Posted in Marketing & Strategy Articles, Total Reads: 1830
, Published on 09 October 2015
“The Future of India lies in its villages” – Mahatma Gandhi
There was a time when the whole world thought that the rural India was a land of snakes and holy men with magical powers. Rural India was thought of as poor, victimized burden dragging down the rising urban India. A part of India that was neglected, abandoned and sometimes mistreated. Maybe it’s time to re-acquaint ourselves with the true identity of the rural side of our country. It’s time to recognize the potential market in the 800 million people of this country. Companies are already starting to take cognizance of this fact. Coke / Pepsi or Chic / Pantene or Colgate / Close Up or Ariel / Surf or Lays / Cheetos are house hold brand names in rural markets today! And this is just the beginning!
In this article let me share my views on the opportunities, challenges in the rural market and solutions to tap the untapped market.
With a contribution of 50 % to India’s GDP and a population of 70%, the importance of rural market is not lost on anyone trying to sell their product/service. Moreover, per capita GDP for rural areas has grown at a rate of 6.7 % CAGR as compared to 4.7 % CAGR for urban areas. This signifies that rural incomes are growing and people are buying more goods than ever. Statistic reveal that rural spending on lifestyle products was $69 billion between 2001 and 2009, significantly higher than urban spending of $55 billion. The FMCG sector in rural and semi-urban markets is estimated to cross US$ 20 billion by 2018 and US$ 100 billion by 2025. The rural FMCG market has grown at a CAGR of 13.2% during the year 2009-15.
The following graph give just a glimpse of the potential rural market up for grabs.
These figures reveal the immense potential rural market of India possesses. “The future lies with those companies who see profit in rural markets” says C.K. Prahalad in his book “The fortune at the bottom of the pyramid”.
However, significant challenges still remain that impede the marketing campaign of several firms.
The biggest challenge to be successful in rural market is to overcome three stages of consumer life-cycle: reaching, acquiring and retaining the rural customer.
Inadequate distribution networks, unavailability of experienced partners and weak media channels are the biggest impediments that a company faces in terms of reaching the customer. Understanding the needs and preferences specific to rural market poses huge obstacle in acquisition of customer. A research study conducted by Accenture of more than 100 companies backs these observations. More than 50% companies cited the reasons mentioned above when asked about the difficulties they face when it comes to customer acquisition.
With much energy focused on the reaching and acquisition aspects, most of the companies tend to ignore the third dimension of retention. Intensifying competition and price wars make retention of customers a serious challenge. High quality, optimum cost, reliable service and consistent performance remain major obstacles. Low connectivity, diverse consumer behavior and lack of basic amenities like electricity make it highly challenging for the firms to retain their customers and develop brand loyalty.
Challenges are many when it comes to rural marketing. However, the way companies respond to these obstacle is what determines their success or failure in the rural market. Their response should be adaptive, innovative, flexible and consumer centric in order to overcome the previously stated challenges.
A practical approach to address the aforementioned challenges and capitalize on the Indian rural market is necessarily multifaceted. Exhaustive studies of successful business models around the world have shown us that there is no one-size-fits-all approach when harnessing the potential of any given market, even more so in a market as diverse and unpredictable as India's. It is essentially a synergistic approach that combines the essence of Innovation, Customization, Availability, Affordability and Awareness.
To be successful in the rural market, companies will have to be innovative and sensitive while choosing their marketing strategies. Traditional urban marketing strategies and best practices should be tailored according to the local situation. Companies should come up with innovative products that are relevant for the rural market and tailored strategies that can help them create product differentiation. As a matter of fact innovative approach can be applied at every level starting from the production to the packaging and services. Harnessing the power of innovation at various layers of business process is essential in becoming a leader in rural market. An ingenious approach that partners with rural customers, adding significant value to their lives can prove to be highly successful in the rural market of India. ‘Ekocool’ solar refrigerator is a perfect example of innovation and ingenuity required for rural marketing. Conventional ice chests were proving to be inefficient to stock and sell beverages, leading to unmet demand. ‘Ekocool’ overcame the problem of lack of electricity, creating a market for Coca-Cola where it was not present at all.
Customization is another crucial aspect. Understanding specific customer needs, avoiding the mistake of considering customers as a homogeneous mass are the basic ingredients for formulating an offer to satisfy the demand of the target consumer. The needs of the rural customers are diverse. This diversity arises from the diverse demographics, backgrounds, cultures, preferences. Trying to fulfill these diverse needs with a general product is a common mistake. A decent amount of research study to understand the latent needs and desires of rural customer is indispensable. An in-depth understanding of the peculiarities of the needs and wants of rural life will help the companies to capture the market smoothly and effectively. Project Shakti is a powerful example of smart and creative marketing by capturing the needs of the target customer. Empowering men and women HUL established a direct personal connect with its customers improving the reach of its products. The symbiotic relationship developed through this project is a good example of innovation when it comes to capturing the rural market.
3) Availability, Affordability and Awareness
Availability, Affordability and Awareness are yet another vital elements of rural marketing. To overcome the challenge of availability, companies need to develop a strong distribution and sales network. Bad conditions of road transportation do not make things easier for the companies. However, innovative methods need to be used to meet the rural demand. Large MNC’s are already using auto rickshaws, bullock-carts and boats in Kerala to service remote areas. Local means of transportation needs to be leveraged in order to ensure seamless availability of the products. Just making the products available, however, will not do. Companies need to ensure that they are within the reach of rural customers. Rural market is still a highly price sensitive market. Some companies have tried addressing this problem of affordability by introducing smaller unit packets and also by forming distributive alliances with local players. Introduction of sachets of shampoos by P&G that proved to be a trend setter for rural market is a notable example. This approach has paid off for P&G increasing their sales significantly. Awareness is another significant challenge on which companies need to work upon. Firms need to come up with conventional and unconventional advertising campaigns with due consideration for brand sensitivity, linguistic culture, and sensitivities of the community. Vans, road shows, wall writing are few examples that can be employed efficiently.
Growth, undoubtedly being the ultimate goal of every business venture, cannot be attained without dealing with the challenges particular to individual markets. That goes without mentioning in case of rural marketing, where challenges are immense and unexplored. The question is can we ignore this untapped market having so enormous potential? Well, the answer is an unequivocal ‘NO’. Rural India already is, and in future will definitely be, a big source of income and a potential market for all the companies ready to explore new options. Overcoming resistance in the face of low initial profits while venturing into Indian rural market and showing a proactive approach is bound to be rewarded heavily considering the current economic growth rate in rural India. Gandhiji believed that India’s future lay in her villages and those among us who can bring innovative marketing to rural markets are the ones to take away the “fortune at the bottom of the pyramid”.
This article has been authored by Saurabh Pandey from XLRI
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