I-BUSINESS INSTITUTE

CENTRE FOR MANAGEMENT EXCELLENCE

CERTIFICATE PROGRAMME IN LEADERSHIP SKILLS & BUSINESS

COMMUNICATION

(A three month highly effective programme to develop the leadership & management skills)

Companies eye on the purchasing power of rural

youth CME/Current Event

NEW DELHI: Last month, when a group of eight top global investors met in London to
ponder over their next India strategy, all they wanted to know was how to go ‘rural’.
They had been advised by experts that the country’s hinterland was no more the
challenge that it was two decades ago, when the economy was first opened up.
Prosperity in the villages was slowly starting to outdo the scope of urban India—Bharat
was blossoming into the next big opportunity.

Deutsche Bank, which facilitated the London meeting, invited Pradeep Kashyap of
MART, an Indian consultancy specialising in emerging and rural markets, to make a
presentation. Kashyap told the eclectic group that all they needed to do was to tap the
village youth.

The same man had years ago helped FMCG major Hindustan Lever (now Hindustan
Unilever) co-create Project Shakti to appoint women micro entrepreneurs among village
self help groups as the company’s salespersons. He was a strong believer in the
concept of opinion makers such as the village headman or the quintessential postman
to influence the villagers’ buying decision. So, why was he now talking about the power
of India’s rural youth?

Part of the reason is the success of the government’s National Rural Employment
Guarantee Scheme, which promised 100 days of guaranteed employment with an
income of `100 a day. Young people not only decided against migration, those who had
already migrated began returning home. At the same time, better power scenario, good
connectivity with the cities and access to communication facilities such as mobiles and
satellite televisions improved not only the standard of life in far flung villages, but also
increased awareness and enhanced aspiration levels. As a result, rural spending in the
last three years quadrupled to a whopping `40,000 cr.

“The nature of the spending shows that the biggest driver of the economy is the youth.
Young people are earning money, spending on their daily chores and are still left
with enough disposable incomes. All that money is going, or will go, into buying
vehicles, TVs, mobiles, FMCG products, clothes and a decent education for the next
generation,” says Sujit Nair, chief executive officer of Linterland, a rural marketing
agency of Lowe Worldwide.

Take a look at the facts. The rural market already contributes more than half of FMCG
and durables sales, 100% of agri-products sales, and nearly 40% of automobile sales.
In the last few years, the biggest push to India’s mobile telephony story has come from
the hinterland where 175 million connections have been sold—and this is expected to
rise to 440 million by 2012. Half of life insurance policies are also sold in India’s
villages.

companies that are operating in India have already latched onto this boom. In village
Shahjahanpur, 30 km off the highway from Meerut in UP, a group of young HUL
executives and rural marketing experts last week made a sales pitch to the villagers
who huddled amid thatched houses to watch a promotional video in a campaign called
‘Khusiyon ki Doli’ (palanquin of happiness). As the women giggled, watching the films
and demos, 20-year old Jyoti Saudan stepped aside to take a call from her husband on
her mobile phone.

“A high degree of awareness facilitated by communication devices has empowered the

youth in the villages. Gone are the days when the company would approach the village
headman or the postman or other opinion makers to influence buying-decisions in the
village. Now, we are creating campaigns that directly influence the youth,” says Raj
Kumar Jha, national creative direcor of Ogilvy Action, a rural marketing agency. “The
money is now with the village youth and it is he/she who does the spending,” adds
Sudhanshu Vats, vice-president for home & personal care category of Hindustan
Unilever.

That explains why Nokia’s campaign for the rural market says ‘Dikhao Apna Standard
(show your worth)’, Bharti Airtel says ‘Aaj Koi Akele Nahin’ (no one is alone) and Max
New York Life Insurance calls its rural policies ‘Vijay’. “More than 50% of rural youth in
the age group of 25-35 years have contributed to `2.5 million value top-ups of our
policies through their mobile phones,” says Anisha Motwani, chief marketing officer of
the insurance firm which has sold 93,000 ‘Vijay’ policies in the rural market.

Companies are also branding Internet café’s, movies halls and youth clubs in villages,
where youth participation in local functions especially during festivals goes up.
“At every function, we demonstrate our mobikes and register at least two sales,”
says Anil Dua, chief marketing officer at Hero Honda. Hero Honda gets 42% sales from
the rural market. Seventy percent of the consumers are in the age group 25-35.

Indeed, it was this youth-led demand that helped the Indian economy post a healthy
near 7% GDP growth even when the world had slipped into the worst recession in
several decades. And so, in the eyes of the investors, India’s rural youth emerged as
the Knights in shining armour. “It is an opportunity no corporate can overlook. India’s
rural market is already a $0.5 trillion market today, and it is expected to double to
$1 trillion by 2020,”