The Hindu Business Line : In need of an overhaul

“In 20 years the rural Indian market will be larger than the total consumer markets in countries such as South Korea or Canada today, and almost four times the size of today’s urban Indian market. The estimated size of the rural market will be $577 billion.”

_ McKinsey & Company, The Bird of Gold: The Rise of Indian Consumer Market, McKinsey Global Institute, May 2007

These statistics are often the starting point of most marketing thought on rural marketing, especially when it concerns growth or expansion of markets. The sheer size of the potential market is not the only temptation; the feeling that these millions are waiting to be wooed by us marketers is the glazed cherry atop the icing.

But while the lure to reach out to newer prospects in newer geographies has led many a marketing manager to take the proverbial deep dive in the field of ‘Rural Marketing’, there is little success to be heard of (apart from the muscular efforts of HLL Project Shakti — the entrepreneurial project of Unilever’s Indian arm involving women self-help groups — and ITC’s e-chaupal — BAT’s Indian representative getting into vertical integration by re-aligning the agricultural value chain).

At the heart of most rural marketing failures is the casual approach to understanding the rural consumer. Academicians often make a statement in this regard — “Rural marketing is marketing to a rural ‘mindset’; not a rural market.” Unfortunately, there exists only the ‘practice’ of rural marketing and few instances of understanding the rural ‘mindset’.

Interestingly, this misinterpretation of the ‘rural’ concept is not new or unique to marketing. One of India’s biggest vehicles of culture — the Hindi film industry — has been guilty of this for years! From the all-encompassing nationalistic movies of the ’50s to the model villages in the ’90s, overflowing with hospitality, welcoming NRIs with open hearts, kitchens and mustard fields! Literature has probably been the only saving grace when it comes to presenting rural India honestly.

A starting point towards making our understanding more ‘real’ is by breaking a few myths around rural consumers.

Myth 1: Rural India is all about agriculture

Reality: Rural India is way beyond agriculture

First, agriculture’s contribution to India’s GDP has steadily come down to just 17.5 per cent. Further, almost half of the rural Indian economy is non-agriculture-based and a third of the households — around 50 million — are engaged in non-agricultural activities — people working in manufacturing, or as traders, shopkeepers, providing services such as electricity generation, construction, mining and quarrying, transportation and haulage.

Most agricultural families supplement their farm income with non-farm activities. About 40 per cent of rural households are landless. Half of the remaining 60 per cent are marginal farmers (owning less than 2 hectares of land). Large farmers, owning more than 10 acres of land, form a tiny 4 per cent of the rural population. Yet, these large farmers and village landlords colour our mental image of the consumer.

Implications: Communication planning needs to take into account the presence of different groups. Targeting might need to be revisited. Newer categories might seem relevant now.

Myth 2: Rural income is mainly agricultural income and thus uncertain.

Reality: A fair share of non-agricultural activities contribute to rural income. Even agricultural income is far more stable now. Rural occupation is not such a finite demographic. It changes throughout the year. Also, let us examine where rural income comes from. In 1980, two-thirds of rural income was farm income while one-third was non-farm income. NCAER estimates that by 2012 the situation will be exactly the reverse. In 2007, by NCAER estimates, the split was about 40:60 — 41 per cent being farm income!

Implications: With more stable incomes around the year, consumer demand from the rural markets is bound to become strong and consistent.

Myth 3: Rural consumers lack purchasing power.

Reality: While the rural consumer is generally seen as less affluent than his urban cousin, things are changing fast.

According to NSSO report no. 527, there was little difference between rural and urban households in the share of the budget allocated to fuel and light (10 per cent for rural, 9 per cent for urban) and clothing, including bedding and footwear (7 per cent for rural, 6 per cent for urban).

While in 1998-99 over 83 per cent of rural households fell in the lower and lower-middle classes, the number has fallen to 70 per cent in 2006-07; the comparative fall for urban India is from 53 per cent to 27 per cent (NCAER data). And if experts are to be believed, the number is set to fall at a rapid rate over the next 20 years.

Implications: The rural shopping basket will have products that till now were thought of as urban.

Myth 4: The decision maker in rural households is the male.

Reality: The power distance between the chief wage earner — male — and the housewife — female — is rapidly decreasing in rural households. Though the primary decision maker in the rural family is thought to be the male, he is seldom in the household. Mass migration of men seeking employment in urban areas has meant that most immediate purchase decisions, especially in categories that do not require savings to be spent, are taken by females. Add to that the fact that there are 60 per cent more literate females in rural India than in urban.

Implications: We should be prepared to convince rational mothers and wives who are, if anything, extra cautious while spending the household’s money, even while indulging in purchases for personal use.

Myth 5: Rural consumers fear technology

Reality: The adoption of technology in rural areas is faster than we imagine.

The growth in rural teledensity has outpaced urban consistently in this decade. From March 2007 to September 2008, the rural teledensity increased by 120 per cent while urban teledensity grew by 53 per cent only (TRAI data). For the quarter ending September 2008, the net additions to wireless connections in the rural areas were more than twice that in the urban areas (19.93 million vs 8.51 million). The growth for this period in rural areas was 28 per cent compared to 4 per cent in urban areas.

Also, PC penetration in rural homes grew by 24 per cent in 2008 as compared to 7 per cent in the urban areas (IRS 2008 R1 and R2)

Implications: Technology needs to be customised based on a renewed understanding of rural India’s interactions with it. Value-added services such as SMS might not be as relevant as a voice-enabled weather information service.

Myth 6: Rural spells potential for products, especially mass consumption categories such as consumer durables, non-durables and two-wheelers.

Reality: Rural is the next frontier for the service industry — from financial services such as insurance, banking and credit to telecom and retail.

According to an Assocham report, the insurance sector was estimated at $12.8 billion and it is likely to grow by 200 per cent, reaching $51.2 billion by 2009–10. Rural India is an opportunity worth $23 billion for the insurance companies providing them the right product mix. Of the 78 per cent households aware of life insurance in rural India, only 24 per cent are policy owners. India’s rural market holds tremendous growth opportunities for life insurance companies with business worth $231.67 million. According to international consultancy firm Celent, the rural life insurance market will grow to a potential of $1.9 billion by 2015 from the current $487 million.

Implications: Traditional formats for services and their delivery would need to change. Insurance companies may no longer be able to demand regular premia but instead offer flexibility and easier terms. Distribution would need to rely on existing infrastructure that can be shared — post offices and banks to minimise overheads in the process of expansion.

Myth 7: Growth in rural is slow. Investments give late results.

Reality: It is much faster than we think.

First, which market does not need a certain gestation period for growth and development? A FICCI survey indicated that consumer durables would see 12 per cent growth in 2008. The rural market is growing faster than the urban, although rural penetration is low. The rural market, which accounts for nearly 70 per cent of the total number of households, saw 25 per cent annual growth while the urban consumer durables market grew at 7 to 10 per cent.

Implications: High growth in a market which develops late often witnesses faster upgrades. Marketers will need to be quick to up-sell and cross-sell in popular categories such as mobile phones and automobiles.

Seventy per cent of India’s population, 56 per cent of its income, 64 per cent of its expenditure and 33 per cent of its savings come from rural India. It is time we did better than just ‘assume’ what these people desire, detest, appreciate and expect.

(The writer is a strategic planner with JWT, New Delhi. Apart from the cited data sources, he has used various publicly available data sources such as the Indian Readership Survey (IRS 2008), the National Council for Applied Economic Research, National Sample Survey Organisation, Central Statistical Organisation and generously borrows, with permission, from various published works in related fields, like that of Rama Bijapurkar. )

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