Rural marketing: Are Companies Finally Taking Rural Customers Seriously?

Published by MBA Skool Team, Published on July 02, 2012

As rightly said by Eric bellman, a WSJ reporter,” India’s backward backwaters have been on the forefront of global corporate thinking recently”. Due to the saturation of urban markets on one hand and revolutionary changes in the rural market on the other, companies are now curious about the emerging rural markets.   Multinational companies are trying to understand, how to seep into India’s lucrative rural markets.

 Rural Marketing

The number of households and population, residing in the rural area makes this sector, very fascinating to the companies. There’s excitement among the corporate about the opportunities in this sector, which has led to new innovations for products and services, keeping rural consumers in mind.

Since Indian domestic market is growing at a reasonable rate, there’s an increase in the disposable incomes in rural areas and as the economy is expected to grow in the coming years, the disposable incomes should go up even further. As per the report by Technopark consultants and the Confederation of Indian industries (CII), it is estimated that India’s rural market generated US $425 billion of revenue in 2010, more than one and half times of the previous year’s revenue.

Reasons for this kind of growth are mainly the increase in spending power, infrastructural changes, media penetration, higher aspirations etc. The percentage of rural households earning less than US $ 760/annum is 24 compared to 65 of 1993. And at the same time the number of households with an income of US $1524 or more, have more than doubled. Also, the Indian rural middle class is at the growth rate of 12 % against the 13% growth rate of its counterpart.

Rural marketing is a challenge in itself. Except a few business organizations, Most marketers are still struggling to analyze the complex rural market. Pricing policy in accordance with the consumer base, distribution and network issues, sparsely populated and sparsely located villages, under developed markets, illiterate people constituting major segment of the markets are few of the problems a new entrant in the rural market, may have to face.

Companies are riding on CSR programs, as part of their rural growth plan. They are investing in education, health care. So they can have easy access to a work force, they can rely upon. They are implementing environmental programs to conserve natural resources, needed to keep their supply chains intact.

PepsiCo helps farmers with progressive farming techniques, which secures a reliable supply chain for PepsiCo. HUL (Hindustan Unilever Limited) started project Shakti in 2001, which now helps 42,000 women earn a living by selling HUL products in more than 100,000 villages in 15 states.

Mobile phone penetration in India is measured at 51 units/100 people in 2010, up from 1.4 units/100 people of 1995. Nokia is the key player in this growth. 40% of US $5 billion annual revenue of Nokia India comes from rural India. As per the report by confederation of Indian Industries (CII), the Indian rural telecom industry is expected to account for more than 65% of the total subscribers in India.

A report by Associated Chambers of Commerce & Industry of India (ASSOCHAM), says that the Indian rural retail industry is worth US $113 billion, which is 40% of total Indian retail market. Companies realise the massive potential of this market, and are already moving to the rural markets. Most of the big players in retail industry like reliance, Av Birla, Godrej are expanding to rural areas.

FMCG Companies like Dabur, HUL, and Godrej are recruiting from rural areas, to have a shot at increasing their network and market. All these initiatives and programs by companies in various sectors, signals that companies, don’t consider rural markets, an appendage to urban markets but an independent market in itself.

As per the research by, Rural Marketing Association of India (RMAI), the rural economy of India was negligibly affected by the global meltdown of 2008-09. In order to keep the rural economy intact and ensure its growth, programs like MNREGA and Bharat Nirman are employed by Indian government. And these programs are constantly being showered with monetary incentives. In the 2009 union budget, MNREGA was allotted an amount of US $8.04 billion, while Bharat Nirman was allotted US $34.73 billion. This shows the importance of rural sector, not only to corporate but to government as well.

Since, the rural market is very large compared to the urban market, its way more complicated to handle it than its counterpart and it has a huge untapped potential. Despite the large size of the market the blend of opportunities and challenges offered by it makes the future very promising to the companies, which can supply the right product at the right price. Companies need to keep pace with highly volatile needs of the rural customers and exploit the market to their best advantage.

There will be many failed attempts, but companies which can create the right innovation, for rural customers, will be on the brink of a monster market ready to take off.

This article has been authored by Amit Kataria from NMIMS.

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