Date: May 17, 2002
Location: The Times of India Building, Mumbai
Participants: Rupam Ganguly, General Manager, Consumer & Trade Marketing, Consumer Electronics, Philips India Ltd; Srinivasan Raman, Vice President, ORG-MARG; D.K. Bose, Consultant, Ogilvy Outreach; Suresh Balakrishnan, General Manager, Linterland Rural Initiatives, and Shubabrata Bhattacharya, General Manager, Corporate Communications, HLL
Moderator: Dr. Ranjan Das, Consulting Editor, Strategic Marketing.
anjan Das (RD): I welcome you to the fourth Strategic Marketing forum. The first in these series of forums was held almost a year ago. In the past forums we have discussed issues such as Performance by Results, Brand Culture and Forever Brands. Today the topic of our discussion is Rural Marketing.
The discussion will have four main modules and we will discuss each module for about 20 minutes or so. The modules are as follows:
1. The changing profile of rural consumers
2. Importance of Rural Media and Distribution system - its problems and opportunities
3. Marketing and sales organization to drive the rural initiatives
4. Application of learning from success of urban marketing

Before we begin, let me share with you why we picked up this topic. The penetration of consumer durables has seen a substantial increase in the Indian rural sector. One thirds of the premium luxury goods are now sold in the rural market. Two thirds of the middle-income households are now in the rural market. According to one study, if the rural income in India goes up by 1%, there would be a corresponding increase of about Rs. 10,000 crores in the buying power. On the other hand, the urban sector (category A and B) has shown little signs of growth in the last 12 months.
Now, let me start with the first module “The changing profile of rural consumers”. Mr. Bhattacharya, I have been told that Hindustan Lever’s sales turnover in rural market alone is over five thousand crores - that’s a whopping fifty percent of the total sales turnover. Can you tell me how your customer profile has changed over the years?
Bhattacharya: Yes, about fifty percent of our sales come from the rural sector. You see, a lot of rural supplies are actually routed through the urban areas. This is because people from villages prefer making their purchases from neighbouring cities.
About the profile... yes, the rural consumer is changing and is catching up with the urban consumer. This is why we re-launched LUX at the price of five rupees. This new five-rupee pack is targeted at the rural consumer. Its not just Lux...slowly we are even taking other premium products (like shampoo sachets) to the villages. The fact that LIFEBUOY which is mostly sold in the rural market had to be repositioned also reflects the changing rural customers.
RD: Mr. Raman, can you tell us what kind of changes you have observed in the rural consumers? For example: according to one source, the rural youth have become major influencing factors in the purchase decisions, especially in consumer durables. What do you have to say about this?
Raman: It is a fact that unlike a few years ago, the rural youth today are playing a far more significant role in influencing the purchases of radios, television (black and white as well as colour). Penetration levels of consumer durables in the rural sector have risen dramatically in the last decade or so. Even the rural woman is coming out of the closet. I won’t say that she is out of the closet completely... but unlike ten years ago (when she had probably an insignificant or no role to play) today, she is exercising her choice in selecting categories - the choice of brands may still be with the males of the household. But yes, in this context I feel the youth have certainly begun to play a role in selecting a brand in certain product categories.
Here it is often observed that there is a tendency to follow the trends of nearest metro. Just like so many youth in Mumbai aspire to be in U.S.A., the rural youth aspire to be in Mumbai, Chennai or Calcutta and so on. This is like a yard stick - the city plays the yard stick in terms of the development in the village.
RD: Studies suggest that the rural youth are playing an increasing important role in purchase decisions. They are ones who actually travel out in the village frequently. So they are the real drivers of the rural market. They may not be the final customers (those who pay money) but often they are the people who influence the purchase of high value products and they decide on which brands to choose.

The motivators for purchase in a rural consumer are different from those in the urban consumer Suresh Balakrishnan

Raman: Certainly they are playing a far more important role than before but I don’t think that they are the drivers or they are the ones who are actually playing the role. They were not as influential a decade back as they are today. But unfortunately, the prerogative of making the final purchase decisions stills rests with the chief male. In other words, the “chief wage earner” syndrome still applies in the rural markets.
RD: Mr. Balakrishnan, do you think the purchase behavior of the rural consumers is different from that of the urban consumers? If so, are there any implications for the companies who target the rural market?
Balakrishnan: Most definitely yes! The motivators for purchase in a rural consumer are different from those in the urban consumer. Therefore we are talking about rural youth. But when we talk about youth, we refer to the age group of 15 to 25. I think that in rural India, it is the age group between 8 and 15 that influence most purchases - more than any other group. This is largely because they tend to retain messages and often play back these messages to others too. Just to give an example: Recently we launched Fair and Lovely soap in a village in Bihar. It’s TV commercial (chaand ka tukda) had debuted on prime time TV just one week ago. The village kids played back the whole commercial to us word by word with the product benefits, the product promise and so on. We were quite surprised as we were targetting the rural women and here we had kids who played back this commercial. So it’s the 8 to 15 age group that has assumed importance. If you have noticed, even HLL and Colgate have begun targeting this age group in their commercials.
Also, another typical rural phenomenon is that kids are sent by their mothers to purchase something without specifying a brand. So kids tend to ask for products they have seen or heard on radio or TV. So to a large extent, kids are driving this change as much as youth.
One more point I would like to make about the changing rural consumer: there is no singular definition that fits all rural consumers in our country. It varies from one state to another and from one culture to another. Media exposure, education levels and many other factors come into play when we describe rural consumers. Villages in Bihar are so much different from those we find in, say, Andhra. So while we are talking about changing profile of rural consumers - yes it is changing. They are becoming more aware, they are buying more luxuries than ever before. Yet certain basic values and beliefs are still the same... boy child being preferred over a girl child.
RD: Mr. Bose let me put a question to you. If you look at a rural consumer today, you would find that there are differences in terms of culture, language, religion and consumption behavior. Do you think that a discussion about rural markets in India must consider these social factors to really understand the consumers?
Bose: Absolutely! First of all let me clarify one point: For the last many years, we have been talking about the rural market as a one homogenous group. But if you ask ten people present here to define the term ‘rural’, each one will probably give a different answer as to what constitutes rural. What is rural to HLL is not necessarily rural to Philips or to Electrolux or to somebody else. And I am talking in terms of marketing and marketing communications, not in terms of demography. Therefore, it is important for us to understand what constitutes rural.
Let me give an example. In 1987-88, Nestle ask me to develop a media plan for mini-metros for magi noodles and they gave me a blanket understanding asking me to develop a media plan for what they called mini metros. And obviously Nagpur was one of the mini metros. I tried explaining to them that though Nagpur may be classified as a mini-Metro on the basis of its population, its characteristics are that of a rural market.
There are 600,000 villages in India. 25% of all villages account for 65% of the total rural population. So you can contact 65% of 680 million or 700 million population by simply contacting 150000 villages - that’s a very large market.
Why are we talking about rural marketing today - it’s not because we love the rural market or that the rural market offers us great potential. What has happened from 1990 onwards is that advertisers spent a lot of money on television and by default they covered some rural markets as well. As a bonus, these advertisers started getting certain returns from the rural market - bonus of investment which they had actually made for the urban market. So television (doordarshan) became the major catalyst for focusing on the rural market.
RD: Mr. Ganguly, lately, more and more premium goods, especially in the consumer durables category, are being sold in the rural market. Do you think there are certain socio-cultural sects, languages or religious backgrounds that are more dominant in buying these products or is this still determined by traditional factors such as location, income level or education level etc.?
Ganguly: Firstly, let me ask if really we understand the rural market? The government of India only defines a non-urban market. An urban market is the one which has a population density of 400 people per sq/km. 7% of its population has to be involved in non-agricultural activities and there is a municipal body. If we go by statistics, roughly around 73% of the Indian population lives in the rural areas. That’s almost 12% of the world population. Since this theoretically constitutes a huge market potential, marketers will tend to throw in their hooks to catch the fish. Now with the urban demand hitting the plateau, rural markets are gaining more importance and we cannot ignore it. Rural markets cannot be termed as one homogeneous entity. We cannot club so many people under one category. Then the same rules that we apply for the urban markets would be applied to rural markets also. You will look at segmentation, demographic profile, psychographic profile, income profile, and age profile etc.
RD: From your experience, are there certain characteristics already visible, particularly in the consumer durables market, (because sales of consumer durables are moving upwards) - would you, for instance, say that rich farmers are buying these products? Are there any typical characteristics of rural consumers that tend to be opting for this kind of premium products?
Ganguly: At this point in time within my industry (consumer electronics) its still at a basic level. So while earlier there was a great demand for black & white televisions, with the price gap between colour and B&W TV narrowing, rural consumers are increasingly opting for Colour TVs. As a consequence, the B&W TV industry is shrinking. Now if you term colour TV as a luxury item, sure rural people are migrating towards color TVs. But when you consider other high end electronic goods such as the CD player market, these really have not yet found entry into the rural market. It is still an analog industry - we sell an amazing quantity of radios in the rural market.
RD: Even sales of washing machine, refrigerators and bicycles are going up. In general, sales of premium goods are going up. You will be surprised to know that the sales of talcum powder have been going up too - it is considered an urban product and yet its doing well in the rural markets. Mr. Ganguly, what has affected the profile of the rural consumer - it is rising income levels or exposure to media?
Ganguly: I guess it would be a combination of both. We all know that the rural market in India is largely dependent on the monsoon. Now for the last 6 years or so we have had very good monsoons. This, coupled with the TV boom (more and more regional channels have come up in the last few years) has contributed to this trend. So I guess that it is a combination of all these elements which has led this change.
RD: Ok, lets now move on to the next module: the issue of media and distribution in the rural markets. Mr. Bhattacharya, I have a question. According to one source, only ten percent of Indian villages are connected by C&S - the rest watch only Doordarshan. Also, in India, the retailers are highly fragmented, highly dispersed. At the same time, each of these regions serves a large population. Talking from the communication perspective, especially if a large portion of your sales comes from the rural sector, how to do you reach out to the rural audience?
Bhattacharya: 5 years ago, DD’s reach was only 55%. Assuming that this reach has gone up by 10% or 20% since then, we still have a situation where at least one-thirds of India is not covered by DD. And our own belief is that the media penetration in rural areas is only about 57%. This means we must think of innovative ways of reaching the rural consumer (haats, melas etc.)...because media as we perceive it is not covering as much as 43% of rural India.
RD: Mr. Balakrishnan, there are approximately two hundred thousand haats in India. Now because mass media does not reach rural consumers as well as it does the urban ones, do you think these haats can be exploited as a major media vehicle and are companies using it effectively?
Balakrishnan: When it comes to the rural market, two out of five Indians are unreached by any media - TV, Press, Radio and Cinema put together. I suspect that these figures are even larger, because you know how media is calculated - I mean if he has got access to television, he can supposedly be reached by media. Having said that, any congregation point therefore, becomes an opportunity to convey your message. So yes haats, mandis and melas are opportunities. And I would like to make a point about unconventionals ways. For most mature marketers these have become conventional. The challenge for communication is in controlling cost per contact. When you talk mandis, melas, whatever the congregation points - the cost for reaching the rural consumers is extremely high. Therefore none of these models are scalable.

If you ask ten people to define the term ‘rural’, each one will probably give a different answer as to what constitutes rural D K Bose

What marketers and advertisers are today worried about is how to develop a scalable model of influencing the rural consumers’ mind over a large period of time and keep it going, given limited or reasonable budgets to make this happen. That’s where mature marketers, (those who really understand rural markets) and advertising agencies can make a difference and develop a scalable media/communication model.
RD: If you compare India v/s United States: The United States has about 18000 journals/periodicals through which you can communicate. India has about 300 all of which are urban-centric. With such limited communication channels, what options do rural marketers have?
Bose: See there are certain principles that we learn, apply and evolve with experience. One basic problem of using the mass media for marketing communication in rural India is that the time gap between the point of exposure and the time of purchase is long. Therefore, what happens is that if the memorability, if the impact of