Posted in Marketing & Strategy Articles, Total Reads: 4350
, Published on 21 October 2011
“Improving the lives of billions of people at the bottom of the economic pyramid is a noble endeavor. It can also be a lucrative one.” says C.K. Prahlad.
In fact, the Indian rural market representing two thirds of the population of 1.3 billion and generating half of the national income offers a viable and lucrative market. Approximately 46% of soft drinks are sold in rural markets, 49% of motorcycles and 59% of cigarettes are also consumed by rural and small town consumers. Apart from this, 53% of FMCG and 59% of consumer durables have market in the rural belts. Not only this, LIC sells more than 50% of its policies in rural India. Of the 20 millions who have signed up for Rediff mail, 60% are from small towns. These statistics clearly show a trend where the rural consumers are not only buying to fulfill their bare necessities but are also taking care of higher needs of comfort and socialization. And thus arises the need for branding at the bottom of the pyramid which corresponds to the Tier-4 population of 4 billion people living on less than 2$ per day.
For a successful branding, it is essential to understand the needs and wants of your customers. In this context, it is imperative to first profile the rural consumer. Indian rural consumer is marred largely by illiteracy and poverty. Illiteracy leads to an inability to identify the brand differences and read the basic text on packages. Poverty and dependence on vagaries of monsoon result into a low and unpredictable purchasing power. As a result, the rural consumer tends to buy in small quantities which led to sachet marketing. There is hardly any brand loyalty in the rural consumption. Nirma is simply referred to as the pila powder and surf as the nila powder. It is also easy for local products to gain a foothold in rural markets. Hence it becomes important that companies educate the customer about the significance of their brands. Pictures and endorsement by local stars will also help in increasing brand awareness. Lack of Infrastructure is yet another problem. With a large percentage of rural India living without electricity or irregular supply of electricity and having devised age old ways in which they can substitute the uses of electronic devices like refrigerator, it seemed impossible to sell such commodities to them. Poor media penetration, lack of hoardings, television reach, newspapers and magazines has made the task of marketers rather challenging. It is also because of poor media penetration and low literacy rates that the village people are highly influenced by the local political and religious leaders.
However, over the past few years the rural consumption trend is changing. Host of projects both from the government (NREGA) and the private companies have changed the rules of the marketing game in rural India.
Traditional methods of advertising and distribution do not seem to work in these markets because of the difficulty in accessing them. The challenge lies in providing not cheap products but in offering products which would be considered value for money. These challenges can be overcome by considering the 4A’s Model of Affordability, Availability, Acceptability and Awareness.
Due to the low per capita income of the people at the BOP, affordability is the marketers focus. Micro-selling methods are very effective in these markets as they allow the consumers to afford and try it, become aware of the brand as well as to build a purchase intention among them. Sachet-marketing is one such example. ICICI Bank in India collaborated with engineers at IIT, Chennai to build the first rural ATM to serve micro-savers. It has the capability to process small denominations and worn notes that are the main currency in Indian villages, and is priced at only $800. Electrolux Kelvinator for example launched a refrigerator that can keep ice frozen for up to six hours after a power failure which makes it proper to be used in regions plagued by blackouts.
Ensuring the availability of products in far-flung areas especially when the villages in India are wide spread becomes a challenge to marketers. Poor infrastructure stands as an obstacle in the way of properly reaching the people in the villages. Distribution cost becomes high but marketers need to decide the tradeoffs between cost and the incremental benefit in more market penetration in the rural areas. FMCG giants like HUL and Coca-Cola have strengthened their distribution network in villages to reach the large customer base there. ICICI plans to take advantage of the Indian postal network to place ATM machines in post offices and integrate them with vending machines.
Figure 2: Opportunities Explored at the Bottom-of-the-Pyramid Market
Acceptability of the product or service can be built through proper customization to have a better fit with the needs of the rural market. LG Electronics for example developed customized TV for the rural areas. Coca-Cola provides low-cost ice boxes like a tin box for new outlets and thermocol box for seasonal outlets to deal with the problem of frequent power fluctuations in rural areas. Insurance companies for example are tying up with NGOs for offering low priced policies in the nature of group insurance covers.
Awareness creation in rural areas is a challenge. TV can be used for this as a medium. However, people are confined to watching Doordarshan and have no access to satellite channels. Radio can also be used for communication. Rural India is media dark with no media making any significant entry into the areas. However with the telecommunication boom, mobiles have been able to enter the market. Iodex, for example, made its foray into headache relief category Iodex Headfast using mobile marketing as a tool in rural areas. They did not use SMS as literacy rate in rural areas is low; rather they used simple voice calling as their communication channel.
Hence, the effecting marketing strategy at the BOP would require a close association of the consumer’s needs and the marketers branding paradigm.