A look at how and why corporates shift their marketing destinations from urban to rural India.
Skyscrapers and swanky multi-level malls may be the order of the day in the rapidly changing Indian cities, but real India continues to live in the village, owing to it being the domain of over 70 per cent of the country's total population. Thus, gone are the days when only the urban population, which constitutes 30 per cent of the customer base for companies, was responsible for 80 per cent of the profits.
Corporate India, for a long time now, has set its sights on drawing from this massive pool of untapped potential. Companies are looking for new opportunities and avenues, as they are witnessing a decline in their growth rates in urban markets due to market saturation, whereas they have a huge, untouched and untapped consumer base in rural India.
What has expedited the process of reaching out to the small town and village level consumer is that the rural youth are educated, have access to technology and have an inclination and desire for change. Also, rural markets have acquired significance as the overall growth of economy has resulted in a substantial increase in the purchasing power of the rural communities.
Premium products are replacing entry-level versions, and commodities are giving way to branded products. Besides, the penetration level is insignificant in comparison to the urban market, thereby resulting in very less competition. Also, with a growing number of banks being set up in semi-urban and rural areas, credit is easily and readily available. Moreover, in the recent years, with the expansion of the overall economy and increased purchasing power of the rural communities, rural markets have gained considerable significance. It is not that it has not been thought of before but rural marketing is gradually being taken very seriously and in an organised manner. Therefore, companies have recognised that to build real sales volumes, they will have to reach outside the big cities.
The enormous potential of the untapped rural market can be realised by one look at its estimated annual size of Rs 1,23,000 crore through FMCG, consumer durables, agriculture inputs and 2/4 wheelers. The huge untouched needs of the rural mass, the growing rural economy and the increasing media penetration and brand awareness make this market extremely attractive to marketers.
The launch of low price point SKUs in FMCG products, consumer durables and other packaged goods have, of course, seen a surge in consumption. But, of late, the service industry is also tailoring offerings to suit the need of the rural consumer. Be it banking, insurance, health or telecom, industries have begun to launch no-frill alternatives at basic costs. Even so, the penetration is still very shallow. Simply having a presence in rural India is not adequate to attract consumers living there; companies need to acquire deep customer and market insights and develop transformational strategies to master these markets.
Undoubtedly, there are several difficulties confronting the effort to fully explore rural markets. The concept of rural markets in India is still evolving shape with the sector posing a variety of challenges, including understanding the dynamics of the rural markets and strategies to supply and satisfy the rural consumers. While many companies remain unsure about the possibility of achieving scale and profits in these markets, a few leading companies, whom we call Rural Masters, are showing the way forward. These companies have been successful in overcoming the challenges by building mutually beneficial relationships with rural communities and channel partners and making additional moves that go beyond traditional selling approaches.
In my opinion, e-commerce also holds the key to exploring the rural markets. With high costs of setting up brick and mortar outlets, lack of high quality manpower and large investments required in inventory, e-commerce undoubtedly holds greater promise for rural India as opposed to the cities ,where organised retail and multi brand malls offer consumers myriad options. Be it services like ticket booking and bill payments or purchase of computer hardware, electronic goods, apparel, books and even commodity purchase, the options are plenty. As the Indian rural market goes beyond consumer products and agri-input marketing, total rural income, which is now at around $572 billion, is estimated to reach $1.8 trillion by 2020-21.
Further, skilled manpower at low costs is also something the industry should be able to effectively tap into. Through dedicated rural job portals and placement initiatives, an effort has begun to recruit rural manpower into jobs like sales and marketing, data entry, event management, customer care and hardware technicians, amongst others. By recruiting a local person, it has been observed that the quality of work, community know-how, buy in and retention of the employee have all gone up significantly.
Thus, looking at the challenges and the opportunities which rural markets offer to the marketers, I can say that the future is very promising for those who can understand the dynamics of rural markets and utilise them to their best advantage. There is a clear need to have much more private entrepreneurial initiatives in rural India. Yet, there is good news that the Indian rural markets are now dominating the urban market in terms of demand and potential.
The rural population is nearly three times that of the urban market. The rural society is also gradually witnessing an increase in literacy rates and exposure to global trends. It's showing interest in branded products and services. The consumption trend in rural areas has shown a paradigm shift from price-driven to quality-driven products.
Meanwhile, a radical change in attitudes of marketers towards the vibrant and escalating rural markets is called for, so they can successfully impress the millions of rural consumers spread over approximately six hundred thousand villages in rural India and thousands of small towns. The future no doubt lies in rural marketing, where the market is enticing and marketing to the rural consumers is exciting. However, a clear understanding of the rural consumers and their present and future expectations are a major part of strategies to tap the rural market as a whole.
(The author is director, sales, marketing and HR, AISECT, a Bhopal-based e-governance network with over 12,000 centres located at small town, district and block levels)