Flip side of Rural

1 Distribution and Logistics

innovative models in recent times has been the usage of the postal
service by mobile operators to penetrate scratch cards to the villages. The
Indian Postal Service with 155000 post offices is the largest distribution
network in the world, and has all of 120000 outlets in India’s villages.

2 Payment collection
3 Pricing While Sachet pricing may have worked very well for Chik shampoo,
the overheads involved in payment collection do not always allow easy
execution of sachet pricing. It is easier to collect in larger amounts as every
instance of collection and carrying of cash has associated costs
4 Scaling cross geographies

5 Developing inorganic scale

Developing synthetic scale through partnerships typically results in larger
overheads in the rural context. Finding the right partner with reach and
presence in villages is difficult to start with.
6 Social and cultural challenges
The cyber café (or kiosk) model has not worked in many parts of rural India due to
socio-cultural issues. One of the reasons for the failure of the kiosk model in Kuppam
in Kerala (HP’s i-community) was the lack of usage by women which was largely due
to their discomfort in going to kiosks run by men.

rural is a volume market and requires scale and achieving that scale organically or
inorganically is a major challenge

Rural India – Few Consumption Data

46% of the soft drinks sales happen in the rural areas.
Rural India accounts for 49% of motorcycle sales.
Rural India accounts for 59% of Cigarettes sales.
53% of FMCG sales happen at Rural India.

In 20 years, rural Indian Market will be larger than the total consumer markets
in countries such as South Korea or Canada today, & almost 4 times the size of
today’s urban Indian market.
 Rural India –Key Statistics
Rural India constitutes 69% of India’s population.
86% of Rural population earns less than $2 per day (most of Indian BoP
households earn $67 per month in 2010 from $42 per month in2000)
There are more phones than Radio in Rural India (100million subscriber base).

Only 0.29 per cent of the male population has reached the graduation level
(0.04% for women) and 6.% of the rural males are educated up to the middle
level
70 % of the disabled in India lives in rural areas
The 4A Approach
Availability
To service remote village, stockiest use auto-rickshaws, bullock-carts and even
boats in the backwaters of Kerala.. LG Electronics defines all cities and towns
other than the seven metros cities as rural and semi-urban market. To tap these
unexplored country markets, LG has set up 45 area offices and 59 rural/remote
area offices.
rural retailers influences 35% of purchase occasions
Affordability

Acceptability
Awareness Mass media is able to reach only to 57% of the rural population.
For generating awareness, events like fairs and festivals, Haats, etc., are used as
occasions for brand communication. Cinema vans, shop-fronts, walls and wells
are other media vehicles that have been utilized to increase brand and pack
visibility. Ideas like putting stickers on the hand pumps, walls of the wells putting
on tin plates on all the tree surrounding the pond are some of the innovative
media used by personal wash like Lux and Lifebuoy and fabric wash items like
Rin and Wheel. Idea was to advertise not only at the point of purchase but also
at the time of consumption.

Hindustan Lever relies heavily on its own company-organized media.

These are promotional events organized by stockiest. Godrej
Consumer Products, which is trying to push its soap brands into the
interior areas, uses radio to reach the local people in their language.
Rural Consumer – Characteristics

1 ) Rural consumer is very religious

2) Rural consumers prefer to work hard themselves
3) Strong family ties and respect for family values
4) Likes to play card and hang out at choupal.
5) Traditional outlook
6) Less exposure to marketing stimuli
7) Realistic aspirations
8) Concept of quality
9) Suspects hype and fear of being cheated

Three shopping-orientation of rural consumers

Segments such as Inactive In shoppers (High level of loyalty towards local merchants),
Active Out shoppers (favorable attitude towards large city shopping) and
Thrifty Innovators (Economic shoppers)
Principles Of Innovation for BOP Markets

1 Focus on price performance of products and services. Serving BOP markets is not just
about lower prices. It is about creating a new price - performance

2 Innovation requires hybrid solutions. BOP consumer problems cannot be solved with old
technologies.
3 As BOP markets are large , solutions that are developed must be scalable and
transportable across states and cultures

4 The developed markets are accustomed to resource wastage . All innovations must focus
on conserving resources

5 Product development must start from deep understanding of functionality not form.

6 Process innovations are just as critical in BOP markets as product innovations

7 Education of customers on the product usage is the key
8 Products must also be developed to accommodate the low quality of infrastructure
9 The heterogenity of the consumer base is the key challenge to innovations team
10 Innovations must reach the consumer base whether dispersed rural market or highly
densed urban market.
 India’s Consuming class

Classification No. of households (in million)

Urban Rural Annual Income

Destitute 5.3 27.7 < 25,000

Aspirants 7.1 36.9 25,000- 50,000
Climbers 16.8 37.3 50,000-70,000
Consumers 16.6 15.9 70,000-1,00,000
The rich 0.8 0.4 > 1,00,000