However, there was a considerable inertia when it came to replacing a working TV set of a previous generation.But Baron also knew that there existed a market, primarily rural, for used televisions. Rural retailers purchased traded-in sets from urban dealers. Urban consumers got something for their old TV sets, urban retailers made their margins from selling the traded-in sets, rural retailers made a profit on used TVs and rural consumers were offered TV sets they could afford. Resultantly, Baron’s sales increased by 1500% over three years making it the most profitable firm in the television business.

Wider competition for a product
Many of the rural buyers tend to have little stock of money, only a flow. Consequently, they tend to make purchases only to meet their daily needs and have little capacity to build inventory. The marketing implications of this are far-reaching. Not only are pack sizes and price points affected, but in turns out that consumers have to make a selection from a much wider array of product categories. Thus the nature of competition for any given product is much broader. For instance, in a village haat, Coca Cola competes not just with Pepsi, but with a broad set of purchases that the rural consumers consider as “treats”.

Preference for Low Unit Packs (LUP)
Trial is often encouraged by Low Unit Packs (LUP) or sachets. The sachet packaging strategy caught the popular FMCG imagination in the early 1990s and it was considered as a breakthrough in the psyche of the rural consumers. Today, the sachets are increasingly dominant on shelves. Shampoo, for instance, has invaded the rural households with sachets at low affordable prices. Sachets of tea, blues and washing powder are being launched in a big way in the village haats by leading manufacturers. Companies like HLL and Marico are making concrete efforts to create and then meet the demand of rural consumers by launching products in small affordable packs.

Channel power
The rural consumers interact directly with their retail salespersons who has a strong conviction power and whose recommendations carry weight. The owners’ relationship with customers is based on an understanding of their needs and buying habits and is cemented by the retailer extending credit. Some of the successful manufacturers creatively develop new revenue activities for the rural retailer. United Phosphorous Limited (UPL), an Indian crop protection company, realized that in its rural markets small farmers were not applying pesticide at all, or applying it inappropriately due to the lack of application equipment. The capital cost of the equipment (mounted pumps and dispensers that cost up to $3000) was placed out of reach of small farmers and most rural retailers. UPL designed a program in which it arranged for bank loans for its rural retailers to purchase application equipment and demonstrated to their retailers the additional revenue possibilities from renting this equipment to small farmers. The result was an added revenue stream for rural retailers.

Price promotion
In an occasional effort to capture volume sale, multinational brands use price promotions that often yield dramatic, if temporary, sales increases in the rural areas. Their large volume increases reveal a potentially large market in the villages that remains untapped, just below the actual price points. To penetrate this market and generate sustainable volume sales, a permanent product entry at the lower price point is required. Failure to recognize the potentially huge market of the villages that lies below the surface of international price points can even place the premium branded business at risk.

Income growth goes into consumption
In urban households there are a number of competing demands for ones money. In rural households, they hardly change their house or go out on a vacation. They save only a small fraction of his money and spend the rest. And when there is a growth in their income, the money goes straight into consumption.

Quality consciousness
It will be unjustified to think that rural consumers are less bothered about product quality. Even the village buyers desire to buy a quality product and upgrade their quality of life. Marico, an Indian edible oil company, has found the rural consumers in the interior of India willingly pay a reasonable price premium for branded cooking oil, over community oil, because they are certain of its consistent quality. Unbranded products are often considered by some of them to be adulterated.

Travails in distribution
In spite of recognizing the potential of this vast market of 700 million, marketers are often unable to cater to it because of lack of adequate infrastructure. The distances between villages, the terrain and the lack of pucca roads connecting the places act as impediments for them to reach their customers. But once if they overcome these hassles and reach those remote bazaars to be first on the shelf in the product category, they develop a privileged relationship with the retailer that offers them a tremendous competitive advantage. Rural retailers are far less specialized than their urban counterparts and carry a wider range of products. Since frequent delivery is not possible in their part of the world, they tend to carry only a single brand in each product category. And, usually, the brands that are first on the rural shelves become synonymous with product category and are difficult to dislodge. For instance, Maggi noodles, the brand that created the category of instant noodles, reached the rural shelves before anyone else and remained the market leader ever since. Thus, a drive down the rugged countryside, sans electricity and other modern facilities, is, surely, torturous. But the pain is worth bearing.

Rural media
Urban consumers shop daily and have 365 opportunities a year to switch brands while the rural purchasers who buy their goods in weekly haats have only 54. Attempts to reach rural consumers, even once during the purchase cycle to ensure repeat purchase, make point of purchase advertising and trade push indispensable. This requires a significant reorientation in the allocation of funds across media. For example, outdoor advertising accounts for over 7% of all media expenditures in India, while it only accounts for 0.8% in USA.
Rural buyers living in small isolated groups distributed across vast distances have limited access to the broadcast media. The existence of a multiplicity of languages and varying level of illiteracy complicates the task of communication further. To overcome some of these challenges, Unilever pioneered the concept of video vans that travel from village to village screening films in the local language, interspersed with advertisements for Unilever’s products. The company also provides product usage demonstrations to the captive audience because written instructions on the pack may be illegible to the consumers who are either illiterate or do not understand the dialect.
Where mass media is used, variability can, at times, back fire. On re-entering India in the 1990s, Coca Cola decided to reinvest massively on a TV advertising campaign. It opted for slick commercials, rich in colour, with high production values, but the effect was somewhere lost on a market where 60% of all TVs are still black and white.
However, in the recent past, the improved technology has allowed the cable and satellite networks to increase their reach across the countryside thus exposing a rural consumer to a lifestyle that was beyond his dreams. And this increasing awareness has led to a significant change in his buying behaviour and consumption patterns.
While the urban market is getting increasingly competitive and saturated, the rural market is blooming with increase in the disposable incomes of the households, thus promising a far better scope for growth for marketers. Hence, with the shifting dynamics of the present-day market situation, now it is the turn of the rural consumers to dictate the terms. And this reinforces the need for marketers to formulate a well-designed strategy to feel the pulse and to tackle the mystic rural market.

The above article has been condensed/abstracted from the
following articles with all their rights are reserved.

1. Rethinking marketing programs for emerging markets,
Chattopadhyay, A., and Dawar. N., Insead R&D, 2000/47/MKT
2. Growing brand awareness, Joseph, Sophie, The Hindu Survey
of Indian Industry, 1999
3. Backcountry Business, Business Today, November 11, 2001
4. The Consumer, Business Today, January 20, 2002
5. Alternative Nation, Baxi, Sachin, Brand Equity, The Economic
Times, 15 May, 2002
6. I’ll play the game my way, Vindi Banga’s interview with Rahul
Joshi and alika Rodrigues, Brand Equity, The Economic Times,
May 22, 2002