The future of India lies in its villages. While the famous quote of Mahatma Gandhi has been gradually abandoned over the decades, the industry data has a different tale, altogether.
Rural India, on many important parameters, is doing much better than urban. Since 2000, per capita GDP in rural areas has grown faster, at a compounded annual growth rate of 6.2 percent, than in urban, where it has grown at 4.7 percent.
A McKinsey Global Institute report says that by 2025, annual real income per household in rural India will grow from 2.8 percent to 3.6 percent. Hence, the burgeoning rural class, which holds over 70 percent of the Indian population, is becoming the most lucrative segment for companies across sectors. No wonder that 67 percent of companies in India are expanding their presence in these small towns and markets.
This, coupled with government schemes such as MGNREGA, PMJDY and others, is leading to economic empowerment of the rural communities.
A $1.8-TRILLION OPPORTUNITY
Rural India presents an opportunity of potentially adding $1.8 trillion to the Indian economy. As per industry estimates, rural income, which is now at around $572 billion, is estimated to reach $1.8 trillion by 2021.
This sector buys 45 percent of all branded soft drinks and 49 percent of motorcycles sold in India. The factors propelling the growth include saturation in urban markets; young and aspirational majority population; improved education; higher disposable incomes; and more employment and economic initiatives by the government.
While companies are tapping consumers through their innovative strategies, they are also beginning to introduce more suitable products, and services, policies and pricing, which are customized for rural consumers.
For instance, Godrej Consumer Products trains rural youth in channel sales. Hindustan Unilever’s Shakti initiative delivers around 20 percent of the company’s overall rural sales. This clearly shows the relevance of designing rural-specific strategies.
‘COOKIE CUTTER’ APPROACH WILL NOT WORK
While the sector offers immense potential, marketers need to address rural and urban markets differently. Marketing strategies that work successfully in urban markets may not necessarily do well for rural.
Corporates who want to go rural in a big way should move ‘bottom up’ and not ‘top down’ – as they are currently doing. Success of brands like Ghari and Cavinkare, which started with rural marketing and are now giving run for money to multi-national brands, proves the point. They can also learn a lot from the success of regional brands in the country which have not only withstood the competition from multi-nationals but are also holding forth very well in their respective markets.
In addition to this, corporates must conduct a thorough research to understand the rural consumers and potential of the market for their kind of product. And then they should develop a comprehensive rural strategy with a dedicated team to implement the same.
WHAT CAN GO WRONG?
The rural sector is rapidly turning into a preferred destination for many big brands, which are entering this market to cater to the rising aspirations of these customers. However, not all brands have experienced success in these markets – some have not been able to survive or were disappointed by the results. What goes wrong?
The biggest mistake that corporates make is being very impatient in dealing with rural markets. Rather, they must be willing to invest time and money for a long haul, if they are to succeed in rural markets.
Besides, based on the lessons learnt in one or two districts, brands should not plan to go national. If rural marketing was that easy, we would have more success stories than the hundreds of aborted attempts by many corporates, believe industry experts.
Similarly, it has been found that forcing city-bred executives with rural initiatives has often resulted to failed efforts. Instead, the brands should hire candidates who have rural or small town background and feel comfortable in rural set up.
While many corporates think that to go rural they must sell products cheap – which is no longer true – there is a growing segment which is willing to pay ‘money for value’. As per Nielsen study, rural buys 26 percent of premium FMCG products and their share is growing at a CAGR of 12 percent. Consumer durable industry is fast learning this lesson.
CHALLENGES TO OVERCOME
Even though rural India is progressing rapidly, some bottlenecks need to be overcome. Education and literacy are a concern; public distribution system is full of holes; caste and communal bias influence village life and local self-governments; the adoption of financial inclusion, banking and insurance practices is slow. In addition to this, business is yet to build a threshold capacity for inclusive growth and there are wide gaps in income spread, poverty and sustainability in different States.
To overcome these challenges, the Central Government and the states must work together on planned deliverables.
BRIDGING THE ‘DIGITAL’ DIVIDE
Technology is going to play a major role in the way brands communicate and reach rural audience. The mobile and internet revolution is already ensuring that crucial information is available to the rural audience at the press of a few buttons, eliminating the role of middlemen who have been exploiting them for generations.
This coupled with the government’s plan for inclusive growth, making banking facilities within the reach of the rural population, should help in transforming the markets in a big way. While the digital divide has already shrunk, the much hoped for reduction in the rural-urban divide is bound to take place in the next decade.
Rural India does not have to compete with its urban counterpart. It has its own strengths, roots and deliverables that will enable this population to carve out a parallel place alongside their urban partners. Rural consumer behaviour will be relevant but always different from a metro youth.
This consumer will evolve on its own economic pillars and sustainable models that will enable a continuous and profitable partnership with industry, government, NGOs and various institutions. Marketers should not attempt to mould the rural population to urbanize senselessly and without direction. They should rather let them evolve.
Brands should keep in mind the following aspects while approaching rural markets:
a.tFind a niche segment for your brand
b.tDevelop a product which fills need gap and satisfies local taste
c.tEnsure that the pricing and packaging is right
d.tUse a communication programme which creates ‘empathy’ in the minds of the customers
e.Constantly monitor the competition and respond quickly with counter actions
No segmentation between rural and urban: S Sivakumar
S Sivakumar, CEO, Agri Business, ITC, shares his thoughts on how rural India will evolve by 2025.
• Bargaining power of rural will be at par with urban
• tDefinition of ‘rural markets’ will change; pockets will become smaller
• tPer capita income, literacy, awareness and aspiration will enjoy positive change
•tChange in connectivity (offline and online) will pose a big opportunity for marketers
• tInfluence of urban Indians will reduce on rural decision makers
Bata Plans Franchise model to tap rural
Leading shoe maker Bata India is betting big on franchisee model to tap the rural markets. Rajeev Gopalakrishnan, Group MD – Bata Emerging Markets, India, says, “The franchise model would be developed for tapping tier-III and IV cities with a population of around 5 lakh.”
The company had also started a rural marketing division. “We plan to put in these markets, different products at different price-points,” he shares.
Bata is planning to open 100 stores in rural areas over the next two years.