Retaining rural customers

While in urban markets the customer retention strategy focuses on reducing churn, in rural markets sustaining product use through an efficient after-sales service is the main concern

As we noted in the first two parts of this series, India's rural markets have been growing faster than its urban markets, and many business executives are keen to take advantage of this. At the same time, many struggle with fundamental questions of how to reach, acquire and retain new customers .

Although companies initially focus on customer reach and acquisition, as businesses gain reach and penetration, customer retention takes centrestage. Customer retention strategies in rural markets are markedly different from those used in urban markets. In urban settings, companies try to reduce or avoid churn. In rural markets, sustaining product use through good after-sales service is the main concern. And many companies struggle to provide such services consistently.

Two reasons for this stand out. First, a business may have relatively few customers spread out over a wide area making it hard to reach them. Second, many businesses simply cannot afford to build a dedicated after-sales service network.

Accenture research suggests that rural masters are making focused and sustained efforts to retain customers and build brand loyalty.

Devising low-cost models for after-sales support
In India's rural markets, companies' sales infrastructure is often strained by the effort to create sufficient demand for products. As a result, after-sales support often takes a backseat. Since customer loyalty is tied in part to such support, that's a big problem that could negate many business-building efforts.

Many companies provide after-sales support through their sales infrastructure -that is, their sales force, dealer networks, and channel partners-because it requires little upfront investment. Some companies are also building a dedicated low-cost after-sales support infrastructure by using local resources who provide "no-frills service."

Rural masters seek creative ways to provide low-cost after-sales support. Hero MotorCorp takes a similar localised approach. Through the company's Service Har Jagah initiative, Hero services customers' vehicles in their own villages through specially designed motorcycles fitted with customised toolboxes. The programme covers more than 100,000 villages in India.

Anchoring customer relationships on trust
Building trust with local communities is critical for retaining the hard-won rural customers. Rural masters foster trust by inspiring belief in their companies and offerings and consciously delivering experiences that meet rural customers' needs and preferences.

Some companies build trust by ensuring product and service quality and living up to the promise of reliability and frugal innovation. Others also engage trusted local community members in their business efforts. Consider Fino, which hires local people as Bandhus (business correspondents). Because women are viewed as more trustworthy than men, they account for 30 per cent of the Bandhu force. Bandhus stay in constant professional and personal touch with customers. To hire bandhus with the right mix of skills, Fino and bank officers interview candidates to evaluate their technical knowledge, financial literacy, social standing, and trainability. The company has also established a 65-member channel skills development team responsible for agent training. There is also a separate team responsible for driving customer financial literacy. In addition, the organisation has conducted financial literacy programmes in many states in partnership with the World Bank, International Finance Corporation, Microfinance Opportunities and United Nations Development Programme.

Rural masters also understand that no matter which approaches they use, building trust is all about showing how a company's products or services fulfil customers' needs. The emphasis is on understanding customers' needs, not scoring sales. Banks, for example, can establish trust by explaining to consumers how saving and financial planning can help them provide for their families. Pharmaceutical companies can explain how improving their health with the right medicines can help customers go back to work and support their families.

Companies that successfully build trust can win customers' confidence and loyalty. This, in turn, can strengthen rural consumers' commitment to companies and their brands, opening up new opportunities for businesses to cross-sell other products and services.

Investing in community development
Rural masters further retain customers by working to lift their standard of living-for example, by creating jobs, building or improving infrastructure, or providing business opportunities. To do this, companies align their long-term interests with rural communities' development, building relationships based on shared goals and aspirations.

Some companies accomplish this by integrating local community members into their value chains as partners with a vested interest in the company's survival. Consider Hindustan Petroleum Corporation Limited's Rasoi Ghar (kitchen) initiative. Rasoi Ghar is a community kitchen shared by several village households, a modern version of the traditional 'sanjha chulha'. Centrally located in the village, the kitchen is set up in a pucca house, where several villagers can cook their daily meals simultaneously.

Each Rasoi Ghar is equipped with a water supply, cooking slab, basic utensils, and several stoves connected to replaceable liquefied petroleum gas (LPG) cylinders. The costs to set up each Rasoi Ghar are covered by HPCL. Villagers pay an average of Rs 4 (US 75 cents) per hour of use, which helps cover cylinder refill costs. This is far less expensive than maintaining an LPG connection in their homes.

Poor infrastructure and fragile channel relationships often frustrate companies' efforts to seize the growth opportunities. But as Accenture's research on rural masters reveals, companies can overcome the challenges and retain the rural consumers they've worked hard to reach and acquire. Devising low-cost models for after-sales support, anchoring customer relationships on trust, and investing in rural community development can help achieve success in rural markets.
Sanjay Dawar
MD, Accenture management consulting

With this article we conclude our series on riural marketing in India