Rural markets drive growth despite drought

Rural markets drive growth despite drought
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First Published: Mon, Nov 30 2009. 10 14 PM IST

Countryside demand: A villager recharges his mobile phone from an Airtel retailer in a village in Chhapra district in Bihar. India’s top mobile phone firm said its growth in villages outpaces that in
Countryside demand: A villager recharges his mobile phone from an Airtel retailer in a village in Chhapra district in Bihar. India’s top mobile phone firm said its growth in villages outpaces that in
Updated: Mon, Nov 30 2009. 10 14 PM IST
In spite of a deficient monsoon this year, which led to 316 districts in 13 states being declared drought-hit, rural markets have proven to be resilient, marketeers say.
For instance, Mahindra and Mahindra Ltd (M&M), the country’s largest maker of tractors, has grown 20%. As many as 40% of new customers at Bharti Airtel Ltd came from the countryside. India’s top mobile phone services firm said its growth in villages outpace urban markets.
“Agricultural prices are growing and agricultural output has been growing very well over the last five years. Yes, there was a drought, but agricultural prices have risen and so rural incomes are not going to decline,” said Adi Godrej, chairman of the diversified Godrej Group that includes business interests in consumer and agro products.
Countryside demand: A villager recharges his mobile phone from an Airtel retailer in a village in Chhapra district in Bihar. India’s top mobile phone firm said its growth in villages outpaces that in urban markets. Madhu Kapparath / Mint
Marketeers also say rural India has held up relatively well through tough times because incomes are no longer solely dependent on agriculture.
“Rural discretionary income is growing dramatically. Rural consumers are interested in buying all kinds of consumer products, durables, and that’s not surprising at all,” Godrej said.
Godrej has been part of a rural immersion programme involving senior management across his group. He visited two villages in Maharashtra, meeting consumers in their homes.
Tanya Dubash, Godrej’s executive director and president (marketing), said: “We want to triple our direct rural reach. In the next three years, we want to get rural sales equal to that of urban.”
Price and reach are key elements to a rural marketing strategy. M&M recently launched a tractor priced at only Rs1.5 lakh. The portfolio of Hero Honda Motors Ltd, market leader in motorcycles, leans heavily in rural markets towards its cheaper entry level 100cc models.
To be sure, marketeers are doing a lot more than just launching inexpensive products targeted at rural India. The amount of liquidity in rural markets has gone up due to government intervention, but marketeers are also supporting their rural customers with better financing options.
Mahindra and Mahindra Financial Services Ltd, the financial services subsidiary of M&M, provides farmers with loans for tractors. Anjanikumar Choudhari, president (farm equipment) at M&M, said that while only 10% of rural households own tractors, almost 35% use them, relying on rentals. This provides an opportunity to the firm.
Hero Honda, too, takes consumer finance seriously and has tied up with not less than 50 rural and cooperative banks that extend credit to rural customers to buy its two-wheelers.
Another big challenge in rural markets is getting product and brand messages across to audiences in areas where firms cannot rely only on mainstream advertising.
“A large part of rural India even today does not have TV (sets). You need activation, sampling, and for the consumer to see your product,” said Dalip Sehgal,managing director at Godrej Consumer Products Ltd.
A similar line of thought motivated Hero Honda to launch a separate rural business segment in 2007 under its Har Gaon, Har Aangan (every village, every courtyard) initiative.
“The activities we’ve been doing range from an opinion leader contact programme to mapping the rural customer to leveraging fairs and festivals, and doing special activities,” said Anil Dua, senior vice-president, sales and marketing. “These are not just in the area of sales, but also in the area of awareness generation, post-sales service and parts availability.”
The improvements in infrastructure, particularly roads, have made rural India far less isolated than it used to be. This spells good news for companies such as Hero Honda.
“Since public transport is yet to keep pace with the development of roads, two-wheeler ownership has become a necessity,” Dua said.
The other aspect that has surprised marketeers is the willingness of rural consumers to reach for premium choices. In the case of Airtel, rural customers are interested in far more than just voice and have been subscribing to value-added services tailored to rural needs.
“Language is a key enabler of this opportunity,” said Atul Bindal, president (mobile services). “The second aspect is the context in which the phone is used in the rural sector. For example, if it is a local artisan or worker, if we can actually provide value-added services that are of use to them, we have found the adoption rates very high.”
An intangible aspect of the rural marketing success story is the sense of optimism that permeates much of rural India, executives say. Positive sentiment and disposable incomes have gone a long way in ensuring that these markets remain lucrative and attractive destinations to those selling goods and services in the countryside.
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First Published: Mon, Nov 30 2009. 10 14 PM IST