The Rural Growth Tide

“Rural consumption outpaces that in cities” read the recent headline in the Times of India. The National Sample Survey Office (NSSO) data showed that while the growth in spending on goods and services by rural India during the two-year period of 2009 – 10was 19%, it was 17% for the urban areas, a clear indication of how the government’s social programmes are trickling down to rural India.

While the overall figure for rural consumption in the country has always been larger than urban consumption, owing to its sheer size and expanse, the disparity between the growth rates should not go unnoticed.

Marketers’ bullishness for rural markets is strongly driven by census figures that show a rapid rise in purchasing power of the rural citizen of India. Recent trends indicate definite changes in rural lifestyles:

  • Growth in education levels and employment owing to the government’s popular rural employment generation push through National Rural Employment Guarantee Act (NREGA)Rural Coke

  • Growing interaction with urban India, fueled by the construction boom and modern retail outlets for farm produce

  • Increase in overall income levels and rural prosperity

  • Enlarged media reach that penetrates almost all rural households (Close to 60% come in contact with any of the conventional media, like press, TV, satellite, radio or cinema)

The urban economy has always been more dependent on the global economy, while the rural economy has been largely insulated – both financially and psychologically! With the government pushing employment in rural areas, households with dual, or even triple incomes are not uncommon anymore. Incomes through agriculture, government provided jobs and for many through part time jobs taken up at a nearby city, not to forget incomes through selling of land to the encroaching city developers, have all contributed to the rising income levels in rural India.

On the other hand, in urban India, the consumption picture is quite bleak – prices continue to climb sky high as inflation rises.The less said about rising house rents, the better. With the government trying to boost up consumption and bring down loan rates, it is the financially savvy city dwellers who are pinching pennies for taking loans and paying EMIs! At the same time jobs are reducing in number, owing largely to the flailing global economy.

It is clear that the global economy is dampening the spirit of urbanities, while the rural folks are getting aspirational and thereby driving consumption! Godrej saw its sales of white goods drop by over a tenth in big cities in the past fiscal year. But sales in towns of less than 100,000 people rose by 19%, and in villages by over 40%. For Bajaj, too,small-town and rural sales have risen handily in recent years, to become a quarter of its home-appliances business. Sales of motorbikes and mopeds have decelerated more gently than cars, an urban luxury. These figures prove that there is a ripple effect to growth patterns. The growth story first hits the cities, then smallertowns and is gradually now entering the villages. It wouldn’t be too wrong to predict that India’s GDP growth will now  increasingly come from rural India.Until,of course, the latest reforms of FDI in retail and aviation begins to yield returns for bigger cities, and the story shifts back!

The catch however, is that rural shoppers cannot always be relied on to splurge. Their wealth often depends on smaller, irregular bonus rather than increased productivity. A poor monsoon curbs spending for a whole year, city jobs are few and far between and require a lot of hard-work, and government provided jobs are for a limited duration. Life in small-town India may be better, for now, but it is still precarious.

Given the background, what are the implications for us as marketers?

For some time now, large FMCG companies from India and abroad have identified these opportunities and have been targeting rural areas – through strengthening their distribution network, adopting BTL promotions like wall paintings, van promotions, street plays etc., or developing new products altogether for the rural market.

Innovation has also been seen in communication strategies,for example Rin Detergent bar was promoted as Nil Mineral Bar in rural areas to achieve consumer connect in the Health and Personal Care space by HUL. Social Marketing campaigns like Lifebuoy Swasthya Chetana was an initiative which the company took to rural areas. This campaign educated rural people on the importance of health and hygiene in preventing diarrhoea, and encouraged them to adopt a simple hand-washing regime using soap. Swasthya Chetnaturned out to be India’s largest ever rural health and hygiene education program.In the year 2010, HUL touched 28,000 villages and 10 million households through this rural activation program. Colgate created a powerful touch point with its Oral Health Program, to draw rural consumers who were lured by the promise of a ‘free oral check-up’. The program provided Colgate with a captive audience for communication, trial and brand building.

Initiatives like Hariyali Kisan Bazaar by DCM Shriram Consolidated Ltd. is an innovative effort aimed at empowering farmers and meeting the needs of rural households by providing access to agricultural products, services and retail.

Innovations have also been seen in packaging and pricing strategies. The “shackets” introduced by Chic shampoo rocketed their sales.Small Pepsi bottles that sell at Rs. 10, Tata Gluco, a glucose-based beverage, which sells at Rs. 5 for 350 ml, Kurkure Masala Balls that sell at Rs. 4 for 10 grams, and many others, have all worked wonders for their respective companies.

While most of these initiatives have worked well for their initiators, these would be considered sporadic in nature, in response to the sudden unravelling of rural potential. Experts on rural marketing are still debating long term strategies on the subject. While few claim that it is a market where smaller sizes would be best received, others trash these claims and assert that a rural consumer is willing to pay if he gets what he wants. Some insist that grass root reach is necessary to sell to a rural consumer; others negate it by saying that villagers travel to bigger villages for many of their purchases, and by targeting specific key locations, 90% of population will be covered.

Marketers have realized, that to build on growing rural demand, they need sound strategies and a dedicated team focused on rural markets. And clearly, there is a case for in-depth research to understand rural consumers, their lifestyles, needs and aspirations, which will eventually help build long term strategies.

(Note: the opinion/views are purely personal based on putting facts together)

This blog post has been written by Rashmi Deshpande, Insight Consultant, Global MR, Brandscapes Worldwide.

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About Brandscapes Worldwide

Brandscapes specializes in marketing analytics and insight consulting for consumer goods, services and the retail sectors. We leverage the power of advanced data mining tools and the practical marketing and communication planning expertise to distil actionable marketing insights.
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