Cos get cracking on rural markets

Cos get cracking on rural markets
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First Published: Sun, Nov 30 2008. 11 36 PM IST

Updated: Sun, Nov 30 2008. 11 36 PM IST
Pilgrims making the arduous journey to the Baidyanath temple in Jharkhand’s Deoghar district in July and August were surprised to find special camps set up for them along the route, offering massages for aching limbs. Billboards along the way, featuring popular Hindi film actors Amitabh Bachchan and Shah Rukh Khan, exhorted travellers to avail of the services.
This was the work of the Kolkata-based fast moving consumer goods, or FMCG, company Emami Ltd, the maker of Himani Navratna oil and Himani Fast Relief ointment. Along with the massages, the company gave free samples of its products to the pilgrims. “It was one of our non-urban consumer-connect initiatives,” says Aditya Agarwal, director, Emami Ltd.
Also See A Growing Market (Graphic)
It’s not just Emami, a home-grown consumer products company, which is trying to exploit such opportunities. Earlier this year, beverages company Coca-Cola India Ltd ran a similar consumer-connect campaign in offbeat markets such as the small towns and villages of Uttar Pradesh and Bihar. The campaign, called Jalsa (carnival), was aimed at promoting the company’s power brand, Thums Up, and was done by organizing dance, theatre and music shows and competitions.
Rural consumers, a term loosely used by marketers to refer to consumers who live in villages, towns, even small cities, are increasingly becoming an important target group for many Indian companies. And in a bid to reach out to these consumers, companies are looking at innovative ways of making an impact.
Reaching out to such consumers is an extremely challenging job. “In order to market products to rural and non-urban consumers, you have to connect with them physically and psychologically. Marketers have to reach out to them and become a part of the crowd,” says Agarwal.
Unlike urban markets, where a largely homogenous group of consumers is exposed to different kinds of media, including television, radio, newspapers, magazines and the Internet, rural markets are largely insulated from the media and are hugely diverse in terms of income, language and consumption culture.
“One good campaign on television or in print is enough for any marketer to reach the urban masses, whereas in many rural markets, where people are largely illiterate and can understand neither English nor Hindi and which television has yet to reach, it is extremely difficult for companies to strike a connect with the consumers,” says Pradeep Lokhande of Rural Relations, a rural consumer relations firm.
Yet the search for elusive growth is prompting companies to make a beeline for these markets—spending power in India’s hinterland is increasing even as vast sections of the market remain untapped. Factors such as rising disposable income, the emergence of employment options other than agriculture and growing awareness levels thanks to the expanding footprint of cable and satellite television are all creating a new class of potential consumer. In addition, the government’s initiatives to improve rural infrastructure are encouraging companies to spend more money to tap the rural consumer.
Also See Hinterland Beckons (PDF)
According to the National Council for Applied Economic Research, or NCAER, rural India accounts for 70% of India’s population, 56% of the national income, 64% of the total expenditure and one-third of the total savings. So, the difficulties faced in cracking these markets pale before the huge potential they offer a company. “Of the total sales (of consumer goods), around 55% come from rural India, and going ahead, the contribution is likely to grow,” says Arjun S. Devatha, senior analyst, consumer markets, Datamonitor India, a market research firm.
NCAER data suggests that in real terms, at 1999 prices, the size of the rural economy will be about Rs16 trillion in 2012-13 compared with Rs12 trillion in 2007-08. The share of non-farm income will be about two-thirds of the rural economy by 2012-13.
Also See The Changing Income Profile of Rural India (Graphic)
While consumer product makers such as Hindustan Unilever Ltd, Godrej Consumer Products Ltd andITC Ltd have set up the basic infrastructure to tap these markets, makers of other more expensive products are also exploring ways of doing so. Colour television sets, for instance, constitute one of the fastest growing, high-priced product categories in non-urban markets. “Of the total 13 million TV sets sold in 2007, around 55% were sold in rural markets. The year-on-year growth in non-urban markets is 20% as compared to 8-10% in the urban centres,” says Suresh Khanna, secretary general of industry body Consumer Electronics and Appliances Manufacturers Association. Some years ago, consumer electronics makerLG Electronics India Pvt. Ltd launched an exclusive range for rural consumers called Sampoorna.The differentiator was the price; according to the company, it was so low that it bridged the gap between local black and white TV sets and the colour ones. “Rural markets for us are a huge opportunity for entry-level products. We have strong marketing plans for the next year, mainly for categories such as television and refrigerators,” says V. Ramachandran, director, marketing and sales, LG.
Auto makers such as Maruti Suzuki India Ltd and Hero Honda Motors Ltd are also working on strategies to make inroads into these markets. Maruti Suzuki, the country’s largest car maker, stepped up its rural marketing initiatives last year and this has resulted in increased car sales. “We sold 16,450 cars in the first seven months of the last financial year. This has increased (to) about 30,000 in the same period this year,” says Mayank Pareek, executive officer, sales and marketing at Maruti. The company sells Maruti 800, Maruti Alto and Maruti Versa in the rural markets.
Currently, the per capita penetration of passenger vehicles is 0.5% in rural India compared to 10-12% in urban centres, while in the case of two-wheelers, it’s between 2-3% in rural markets and 10-12% in the urban markets, according to Datamonitor India. With the government focusing on the basic infrastructure in these markets, many auto makers see new growth opportunities opening up.
“The Pradhan Mantri Gram Sadak Yojna is a programme launched by the government that aims to connect every village with 1,000-plus population in the plains and 500-plus population in hilly terrain by roads and this is good news for the public transportation sector,” says a spokesperson for Tata Motors Ltd.
According to a study conducted by McKinsey Global Institute (the economics research arm of consultancy firm McKinsey and Co.)in 2007, India will be the 12th largest consumer market by 2025. The study says that while much of the new wealth will be created in urban areas, “rural households will benefit too”. “Annual real rural income growth per household will accelerate from 2.8% over the past two decades to 3.6% over the next two.”
But communicating with rural consumers, the first step towards selling to them, still remains a big challenge for marketers.
Besides using local modes of communication or inventing new ways of reaching out, they have to devise strategies that will suit local tastes and culture, be mindful of sensitivities and give consumers a feel of the product, given their reluctance to buy a new product or change the one they have been using for a long time.
“Mediums such as TV and print have not penetrated very well in these markets, so companies have to make their products physically felt by consumers,” says Priya Monga, business head of Rural Communication and Marketing Pvt. Ltd, or RC&M, an experiential marketing company.
Sensing an opportunity to provide local communication solutions to companies, most marketing and advertising companies have set up dedicated rural divisions. These include Anugrah Madison Advertising Pvt. Ltd, Rural Relations, Sampark, Ogilvy Activation, Linterland, RC&M, Impact Communications, Kripa Outdoor Publicity, Indian Agribusiness Systems and Rural Eight. Many companies have also partnered with independent consultancies, such as RC&M, for effective communication solutions.
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First Published: Sun, Nov 30 2008. 11 36 PM IST