Understanding rural markets

Companies tend to dump their inferior and outdated products in rural markets

M V Sasidharan

A Rs. 1,23,000-crore market, with as many as 700 million potential customers. That's the estimated size of the country's rural market for goods and services. And India Inc. is slowly but surely spanning its attention to the countryside. While companies, including the biggies like HLL, ITC, Godrej, Nestle, along with smaller players including Nirma, have kicked off efforts to get a toehold into this lucrative market before competition really sets in, the stumbling block for many still remains their inability to decipher the conundrum called the rural market and the buying behaviour of our village folk.

While it remains to be seen how well firms cope up to the challenge, what is clear is that it's still a long way off before rural India probably sees the kind of competition among players that is being witnessed in the metros and bigger towns. In the interim, apprehensions are being voiced about the possibility of manufacturers choosing to dump substandard products, which find no takers in the cities, on to the rural markets.

The main challenge before companies that have forayed into the rural markets is to comprehend the peculiarities in the buying behaviour of the average Indian rural consumer. Market research studies relayed at a recent seminar on 'The Challenges of Rural Marketing' found that Horlicks was being fed to buffaloes and hair dye being used to paint them.

With more players now chalking out their strategies for entering the rural markets, increasing number of firms are dedicating teams and funds to the rural markets the aim of re-learning marketing lessons. What is becoming clearer though is that rural India was not so "rural" and "illiterate" and "gullible" after all. MART, the specialist rural marketing and rural development consultancy has found that 53 per cent of FMCG sales lie in the rural areas, as do 59 per cent of consumer durable sales. Of two million BSNL mobile connections, 50 per cent went to small towns and villages, of 20 million Rediffmail subscriptions, 60 per cent came from small towns, so did half the transactions on Rediff's shopping site.

According to a study by Chennai-based Francis Kanoi Marketing Planning Services Pvt. Ltd., the rural market for FMCG is Rs. 65,000 crore, for durables Rs. 5,000 crore, for tractors and agri-inputs Rs. 45,000 crore and two- and four-wheelers, Rs. 8,000 crore. All in all, a whopping Rs. 1,23,000 crore, if corporates manage to comprehend the rural buying behaviour and get their distribution and pricing right.

Getting strategies bang on

Companies have started reinventing the sales and marketing wheel to cater to the rural consumers. Peculiarities in rural buying behaviour, including the propensity to buy in smaller packs, have been capitalized on by nearly all the FMCG firms that are present in the rural markets. The concept of sachets was launched by FMCG majors only aimed at the rural market. Then there are other issues including a perceptible brand stickiness demonstrated by rural buyers, where a consumer buys a brand out of habit and not really by choice.

Rural masses are also sometimes less price-sensitive as compared to their urban counterparts. For instance, the MART study shows that expensive brands, such as Close-Up, Marie biscuits and Clinic shampoo are doing well because of deep distribution. And many brands are doing well without much advertising support, like Ghadi - a big detergent brand in North India.

The peculiarities in buying behaviour has forced companies to innovate and rethink on ways to entice the market. Durable manufacturers have, for instance, launched hand-held vacuum cleaners, washing machines without driers to cater to the needs to a discernable, yet purse conscious rural consumer. Marketing efforts are also being targeted on mediums such as radio stations, cinemas, haats, melas, and village panchayat meetings, to effectively home in on the rural eyeballs.

Rural consumers have also started throwing their weight around, though in a rather limited way. A sugar co-operative in Maharashtra's Kolhapur district, of instance, asked Hero, TVS and Kinetic to stage a competitive demonstration so that they could order 400 mopeds. Villagers collectively asking companies to display and demonstrate their products at haats or other meeting points is also now commonplace.

TTK Prestige has achieved success in retrieving market share in the South by tying up with women's self-help groups and NGOs in Andhra Pradesh to market its pressure cookers.

The company is still perfecting a replicable model to adopt in other states whereby it can empower the rural people by providing them with some money and itself achieve its business goals.

A cooker brand exclusively for the rural areas is on the drawing board.

ITC e-Choupal initiative has given farmers the power of scale and better bargaining power when it came to selling their produce and buying agri-inputs. It de-linked information from transaction and bestowed the freedom of choice on the farmers.

Even as competition among manufacturers enters the countryside, the issues of sub-standard, outdated products finding their way on to rural markets could also be quite real. For instance, Black and White TV sets, phased out of most urban markets, are still being sold in the villages. Pricing could be another contentious issue, since the "sachet" concept, adopted by most FMCG players in the rural markets, proves to be more expensive as compared to buying a whole bottle or packet of the commodity. The prevalence of spurious brands in the rural markets is also a big problem.

According to manufacturers though, the sales of products such as B&W TVs and strip-down versions of washing machines is taking place in rural markets since there is a demand for such products. Also, it is sometimes cheaper for a rural/semi-urban consumer to buy durables in a city because the margins given to a big retailer there were better than those given to a distributor closer to home, they argue.

What is encouraging, though, is that along with the manufactures and service providers entering the rural market, there is new breed of players who are developing rural Indian as their niche and playing a role in unraveling the rural marketplace.

Chennai-based Anugrah Madison Advertising Service Pvt. Ltd., for instance, specialises in rural strategy and communication and has the skills to conduct campaigns in several languages. MART is involved in rural research, strategy and distribution.

A firm called Rural Relations is emerging as a big player in rural customer relations management and it has a huge database of opinion leaders in six states. Sampark is engaged in managing rural van operations and other events.