Blog‎ > ‎

Selling to Rural India

posted Dec 20, 2011, 1:46 AM by Puneet Goyal
The rural-urban gap is narrowing, yet rural markets will evolve in a unique way.
The rural growth story and “size” of the potential that rural markets offer is a much talked-about subject, of late. Over 700 million people live in Rural India and contribute around 48 per cent of the approximately Rs 79 trillion GDP, i.e. Rs 38 trillion.

The Indian rural market is set to grow tenfold to $100 billion in the next 15 years, according to a Nielsen study. In short, it is a large market space with very low organised player penetration. Across the globe, the Indian rural market is probably the single largest “unit” of opportunity.

During the economic slowdown in 2008, the rural economy stayed fairly “insulated” and clocked good growth numbers. The slowdown experienced by India on account of IT, real-estate, financial services, was an urban phenomenon and did not impact the hinterland. Rural markets' attractiveness as the “resilience factor” to the economy or to a company's balance sheet, therefore, got established.

The positive about our focus on Rural India as a group is that we are far more in touch with the “Complexity” of rural markets and not just their size. Our exposure has made us aware of some basic facts: First, merely extending urban marketing strategies will not help penetrate the rural market. Second: Many rural customers are not necessarily looking for the cheapest product and third: The rural market is not homogeneous; there are geographical, cultural and demographical differences.

As a country, we are poised to tap the vast potential of rural markets through innovative products, customised offerings and market developments efforts. Even as we go after the rural pie, it would be wise to keep a few pertinent factors in mind.

The rural middle class is becoming increasingly aspirational and thinking like its urban counterpart. Today's rural children are growing up in an environment where they have “information access” to education opportunities, job opportunities, products and services. According to Nielsen, 79 per cent of rural youth aspire for a professional degree. Rural India has more TVs than in urban India. There are 100 million mobile connections against 160 million families. Access to the outside world through mobile phones, the Internet and TV is bridging the gap faster than we imagine.

A seamless integration of rural and urban markets is already under way. The rural economy may, therefore, increasingly become inter-dependent rather than insulated from the rest of the economy. Each rural family today has at least one family member employed in the non-agricultural sector. These sectors are fairly linked to the urban economy.

With regard to the rural customer, while television may put him in touch with several new brands and products, he may still continue to buy ‘copycat' brands. The demand in rural India is less predictable than in mature markets. The parallel ‘copycat' brands market dishes out low-quality, low-price products and thus meets the price-value equation of a large chunk of the rural customers.

Several surveys indicate that rural consumers believe that “copycat” products offer the same benefit at half the price. While the rural rich may migrate to good-quality urban products, Corporate India still has a task in re-engineering products to cater to rural India.

It is often said that rural customers show high resistance, but once converted, are much more loyal.Word of mouth plays a much bigger role once a product is proven. But the role of intermediaries is very important. Therefore, corporates need to forge alliances with distribution partners/retailers who can educate customers. Marketing spends need to be oriented more towards market development rather than on securing market share.

Anecdotes about rural India show that the habits of the rural consumer are changing. Our experiences through Hariyali have exposed us to many such trends, like in the FMCG sector. The sachet revolution has done its job and almost 20 per cent of shampoo sales in organised rural retail is now of 400 ml packing.

Against 19 per cent overall FMCG growth in rural India, ‘extra large' packs and ‘large packs' account for 41 per cent and 21 per cent, respectively. One would expect the farmers to use their own wheat for atta, but atta sales in rural areas are showing impressive growth.The rural customer has latched on to mobile phone applications such as songs, FM, movies, much more than his urban counterpart.

The rural consumer is no longer merely experimenting with urban products because of a phase of prosperity — rather, he/she revels in it. These findings have resulted in brands creating successful portfolios and packaging formats that recognise these traits and appeal to the rural consumers.In summary, while we see a blurring of the rural-urban divide, it will be simplistic to assume that rural markets will evolve the same way as urban markets have.

Rural markets will evolve in a unique way which will be a mix of fast and slow adoption, high and low prices, efficient and not so efficient markets.Those with a deep understanding of the drivers are more likely to succeed in the long term in rural India.
The author is CMD, DCM Shriram Consolidated Ltd