Rural India – A Promising Marketplace

 742 million rural consumers waiting to be tapped

 Thirteen consecutive good monsoons barring 2002 and 2003

 600% increase in the five year plans from the Eighth to the Tenth plan

 230% increase in flow of institutional credit for agriculture between 1997-98 and 2004-05

 Area covered, crop production and yield up nearly 50%

 As per NCAER, consuming class households in rural India equal those in urban India

 More than 50% of India’s largest FMCG company HUL comes from the rural market

 In durables, the average ownership of electrical goods is 2.48 per rural family (for electrified
villages) against 3.39 in the urban sector

Some Impressive Facts on Rural India

 42,000 rural supermarkets (haats) in rural India against 35,000 retail chain stores in the US

 The billing per cell phone in small towns in Andhra Pradesh is higher than the billing in the state
capital Hyderabad

What Makes Rural markets Attractive?

Definition

 The Census of India defines rural as:

 Any habitation with a population density of less than 400 per sq. Kms.

 Where at least 75% of the male population is engaged in agriculture

 Where there exists no municipality or board

 Most FMCG companies define rural with a population of up to 20,000 population

 Most durable companies keep the limit at 50,000

Rural
Understanding Rural Consumers

 Fundamentally different from the urban mind set

 High degrees of difference in different parts of the country

 Due to lack of mobility and because of socio-cultural reasons males take most of the purchase
decisions in the family

 Community decision making is also very common in rural India

New Influencers

 The sarpanch/pradhan continues to be a key opinion leader

 His influence is diminishing and is limited to decisions on agri-products only

 The rural youth who are attending colleges in nearby towns and are exposed to the brands and
trends are gaining as influencers as compared to the classical school teacher

Products

 Usage of products is different in rural environment

 Cooking on ground rather than on platform

 Electrical gadgets to withstand heavy voltage fluctuations

 Washing machines to run without running water

 Smaller pack sizes for affordability and freshness

 Innovation and education is the mantra for product success in rural

Rural Distribution

 Need to understand where the rural consumer buys products

 90% of durables are purchased from 20,000+ towns (Source – IMRB study). There are 2,300 such
towns all over India

 Situation with FMCG more complex with distribution to cover villages with population over
2,000 population

 Stockists are however limited to 20,000+ population towns to feed these villages

 Need to understand that the consumer may be buying particular brand or product category for
first time
  Limited sources of influencers and information make decision difficult

 Below the line is therefore more suitable for rural

 Mass media only for creating awareness and some interest

Ineffective use of traditional channels like

Haats and Melas
Considered most relevant and credible by
rural segment
Important to understand aspirations, fears
and hopes in relation to each product
category
Need for localised communication aimed at
relatively homogeneous rural segments

Information Technology in Rural

 Cost of technology down

 Choupal by ITC

 PCO in all 1,000+population village with STD facility

 Change in stocking pattern of retailers in villages

 Improvement in infrastructure

 Introduction of large retail formats by corporates and impact on the local bania
Rural Markets – The Way Ahead

 The 4 Ps in marketing have to give way to 4 As:

 Awareness through traditional media of rural

 Acceptability through product modifications

 Availability through deep and innovative distribution

 Affordability through new price points

 Public private partnerships to increase the size of the rural pie by creating economic activity in
rural

 As rural moves from poverty to prosperity corporates will have to shift focus to efficiencies and
market innovations