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Companies eye the purchasing power of rural youth

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Role of rura

Role of rura

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  • 1. Printed from Companies eye the purchasing power of rural youth 25 Jul 2010, 0008 hrs IST,Monica Behura,ET BureauNEW DELHI: Last month, when a group of eight top global investors met in London to ponder over theirnext India strategy, all they wanted to knowwas how to go ‘rural’. They had been advised by experts that the country’s hinterland was no more thechallenge that it was two decades ago, when the economy was first opened up. Prosperity in the villageswas slowly starting to outdo the scope of urban India—Bharat was blossoming into the next bigopportunity.Deutsche Bank, which facilitated the London meeting, invited Pradeep Kashyap of MART, an Indianconsultancy specializing in emerging and rural markets, to make a presentation. Kashyap told theeclectic group that all they needed to do was to tap the village youth.The same man had years ago helped FMCG major Hindustan Lever (now Hindustan Unilever) co-createProject Shakti to appoint women micro entrepreneurs among village self help groups as the company’ssalespersons. He was a strong believer in the concept of opinion makers such as the village headman orthe quintessential postman to influence the villagers’ buying decision. So, why was he now talking aboutthe power of India’s rural youth?Part of the reason is the success of the government’s National Rural Employment Guarantee Scheme,which promised 100 days of guaranteed employment with an income of `100 a day. With 43 mn newjobs (1.82 billion new mandays), the village economy became a big draw for the village youth. Youngpeople not only decided against migration, those who had already migrated began returning home. Atthe same time, better power scenario, good connectivity with the cities and access to communicationfacilities such as mobiles and satellite televisions improved not only the standard of life in far flungvillages, but also increased awareness and enhanced aspiration levels. As a result, rural spending in thelast three years quadrupled to a whopping `40,000 cr.“The nature of the spending shows that the biggest driver of the economy is the youth. Young peopleare earning money, spending on their daily chores and are still left with enough disposable incomes. Allthat money is going, or will go, into buying vehicles, TVs, mobiles, FMCG products, clothes and a decenteducation for the next generation,” says Sujit Nair, chief executive officer of Linterland, a ruralmarketing agency of Lowe Worldwide.Take a look at the facts. The rural market already contributes more than half of FMCG and durables
  • 2. sales, 100% of agri-products sales, and nearly 40% of automobile sales. In the last few years, the biggestpush to India’s mobile telephony story has come from the hinterland where 175 million connectionshave been sold—and this is expected to rise to 440 million by 2012. Half of life insurance policies arealso sold in India’s villages.Companies that are operating in India have already latched onto this boom. In village Shahjahanpur, 30km off the highway from Meerut in UP, a group of young HUL executives and rural marketing expertslast week made a sales pitch to the villagers who huddled amid thatched houses to watch a promotionalvideo in a campaign called ‘Khusiyon ki Doli’ (palanquin of happiness). As the women giggled, watchingthe films and demos, 20-year old Jyoti Saudan stepped aside to take a call from her husband on hermobile phone.“A high degree of awareness facilitated by communication devices has empowered the youth in thevillages. Gone are the days when the company would approach the village headman or the postman orother opinion makers to influence buying-decisions in the village. Now, we are creating campaigns thatdirectly influence the youth,” says Raj Kumar Jha, national creative direcor of Ogilvy Action, a ruralmarketing agency. “The money is now with the village youth and it is he/she who does the spending,”adds Sudhanshu Vats, vice-president for home & personal care category of Hindustan Unilever.That explains why Nokia’s campaign for the rural market says ‘Dikhao Apna Standard (show yourworth)’, Bharti Airtel says ‘Aaj Koi Akele Nahin’ (no one is alone) and Max New York Life Insurance callsits rural policies ‘Vijay’. “More than 50% of rural youth in the age group of 25-35 years have contributedto `2.5 million value top-ups of our policies through their mobile phones,” says Anisha Motwani, chiefmarketing officer of the insurance firm which has sold 93,000 ‘Vijay’ policies in the rural market.Companies are also branding Internet café’s, movies halls and youth clubs in villages, where youthparticipation in local functions especially during festivals goes up.“At every function, we demonstrate our mobikes and register at least two sales,” says Anil Dua, chiefmarketing officer at Hero Honda. Hero Honda gets 42% sales from the rural market. Seventy percent ofthe consumers are in the age group 25-35.Indeed, it was this youth-led demand that helped the Indian economy post a healthy near 7% GDPgrowth even when the world had slipped into the worst recession in several decades. And so, in the eyesof the investors, India’s rural youth emerged as the Knights in shining armour. “It is an opportunity nocorporate can overlook. India’s rural market is already a $0.5 trillion market today, and it is expected todouble to $1 trillion by 2020,” adds Kashyap.