Even today ‘India lives in its Villages’ about 650,000 villages make up this hinterland. These villages are inhabited by about 850 million consumers making up for about 70 percent of population and contributing around half of the country’s Gross Domestic Product (GDP). Consumption patterns in these rural areas are gradually changing to increasingly resemble the consumption patterns of urban areas.
Besides that, the reason for this sudden twist of corporate concentrating on the rural areas are based on two major factors. One is size of the segment and increasing spending pattern among rural population. It is unbelievable that half of the total world population is covered by this segment. Among them one third world’s rural population lives in South Asia which made the multinational companies to run towards the Asian countries. In India, 70 percent of the population is in rural areas. Most of the corporate work on the statement given by C.K. Prahalad, Professor of Corporate Strategy at University of Michigan Stephen M. Ross School of Business “The future lies with the those companies who see poor as their consumers” means the companies should treats poor at bottom of pyramid as consumers not only by lowering the prices but also by creating buying power, offering bundle of benefits etc., P&G is a major player who made huge market share in the Indian rural market segment by the strategies like strong market penetration, pricing strategies and brand portfolio.
The second aspect, many think the segment size is huge but whether they have money? “Rural doesn’t mean poor”. At the current scenario, many Government schemes like Mahatma Gandhi National Rural Employment Guarantee Scheme, Integrated Rural Development Program, Pradhan Mantri Gram Sadak Yojana etc., assures the employment which directly results in the income generation of rural population. As a result, India’s unemployment rate has declined to 4.8 percent in February 2017 compared to 9.5 percent in August 2016. So there is a sound market segment which can be utilized.
Every company is looking for rural market because of saturation in the urban market segment due to heavy competition and substitutes. Many companies may think that rural and urban factor is different. But the truth is the aspiration levels of both consumers are same. Most of the rural consumers’ preference is to buy the products which are tailored to their needs. So the companies should mind such things to survive in this segment.
Many may think there is shrinkage in rural population in India and it is impossible to change overnight. Presently India is what US was in 1880, in terms of urbanization. It took many years for US’ urban conversion. The development in rural regions, like infrastructure, literacy rates etc., makes the companies to have better distribution channels for the availability of products and brings awareness through television media and mobile phones.
Market research firm Nielsen expects India’s rural Fast Moving Consumer Goods (FMCG) market to reach a size of US$ 100 billion by 2025. Another report by McKinsey Global Institute forecasts the annual real income per household in rural India to rise to 3.6 per cent 2025, from 2.8 per cent in the last 20 years.
Therefore, multinational companies want to utilize this platform for generating more revenues. When it comes to the rural consumers, they are very loyal to the brand, compared to their urban counterparts, which is called as ‘brand stickiness’. One of major difficulties in developing rural marketing strategies is rural consumers have traditional values. So the companies should also keep this in mind to become a big player in the rural segment.
The author, Swathy. P is a PGDM Student in Agribusiness and Plantation Management, Indian Institute of Plantation Management, Bangalore. firstname.lastname@example.org
(This article was originally published in ‘The Agraria’ e-Magazine. You can Subscribe it by clicking here)