The vast size and large demand base of the Indian rural
market offers great opportunities to FMCG companies. A location
is defined as ‘rural'if 75% of the population is engaged in
agriculture-related activity. India has 450 districts and
approximately 6,30,000 villages. These villages can be sorted on
the basis of different parameters like income levels, literacy
levels, penetration, accessibility and distance from the nearest
town. In August 2002, around 700 million people, approximately
70% of the Indian population was engaged in agricultural
activity, contributing 1/3rd of the country's GNP. Apart from
the fact that the rural population is very large, it has also
grown richer since the 1990s, with substantial improvements in
incomes and spending power. This was a direct result of very
high crop yields due to successive good monsoons. Tax exemptions
for agricultural income have also contributed to greater rural
purchasing power.
For all these reasons, rural India is now seen as a vast market
with unlimited opportunities. Therefore it is not surprising
that many companies that market FMCGs of everyday use, have put
in place parallel rural marketing strategies. The biggest brands
in India belong to companies with a strong rural presence. Many
FMCG companies had already hit saturation points in urban India
by the mid-1990s. The late 1990s saw many FMCG companies in
India shifting their emphasis to rural marketing. Companies like
HLL, Marico Industries, Colgate-Palmolive and Britannia
Industries took up rural marketing in a serious manner during
the 1990s. However, selling FMCG products in rural India was a
tough task. It has always been difficult to gauge the rural
market. Many brands which were well-established in urban areas
have not been successful in rural India. Therefore, it is
important for a company to understand the social dynamics and
attitude variations within each village. A company has to
address several problems before it can sell its products
successfully in the rural market. These include:
• Physical distribution
• Channel management and
• Promotion and marketing communication
Amongst these, problems related to physical distribution and
channel management adversely affect the service and the cost of
the company. Typically a market structure consists of a primary
rural market and retail sales outlets. The retail sales outlets
in towns act as the stock points to service the retail outlets
in the villages. But maintenance of the service required for
delivery of the product at retail level is costly as well as
difficult. Many companies use delivery vans to take products to
the customers in the rural areas as well as to facilitate direct
contact with them, for sales promotion. However, in general,
only large companies can afford to undertake such initiatives. |
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