urban customers, who are more willing to experiment. We work with our distributors to cater to their peripheral markets and see that Mawana is available in as many towns and villages as possible,” says Surjya Meher, Vice-President, Retail, Mawana Sugars.To penetrate the rural markets and the catchment areas around towns, Mawana first introduced a small LUP (Low Unit Pack), priced at Rs.5, and managed to successfully penetrate stores that never sold branded sugar packs.

“Rural consumers got their first interaction with our brand and once they were familiar with our product, it was easy to introduce the larger packs. This strategy also helped us increase the number of outlets serviced. In the long term, we intend to introduce packs that induce trial and conversion,” says Meher.

“At the moment, sales in towns with an under-50,000 population are negligible. But we understand the potential. These are virgin territories, and we expect the market to surprise us the moment our brand offers value for their money. We are working on these strategies and will soon make our products affordable in rural India,” adds Meher.

While such strategies are easier to implement for FMCG products, it is very difficult in case of electrical products. For example, a fridge cannot run on battery. “We are now test marketing ‘Chota cool’ refrigerators, which can function on 12V current. We are targeting the rural markets with such special products because what works successfully in the urban scenario do not always find takers among the rural masses,” says Kamal Nandi, Vice-President, Marketing, Godrej and Boyce.

Nandi says his company is focusing on consumers at the bottom of the pyramid by offering them low-cost refrigerators. “We looked at consumers at that level and found that their storing habits are very different from that of people in urban India. Their prerequisite is cooling rather than storing. So, a refrigerator meant for rural areas should be high on cooling, since people in rural India prefer to eat fresh food and do not preserve leftovers,” adds Nandi.

Hindustan Unilever Ltd. (HUL) believes in ‘straddling the consumer pyramid’, too, and targeting the rural markets that contribute significantly to the overall FMCG market. According a HUL spokesperson, rural India presents enormous potential for growth—both in terms of penetration and consumption across the categories it operates in.

“As a market leader, HUL has led this growth through its range of products and market innovation. Our portfolio—which includes pre-mium brands for the affluent, value-for-money brands for middle-income consumers and affordable quality products for low-income consumers—provides us with a well-entrenched capability to leverage the opportunity in rural areas,” says the HUL spokesperson.

Focus on maintenance
The key attribute of a rural market is that while designing the product, one has to keep in mind the budget of the consumer. Manufacturers have to understand that they will be able to satisfy consumers’ needs only at price points that would make sense in a rural setup.

“Product maintenance should also be a key focus area of manufacturers looking to succeed in rural areas. People in rural India generally have a fixed budget for maintenance. Any product sold here has to be high on efficiency, so after-sales services need to be a priority area for companies and entrepreneurs operating in rural areas,” says Nandi.

Challenges
The challenges faced by rural marketers are manifold. Difficulty in physical distribution due to the widespread nature of rural geography, channel management, promotion and communication, poor infrastructure, uneconomical market sizes and consumer profiles limit the reach to rural market. So it becomes essential for the industry players to design creative solutions to achieve success in rural markets.

“Challenges are high for marketing branded sugar in rural markets, as the product is price-sensitive. Open sacks of sugar are unhygienic; that’s probably the route to market. We need to educate consumers on product hygiene. Since our product is high-volume and price-sensitive, our biggest challenge is managing the deliveries and cost. Servicing rural markets sometimes becomes unviable and sales volumes do not justify the aggression,” says Meher.

For electrical and electronics goods industries, which are driven by electricity, the rural markets pose basic problems. “Most of our products cannot run on batteries, and since many villages lack electricity, we cannot operate in those areas,” rues Nandi. The key to successfully operating in rural India seems to lie in going down to the grassroot levels and understanding the needs of consumers there, while keeping in mind infrastructure restrictions.

Make friends
According to the ASSOCHAM, the organized private sector has traditionally not enjoyed a good rapport with low-income groups in urban as well as rural areas. Therefore, to enlarge the role of the private sector in rural development, a shift in the mindset of rural people needs to be brought about. The corporate sector needs to change its preconceived “hostile” image to that of a “friendly” one.

“Project Shakti is a prime example of how we are increasing our rural market by reaching out to new consumers who are otherwise not touched by the more established distribution systems,” says the HUL spokesperson.

Next: HUL’s Marketing Initiatives in Rural India ->>>

Tags:
Boyce, Clinic Plus Jatra, FMCG, Godrej, grassroot, Hindustan Unilever, HUL, India Inc, Kamal Nandi, Lifebuoy Haat, marketing, Mawana Sugars, Project Shakti, Rural, Surjya Meher