The rural rupee

Marketers and innovators start looking to India's villages

At the annual Cannes Lions International Festival of Creativity, India took home 27 medals. What is particularly interesting is that many advertising agencies won awards for campaigns that focused on inclusive - particularly rural - marketing. The Indian consumer landscape is changing fast, and rewards accrue to those who understand how. Lowe Lintas and Partners, for example, won for its work for Hindustan Unilever. HUL has been at the forefront of tapping markets far beyond the so-called socio-economic class A. The fact that Kan Khajura Tesan (or centipede station), a programme by HUL to provide radio on mobile phones to media-dark parts of north India, won three gold trophies at Cannes shows how many of India's leading companies have woken up to hard data that rural India - an amalgamation of 7,800 small towns and about 650,000 villages - controls 75 per cent of the country's purchasing power. And aspirations there are rising, which makes rural consumers an inevitable target for companies across sectors - whether it's consumer goods, telecom, financial services, automobiles or the media.

It is a market that accounts for about a third of Maruti's total sales. Even so, cars are being sold only in 90,000 villages now. Innovators have started to respond: consider, for instance, Chotukool - refrigerators for the bottom of the pyramid created by village girls and engineers at Godrej and Boyce. Chotukool needs half the power consumed by regular refrigerators, and so is cheap to run. The price tag is almost 35 per cent less than the cheapest category of refrigerators. Similarly, Coca-Cola tried to beat the acute power crisis in the hinterlands by launching solar-powered coolers.

The challenge is to make this growth sustainable. For example, HDFC Bank has done a tremendous job in expanding in rural India; but the stark fact is that, while 54 per cent of the bank's branches are now in rural areas, they contribute just 15 per cent to its income. Many of the rural-specific retail stores have not succeeded. For example, by 2008, Hariyali Kisaan Bazaar, with about 300 stores, became the biggest rural retail chain. However, though its revenue grew at a rapid clip, the chain sank deeper into the red - which prompted its promoter to exit the business. Even Triveni Engineering and Industries, owner of Khushali Bazaar outlets, exited the business after running it unprofitably for five years.

But lessons can be learnt from those who succeeded. For example, take ITC's Choupal Sagar, which has prospered because the group first developed linkages through its e-Choupal initiative to buy agricultural products from farmers and improve productivity, thereby helping raise their incomes. It then launched Choupal Sagar stores to sell a variety of products and services, including farm inputs, consumer goods and consumer durables, apparel and fuel. This means ITC first built an ecosystem for its rural retail venture. Although technology has made it possible to explore the new market at a relatively low cost, companies have to realise fast that they cannot extend their general marketing strategies to rural areas. They need to devise specific strategies after figuring out crucial issues about rural consumer behaviour, more specifically relating to various regions of the country.