Rural India: The new frontier

This article looks at the factors driving growth in India's rural markets and the challenges that marketers face.
• Increased government spending, better education and increased connectivity have all contributed to changing the
profile of the typical rural consumer.
• And as rural consumers move from being digitally present to digitally pro-active, marketers are having to revise the
ways they engage with them.
• Push marketing is no longer as effective as more informed individuals and communities make their own decisions.
• But even as the aspirations of rural consumers follow those of their urban peers, they remain rooted in the traditions
of small-town life, so marketers need to identify the crossover points.

Bindu Nair
The potential of rural India is evident in many statistics:
• Since 2000, per capita GDP in India's rural regions has grown at a compound annual growth
rate (CAGR) of 6.2% (India Brand Equity Foundation)

• Rural per capita consumption increased by 19% annually in the period from 2009-10 to
2011-12, while spending in rural India in the same period touched US$69 billion. (India
Brand Equity Foundation)
• There are 850 million consumers inhabiting 650,000 villages across the country. (India
Census- 1991, 2001 and 2011)

• Nielsen expects the FMCG market in rural India to top US$100 billion by 2025 (Nielsen)
Those figures tell a promising story about rural marketing in India. However, the problem with the
narrative on rural marketing is that marketers have been cooing about the promised rural Indian
growth story for a long time now, but just how far has it actually evolved? A lot, if one speaks to
marketers and rural marketing experts who expect incremental growth in the next five years. This
has been made possible because of better education, improved connectivity through internet and
mobile and evolving healthcare and infrastructure facilities. All these factors have gone a long way
to making the rural market the next frontier for brands in India today.
Of course, such opportunities come with their own set of challenges, not the least of which is the
fact that this target segment can no longer be treated as one homogenous group. The third edition of
Accenture's report "Masters of Rural Markets: From Touchpoints to Trustpoints – Winning over
India's Aspiring Rural Consumers" (released November 2014) divides the rural consumer into four
significant consumer blocks. These include the traditionalists (conservative spenders driven by
pricing), the steady climbers (those aspiring for a better lifestyle and looking to buy branded
products), the young enthusiasts (rural consumer between the ages of 18 and 28 who use technology
enthusiastically, buy branded products and exercise influence on the decisions of other consumer
segments) and finally the village elites (progressive rural consumers who have high education and
awareness levels and desire the best in product quality and aesthetics)

Factors driving growth

For all the consumer segmentation and data that studies on the rural
segment throw up, the value of the hands-on local knowledge that
villagers have about their own communities is priceless. It was this
insight that prompted social entrepreneur Pradeep Lokhande and his
wife to write 20,000 postcards to teachers, sarpanchs and postmasters
in close to 40,000 villages in Maharashtra in an attempt to create a
database. At the first attempt, Lokhande and his wife received hardly
any responses. The second time around, Lokhande says, he wrote to
them asking them how they were during the festive season, and again
asked for their personal details. This time, he got a tremendous
response. "I learnt my lesson," he recalls. "I wanted all this personal
information from them, without bothering to know about their
personal lives. The people who responded the second time, felt that I
cared about their lives enough to share their personal information
with me."
Often referred to as "the postcard man" among rural marketing experts, Lokhande has since then
steadily built up a database of the rural community in Maharashtra. He intends to increase its scope
beyond the western state and has ambitious plans for the same. His company Rural Relations is
working on villagewiKY, an online resource that plans to reach out to 49,000 key and feeder
villages of India in its first phase.
Lokhande says there are a number of factors driving change in rural India. "The influence of cities
and metros is petering down to rural markets and that is driving change in a big way. Also,
government spending on rural India has gone up substantially." He also points to the impact of
better education and adds that the woman of the house plays a very important role in the
household's decision making.
Better connectivity through mobile and increased penetration of smartphones have also contributed
towards a significant change in the typical rural consumer's profile. In Lokhande's view, mobile will
be the best medium to reach the last mile for companies where the rural market is concerned. "By
2017, android smartphones should be in the range of Rs 3000 to Rs 4000, and by then 4G should be
available too, so access will be cheaper. That's when everyone in rural India will be connected so
companies looking to target this market should be prepared."
Mobile has acted as an enabler for rural India. For the farmer, access
to mobile connectivity keeps him informed about commodity prices in
the market, and for the average mason, having a phone ensures that
there is a way for his customers to reach him. Lokhande calculates
that on an average, the typical rural consumer spends between Rs 35
to Rs 150 per month on value-added services.
'Media dark' is a term that has often been used in the context of rural marketing in India in the past.
But Dalveer Singh, head of experiential marketing at GroupM (APAC), says it is no longer relevant
to the changing rural marketing landscape.
"With mobile in the picture the access to internet in rural India has been immense. The availability
of cheaper smartphones and 2G/3G penetration is accelerating the adoption of mobile internet-based
solutions in rural India." He cited statistics showing that the mobile internet grew tenfold between
mid-2012 and mid-2014, while mobile video consumption in rural is showing also signs of growth,
since it breaks the barrier of literacy. Since Airtel launched its new video store in May 2012, half of
the 12 million downloads came from rural areas. Lower charges and higher internet speeds are
driving online video viewership and 4G is expected to further boost online video user base and
consumption in the future.
Nor is mobile completely dependent on internet and digital reach. "With mobile communication
mediums like SMS and IVR, brands can reach out to their rural India audiences easily," Singh
added.
Sanjay Tripathy, svp/marketing, product, digital and e-commerce, HDFC Life, says the biggest
change driving growth in rural India for marketers is, without doubt, the adoption of technology.
"IAMAI in conjunction with IMRB has pegged the number of internet users in rural India to be 53
million by June 2015 with a growth rate of 33% from October 2014. The rural consumer is now not
just digitally present, but digitally pro-active." And that shift has had to be reflected in the approach
to marketing. "We have to complement the template previously used for getting through to the rural
consumer – haats, wall paintings, mobile vans, paisa packs, street corner demos on benefits and
methods of usage, etc. – with digital options. Also, the opinion leaders we have been looking at, to
drive usage or adoption of our products needs to change," he says.
Of course, growth rates are a true measure of the strength of any market. Taking the Consumer
Packaged Goods industry as an example, GroupM's Singh says that the rural market contributes
35% of total sales of that industry (Nielsen, 2014). "It has grown at a faster clip than urban sales for
the past two years. Another, front runner in the rural market is banking services: with increasing per
capita income in rural India, we see many financial service providers reaching out to the rural
market via ATMs and also mobile banking," he says.
The exceptional increase in access to information, he suggests, has gone a long way in
strengthening the digital revolution in rural India.
"Millions of people who barely knew about issues surrounding them, now have a know-how of
international issues. Additionally, increased literacy (In last 20 years rural India has seen a 54%
increase in the literacy rate) and connectivity via infrastructure in rural India has added to the
accessibility," he says.
The notion of rural consumers being passive audiences has undergone a major shift. "The push
model of marketing is dying when it comes to rural consumers," says HDFC Life's Tripathi. "Rural
consumers today are empowered individuals and communities able to make their own informed
decisions. They are fast evolving from the stereotypical need-to-be-educated consumer we had
narrowed down on earlier to a much more evolved urban-esque consumer. And therein lies the
biggest change that modern day rural marketers need to keep in mind." He added that marketers
should also adopt a vernacular approach to connect with rural audiences.
GroupM's Singh says marketers are pitching their brands as "aspirational" to rural consumers in a
bid to convince them to "trade-up" their consumption patterns. This operates on multiple levels:
"with a thing as small as oral health, buying a toothpaste and not a tooth powder; or a bigger
purchase like a motorbike instead of a bicycle". That pattern is being repeated in mobile devices as
smartphones replace feature phones. "The phenomenon that is occurring here is 'creating an elite
class' within rural India," he says.

Challenges on the horizon

Tripathi says that building an understanding the rural consumer is no easy matter. "The rural
consumer today stands at these crossroads where he is aware of the motivations of his urban
counterpart and slowly but surely is buying into the very same aspirations while still being deep-
rooted in familial ties, and the traditions of his small-town life," he explains. "And it is in decoding
these crossroads where the biggest challenge lies."
The media, he adds, has played a huge role in shaping the rural customer and creating an
aspirational set of values in the mind of rural consumers by disseminating the same information to
this population as their urban counterparts. "Even if they are not the digital natives that their urban
counterparts are, most of them have a digital footprint with cyber cafes and mobile phones levelling
the access available. The advantages of e-commerce are not hidden from anyone especially in
regions where physical distribution is weak," he says.
Singh lists the three key challenges facing marketers in rural markets. "Affordability is a key
challenge – a major chunk of people in rural India can't afford Rs. 2000 per month worth of internet
broadband connectivity. Consequently, mobile Internet penetration and adoption is low, though it is
showing signs of improvement. Connectivity is the second issue: even though we have 3G
penetration improving, in 2014 only 56% of smartphone users accessed mobile internet and 44% of
smartphone users didn't watch mobile videos due to lengthy delays when loading."
After these two practical issues, content is the third factor. Singh noted that in rural India 73% of the
content consumed is entertainment like Bollywood music and videos, but there are problems here
that need to be addressed. "Content created is for the most part for male consumption," he says,
"with the male versus female content consumption ratio in rural India being 82:18." Another
drawback is localization of content: just 27% of rural internet users access content in their local
languages (Hindi, Marathi and Tamil being the top three). Internet content remains English-oriented
"and that is something that needs to change for more people to adopt the internet," Singh observes.
According to Lokhande, the biggest challenge in rural markets is the need to give value for money.
He says consumer awareness has already been created, and what is essential now is the need to map
this behaviour. "The sachet revolution was a big revelation into the psyche of the rural consumer,"
he says. "A rural consumer gets the same product as an urban consumer when he buys a sachet of
Head & Shoulders shampoo – it is a big game changer in my view."
Quoting projected figures on government spending over the next ten years, Lokhande says that the
Rs 50 lakh crore that has been earmarked for the rural sector will go a long way to creating
entrepreneurs in rural India. "There is a need to foster vocational entrepreneurs in rural India – we
need more carpenters, plumbers, electricians," he says.
Another key challenge, as Lokhande points out, is the incidence of copycat brands that cost the
bigger FMCG companies in a big way. "Brands have to care about this and take action," he says.
The size of the rural market, along with its expected potential over the next five years is a growth
story that marketers in India cannot afford to ignore. As urban markets become saturated, brands
will have to address rural consumers in a radically different way from their urban counterparts. As
the Accenture report points out, companies that act on changing rural consumer behaviour now and
adapt their marketing and communication accordingly, will have a competitive edge over those that
delay addressing the rural market until it has fully evolved.

About the author

Bindu Nair has been a journalist for most of her working
life, starting with working for the Delhi-based
newspaper The Pioneer. Her career has included stints in
broadcast and print journalism, including time spent at
Bennett & Coleman and Haymarket Media. She has
been writing about advertising and marketing for the last eight years,
and can be contacted at [email protected].