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Rural India accounts for more than 45 per cent of the total market in most consumer product categories including fast moving consumer goods, two- and four-wheelers, and consumer durables such as televisions and telecom products, a report by Confederation of Indian Industries and retail consultancy Technopak Advisors says. Rural markets are growing at double the pace of urban markets for many product categories, the report says.

business Updated: Mar 14, 2010 22:03 IST
Ritu Tripathi

Rural India accounts for more than 45 per cent of the total market in most consumer product categories including fast moving consumer goods, two- and four-wheelers, and consumer durables such as televisions and telecom products, a report by Confederation of Indian Industries and retail consultancy Technopak Advisors says. Rural markets are growing at double the pace of urban markets for many product categories, the report says.

That’s exactly why consumer product marketers are working hard on rural marketing. “The FMCG market has grown at 23 per cent last year in rural India. As durables shrink in urban India, the rural market is witnessing a 15 per cent growth rate. Telecom in rural India is growing at 31 per cent,” says Saloni Nangia, VP, consumer goods and retail, Technopak Advisors, a retail consultancy.

IMRB's research shows that both the personal care and household care categories are showing healthy growth in rural India. Rural consumers are willing to try out newer categories.

Other consumer categories are also tapping the rural promise. Automobile companies such as Maruti, General Motors and Hyundai have tied up with public sector banks to expand their rural reach. Arvind Saxena, director, marketing and sales, Hyundai Motor India, says, “Tie-ups with various banks has helped us extend our potential customer base. Public sector banks have greater penetration in the hinterlands. Our growth in smaller towns, beyond the top 40, has been 29 per cent in calendar 2009 as against 24 per cent in 2008.”

At an estimated 720-790 million consumers, the rural Indian market has begun to merit special effort by marketers. As Nangia observes, “Several companies are working to improve the four As — affordability, awareness, availability and acceptability — in the rural marketing mix. Small sachets at lower price points, and Coca-Cola’s training programmes for rural kirana stores — over 6,000 retailers have been trained already — to display and stock products.” IMRB research finds that marketers are effectively using smaller SKUs to drive trials and gain category penetration.

Hyundai India started a unique rural promotion, Hyundai Utsav, in April 2009 to reach out to prosperous farmers, money lenders, the business community, private companies, government employees, doctors and lawyers across all non-dealership towns. “We created awareness about Hyundai using the local wholesale ‘mandi’. Earlier, we had also launched a rural promotion scheme called ‘Ghar Ghar Ki Pehchaan’ under which a special scheme for government employees in rural areas and members of gram panchayats was offered on the purchase of the Hyundai Santro. Through this, we contacted 58 per cent of Indian villages with a 500-plus population,” says Saxena.

Hindustan Unilever too has Project Shakti as part of its endeavour to grow disproportionately by 'straddling the consumer pyramid'. It targets small villages populated by less than 5,000 individuals. The Shakti Entrepreneur programme creates livelihood opportunities for underprivileged rural women and the Shakti Vani program improves quality of life by spreading health and hygiene awareness in media-dark regions.

A Hindustan Unilever spokesperson says, “Project Shakti is a prime example of how we are growing the market through reaching new consumers who are otherwise not touched by the established distribution system. It helps us build an emotional connect that goes beyond our brands’ functional benefits and provides us enormous competitive advantage.”

On the affordability plank, Nangia says, Adidas and Reebok have managed to increased sales by 50 per cent by reducing prices. Philips has launched a low-cost smokeless stove, while Schneider Electric has launched e-lamps priced at Rs 450-550. LG Electronics has developed a television that can pick up low intensity signals, and sold 1,00,000 units within a year.

Vipul Sabharwal, director sales, Nokia India, says, “The gap between expectations and lifestyle aspirations of rural and urban consumers has gradually narrowed. With rural penetration of the electronic mass media, improving infrastructure and higher literacy levels, marketers discern a clear shift in demand patterns of what was hitherto a largely utilitarian consumer base.” Although price and value conscious, he adds, rural consumers are also looking for products that enhance their lifestyle. Nokia has introduced affordable products based on these insights.

Mohan Krishnan, senior VP, IMRB International, says, “With media penetration growing, the focus on semi-urban and rural folks for messaging is increasing.”

Sabaleel Nandy, head – water purifier business, Tata Chemicals, predicts, “With greater awareness and education, rural consumers could soon begin to appreciate more complicated and technologically superior offerings. The offerings will then have greater elements of customer delight inherent in them.”