The second panel discussion at 101 Markets: India beyond the Metros, the day-long seminar organised by afaqs! to highlight the marketing potential and importance of the emerging towns of India, focused on the challenges faced by the service industry in non-metro areas. The event was sponsored by STAR Ananda, STAR Majha, Hindustan and Jagran Solutions.
The session was moderated by Bhupesh Bhandari, senior associate editor at Business Standard. The panellists were Anisha Motwani, executive vice-president, marketing and chief marketing officer, new markets, Max New York Life (MNYL); Nikhil Rungta, head, marketing, Yatra.com and Om P Pandey, country head, Hughes Communications India.
Bhandari started the discussion by saying that in the last year and a half, due to the slowdown and other factors, companies have begun looking at markets beyond metros, to smaller towns and even villages. With this has come the realization that consumers in these areas have adequate purchasing power.
Bhandari then raised a question: Do we really understand the consumers of small-town India -- what are their aspirations and what intimidates them?
He shared the experience of his own company -- Business Standard -- which launched a Hindi edition in 2007. The consumer insight was that the potential consumers have adequate purchasing power; they have aspirations and are willing to improve their life; but they get intimidated by the English language and the jargon used in an English daily.
Next, Bhandari asked Anisha Motwani of MNYL how tough the customers in small-town markets were, and whether it was easy to convert this traditionally LICI (Life Insurance Corporation of India) population to its own customers.
Motwani accepted that from her experiences in the last 18 months, she has learnt that the customers in these markets cannot be taken for granted.
"One has to treat it as a different market," she advised. This is why MNYL has a different business stream to service the consumers in small-town India. "For us, these are two separate functions with separate P&Ls (profit and loss accounts)," she said. This is also why Motwani has a dual designation.
The other members of the panel did not quite agree with this proposition. They felt that there was essentially no difference between customers in metros and small towns.
"It is only the sales pitch and product customisation that have to be different," he said.
Rungta went on to explain that the travel portal has ventured into 12 brick and mortar outlets to service small towns, because consumers in these areas are intimidated by going online. "These consumers are reassured with a physical presence," he said.
When asked about the share of business that comes from these markets, Rungta said that although the larger chunk still comes from metros, around 40 per cent of Yatra's revenues come from non-metros, which is an encouraging number, as these markets are growing. "The small-town consumers are not only moving out of their cities; they are also increasingly looking at outbound travel packages."
Pandey concurred with Rungta when he said that the approach for the small-town consumers might be different, but in terms of aspirations, these consumers are no different. They do enough research to find out what they want.
Rungta further said that while customizing products for a small-town consumer, one needs to keep nuances in mind. For instance, in the travel segment, for a small-town consumer, food is very important. Besides, he said, premium has a different connotation for a metro consumer and a small-town one. For instance, for a metro person, spending Rs 5,000 for one night might not be a big deal; but a small-town consumer might worry about spending Rs 1,000. Based on these insights, Yatra.com customizes its products for small-town consumers.
To the moderator's question on whether small-town Indians are willing to pay a premium, Motwani replied, "They are more value-conscious, but they are also lot more evaluative. This is because the small-town consumers also have a lot of time on their hands, which gives them time to explore and experiment. Once these consumers are convinced that there is genuine value in something, they are ready to pay a price for it. This is unlike metros, where everything has to be completed over weekends due to lack of time."
On customization of products in the education sector, Pandey shared his experience, saying that the desire for a good education has become stronger than earlier in small-town India, which he also termed as emerging markets.
One basic difference between the metro and small-town consumers, which Hughes keeps in mind when offering products, is the need. Pandey says, "While a metro consumer is more interested in self-development products -- which is why Hughes has tied up with the IITs and IIMs; the small-town consumers are more interested in job-oriented courses, which increase their employability."
Motwani also agreed that the key to succeeding in small-town India was customization.
Sighting the example of the success of Tata Nano, Motwani said that the success of evolutionary products cannot work in small towns; rather, the product has to be revolutionary. According to her, a low-priced Tata Indica would not have worked in small towns, but a Tata Nano did; because a stripped down version of an existing product doesn't work, rather, a customized product works.
She also talked about how her company had to change its sales pitch, because in small towns, customers do not plan for their future and can only pay premiums in small amounts.
MNYL solved this problem by creating premiums of small amounts, such as Rs 10 and Rs 50, and allowing customers to pay anytime and anywhere.
When asked about brand consciousness in the 101 markets, Pandey said that brands have a presence in the smaller markets, but he added that what one needs to look at is the "next level" of markets -- that is, beyond the 101 markets. "The big challenge is the rural market. What value proposition do we have there?" he enquired.
Motwani agreed that there is a big distance to cover in smaller towns and rural markets, saying there are about 4,000 other towns to reach out to. "The bottom of the pyramid is shrinking. We have about 100 million households in the upper chunk of rural India and lower chunk of urban India. These markets have been utilized well by the telecom players, but other sectors, such as insurance, still need to leverage the potential in these markets."
Bhandari then asked Rungta on how engaged the small-town consumers were. This question was based on his own experience, where the demands of Hindi readers were far more specific than the English readers.
Rungta replied that because small-town consumers have ample time, they are far more engaged; while in metros, people want quick redressal of problems. "The small-town consumers are also far more patient," he said.
Rungta also said that the level of engagement is also higher when it comes to the buying process - and not only servicing - as compared to the metro consumers.
The conclusion of the session was that though there is no discernable difference in customers of services in metros and small towns, the sales approach to them has to be according to their cultural beliefs and regional needs.