afaqs!

Special: The insight story on smaller Indian markets

By Ravi Balakrishnan , afaqs!, Mumbai | In Others | September 03, 2009
It always pays to look deep inside the consumer's psyche

It may not be just blunt marketing prowess and a highly motivated sales force, but deep insights into consumer behaviour that's brought home the big bucks for some of India's smaller marketers.

It's almost a historical inevitability of marketing. A player either originates from or chooses to focus on small towns and suddenly becomes large enough for national players to get worried. It's a tale as old as Nirma and one that keeps repeating itself - to the point where at least publicly, larger companies are often dismissive about the upstarts. Their success is considered a flash in the pan; built on distribution muscle, high trade margins and low prices.

What is often discounted is the role of consumer insights - thought to be the exclusive preserve of brands that do not take a step without research and consulting focus groups. And yet knowing the consumer better is one of the largest factors contributing to the continued success of smaller firms. According to Jagdeep Kapoor, chairman and managing director, Samsika, a consultancy firm that advises many such companies, "It's a myth that only higher margins, larger credits and lower price are responsible for success. The real reason they've succeeded is because they understood the local consumer's local needs."

Surya Food and Agro, maker of Priya Gold biscuits, has benefitted tremendously from catering to small town consumer's desire for novelty. A relatively late entrant, it maintains a rigorous launch cycle of a new product every two or three months. Shekhar Agarwal, executive director, Priya Gold says, "The sector is growing at 8-9 per cent but our company is growing at 20 per cent. We penetrate deeper and create new customers and segments." Unlike most marketers who start in the urban centres and take the product to the hinterlands, Priya Gold's first port of call is smaller markets. As did Wagh Bakri.

Know your consumer

Wagh Bakri created a very strong tea in order to appeal to the customer base in its home territory, Gujarat, which has made it among the largest players in the area. A similar strategy holds true for Sapat, a Rs 60-crore tea brand in rural Maharashtra. According to Nikhil Joshi, managing director, Sapat, which owns the Parivar brand, "The tea market in the rest of Maharashtra is 6 to 7 times the size of the market in Mumbai."

Looking to penetrate media dark markets, and increase its margins, Sapat chose to focus on places with a population of between 2,000 and 5,000 - 51 per cent of the small town and rural population in Maharashtra.

The first innovation happened at the product front. Joshi found that people in these areas prefer leaf tea to dust tea but felt the former didn't have the strength of the latter.

Sapat conceived of a blend that appeared like a leaf tea but with the strength of dust. "We knew they would be willing to pay more. The per capita income in the sugar belt of Baramati is among the highest."

Communicating was a huge problem because many of these places were subject to up to 12 hours of load shedding. The net viewership of TV and, therefore, the filter through of ads was very poor.

The solution was a unique rural model based on structured word of mouth. Joshi drew inspiration from the 'milk miracle' phenomenon where news about idols of Ganesha consuming milk spread like wildfire. He says, "We knew there was something about tier II towns and rural communities where communication channels are established." Sapat 'adopted' 12,000 villages and got one really talkative person from each of areas to communicate the virtues of the Parivar brand.

Joshi says, "They didn't sell but were communication agents. And they were surprised at being paid just to talk." These agents also distributed samples and customised name plates with Parivar branding. As a result, the brand has been doing extremely well. Joshi says with a certain measure of pride that it is larger in volume terms than Red Label. He adds, "It's a myth that people in rural markets do not have money. The problem is we don't have out of the box rural marketing campaigns and strategy."

The 'premium' edge

Parivar hasn't got by on being a budget brand; it is 25 per cent more expensive than competition. The strategy continues with Sahyadri launched in the Eastern part of Maharashtra and is being extended to MP, Chhattisgarh and Andhra Pradesh. According to Joshi, "Rural strategies fail mostly because they are downgraded versions of urban plans. If you design from ground up, you get a lot of value." However, customising is an area that many national brands will not or cannot get into. Says Sunil Alagh, chairman, SKA Advisors, "National players broadbase taste, trying to make things that are liked by all. Small players customise for just one part."

Another popular myth is that the cheapest product always wins. Given low income levels and brands having to compete against unbranded commodities and fakes, it seems almost self-evident to price as low as possible. Except, this does not always work. There's a distinct trend among small town consumers to be more oriented towards value than price and looking to upgrade.

This is borne out by the success of Oont bidi, a particularly remarkable achievement, considering that the brand operates in a category with more than its fair share of misconceptions. Popular wisdom dictates that bidis are less capable of securing brand loyalty and are a cheap option for consumers who would move to cigarettes given half a chance. This runs entirely contrary to the experience of Shrirang Sarda, partner M/s S K Sarda, Oont bidi.

A third generation entrepreneur, Sarda says "Even in this market, image matters." Oont is positioned as a premium bidi, smoked by elders of the village. While not allowed to use mass media, Oont has campaigned around point of purchase and run promotions with cars as giveaways - a fairly extravagant gift. He says, "We were the only ones to do a milk-run kind of system for the delivery vans. They would show up in the village painted very brightly and attractively. We talk about it being the premium smoke, for premium people, everywhere." Brand loyalty once established is hard to dislodge.

Sarda explains, "It's not necessary that every bidi smoker given the opportunity or money would switch to cigarettes." Besides, the consumers have very definite ideas of what they want from Oont. Fresh from his stint overseas, Sarda wanted to introduce a low tar, low nicotine bidi, but people clearly preferred a stronger smoke. Sarda says, "I had to understand the decision in the context of their lives. I asked them 'aren't you concerned about health?', but health to them is a fairly holistic concept. They said, 'the kind of work I do, the area I live in, and the water...none of these are the best for my health. Between all of that, bidi is such a small thing which is potentially unhealthy.'" It relates to one of Alagh's marketing mantras: "focus on LSD - goods that cater to Luxury, Stress and Daily use." He believes the stress range gains importance through tough times and includes alcohol, cigarettes, movies, tea and for rural markets, even travel.

Where is it?

The small town consumer finds himself in the odd position of being exposed to a wide variety of products through TV channels but experiencing relatively few of them. As Kapoor puts it, "Often TV reaches them, but not the products. A handful of companies with very good physical distribution grow." While distribution helps get a foot in the door, consistent innovation lets a company get all the way in.

Agarwal of Surya Agro admits candidly that success is partly due to the reluctance of larger brands to delve deeply. They are unable to meet the small town consumer's need for new varieties. "In metros, everything is always available. Each product already has one or two existing variants, and the shopkeepers are often not very enthusiastic about new products. But in the rural markets both shopkeepers and the customers are eager to try something new," he says. Priya Gold intends banking on the same clutch of consumers as it forays into other areas that are at present sparsely populated by just one or two brands - fruit drinks and chocolates.

Eyes wide open

Even in the absence of traditional research, many of these marketers remain very close to consumers. The trade often plays a significant role, especially since the distributors are often locked into quasi-exclusive arrangements. According to Joshi, even relying on trade is not enough: "Unless the inventors are directly in contact, it is very difficult to synthesise an idea. You have to create a proposition, give consumers a vision for a better life, and bring in products and services that do not exist. The insight mining has to be driven from the top."

Knowing and catering well to a single market does present problems when it's time to expand. Neither Ghadi (a detergent) nor Wagh Bakri has been as successful out of the core markets according to Alagh. Kapoor suggests a way forward: "As long as they keep the purity and sensitivity of understanding local markets locally they succeed. You cannot replicate sensibilities. There will be common practices but you need to understand each market differently. In India, after every 200 km the nuances of consumer insights change. And sometimes these make the difference between failure and success."

 

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