Rural marketing: the bottom-of-the-pyramid game

09 May 2008

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The Marcus Evans conference 'Proactive Rural Marketing Strategies' brought together executives from companies across industries to discuss the challenges and triumphs of their endeavours in rural marketing. Dhruv Tanwar reports from the venue Mumbai: The opening session, which was also one of the most interesting of the first day of the twoday conference, was by S K Roy, executive director, Life Insurance Corporation (LIC), and possibly on of the biggest rural marketers in the country. LIC: Selling life insurance to farmers Narrating from personal experience, Roy provided deeply insightful peeks into his experiences with rural marketing at LIC, which innovates its products to specifically appeal to the needs of the rural consumer. He also talked about banking and insurance markets which form symbiotic relationships when it comes to tapping rural markets, with banking being an excellent distribution channel for marketing insurance products. Citing the example of LIC tapping the extensive branch network of nationalised banks in deep, milesfrom-anywhere locations, he said the model has allowed for unprecedented penetration by LIC into rural India. The critical success factor in succeeding in India's rural markets is the element of trust that a company has to gain from the rural consumer, Roy said in conclusion. HughesNet Fusion: Providing technology to rural marketers Vaibhav Magow, director, marketing, HughesNet Fusion, a company that builds shared IT infrastructure and connectivity in rural India, said rural markets would be the growth engine for times to come, while talking about HughesNet Fusion's pay-per-use shared infrastructure in rural areas that is available to a number of companies to set up their presence in rural markets. Magow said that by providing broadband access of a minimum of 256 kbps though satellite connectivity, his company provides access to the wired world from rural market locations, which will soon herald a minirevolution or ''a tsunami of change'' (as the case may be) in various fields such as medicine and health care, once telemedicine initiatives come to rural markets in India. Using the franchisee route, HughesNet Fusion is stimulating entrepreneurship in rural India the company provides broadband connectivity at no cost to entrepreneurs setting up a centre, though it

charges around Rs200,000 to set up the centre infrastructure, and about Rs5,000 in running costs each month. Since a centre is set up to serve six surrounding villages, once an element of trust is established with the local population of around six to eight thousand households per village, revenues start to flow in about seven to eight months. Readers Digest: Relying on the post office Sandeep Pardoshi, operations head at Reader's Digest outlined the hurdles to rural marketing, with the chief one for his business being the low literacy rates, and the need for communicating in the local language. Other than communication challenges, he said high distribution costs add to the rural marketer's problems, as urban channels superimposed on rural markets tend to prove costly. Talking about Reader's Digest, Pardoshi said that around 35 per cent of Reader's Digest's 600,000 customers were located in rural and semi-urban areas, with a large chunk of them being school teachers. Using the post office as their primary delivery and direct marketing mechanism, he said the rate of undelivered copies is less than one per cent, though the pilferage of books, atlases and other publications of higher value sent out by Reader's Digest does seem to be a continuing problem. Other problems in tapping into rural markets were outlined as:

High initial market development expenditures Multiple tiers, higher costs and administrative issues Inability of the small rural retailer to carry inventory without substantial credit line support from the company Generating effective demand for manufactured goods Wholesale and dealer network issues Mass communication and promotion problems Scant availability of trustworthy market research Inadequate infrastructure, both physical as well as economic and telecommunications connectivity Highly disbursed and thinly populated markets Low per capita incomes, with a substantial propensity to save as opposed to consumption Cultural gaps between urban marketers and rural consumers, and The lack of skilled rural sales force.

Acer India:Going beyond the metro For computer maker Acer India's marketing chief S Rajendran, the rural market per se comprised category C and D towns, as opposed to villages in rural India. Rajendran acknowledged that IT is still a relatively high cost and low penetration product, shipping an abysmal

eight million units annually in a country of over a billion people. He attributed this to lack of policy and legislative support from the government, specially since the example of the mobile phone industry is staring everyone in the face with a zero per cent duty on mobile phones, the industry has more than mushroomed. PC makers however still have to live with a 16 per cent levy. However, the shift from assembled PCs to branded ones is clearly visible, with the trends in the early 1990s for a 65-per cent preference for assembled PCs having shifted to a 68- per cent preference for branded PCs. Rajendran said that penetration was at around 31 per cent year on year, with metros making up 23 per cent of the market, class B towns another 12 per cent, and the remaining 65 per cent coming from ''other'' rural markets. Rajendran's major rural marketing challenges lay in diversity, language, cost on account of the duty structure, power shortages, and the lack of broadband. Taking Acer as an example, Rajendran explained the preferences of the Indian PC consumer, who he says is not price conscious, but is most definitely value conscious. He said that the consumer needs a functioning computer, with no fine print in the deal, and no surprises from the product, at a reasonable price. Acer, says Rajendran, undertook demand generation initiatives in upcountry markets via canopy shows, walking inflatables, signages and glow signs, and with handouts and pamphlets, which turned out to be the most effective form of marketing in its rural markets. Moreover, the mass appeal of brand ambassador and Bollywoord star Hrithik Roshan added to the brand's appeal, though he did clarify a question that Hrithik was selected after due consideration to marketing parameters, and not because competitor Compaq had a brand ambassador in Shah Rukh Khan. Responding to a question about rural consumers buying computers under finance, Rajendran clarified that the speed of obsolescence in the industry does not allow any financier to profitably fund purchases, which is why Acer's partnership in this area with two separate financial institutions fell through. He said that in case of default, the financier is not able to recover the investment by reselling the computer, as by then the value of the asset falls below the amount due. He said this rate of obsolescence also affects new PCs, and PC makers by-and-large cannot afford to have stagnant stocks beyond two to three months, as thereafter they would have to resort to price cuts going upto 30 per cent to get their dead inventory moving.

Concluding his presentation, Rajendran said that e-governance initiatives could be a starting point for growing the PC market from eight million units annually to 16 million units a year. Monsanto:Hand holding the farmer Zia Hajeebhoy, head of Monsanto's chemistry business group bowled the audience over with her presentation on Monsanto's experience in selling to Indian farmers. As she clarified at the very start, Monsanto does not have a rural and urban market differentiation, as the only market it has is rural. Hajeebhoy spoke at length about building a brand out of products sold in the rural markets, with its variety of hybrid seeds commanding a strong market share since over three decades. She said that one of the things that works best in the rural scenario, are local testimonials by immediate peers in the same area. After sales service was another area that she said was most critical to success in rural marketing, as you can't just sell a bag of seed and walk away if you want the farmer to buy from you next season. She said that extensive involvement, handholding, and education endeavours in helping farmers to increase their yields is what has helped Monsanto garner a 63-per cent market share for its Bollguard cotton brand, despite the presence of illegal and spurious alternatives. Also, using touch points for direct marketing, Monsanto executives built direct relationships though farmer meetings, which proved to be the most powerful tool in Monsanto's rural marketing endeavour, and helped it get a pulse of what is going on. Hajeebhoy walked the audience through Monsanto's case study on its Bollguard brand, where the company used Bollywood actor Nana Patekar for its localised marketing and advertising, which was delivered through CDs and highly local media. Two other pointers she had for the audience were to use the packaging effectively as a marketing tool, and connecting with the rural consumer at a human level, as opposed to an urban or rural level, to ensure success.