Financial Daily from THE HINDU group of publications
Thursday, Aug 28, 2003
The rural conundrum
IT is not a one-time act, not a marketing gimmick or a sound byte. It has been the Waterloo of many companies. It involves addressing some 700 million potential consumers, over 40 per cent of the Indian middle-class, and about half the country's disposable income. Rural marketing, a much-talked about and hotly debated subject, was once again the focus of attention of FMCG majors such as Nestle India and Coca-Cola.
Last week's Marketing Summit in New Delhi hosted by the Confederation of Indian Industry saw heads of these companies express diverse points of view on the issue.
Carlo Donati, Chairman & Managing Director, Nestle India and Sanjiv Gupta, President, Coca-Cola India.
Carlo Donati, Chairman and Managing Director, Nestle India, observed that `generalising the rural market can be dangerous'. "It is true that in today's congested and difficult markets, both local and global, all FMCG as well as other companies or corporations look and search for new opportunities, consumers and markets. Going rural is a question any marketing person must have reflected on many times," he said.
Drawing attention to the 700 million potential consumers in rural India, Donati pointed out that the rural market presented both an opportunity and a problem, given that this market has been characterised by unbalanced growth and infrastructural problems.
So is Nestle going rural? "Our product portfolio is essentially designed for urban consumers; but all the same we are closely monitoring the rural consumer," Donati said.
Nestle's rural initiatives have largely been based on price-led initiatives. Brands such as Maggi noodles and KitKat chocolates have been priced at Rs 5, and few other candy and chocolate brands are priced at Rs 2 per unit. These price points not only help Nestle reach more retail formats in urban markets, but also help in making inroads into rural markets. Currently, rural markets account for below 10 per cent of the food major's revenues.
The thanda Coke ad
Coca-Cola, on the other hand, which has been investing heavily in tapping the rural market, has pegged its rural strategy on three factors - availability, affordability and acceptability. "The rural market is tempting, but tapping it has been fraught with challenges," pointed out Sanjiv Gupta, President, Coca-Cola India.
"Take availability. It involves a trade-off between the cost of distribution and incremental penetration. Issues such as poor infrastructure and bad roads drive up servicing costs. Then there's the affordability factor - disposable incomes are low, and largely dependent on the vagaries of the monsoon. In the case of acceptability, the trade-off is always between customisation and standardisation of the consumer proposition. Most branded products are considered a luxury, media consumption is limited, and general product consumption is highly seasonal and skewed towards the harvest and festival time. Here, the question of customisation versus standardisation of the consumer proposition also arises. In the case of our thanda commercial, for example, we could connect both with the rural and urban consumer so that the campaign did not need customisation," Gupta said.
Drawing comparisons between the urban and rural consumers, Gupta pointed out that while movies, music, social interactions and identifying the family as a key unit were the common attributes exhibited by both, expressions of these activities varied between the two sets of consumers. The rural consumer, for example, sought outings through local fairs, melas and haats, social gatherings such as card sessions, television viewing which was by and large confined to Doordarshan and DD Metro with limited influence of cable and satellite television, besides inter-village competitions.
While emphasising the flexibility of the supply chain the rural market offers, Gupta added that "the buying pattern of the rural consumer is different from the urban consumer; purchase behaviour is occasion-driven by events such as weddings and harvests".
Donati elaborated on the differentiated purchasing patterns of the urban and rural consumer. "The urban consumer has adapted much faster than his rural counterpart. The reasons probably range from higher exposure to media, to changing lifestyles, to increased pressure on time. On the other hand, the key feature of the Indian consumer - his restraint towards consumption - is more visible in the rural, more traditional environment. Hence, the cost of conversion of rural consumers (to the product) is higher," he said.
Cautioning marketers against plunging headlong into the rural market, Donati added, "This does not mean that the rural consumer is not or should not be a target. There are a number of success stories that contradict my statement. I'm just raising a word of caution looking at the large numbers out there. Going rural without first assessing the profitability of such a move can be dangerous. Too much attention on the rural consumer might cause a company to lose focus on its core business. Therefore, attempts to generalise the concept of rural marketing tend to be wrong. I believe one should focus on high GDP areas - whether the population is urban, semi-urban or rural."
Cracking the market, Gupta reiterated, was not only about grappling with issues such as availability, affordability and acceptability. It was about reinforcing them over and over again.
One of the examples Gupta touched upon was to do with issues involving the rural retailer. To counter negligible or erratic supply of electricity, for example, ice-boxes were offered for chilling. For rural retailers preferring high-margin local brands, pricing competitive to that offered by local players and creation of consumer pull have been attempted.
The Summit concluded with a reality check - that rural marketing isn't the fad of the decade. Ingredients for success here include long-term commitment, cost re-engineering and sustained innovation. To put it as a cliché - it is the survival of the fittest.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2003, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line