companies vying for rural customer

8/8/2019 Companies Vying for Rural Customer

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COMPANIES VYINGCOMPANIES VYING

FOR RURAL CUSTOMERFOR RURAL CUSTOMER

By:By:--Sikander Singh DhaliwalSikander Singh DhaliwalMBA IMBA I


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INTRODUCTION:INTRODUCTION:

When India's GDP was declared in 2009 numbers wereWhen India's GDP was declared in 2009 numbers werereleased, many were happily surprised. In the fourthreleased, many were happily surprised. In the fourthquarter of the fiscal year (Januaryquarter of the fiscal year (January--March 2009), theMarch 2009), theeconomy grew 5.8% against expectations of less thaneconomy grew 5.8% against expectations of less than5%.5%.

During the last quarter of 2008During the last quarter of 2008--2009, manufacturing2009, manufacturingshrank 1.4%. In contrast, agriculture grew 2.7%.shrank 1.4%. In contrast, agriculture grew 2.7%.

The rural market is insulated from the global meltdown.The rural market is insulated from the global meltdown. Several factors have led to an increase in ruralSeveral factors have led to an increase in rural

purchasing power:purchasing power:

1.1. Minimum support price.Minimum support price.2.2. NREGS.NREGS.3.3. Loan waivers [introduced in the last Union Budget].Loan waivers [introduced in the last Union Budget].


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MEANING OF RURAL:MEANING OF RURAL:

People living a different lifestyle as opposed to that ofPeople living a different lifestyle as opposed to that ofthose who have settled in the bigger cities and towns.those who have settled in the bigger cities and towns.

Mass of people who relate their income closely to theMass of people who relate their income closely to thelands they till or use to raise their cattle and livestock.lands they till or use to raise their cattle and livestock.

The primary source of livelihood is agriculture,The primary source of livelihood is agriculture,employment opportunities in the organized sector areemployment opportunities in the organized sector arenegligible, eating choices are restricted to homenegligible, eating choices are restricted to home--

cooked, simple food, schools are far away, healthcooked, simple food, schools are far away, healthfacilities are rudimentary.facilities are rudimentary.

But acc. to me rural is not a geography; it is a mindset.But acc. to me rural is not a geography; it is a mindset.


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MASSIVE MARKET:MASSIVE MARKET:

Around 12.2% of the world's consumers live in India.Around 12.2% of the world's consumers live in India.Rural households form 72% of the total households.Rural households form 72% of the total households.This puts the rural market at roughly 720 millionThis puts the rural market at roughly 720 million

customers.customers. Total income in rural India (about 43% of total nationalTotal income in rural India (about 43% of total national

income) is expected to increase from around US$220income) is expected to increase from around US$220billion in 2004billion in 2004--2005 to US$425 billion by 20102005 to US$425 billion by 2010--2011.2011.

Moreover zeroMoreover zero--tax on farm income, creates far moretax on farm income, creates far moredisposable income.disposable income.

The purchasing power of rural India is more than halfThe purchasing power of rural India is more than halffor FMCGS [US$17 billion].for FMCGS [US$17 billion].


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CONTD:CONTD:

The durables and automobile sectors contributeThe durables and automobile sectors contributeUS$2.5 billion each, and agriUS$2.5 billion each, and agri--inputs (including tractors)inputs (including tractors)about US$1 billion.about US$1 billion.

Some 42 million rural households [use] bankingSome 42 million rural households [use] bankingservices against 27 million urban households.services against 27 million urban households.

There are 41 million Kisan credit cardholders [creditThere are 41 million Kisan credit cardholders [creditcards issued to farmers for purchase of agriculturalcards issued to farmers for purchase of agriculturalgoods] against some 22 million card users in urbangoods] against some 22 million card users in urbanmarkets.markets.

EXAMPLE: The State Bank of India (SBI) has started aEXAMPLE: The State Bank of India (SBI) has started azerozero--balance bank account program for villagers.balance bank account program for villagers.


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PRODUCTS FOR RURALPRODUCTS FOR RURAL

MARKET:MARKET: Maruti Suzuki.Maruti Suzuki.

Telecom: According to industry estimates, 70% of all new subscribers willTelecom: According to industry estimates, 70% of all new subscribers willcome from rural areas.come from rural areas.

Nokia handsets.Nokia handsets. Shampoo in sachets to cut down the prices as rural area people are moreShampoo in sachets to cut down the prices as rural area people are more

price conscious.price conscious.

Moreover NANO also attract the rural segment as rural person believesMoreover NANO also attract the rural segment as rural person believesspending US$12,000 on a car is a sin. He wants it at US$3,000.spending US$12,000 on a car is a sin. He wants it at US$3,000.

Private sector companies like ITC have set up the ITPrivate sector companies like ITC have set up the IT--enabledenabledeChoupal network, and Hindustan Unilever has project Shakti,eChoupal network, and Hindustan Unilever has project Shakti,under which women's selfunder which women's self--help groups act as the last link of thehelp groups act as the last link of theretail chain.retail chain.


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FROM FOUR P'S TO FOURFROM FOUR P'S TO FOUR

A'S :A'S : The traditional four P's of marketingThe traditional four P's of marketing ---- product, price, place andproduct, price, place and

promotion, have been replaced by four A'spromotion, have been replaced by four A's ---- affordability,affordability,awareness, availability and acceptabilityawareness, availability and acceptability ---- for rural markets.for rural markets.

AffordabilityAffordability ---- Godrej introduced three brands of soaps Cinthol,Godrej introduced three brands of soaps Cinthol,Fair Glow and Godrej (soap) in 50Fair Glow and Godrej (soap) in 50--gram packs.gram packs.

Size and design changesSize and design changes ---- Videocon introduced a washingVideocon introduced a washingmachine without a drier for US$60.machine without a drier for US$60.

DCM Shriram developed a lowDCM Shriram developed a low--cost water purifier especially forcost water purifier especially for

rural areas.rural areas. FMCG companies innovated on package sizes to introduce lowFMCG companies innovated on package sizes to introduce low

price points.price points.

Promotional strategies for rural markets using local language andPromotional strategies for rural markets using local language andtalent.talent.


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TAPPING INDIAS RURALTAPPING INDIAS RURAL

MARKET :MARKET : With the economic liberalization, foreignWith the economic liberalization, foreign

brands are now prevalent across India. Today,brands are now prevalent across India. Today,multinational corporations view emergingmultinational corporations view emerging

markets such as India as prime opportunitiesmarkets such as India as prime opportunitiesfor growth .for growth .

But success in India's rural markets forBut success in India's rural markets formultinational corporations is not easy tomultinational corporations is not easy toachieve.achieve.

Kellogg's' is an excellent example of aKellogg's' is an excellent example of acompany that has struggled in the Indiancompany that has struggled in the Indianmarket.market.


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Contd:Contd:

UNDERSTAND THE RURAL MARKETUNDERSTAND THE RURAL MARKET::A much greaterA much greaterpercentage of India's population is still low income. As a result,percentage of India's population is still low income. As a result,they spend money, live, and use products differently than thethey spend money, live, and use products differently than the

countries where most multinational corporations originate. Ruralcountries where most multinational corporations originate. Ruralareas, in particular, exemplifyareas, in particular, exemplify these differences.these differences.

DEFINING RURAL:DEFINING RURAL:..

RURAL INCOME :RURAL INCOME : With an average income equivalent to $42 perWith an average income equivalent to $42 permonth ($504 dollars per year), rural Indians have a very lowmonth ($504 dollars per year), rural Indians have a very low

disposable income. Rather than buying in bulk, which would meandisposable income. Rather than buying in bulk, which would meanpaying more for a large quantity upfront, rural Indians tend to buypaying more for a large quantity upfront, rural Indians tend to buywhat they need for short segments of timewhat they need for short segments of time


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Contd:Contd:

PRODUCTS AND USES:PRODUCTS AND USES: Urban Indian consumers wouldUrban Indian consumers would typicallytypicallyuse toothpaste for brushing their teeth, while most rural Indiansuse toothpaste for brushing their teeth, while most rural Indiansprefer using tooth powder.prefer using tooth powder.HUL discovered that rural Indians tend to use the same soap forHUL discovered that rural Indians tend to use the same soap for

washing everything from hair to their bodies to clothing.washing everything from hair to their bodies to clothing. RURAL MARKETING IN INDIA:RURAL MARKETING IN INDIA: With the initiation of various ruralWith the initiation of various rural

development programmes there have been an upsurge ofdevelopment programmes there have been an upsurge ofemployment opportunities for the rural poor.employment opportunities for the rural poor.The steps taken by the Government of India to initiate properThe steps taken by the Government of India to initiate properirrigation, infrastructural developments, prevention of flood, grantsirrigation, infrastructural developments, prevention of flood, grants

for fertilizers, and various schemes to cut down the poverty linefor fertilizers, and various schemes to cut down the poverty linehave improved the condition of the rural masses.have improved the condition of the rural masses.


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ASSESSING THE MARKETING FORASSESSING THE MARKETING FOR

RURAL INDIA:RURAL INDIA:

Several large companies like HUL, ITC, CocaSeveral large companies like HUL, ITC, Coca--Cola, LG, Britannia,Cola, LG, Britannia,Philips, ColgatePhilips, Colgate--Palmolive etc., penetrated aggressively into thePalmolive etc., penetrated aggressively into therural markets and spent heavily in the rural areas.rural markets and spent heavily in the rural areas.

But were the companies successful in offering their products to theBut were the companies successful in offering their products to therural consumers ?rural consumers ?

Most of the products purchased by the rural masses were at timesMost of the products purchased by the rural masses were at timesused for some unusual purposes other than what they wereused for some unusual purposes other than what they werebasically made or manufactured for. Like the Godrej hair dye isbasically made or manufactured for. Like the Godrej hair dye isused by the rural consumers for applying on their buffaloes toused by the rural consumers for applying on their buffaloes to

make them look immaculate black before displaying in the marketmake them look immaculate black before displaying in the marketfor sale.for sale.

So the companies need to make proper assessment whileSo the companies need to make proper assessment whilemarketing for the rural Indiamarketing for the rural India..


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Contd:Contd:

1.1. THE RURAL MARKET SCENARIO:THE RURAL MARKET SCENARIO:

In India the ratio of rural to urban population was slightly higherIn India the ratio of rural to urban population was slightly higherthan the world's ratio with 70 percent of them living in ruralthan the world's ratio with 70 percent of them living in ruralareas. They domiciled in nearly 6,27,000 villages spread overareas. They domiciled in nearly 6,27,000 villages spread over3.2 million sq. km.3.2 million sq. km.

About 40 percent of the graduates coming out of IndianAbout 40 percent of the graduates coming out of IndianUniversities were from rural areas.Universities were from rural areas.

The colour televisions, refrigerators, airThe colour televisions, refrigerators, air--conditioners andconditioners andmicrowaves have become a household sight in villages andmicrowaves have become a household sight in villages andsmall townships.small townships.


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Contd:Contd:

2.2. THE PARADIGM SHIFT :THE PARADIGM SHIFT : In most of the rural areas in different parts of the country, thereIn most of the rural areas in different parts of the country, there

is considerable awareness on various latest products that areis considerable awareness on various latest products that areavailable in the market.available in the market.

Some of the important causes for the growth of rural marketsSome of the important causes for the growth of rural marketsareare

* The rise in disposable income of the rural families* The rise in disposable income of the rural families* The economic boom* The economic boom* Timely rains* Timely rains* Rural population involved themselves in business other than* Rural population involved themselves in business other thanagricultureagriculture* Increase white* Increase white--collar jobs in nearby townscollar jobs in nearby towns

* Saturation of the urban markets* Saturation of the urban markets* Media penetration in rural areas* Media penetration in rural areas* Globalization* Globalization* Economic liberalization* Economic liberalization*Women empowerment*Women empowerment


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Contd:Contd:

3.3. THE MARKETER'S PLAN:THE MARKETER'S PLAN:

Companies like Cavin Care who launched their shampoo inCompanies like Cavin Care who launched their shampoo insachets, Britannia who conveniently packaged its Tiger brandsachets, Britannia who conveniently packaged its Tiger brandbiscuits with low price tag are the best examples of understandingbiscuits with low price tag are the best examples of understandingthe rural customer's needs and providing them with the desiredthe rural customer's needs and providing them with the desiredproducts.products.

The companies need to make proper assessment while marketingThe companies need to make proper assessment while marketingfor the rural India.for the rural India.

Uses of skits, magic shows, and education by NGOs are some ofUses of skits, magic shows, and education by NGOs are some ofthe most preferred traditional media which the marketers canthe most preferred traditional media which the marketers canusually use as it goes well with the tastes of the rural consumers.usually use as it goes well with the tastes of the rural consumers.


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HIGH SECTOR EYES INDIANHIGH SECTOR EYES INDIAN

RURAL MARKET:RURAL MARKET:

From multinational highFrom multinational high--tech consumer durable companies totech consumer durable companies toChinese mobileChinese mobile--phone makers; from global information technologyphone makers; from global information technologygiants such as Microsoft to backgiants such as Microsoft to back--office service providers; globaloffice service providers; globaltelecom and biotechnology companies, and even Indias ITtelecom and biotechnology companies, and even Indias IT--sector,sector,

the National Association of Software Services Companiesthe National Association of Software Services Companies(NASSCOM), are stepping out of the cities and moving into the(NASSCOM), are stepping out of the cities and moving into thevillages and towns of rural India.villages and towns of rural India.

Most telecom companies (and even mobile handset makers) areMost telecom companies (and even mobile handset makers) aremoving out of larger cities and plugging into the rural sector,moving out of larger cities and plugging into the rural sector,

purely to ramp up volumes.purely to ramp up volumes. Even the internet companies like YAHOO and GOOGLE areEven the internet companies like YAHOO and GOOGLE are

making their search engine less complicated, as well as developmaking their search engine less complicated, as well as developcontent for rural userscontent for rural users such as weather updates, crop patterns,such as weather updates, crop patterns,ebb and tide schedules, etc.ebb and tide schedules, etc.


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SWITCHING ON IN RURALSWITCHING ON IN RURAL

INDIA:INDIA: LG has entered the rural market through two ways:LG has entered the rural market through two ways:

1.1. At one level, it has introduced cheaper products.At one level, it has introduced cheaper products.

2.2. At another it has gone on an officeAt another it has gone on an office--opening spree inopening spree inIndia's smaller towns.India's smaller towns.

The majority of LG's revenues are now coming fromThe majority of LG's revenues are now coming fromsmaller towns.smaller towns.

Godrej introduced a direct cool refrigerator whoseGodrej introduced a direct cool refrigerator whoserange starts at Rs 6,500. Moreover they arerange starts at Rs 6,500. Moreover they areadvertising on doordarshan.advertising on doordarshan.


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CASE STUDIES:CASE STUDIES:

CASE I:CASE I: NOKIA TARGETING BILLIONNOKIA TARGETING BILLION

CUSTOMERS IN RURAL INDIA.CUSTOMERS IN RURAL INDIA.

CASE II:CASE II: CELLPHONECELLPHONE

ENTERTAINMENT IN RURAL INDIA.ENTERTAINMENT IN RURAL INDIA.


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CONCLUSION:CONCLUSION:

The rural India that has lot of money withThe rural India that has lot of money withit definitely offers a great potential for theit definitely offers a great potential for the

companies. But only those companiescompanies. But only those companieswould survive at these places and winwould survive at these places and winover the rural consumers who can spendover the rural consumers who can spend

time and money on understanding thetime and money on understanding theneeds of them and come up withneeds of them and come up withinnovative ideas.innovative ideas.


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THANKSTHANKS

companies vying for rural customer

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