Challenges to Overcome in Rural India
The rural Indian market is growing at a rapid pace. They need many products and the choices of rural consumers are transforming drastically. So, rural marketing is becoming important in today’s competitive market. Different services and products are being offered to rural folks. They may or may not be different from the ones in urban areas. But altogether different strategy is required to promote and market them. To face these challenges, marketers are using a combination of advertising and promotional techniques and also unique media communications for rural areas. With the rise in rural consumption, there has been a lot of discussion on marketing in villages. Rural India presents immense opportunity, but there are unique challenges that the area presents and need to be cautious. Spurious products, lower priced look alike and the challenge of reaching the last mile have always kept companies on their toes. Correct pricing and the scaling up in larger areas need to be really cautious about not losing money. The rural markets are credit markets and the payment collection have always been a challenge. I am sharing my experience which I have gained after multiple years of running campaigns.
Spurious and Me Too Brands:
The brands face a fierce competition from the spurious and me-too products in the market. These products are locally manufactured and are supplied to the retailers directly. They use the similar packages of the brands and look alike and use similar names, for example, ‘Dabaar Aamlaa’ and many others like this. These products are sold by retailers because of the lack of awareness at the rural level. Secondly, the lack of reach of the brands at the deep rural level also affects their sale at that level. Product awareness and reach is required by the brands to pick up sales in rural areas. Me-too brands work in small areas and they do appropriate branding there. With a strong workforce in small areas and low prices they pose a strong competition to the brands.
I will cite an example here. L&T sells switches for the motors and pumps which are used in farms. In Punjab, they were faced with a fierce competition by one of the me-too brands. This brand was offering a lower price and offering exchange of the product if any problem occurred. Whereas although L&T was present in the market for more than 50 years, their connection with the customer was almost lost. The product, however, was working well wherever installed from the last twenty years in some cases. Due to the hyper activeness of the me-too brand and low activity of L&T, sales was hit. They approached us for a solution. We surveyed and analysed that L&T needed an awareness campaign for the brand. We started the awareness and focussed on the USPs of the product. We connected with the potential targets and the results started showing.
The brands need to reinvent themselves regularly in order to remain strong. This is quite a challenge for companies.
Logistics and Distribution:
Lack of proper infrastructure is a top challenge in Indian villages. Secondly, lack of efficient distribution system hampers the reach of services/ products into rural Indian villages. One of the models in recent times has been the usage of the Indian postal service by mobile companies to penetrate scratch cards to the rural areas. The mighty Indian Postal Service with more than 1,50,000 post offices is the largest distribution network across the globe and has more than 120000 centres in India’s villages. Another challenge is the small usage by the rural villages does not make a full truckload and hence becomes expensive logistically to distribute the material at every corner. With the advent of Tata Ace, also called ‘Chota Hathi’, some problems have been resolved. The companies need to build the warehouses in the 200 km area so that the material should reach in a few hours. The use of appropriate vehicle can also reduce the cost of logistics. Quicker supply can also help in improving the sales. Still logistics and distribution is quite a challenge for many companies. I believe that logistics intertwined with technology can solve it in a much better way.
Payment Collection and Credit Market:
Times are changing very fast, Indian villages are connecting with banks. Reduction in usage of cash has started but still we have to go a long way. The real challenge in the rural markets is that largely the markets are agriculture dependent and credit is required at every step. The rural markets need credit from companies as well and sometimes the payment collection becomes really difficult, especially when there is a stress in the market like monsoon delays or rains at wrong times. It creates a lot of pressure on the trading community and they are not able to pay at the right time. Selection of the distributors is also a quite a challenge in these areas. The proven manufacturer, distributor and retailer network has been the only success so far, although setting up such a structure is quite difficult.
Pricing:
The price is the value a customer pays for what he gets as a package of utility, honour and satisfaction. While pricing a product all these three values should be considered. Normally a price is calculated with the costs plus the profit. But this is not the real way to do it. The price depends on multiple factors and the affordability comes last. The first one is the need of that product. The larger the need, more the value it creates. Secondly, how critical the product is for the customer. A particular pesticide may be required at a critical stage of the crop where the farmer cannot take a risk, the value of the product automatically rises and so the price. Here the price is not calculated with the profits generated rather what benefit it gives to the farmer. Thirdly, the point of affordability comes in. But there are many other factors behind the process of pricing. The study of the competition market and placing your brand in that bandwidth is again a very challenging task. Understanding your brand value and positioning it in resonance with brand value is the key to pricing. The lower pricing could hit the margins and devalue the product. Whereas over pricing could be the reason for loss of sale. So pricing is one of the critical steps in the rural marketing jargon.
Scaling Up in Other Markets:
India is a country of different cultures, the trend becomes even more scattered in the case of remote villages. Setting up business operations on a PAN-India level encounters different kinds of issues in various states ranging from social to political factors. Any business model where scalability means scaling on real grounds, operations is bound to run into unknown issues as we switch from one state to the other. Add to it the differences in consumer priorities and behaviour across locations than in the relatively less scattered urban Indian population. The heterogeneity and diversity in the country creates many challenges for companies to move forward and expand. Few factors need to be considered before starting the expansion. Analysis of the strength of the market for a particular product is required, whether a similar product can be delivered or if some cosmetic or other changes are required. LG electronics gives different designs for different regions of India after studying requirement and liking of specific regions. This strategy has worked well for LG. Another factor could be the affordability of that product in that particular region. The development levels, job opportunities and the life style of the people of that area are also important factors. The awareness levels and adaptation to new technologies is also a major factor for launching a new product in a particular region. The demography, seasonal study and the crop pattern is also an important factor to be considered. A particular agricultural machinery is required in one region and another in the other region. Developing artificial scale through partnerships has resulted in growing overheads in the rural Indian market. Finding the right person with reach in villages is not so easy to start with. Moreover, there are very few companies who are strong on these people across multiple areas. Hence, a whole India roll out requires multiple strong partnerships resulting in growing partner management overhead costs. So the scalability is not just a cut paste job in rural India but needs a lot of research and analysis before going for it.
Picking Up Pace:
The growth in sales is the dream of every organisation. Improvement in sales can be done in three ways, by cross selling the existing customers, adding new customers and expanding in new areas. The expansion challenges have been discussed in the earlier paragraph. The cross selling and adding new customer in the same geography is the best way to improve sales without adding much to the overheads. Cross selling is selling another product to the existing customer. This can be done by leveraging the brand value of the existing product for the customer. For that we could generate the database of the existing customers by using code based packing and luring the customer to send the code on a particular number. We can lure the customer through a lucky draw or assured prize for every code sent. We will be able to collect the users’ numbers and can push our other products for sale to the existing customers. We could do this with digital technology and even build an ecosystem for customer entertainment, satisfaction and finally delight. Here, the chances of sales are very high. Adding new customers is always a challenging preposition. But focusing on the right set of consumers through target focusing methodology we could influence them through multiple campaigns. The best being 360 Degree Sales and Marketing Model as explained earlier in this book. The acquisition of new customers is always a bit expensive but long term engagement could give fantastic results in the form of brand value and brand loyalty. The selection of the geographical areas in the form of clusters will benefit the most as the communication will be percolated around the cluster automatically making it a branding success leading to sales explosion.
Social and Cultural Challenges:
The socio cultural fabric of India is very diverse and it poses a lot of challenges for the companies and the marketers. The patriarchal society makes half of the population powerless and stops them from using their full potential for growth. Women now have started rising educationally and financially which have changed the scenario. But reaching women for the products related to them is still a challenge. Taking an example of kiosk model, the kiosk model has successfully worked in some parts and not worked in other parts of rural India due to socio cultural fabric. One of the prime reasons for the fall down of the kiosk model was the lack of usage by women, reason being their discomfort in going to kiosks run by opposite gender. Similarly the social structure of caste system in our society have destroyed the self-confidence of almost 60% of population which comprise of the lower class, although with reservation and other government policies they have started rising. With the advent of lower caste leaders in politics, the self-confidence of these classes have started rising. But still educational backwardness rules the roost. Reaching the lower classes is still a challenge. Around 70% of the population is under poverty line and expecting demand generation from such families will be a futile exercise. In order to build this country into a developed nation we need to work on our poor. I don’t, at any point, want to play down the potential that is present. Most of the points just go back to the basic assumption that rural India is a volume market and need scale that is organically the largest challenge. The ones who will succeed in solving these problems will definitely change the world around us. The target behind all these efforts is to create awareness and changing spending habits among farmers and others about bank services and benefits. These challenges create a lot of trouble for the marketers in rural India.
For more insights Read Book " Rural Market Unleashed " available on Amazon.in