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Prof. C. S. Venkataratnam, Member, FICCI Higher Education Committee & Director, IMI, New Delhi
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The vast Indian rural market beckons Indian companies

Prof S. Mitra

In India today most of the brands offering products are faced with saturated markets, competition, declining sales and profitability. As more and more budgets are allocated for promotional expenditure it only adds to the ever increasing clutter and its contribution is almost insignificant in terms of whatever objectives it is likely to reach.

As most of the marketing initiatives are directed towards the urban and semi-urban markets, rural markets offer great opportunities and challenges for brands facing a dead end in the urban context. As more than 70 per cent of the Indian population is dispersed in rural India with rising purchasing power, rural India offers great opportunities for major brands like HLL, ITC, Coca Cola, Pepsi, Hero Honda and Nokia which have proactively planned their focus towards rural markets.

Rural consumers, who are now information enabled (through radio, television and ITC e-choupal or self-help groups), technology savvy, business-oriented thinking (through the development and implementation of the agricultural marketing concepts both from micro or macro perspective) and growth of contract farming or cooperatives, rural consumers in India have multiplied their purchasing power in contrast to the last decade.

Several rural development and rural electrification programmes have not only developed rural infrastructure but also contributed to employment and business opportunities for rural people ultimately contributing to their purchasing power.

The support of several literacy programmes from the government, cooperatives and private companies (as part of Corporate Social Responsibility or publicity) have enabled rural consumers to take decisions in their best interest. A price sensitive rural consumer is now looking for products that contribute value for money rather than cheaper products. More and more rural consumers can now think independently with a flexible attitude.

The reach of satellite television channels like Zee TV and Star Plus have generated aspirations for a better lifestyle in rural markets and rural consumers for the first time felt the need of products that they never felt before. This has again created opportunities for companies to penetrate in the rural market domain.

However challenges are plenty. To venture into rural markets, one must first start with reshuffling the entire market mix completely tailor-made for rural markets. Rural markets may be characterized as completely unorganised, highly dispersed and unplanned.

Rural consumers have low income and hence low purchasing power. There is a huge problem of distribution due to lack of infrastructure and accessibility. More than 30 per cent of Indian villages have population of less than 500. A similar number of villages may not have a retail outlet of their own. For bigger brands, the hub and spoke distribution system may be a solution but may not be affordable for smaller brands.

In some cases self-help groups can be a good option as is seen in the case of Hindustan Lever followed by several other brands. Several consumer goods companies are using this as an effective tool to achieve penetration and acceptability in rural markets.

Products that need to be sold in rural markets must be affordable and acceptable to the rural consumers. They are price sensitive but they do not look for cheaper products. They are interested in value for money. It is due to this reason that rural consumers now accept branded products; however, such products should be available in smaller pack sizes so that it is possible for them to purchase the product. Today, we can see several brands like Sunsilk (small pouches), Wheel, Coke, and Pepsi, all reducing their product sizes to find a place in the rural consumer’s basket of goods. Companies must take into consideration the product as well as brand re-engineering as a part of their rural marketing, orientation strategies.

The battery-powered refrigerator from Kelvinator or manually powered radio from Phillips are some of the product re-engineering strategies implemented in rural markets. Promotion in rural markets needs to be addressed differently. As most of the rural consumers are illiterate, textual communication may not be always effective. Audio-visual communication can be the best means to reach rural markets. Radio and Television may be the best alternative with All India Radio and Doordarshan having the highest reach. Vans carrying television for product demonstration and wall paintings are better means of communication in rural India.

Communication should also keep in mind its simplicity and parity with rural lifestyle. Using rural folklore, rural theme or content as the base of such communication increases its effectiveness. As reliability is the key factor, personal selling or the help of opinion leaders such as the panchayats or health workers is the key factor for rural acceptability of brands. “Thanda Matlab Coca Cola”, ad by the popular actor Amir Khan and its success story shows the way. Marketing products in haats and mandis have also become popular.

As more and more rural people are developing greater aspiration to grow and be on a par with their urban counterparts, in terms of income and lifestyle, they are adding themselves in large numbers to the consumer database of India. Modern farming methods, advanced agri-inputs, equipment and devices, better productivity, employment and agricultural marketing initiative both from farmers, farms, cooperatives, government, private and public companies have opened up the possibility for rural markets to be organized and lucrative for various companies to penetrate this almost virgin sector. With market saturation, competition and economic slowdown threatening established markets, the large rural markets can be seen as an opportunity to shield it from market uncertainties adding to their growth, stability and sustainability in the long run. It is now time that modern managers must develop proactive strategies to achieve foothold in the vast Indian rural market.

The author is Associate Director, International Business School, Kolkata.