Business Standard

Cracking the rural code

With rural demand being driven by diversification of income, a rise in land prices and transfer of resources by the government to the countryside, companies from auto to banking and FMCG to electronics are making a beeline for Rural India

Related News

Executives from a Mumbai-based agency representing multinational have been making quiet trips to households in rural Gujarat and Punjab. They carry a bag and a nine-inch TV in hand much to the surprise of onlookers. Once they arrive at a given neighbourhood, they knock at every door, requesting for some time to show Cadbury Bournvita commercials. Once the message has been disseminated among members of a household, the men get down to doing what they are best at: Hard-sell the product, a health food drink, offering spot discounts and offers if required.

S Venkatesh, director of RW Promotions, the agency which is carrying out this initiative, says that the response to the campaign has been good. “The idea of personally showing the commercials has worked,” he says. “Our executives get a chance to interact one-on-one with potential consumers, clear their doubts and highlight the benefits of the product. The attempt is to try and close a sale right there and then.”

What Cadbury-Kraft is doing is something that many consumer-facing businesses are pursuing aggressively today: reaching out to rural consumers.

WHY RURAL?
According to a recent report by Kotak Institutional Equities, there are five factors driving rural demand: significant diversification of income; land price rise leading to a wealth effect; government to rural India; development schemes lending a hand; and expectations of more income-transfer schemes.

The report points out that subsidies and schemes such as have contributed 12 per cent to rural per capita income in the last few years — which means that consumers in the hinterland today have more money at their disposal than they did earlier. No wonder companies from auto to banking, fast moving consumer goods (FMCG) to electronics are making a beeline for Rural India. Some firms such as those in auto and have already made significant headway in the countryside.

For instance, rural sales of FMCG companies are in the region of 30-40 per cent today. This is slated to go up in the next few years as firms increasingly bet on rural markets, say analysts. Sales of two-wheelers from rural areas are already close to 60 per cent of total sales, while sales of four-wheelers are closer to 40 per cent, say experts. Mobile service providers and handset manufacturers, while being more recent entrants, are attempting to increase their presence rapidly, given that rural tele-density is one-fourth that of urban areas.

According to the Telecom Regulatory Authority of India (Trai), rural tele-density is just over 35 per cent in comparison to urban tele-density, which is over 155 per cent. Most telecom service providers as well as handset makers realise that the next phase of growth will come from rural areas.

Says Vikas Jain, chief executive officer, Micromax: “Rural areas are increasingly becoming critical for most handset manufacturers. We too have models that are targeted at rural consumers, keeping their needs in mind.”

Shashin Devasare, executive director, Karbonn Mobiles, says, “Ignore rural areas at your peril. We began our operations with a bottom-up approach rather than a top-down approach, starting off in districts and tehsils, then moving to urban areas. This has helped us in gaining critical mass.”

NOVELTY IS KEY
Most companies keen on targeting rural areas have dedicated resources assigned for the purpose. Take Hindustan Unilever (HUL), for instance. The nearly Rs 20,000-crore company was one of the early adopters of rural marketing in India, building capability and reach in the hinterlands. HUL was also one of the first few firms to begin tapping the bottom-of-the-pyramid consumer, a term coined by the late management guru C K Prahalad, who was also on the HUL board, much before others did. Today, HUL has a 1.5 to 2 million-outlet reach in rural areas, besides 45,000 and over 20,000 shakti-ammas and shaktimans respectively, who take up the role of distributors in remote areas and villages.

Besides this, HUL has some interesting consumer and retailer engagement programmes that aim at building awareness and inducing trials mainly in “media-dark villages”. A case in point is Khushiyon Ki Doli. Running for the last two years in states such as Uttar Pradesh, Andhra Pradesh and Maharashtra, the programme has contacted 10 million consumers and 170,000 retailers in 28,000 villages so far. Most of the people living in these villages do not have access to basic facilities. HUL through Khushiyon Ki Doli has been educating consumers not only about their brands but also about basic hygiene and cleanliness.

The campaign this year, says an HUL spokesperson, has been extended to five states (West Bengal, Bihar, Maharashtra, Andhra Pradesh and Uttar Pradesh) covering 70,000 villages, 25 million consumers and four lakh retailers. The brands that are part of the campaign this year include personal care and home care brands such as Wheel, Surf Excel, Fair & Lovely, Sunsilk, Vim, Lifebuoy and Closeup, among others.

What HUL has also attempted to do with this initiative is make it lively and engaging, with the use of traditional symbols such as the palki or doli (which is a palanquin). The TV, used for showing audio-visuals and brand commercials, is carried in the palanquin for people to see. Moreover, the company also conducts live demos for small focused groups to increase engagement. Trials are induced with the help of promos and offers, the company spokesperson says.

ITC, on the other hand, has gone a step further, integrating its on-ground machinery and online trading platform called e-choupal to tap the rural consumer. From identifying markets to be serviced by sales representatives to designing packs based on trade inputs, ITC has well-oiled machinery, comprising stockists, distributors and company salesmen, to ensure that the product reaches the end user. The e-choupal platform also provides a ready database of consumers to the company, which uses it to push its FMCG products.

Britannia and Parle Products, while smaller than HUL and ITC, have been focusing on rural markets, pushing creams and cookies rather than glucose biscuits, which are the staple in the hinterland. “As much as 70 per cent of the demand is there and we are going after that potential as aggressively as possible,” says Neeraj Chandra, VP & COO, Britannia Industries. This point is reiterated by Praveen Kulkarni, general manager, marketing, Parle Products: “A category such as biscuits finds easy traction in rural areas.”

Packs of three jam cookies or cream biscuits, for instance, have been priced as low as Rs 5 by Britannia and Parle, keeping in mind rural consumers.

But the innovation in product, price or consumer engagement is not restricted to FMCG alone. In auto, for instance, Maruti Suzuki, Hyundai Motors and General Motors run special panchayat schemes for those keen to buy a four-wheeler. Besides offering steep discounts through these schemes, companies also go all out to ensure that the paperwork is hassle-free and loans if required can be tied up easily. While tractor makers, in contrast, have only rural consumers to count on for sales, firms such as John Deere have begun working closely with their target audience when making changes in design — something multinationals never did earlier.

In consumer durables, Godrej Appliances has been using local communities and even the local postal network to push ChotuKool, the low-cost cooling solution, which is available in the hinterlands of Maharashtra, Tamil Nadu, Gujarat and Karnataka. The game plan, according to company executives, is to have a basket of low-cost products, be it a low-cost water-purifier or washing machine, as part of its efforts to target the bottom-of-the-pyramid.

MELAS STILL A SURE-SHOT WAY OF REACHING CONSUMERS
Ironically, the mela (or fair) remains one of the most potent tools of reaching rural consumers. The reason is not difficult to gauge. Unlike their urban counterparts, rural consumers enjoy coming together for festivals, events or gatherings — which is why the haat or mela or jalsa acquires significant importance in his life. This is also a time when he is relaxed, in a mood to listen, and even spend. Brands across the board in the last few years have taken full advantage of this, flocking to fairs much more than they did earlier. While setting up stalls and promoting one’s products is commonplace, some brands such as Thums Up from Coca-Cola India have gone the extra mile in drawing the attention of the rural consumer.

Into its third year, Thums Up Jalsa is simply what it denotes: a fair, where aficionados are treated to an array of action-packed games, entertainment and fun. Entry to the fair is on purchase of Thums Up, which gives the consumer a ticket to the event. Despite this, so successful is the initiative that Coca-Cola has expanded the franchise, organising it in more than 300 centres across the country for two months stretching from February to March, this year. For Coke, it’s a sure-shot way of conveying the machismo of brand Thums Up. For consumers, it’s a time to simply let down their hair and have fun.

(With inputs from Raghuvir Badrinath in Bangalore, Vijay Roy in Chandigarh, Swaraj Baggonkar and Katya Naidu in Mumbai)

Read more on:   
|
|
|
|
|
|
|
|
|
|
|

Read More

Natco formulates a new opportunity

“The drug prices of global pharma companies have no justification whatsoever, not just in India but around the world,” says V C Nannapaneni, chairman ...

Quick Links

Advertisement

Back to Top