2462654-4-as-of-rural-market

2462654-4-as-of-rural-market - Transcript

4 A s approach of Indian Rural Market
Opportunity
The Indian rural market with its vast size and demand base offers a huge opportunity that MNC s cannot afford to ignore With 128 million households the rural population is nearly three times the urban
As a result of the growing affluence fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991 rural India has a large consuming class with 41 per cent of India s middle class and 58 per cent of the total disposable income
The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet soap users and 38 per cent of all two wheeler purchased
The rural market accounts for half the total market for TV sets fans pressure cookers bicycles washing soap blades tea salt and toothpowder What is more the rural market for FMCG products is growing much faster than the urban counterpart
The 4A approach
The rural market may be appealing but it is not without its problems Low per capita disposable incomes that is half the urban disposable income large number of daily wage earners acute dependence on the vagaries of the monsoon seasonal consumption linked to harvests and festivals and special occasions poor roads power problems and inaccessibility to conventional advertising media
However the rural consumer is not unlike his urban counterpart in many ways
The more daring MNC s are meeting the consequent challenges of availability affordability acceptability and awareness the so called 4 A s
Availability
The first challenge is to ensure availability of the product or service India s 627 000 villages are spread over 3 2 million sq km 700 million Indians may live in rural areas finding them is not easy However given the poor state of roads it is an even greater challenge to regularly reach products to the far flung villages Any serious marketer must strive to reach at least 13 113 villages with a population of more than 5 000 Marketers must trade off the distribution cost with incremental market saturation Over the years India s largest MNC Hindustan Lever a subsidiary of Unilever has built a strong distribution system which helps its brands reach the interiors of the rural market
To service remote village stockiest use autorickshaws bullock carts and even boats in the backwaters of Kerala Coca Cola which considers rural India as a future growth driver has evolved a hub and spoke distribution model to reach the villages To ensure full loads the company depot supplies twice a week large distributors which who act as hubs These distributors appoint and supply once a week smaller distributors in adjoining areas LG Electronics defines all cities and towns other than the seven metros cities as rural and semi urban market To tap these unexplored country markets LG has set up 45 area offices and 59 rural remote area offices
Affordability
The second challenge is to ensure affordability of the product or service With low disposable incomes products need to be affordable to the rural consumer most of who are on daily wages Some companies have addressed the affordability problem by introducing small unit packs Godrej recently introduced three brands of Cinthol Fair Glow and Godrej in 50 gm packs priced at Rs 4 5 meant specifically for Madhya Pradesh Bihar and Uttar Pradesh the so called Bimaru States
Hindustan Lever among the first MNC s to realize the potential of India s rural market has launched a variant of its largest selling soap brand Lifebuoy at Rs 2 for 50 gm The move is mainly targeted at the rural market Coca Cola has addressed the affordability issue by introducing the returnable 200 ml glass bottle priced at Rs 5 The initiative has paid off Eighty per cent of new drinkers now come from the rural markets Coca Cola has also introduced Sunfill a powdered soft drink concentrate The instant and ready to mix Sunfill is available in a single serve sachet of 25 gm priced at Rs 2 and mutiserve sachet of 200 gm priced at Rs 15
Acceptability
The third challenge is to gain acceptability for the product or service Therefore there is a need to offer products that suit the rural market One company which has reaped rich dividends by doing so is LG Electronics In 1998 it developed a customized TV for the rural market and christened it Sampoorna It was a runway hit selling 100 000 sets in the very first year Because of the lack of electricity and refrigerators in the rural areas Coca Cola provides low cost ice boxes a tin box for new outlets and thermocol box for seasonal outlets
The insurance companies that have tailor made products for the rural market have performed well HDFC Standard LIFE topped private insurers by selling policies worth Rs 3 5 crores in total premium The company tied up with non governmental organizations and offered reasonably priced policies in the nature of group insurance covers With large parts of rural India inaccessible to conventional advertising media only 41 per cent rural households have access to TV building awareness is another challenge Fortunately however the rural consumer has the same likes as the urban consumer movies and music and for both the urban and rural consumer the family is the key unit of identity However the rural consumer expressions differ from his urban counterpart Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state owned Doordarshan Consumption of branded products is treated as a special treat or luxury
Awareness
Hindustan Lever relies heavily on its own company organized media These are promotional events organized by stockiest Godrej Consumer Products which is trying to push its soap brands into the interior areas uses radio to reach the local people in their language
Coca Cola uses a combination of TV cinema and radio to reach 53 6 per cent of rural households It doubled it s spend on advertising on Doordarshan which alone reached 41 per cent of rural households It has also used banners posters and tapped all the local forms of entertainment Since price is a key issue in the rural areas Coca Cola advertising stressed its magical price point of Rs 5 per bottle in all media LG Electronics uses vans and road shows to reach rural customers The company uses local language advertising Philips India uses wall writing and radio advertising to drive its growth in rural areas
The key dilemma for MNC s ready to tap the large and fast growing rural market is whether they can do so without hurting the company s profit margins