Untapped Indian Rural Markets 260711


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White Paper Co-authored by me along with Hemant Kothari

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Untapped Indian Rural Markets 260711

  1. 1. Untapped Indian Rural Markets - Mr. Pradeep Kumar & - Mr. Hemant Kothari By 2020, Indian Rural Economy is set to touch a staggering $1 Lac Cr. - or to set perspective equivalent to the economy of the 2nd largest country in the world - Canada.Often companies estimate or in other words underestimate rural economy in terms itspotential, its size and its prosperity index. Rural economy is distinct in most aspects.Though rural economy consists of the breadth and width in terms of heterogeneousmarkets available for durable, FMCG and other industries it is mostly untouched interms of brand penetration.This untapped market can only be penetrated through products and services developedafter a deep understanding of rural consumer’s needs and habits. For example – Withthe understanding of the disposable income and weekly salary pattern of the ruralconsumer; CavinKare offered Chik Shampoo in a small single use pouch at 50p.There have been initiatives from the Govt. to develop rural markets. In later part of thisarticle, we will discuss about the Govt. initiatives with strengths and weakness of thesame.
  2. 2. Rural Market contributes to the 56% of the country’s GDP with 70% of population. Asper recent research it was found that 70% of Indian population is from villages and theyaccount for 60%, 50% and 40% sales of FMCG, TV Sets & Two wheelers marketsrespectively. Maximum of these sales happen from 17% of the villages which is mainlyin population bracket of 2000 to 5000 people. Recently, we came across an interview ofMr. Ajay Chaturvedi, CEO – Harvay the first rural BPO of India, where he hasmentioned that only imparting training to rural population for his business was notenough but handholding with them in practical application of those trainings as acritical aspect.Difference between Rural and Urban Psychology:Urban and rural consumers differ in many ways due to their upbringing, theirperspective towards luxury and their social set-up. An urban consumer is in touch withhis social group on a frequent basis, though not in a face to face manner. Compared tourban social occasions of parties, social gatherings, the rural community is more close-knit with its Choupal, community meetings, where people interact with each other on adaily basis.Symbols of status for rural and urban users also vary significantly. Car for urban usersgets replaced by a more utilitarian tractor for rural audiences. In terms of real estate -land holding is more crucial for a rural consumer compared to luxury amenity like air-conditioner for urban consumers. This is also seen for travel preferences - while theurban consumer would aspire for a holiday abroad, the rural consumer aspires for anonce-in-a-lifetime pilgrimage.Strong Difference is Purchase Decision Making:Buyer psychology distinctly varies between urban and rural consumer. At variouspoints of time different people influence the rural consumer on aspects like decisionmaking on whether to purchase, evaluation among brands, finance to complete thetransaction, usage and maintenance tips. The urban consumer is more independentwhen it comes to the purchase process than the rural consumer.Due to legacy of political history and social environments in this country, there are bighurdles created between rural and urban environments (i.e.) hurdle of inequality ofincome, development, basic infrastructure to live in, etc. These hurdles somehow werebuilt by the Govt. policy in early 1990s as focus was only on urban development andindustrialization, thereby reforms not reaching rural masses.We have discussed the differences in basic psychology in urban and ruralenvironments. All forms of communication to rural population should be different than
  3. 3. that of urban. To increase the effectiveness of all communication in rural should havedifferent mode of communication (like rural Jatras, community Baithak etc)Current need in Rural IndiaImprove Reach of Govt. Initiatives:Even after sixty years of independence, we have still not addressed the real problemsfaced by the rural citizen (i.e.) basic infrastructure, training, lack of basic systems inplace and high level of corruption, where benefits doesn’t reach to the targetpopulation. In recent past, we have seen some big scams like Commonwealth scam, 2-GSpectrum, etc. These have some how built disbelief of rural citizen on Govt. Agenciesand their work on rural development. The potential of those benefits have not beingeven tasted by target population like NREGA schemes of GOI.Making Products more accessible:In recent research done by MART, it has been seen that number of products in acategory found in rural market is far less than urban. Compared to urban marketswhere brands are constantly fighting with each other for shelf space, in rural marketsbrands can win the battle of the markets by just being present at the right place. Arecent study of MART revealed that the rural retailer has access to only three brands ofHair Oils, Biscuits and Toothpaste each, in comparison to the urban retailer who stocks7 brands of Hair Oils, 9 Brands of Biscuits and 6 Brands of Toothpaste on an Average. Ithas been also experienced that most of these rural brands are local brandsmanufactured near to these markets than in urban markets.
  4. 4. Future Potential:The population of rural India is800 million - which is astaggering 12% of the World’sPopulation. And rising incomesand increasing opportunitieshave ensured that the bottom ofthe pyramid is slowly changingthe shape of how we havetraditionally viewed them toshape of a diamond.Road Blocks to Growth:Growth in rural Indian markets is at mercy of Govt. intervention, issues ininfrastructure, political instability and climatic influences (early or late monsoon canaffect FMCG markets)Lot of Govt. initiatives has been taken in last five years which influenced large numbersof rural masses to be more bankable and help them to have sustainable livelihood.There are many efficient Govt. reforms which have unfortunately not reached thegrassroots due to high corruption at all levels of Govt. entities. Some of those initiativesare Banking Correspondence (BC) for all PSU banks by RBI, Bharat Nirman underNeGP program from GOI (providing all Govt. Services and other services through ITenabled kiosk). These initiatives have somehow brought sustainability to ruralpopulation by making them entrepreneurs.Many private organizations have contributed to the welfare of rural Indians and gainedimmense monetary and brand currency by being meaningfully present in their lives.Popular example is the Project Shakti of Unilever Limited - which has empoweredmany rural women financially.Most of the companies never actively participate in demand generation activities inrural India through rural acceptable mode of communication. This makes rural marketless attractive to them. In recent survey from MART, it was found that 17% of ruralmasses contribute 60% of wealth to the expenditures. It is also important to do theserural acceptable activities to generate demand for their products/services.