Next Round of Growth in Rural India

Published by MBA Skool Team, Published on October 31, 2010

The dynamics and demographics of rural India make it impossible for any company to turn blind eye on rural market. The recent development in the rural market has shown us that marketers have to be innovative and novel in their thinking to tap ever increasing needs of rural India.  They may have to go beyond logic to explain the recent phenomenon of burgeoning demand from rural market. Rural India is a place with a sense of peace where terms like ‘recession’ or ‘India shining’ are relatively remote.


Consider this, rural India buys 46% of all soft drinks, 49% of motorcycles 59% of cigarettes and almost third of the rural India uses shampoo. With rising incomes and less dependence on agricultural income, the needs of rural India are continuous evolving, which every marketer needs to identify and realign its strategy to focus on them. Companies today are realizing that urban and rural want are nearly same but rural person is savvier and demands for value money.  In order to achieve this, marketers need to re-engineer their products. Looking at the auto segment, both rural and urban need is same. Both have same amount of money, however unban person will not mind spending Rs10,000 but rural person wants it at Rs4000. The solution is nano. Every category needs to operate on this ‘nano’ paradigm. Marketers should realize that needs are same across rural and urban but the solutions have to be different. Marketers have to be different in their approach in order to find this solution. Urban India is a place where the focus of the marketers is towards brand building. Marketing to rural India involves building categories and persuade them to try and adopt products which they have not used before. Colgate built the category ‘toothpaste’ convincing people to switch to toothpaste from their traditional neem twigs to clean their teeth. It is more than asking people to switch brands. Chik shampoo sachet created totally new product segment. The product which sells in urban India may not sell rural India. The prime example of this is Nokia’s cell phone with built in torch. The need to talk exists in both urban as well as rural market but the product needs to be customized to suit this logical difference between rural and urban India. Nokia identified this potential and helped it to increase its market share to as high as 70% in GSM mobile telephony.

Rural India

Distribution and promotional strategies are needed to be different for rural markets. With widely scattered rural population and difficult terrain distribution has become a challenge for rural marketer. Many companies have gone beyond their traditional models to strengthen their distribution networks.  ITC’s ‘e-choupal’, HUL’s ‘Shakti’, Godrej’s ‘Godrej Aahaar’, Tata Tea ‘Gaon Chalo’, Coca Cola’s ‘Parivartan’ program have not only increased their rural penetration but also helped in rural empowerment. ‘Parivartan’ program has trained more than 6,000 retailers in rural areas; Dabur has created a training module ASTRA (Advanced sales training for retail ascendence) which have enabled them reach rural consumers.

Rural and urban India are vastly two different regions which can be explained with help of recent financial tsunami which swept across urban India. With consumption falling, low demand and stagnating bottomlines of major companies, rural India is the one which kept India on track towards sustainable GDP growth. When the entire world was falling apart like pack of cards, rural India defied the logic and stood tall amid financial woes of the urbanized world. Rural part of our economy remained untouched by the credit card defaults and mortgages crises.

In DTH industry, 70% of the DTH connections are from rural India and small towns. Out of the total 13.2 million DTH subscribers, over seven million DTH subscribers are from rural India. The reason for this is the high penetration of cable industry in urban India and rural market is still untapped presenting high growth opportunities.

A widening gap in teledensity in rural and urban areas and saturated urban markets has prompted major telcos to shift towards rural areas. With close to 60% of its new additions coming from rural India, Bharti has launched ‘Rural Airtel Service Center’. To capture this vast and untapped market Bharti is setting up 200,000 such service centers in villages, offering micro finance options for its customers and rolling mobile money transfers to target segments of the country’s segments of the country’s population untouched by banks.  The subscriber base that stands at 350 million today is expected go upto 500 million by 2010. Out of the said numbers, rural sector is likely to account for the maximum amount of growth.

Maruti has plans to double the number of oulets in rural India form the present 231 to around 450 in next two years. Rural oulets will account for nearly 50% of Maruti’s network compared with just around 35% now. Hyundai too has launched rural marketing strategy. The company recently launched 42 day initiative where it has set up sales camp in 50 centers in interiors of Andhra Pradesh and Punjab. Hero Honda survived the challenging market dynamics and downturn by going rural in aggressive manner. Nokia hopes to break into rural markets by taking help of microfinance institutions in the country. Nokia has already launched ‘showroom on the wheels’ and ‘Rural care on the go’ marketing and servicing vehicles.

Retailers in urban areas are struggling to maintain their sales growth. Indiabulls, Shubiksha and Spencer have been forced to wind up their operations in some cities, companies such as Godrej and Kisan Sansar have focused on rural areas and have performed well. According to study conducted by ASSOCHAM, rural India contributes around 40% approximately $112 billion in the total market for organized retail, becoming hottest destination for Indian retail industry.

The traditional four P’s of marketing have been replaced by different framework for analysis for rural markets. The four A’s of marketing – affordability, awareness, availability and acceptability.

Affordability: Godrej launched 50 grams pack of three brands of cinthol, fair glow and godrej at Rs 5 each. Addidas and Reebok increased their sales by 50% in rural areas by reducing prices.

Size and design changes: Videocon launched washing machine without drier for Rs 2700. Philips launched low cost smokeless stove. DCM shriram launched low cost purifier.

Product Acceptance: LG Electronics customized TV, cheap and capable of picking up low intensity signals. It sold 100,000 boxes in the first year. Coca Cola provided low cost ice boxes because low refrigerator penetration in rural India.

The success of in rural market will depend on factors like customer education, customized advertisements, rural specific promotion methods like demonstrations, puppet shows, house-to-house campaigns, processions, rural melas, dance programmes etc, quality services at low price along with rural financing. How Indian marketers leverage the potential of rural market will define the future growth of India. Organizations will need to get out of their traditional mindset and deploy sharper brains from within the organization to rural strategy formulation. Marketers will have to go beyond the obvious to achieve next round of growth.

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